Resolution No. 0540-99: Regulation for Savings and Credit Cooperatives Not Authorized to Operate with Public Funds

Lima, June 15, 1999
Superintendence Resolution
No. 0540-99
The Superintendent of Banking and Insurance

CONSIDERING:

That, item 3 of the Twenty-Fourth Final and Complementary Provision of the General Law of the Financial System and the Insurance System and Organic Law of the Superintendence of Banking and Insurance - Law No. 26702, establishes that the supervision of savings and credit cooperatives not authorized to operate with third parties is the responsibility of the National Federation of Savings and Credit Cooperatives (FENACREP) or other cooperatives federations to which they voluntarily affiliate and that are recognized by this Superintendence;

That, item 6 of the Final and Complementary Provision previously cited indicates that this Superintendence supervises and controls the aforementioned cooperatives federations, regulates the operations of savings and credit cooperatives not authorized to operate with public funds, and is empowered to order the adoption of necessary measures to correct detected patrimonial or administrative deficiencies;

That, it is necessary to issue regulatory norms regarding the operations and supervision of said cooperatives; and,

In accordance with the opinion of the Adjunct Superintendencies of Banking and Legal Advice, and in exercise of the powers established in items 7 and 9 of Article 349, as well as in the Twenty-Fourth Final and Complementary Provision of the aforementioned General Law;

RESOLVES:

Article First.- Approve the regulation for savings and credit cooperatives not authorized to operate with public funds, which forms an integral part of this Resolution.

Article Second.- This norm enters into force the day following its publication in the Official Gazette El Peruano, from which date Resolution SBS No. 0077-99 of January 29, 1999, Resolution SBS No. 190-95 of February 21, 1995, Resolution SBS No. 453-94 of July 8, 1994, Office No. 6707-94 of November 30, 1994, and Office No. 6381-96 of November 8, 1996, are rendered ineffective.

Register, communicate, and publish.

MARTÍN NARANJO LANDERER
Superintendent of Banking and Insurance

REGULATION FOR SAVINGS AND CREDIT COOPERATIVES NOT AUTHORIZED TO OPERATE WITH PUBLIC FUNDS

INDEX

TITLE I CONSTITUTION AND REGISTRATION
TITLE II OPERATION
CHAPTER I OPERATIONS AND SERVICES
CHAPTER II CONTROL AND MANAGEMENT
CHAPTER III PRUDENTIAL NORMS
SUB-CHAPTER I SOCIAL CAPITAL AND EFFECTIVE EQUITY SUB-CHAPTER II LIMITS AND PROHIBITIONS SUB-CHAPTER III VARIOUS PROVISIONS TITLE III SPECIAL REGIMES AND END OF THE COOPERATIVE
CHAPTER I INTERVENTION
CHAPTER II DISSOLUTION AND LIQUIDATION
TITLE IV SUPERVISION
CHAPTER I SUPERVISION OF THE FEDERATION OVER THE COOPERATIVES
SUB-CHAPTER I INSPECTION
SUB-CHAPTER II SANCTIONS
CHAPTER II SUPERVISION OF THE SUPERINTENDENCE OVER THE FEDERATION
FINAL PROVISIONS
TRANSITORY PROVISIONS

REGULATION FOR SAVINGS AND CREDIT COOPERATIVES NOT AUTHORIZED TO OPERATE WITH PUBLIC FUNDS

Article 1st.- Definitions
For the purposes of this regulation, the following definitions shall be considered:

1. Cooperative(s): Savings and credit cooperatives not authorized to operate with public funds.
2. Law: General Law of Cooperatives.
3. General Law: General Law of the Financial System and the Insurance System and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702.
4. Days: Calendar days, unless otherwise indicated.
5. Superintendence: Superintendence of Banking and Insurance.
6. Federation: National Federation of Savings and Credit Cooperatives of Peru (FENACREP) or another Federation recognized by the Superintendence.
7. Regulation: Regulation for Savings and Credit Cooperatives not authorized to operate with public funds.
8. Assembly: General Assembly of Members.
9. Directors: The members comprising the Board of Directors and the Board of Auditors.
10. Managers: Officials who have decision-making capacity on matters of relevance within the Cooperative.

TITLE I
CONSTITUTION AND REGISTRATION

Article 2nd.- Constitution
Cooperatives are constituted in accordance with the provisions of the Law and acquire the status of legal entities from their registration in the Public Registries, without the need for a prior administrative resolution of official recognition.

Article 3rd.- Registration 1
Cooperatives may operate validly only after their registration in the Register of Legal Entities, being subject to the procedures and norms of constitution and registration indicated in the Law.

Cooperatives must communicate their registration in the Public Registries to the Federation within a period not exceeding fifteen (15) days from the date of registration, attaching a certified copy of the minutes of constitution and approval of their statutes, and the certificate of registration.

Article 4th.- Statutes 2
Modifications to the statutes of cooperatives must be carried out in accordance with the provisions of Article 13 of the Law, and cooperatives must communicate such modifications to the Federation within a period not exceeding fifteen (15) days from the date of registration, for which they will attach a certified copy of the minutes recording the statute modification and the respective certificate of registration.

Article replaced by SBS Resolution No. 621-2003 of 20.05.2003
Article replaced by SBS Resolution No. 621-2003 of 20.05.2003

TITLE II
OPERATION

CHAPTER I
OPERATIONS AND SERVICES

Article 5th.- Authorized Operations and Services 3
Cooperatives may only operate validly with their members, being authorized to carry out, in accordance with the nature of the type of cooperative indicated in item 2.11 of Article 7 of the Law, the following operations:

a) Receive deposits from their members. b) Grant direct credits to their members in accordance with the conditions set forth in the respective credit regulation of the cooperative. c) Provide guarantees and sureties to their members, for a determined term and amount. d) Acquire, conserve, and sell shares and bonds that are quoted on the stock exchange, issued by anonymous societies established in the country, as well as participation certificates in Mutual Funds and Investment Funds. Likewise, it may be a partner of other cooperatives, as well as acquire shares or participations in societies whose object is to provide services to their members or that are compatible with its social object, it not being necessary in these cases that the shares or participations be quoted on the stock exchange. e) Receive credit lines from national or foreign entities. f) Acquire the movable and immovable assets necessary for the development of its activities. g) Carry out credit operations with other cooperatives or companies of the financial system. h) Provide cash and treasury services to its members. i) Make deposits in financial institutions or in other entities of the savings and credit cooperative system of which it is a member. j) Issue Negotiable Mortgage Credit Titles in accordance with the regime established in Article 245.4 of the Securities Law, Law No. 27287 and its amendments. 4

Likewise, cooperatives may carry out other operations and services different from those proper to the type of cooperative previously indicated, provided that these are only accessory or complementary activities and are carried out under the terms established in item 9 of Article 8 of the Law, without this signifying a change in the type or social object of the cooperative.

Article 6th.- Credits and Guarantees
The credits granted by cooperatives must be subject to a credit regulation, which contains the policies and procedures to evaluate and grant a credit. The aforementioned regulation must include, among other aspects, the requirements, conditions, and approval levels of the credits, as well as the types of guarantee that can be received. Said regulation must be approved by the Board of Directors, adequately disseminated among the members, and be available to the Federation for the purposes of supervision it deems pertinent.

When, as a result of the payment of a debt, the cooperative receives or adjudicates in payment total or partial, movable or immovable assets, they must be alienated within a period of one (1) year, which may be extended by the Federation for a single time and for a maximum of six (6) months. Such assets will be subject, where pertinent, to the norms issued by the Superintendence on provisions for adjudicated assets.

Likewise, the credits and guarantees received by cooperatives are subject to the current provisions on the matter approved by the Superintendence.

Article replaced by SBS Resolution No. 621-2003 of 20.05.2003
Literal incorporated by SBS Resolution No. 85-2007 of 24.01.2007

Article 7th.- Bank Secrecy
The norms on bank secrecy established by Articles 140 to 143 of the General Law are applicable to cooperatives, where pertinent.

Article 8th.- Transparency
In the publicity that cooperatives carry out regarding their operations and services, they must clearly indicate that they do not capture public funds and that the deposits of members are not covered by the Deposit Insurance Fund. Likewise, they must observe the regulations on the matter issued by the Superintendence.

CHAPTER II
CONTROL AND MANAGEMENT

Article 9th.- Control
The control of cooperatives corresponds, in the first instance, to its Board of Auditors and its Assembly, in accordance with the provisions of item 2 of the Twenty-Fourth Final and Complementary Provision of the General Law.

Article 10th.- Suitability and Characteristics of Directors
The Assembly is responsible for ensuring that the members elected to serve as directors of the Boards of Directors and Auditors meet conditions of technical and moral suitability, as well as have the necessary experience for the performance of the corresponding directorial and control functions.

Likewise, the exercise of said directorial functions will be subject to the following considerations:

a) The directorial functions of cooperatives are personal and non-delegable. Substitute directors may be appointed in accordance with the procedures determined by the statutes. b) The members of the Boards of a cooperative cannot hold executive positions nor develop administrative functions or activities in the cooperative itself. c) Per diems will only be assigned for ordinary sessions and paid to directors who register effective attendance at them. d) Substitute directors will receive per diems only when the titular director is absent or unable to attend, and the substitution is effectively exercised.

The statutes of cooperatives must include the requirement of the conditions indicated in this article.

Article 11th.- Impediments 5
Those who are subject to the impediments indicated in item 3 of Article 33 of the Law cannot exercise the functions of leaders or directors or managers of cooperatives. Likewise, in accordance with item 8 of the Twenty-Fourth Final and Complementary Provision of the General Law, those who have been found administratively or criminally responsible for acts of mismanagement cannot be elected or appointed as directors and officials, respectively, of savings and credit cooperatives and central cooperatives.

Article 12th.- Communication of Election and Vacancies of Directors
Any election of directors of a cooperative, as well as vacancies and the designation of replacements, must be communicated to the Federation within a period not exceeding fifteen (15) days from their occurrence, by sending a certified copy of the minutes of the corresponding session, issued by the secretary of the Board of Directors or whoever acts in their stead, as well as the corresponding documented curricula vitae.

Article 13th.- Responsibilities of Members of the Board of Directors
The directors of the Board of Directors, in addition to what is established in the Law, are responsible for:

a) Approving operations and adopting agreements in violation of applicable legal provisions, especially prohibitions or limits established by this Regulation. b) Omitting the adoption of necessary measures to correct management irregularities. c) Failing to comply with the provisions of the Federation. d) Failing to provide information to the Federation, or providing false information regarding facts or operations that could affect the stability and solidity of the cooperative. e) Refraining from responding to communications from the Federation. f) Omitting the adoption of necessary measures to guarantee the timely performance of the tasks of the Board of Auditors and external audits, as appropriate. g) Failing to inform the Federation about the sanctions applied by the Assembly to the directors and managers of the cooperative. h) Failing to demand the presentation of the reports referred to in Article 16, as well as failing to analyze them and adopt the necessary corrective measures. i) Periodically informing all members of a summary of the reports indicated in Article 16, as well as of the communications from the Federation indicated in Article 17.

Article 14th.- Adequate Exercise of Attributes 6
The Assembly, in exercise of the attribute indicated in item 1 of Article 27 of the Law and for the adequate fulfillment of the responsibility assigned to it by item 2 of the Twenty-Fourth Final and Complementary Provision of the General Law, is responsible for ensuring that the statutes of the cooperative contain provisions for the adequate exercise of the attributes of the members of the Boards, rationality in the allocation of per diems, quorum, periodicity of sessions, and other aspects indicated in Article 33 of the Law and this Regulation.

Article 15th.- Management 7
The Manager must be a natural person who meets the necessary conditions of technical and moral suitability to perform the position. The provisions established in Articles 11, 12, and 13 are applicable to the Manager, or whoever acts in their stead, where pertinent.

Article 16th.- Management Reports
The Manager is responsible for presenting to the Board of Directors, at least, the following management reports:

a) Inform at least quarterly and in writing, on the economic progress of the cooperative, comparing that report with the corresponding one from the previous quarter and with the targets foreseen for said period. b) Inform in each ordinary session and in writing, on the credits granted as well as on the investments and sales carried out since the preceding session. c) Inform in each ordinary session and in writing, on the situation of its credit debtors and investments. For this purpose, it must apply the norms on the matter established by the Superintendence. d) Inform, at least semi-annually and in writing, on the main risks faced by the cooperative and the actions adopted to manage them adequately.

The Federation may request, when it deems necessary, copies of the aforementioned reports within the period it deems pertinent.

Article 17th.- Timely Knowledge of Communications from the Federation
The President of the Board of Directors or the Manager, depending on who receives the communication, under their responsibility, must bring to the knowledge of the Board of Directors, immediately, any communication received from the Federation, primarily referring to inspection or investigation visits carried out, or containing recommendations on its activities or operations.

Likewise, depending on the nature and importance of the communication or when requested by the Federation, it must also be informed, immediately to all members of the cooperative, about the content of said communications.

Article 18th.- Board of Auditors 8
For the adequate fulfillment of the control function indicated in item 2 of the Twenty-Fourth Final and Complementary Provision of the General Law, as well as for the oversight attributes indicated in item 7 of Article 31 of the Law, related to the power to order audits, the Board of Auditors is responsible for the adequate implementation of said audits, taking into consideration the norms issued on the matter by the Superintendence.

Article 19th.- External Audits
Cooperatives must hire external audits in accordance with the current norms issued by the Superintendence. Such audits must meet the requirements, scope, and standards established in said norms.

The omission or defective compliance by external audit firms of what is provided in the previous paragraph will be communicated by the Federation to the Superintendence, with the corresponding supporting documentation, for the purposes it deems pertinent. This includes, among others, the formulation of the proposal for exclusion from the corresponding register.

Article replaced by SBS Resolution No. 621-2003 of 20.05.2003

Article 20th.- Management Follow-up
The follow-up of the adequate functioning of the Boards of Directors and Auditors must be exercised by the members, who, assembled in Assembly, must adopt and permanently evaluate the pertinent policies and measures, including those necessary for the adequate compliance with this regulation.

CHAPTER III
PRUDENTIAL NORMS

SUB-CHAPTER I
SOCIAL CAPITAL AND EFFECTIVE EQUITY

Article 21st.- Capital and Contributions 8
The social capital of cooperatives is constituted with the contributions of the members. The initial capital and the minimum sum that a member must pay to the contribution account they subscribe to is indicated in the statutes of the cooperative. This minimum sum may consider the characteristics of variable capital and the member's right of withdrawal established in item 2.5 of Article 5 and Articles 23 and 38 of the Law.

The document used to prove the contributions of the members must contain a description of their nature, clearly differentiating it from the deposits of the members.

Article 22nd.- Effective Equity and Cooperative Reserves
To determine effective equity, the following procedure is followed:

a) Paid-in social capital, the cooperative reserve, remaining balances, as well as discretionary reserves and generic provisions for credits that make up the normal portfolio, up to a maximum of one (1%) of said portfolio, are added. b) Losses from previous exercises and the current exercise, as well as the provision deficit detected and not charged to results, in application of the current norm on the requirement of provisions approved by the Superintendence, are subtracted, if applicable. c) The equity participation in cooperatives or societies whose object is to provide services to members or with which financial statements should be consolidated or are their subsidiaries is subtracted.

Accumulated and period remaining balances will only be incorporated into effective equity when there is an agreement for their capitalization by the Assembly or the Board of Directors, by express delegation of the Assembly.

Cooperatives must reach a cooperative reserve no less than the equivalent of thirty-five percent (35%) of their social capital. This reserve is constituted by allocating annually no less than twenty percent (20%) of the remaining balances, without prejudice to the statutes of the cooperatives determining higher percentages.

SUB-CHAPTER II
LIMITS AND PROHIBITIONS

Article 23rd.- Limits
Cooperatives are subject to the following limits:

a) The amount of assets and contingent credits of a cooperative, weighted by credit risk, in national or foreign currency, cannot exceed eleven (11) times its effective equity. The calculation of this limit will be carried out applying what is regulated to such effect by the General Law and the complementary norms issued on the matter by the Superintendence. b) The total amount of credits granted to a member directly and indirectly cannot exceed five percent (5%) of the effective equity of the cooperative.

The provisions on linkage established in Article 203 of the General Law and the complementary norms issued on the matter by the Superintendence apply for this effect. c) The holding of shares, bonds, and participation certificates in Mutual Funds and Investment Funds cannot exceed fifteen percent (15%) of the effective equity. When it concerns participations in other cooperatives or shares or participations in societies whose object is to provide services to members or are compatible with its social object, they must not exceed fifty percent (50%) of its effective equity. d) The acquisition of movable or immovable assets necessary for the development of its activities cannot exceed forty percent (40%) of its effective equity collectively.

When the cooperative acquires or constructs real estate exceeding the previously indicated limit, the Federation will require its sale within a period of one year, extendable for a single time, for an equal period, if there is a justified cause, without prejudice to the application of the corresponding sanction. e) The direct and contingent credits granted to another cooperative and the deposits constituted in it, when they are partners with each other, added to the guarantees, sureties, and other guarantees received from said cooperative, cannot exceed twenty percent (20%) of the effective equity.

Article 24th.- Excess of Global Operation Limit
The cooperative whose assets and contingent credits weighted by risk exceed the limit of eleven (11) times its effective equity must deposit all increases in the level of its deposits in a special account in a multiple operations company of the financial system qualified in category A. These deposits will be maintained as long as the excess is not regularized.

Article 25th.- Excesses of Individual Limit
Exceptionally, cooperatives may exceed the limit referred to in item b) of Article 23 up to the equivalent to the percentage of its effective equity indicated in each case, provided that, at least by an amount equivalent to the excess over the limit, it has any of the following guarantees, at realization value:

1. First mortgage on immovable assets (15%).

2. First pledge on movable assets, with legal delivery or physical delivery (15%).

3. Warrants (15%).

4. First lien on securities that serve as the basis for determining the selective index of the Lima Stock Exchange, at their corresponding market value, updated once a month (20%).

5. First lien on savings or time deposits in the cooperative itself, duly constituted (20%).

6. First lien on instruments representing obligations of the Central Bank or the Public Treasury, at their market value, updated once a month (20%).
   For the mortgages and liens referred to in the preceding items to be eligible, they must be registered in the corresponding registry.
   For the purposes of applying this article, higher-ranking guarantees may substitute lower-ranking ones, in the corresponding percentages.

Article 26°.- Prohibitions
Cooperatives are subject to the following prohibitions, without prejudice to others contained in their own Law and other provisions issued regarding this matter:
a) Granting credits to finance political activities. b) Granting credits with the purpose of allocating them, directly or indirectly, to pay contributions to the same cooperative. c) Providing guarantees or backing obligations of members, for an indeterminate amount and/or term. d) Guaranteeing loan transactions concluded between third parties, unless one of them is another member cooperative. e) Assuming risk coverage for their members. f) Facilitating resources to their directors, managers, or employee-members, by any means, to pay fines imposed by supervisory bodies under this Regulation and other norms, or to cover legal expenses regarding sanctions imposed by the Federation. g) Credits granted by a cooperative to its member directors and managers, as well as to their spouses and relatives who are also members, cannot be granted under more favorable conditions than those offered to other members of the cooperative. h) Others expressly indicated by the Superintendence.

SUB-CHAPTER III
MISCELLANEOUS PROVISIONS

Article 27º.- Matching of Operations
Cooperatives must maintain an adequate correspondence, not necessarily exact, between the terms of their active and passive operations, as well as between their resource capture and the respective placements and investments. This correspondence must also apply to their positions in foreign currency.

Article 28º.- Available Funds
Cooperatives must maintain, at all times, available funds at a level compatible with the nature of their operations.

TITLE III
SPECIAL REGIMES AND TERMINATION OF THE COOPERATIVE

CHAPTER I
INTERVENTION9

Article 29º.- Grounds for Intervention (8)
Article 30º.- Purpose of Intervention (8)
Article 31º.- Actions of the Assembly (8)
Article 32º.- Duration of Intervention (8)

CHAPTER II
DISSOLUTION AND LIQUIDATION

Article 33º.- Grounds for Dissolution
Cooperatives may be voluntarily dissolved by agreement of their Assembly, in the manner established in their statutes and in accordance with the Law, or judicially by the corresponding jurisdictional body upon request of the Superintendence, prior to a request from the Federation, due to the occurrence of grounds established in the Law and this regulation.

Article 34º.- Communication and Dissemination of Voluntary Dissolution
Voluntary liquidation must be communicated to the Superintendence and the Federation, attaching an authenticated copy of the agreement, within five (5) days of its occurrence, which must be registered in the corresponding Public Registries. The agreement of voluntary dissolution and liquidation will be published once in the Official Newspaper “El Peruano” when the cooperatives are located in the province of Lima; and in the local newspaper with the widest circulation in the case of cooperatives located outside the province of Lima.

Article 35º.- Appointments
In voluntary dissolution, the following guidelines for the appointment of members of the Liquidation Commission and the Supervisory Council must be contemplated:

a) The Assembly, in the same session in which it adopts the agreement of voluntary dissolution and liquidation, must designate a Liquidation Commission composed of no fewer than three nor more than five members, whose members, armed with the necessary powers duly registered in the corresponding Public Registries, will proceed to liquidate the assets in accordance with what is provided in the Law, the cooperative's statutes, norms issued on the matter, and specific provisions of the Superintendence. Likewise, said Assembly must also appoint the members of the Supervisory Council, an organ that, according to what is provided in item 23 of Article 31º of the Law, has the function of

Articles repealed by SBS Resolution No. 621-2003 of 05.20.2003

overseeing the liquidation operations. b) With the agreement of dissolution and liquidation of the cooperative, the members of the governing bodies and managers are automatically removed from their positions. c) The impediments established in Article 11º of this Regulation apply to the members of the Liquidation Commission and the new Supervisory Council. Additionally, those who have been directors, managers, or advisors of the cooperative at the time of liquidation or within the five (5) years prior to the date of the dissolution and liquidation agreement cannot be members of the aforementioned commission. Nor can those be members who have pending processes or have been sanctioned with dismissal or disqualification, or judicially. d) The liquidation process, as well as the period of tenure of the members of the Liquidation Commission and Supervisory Council, must not exceed two (02) years counted from the date on which the Dissolution and Liquidation of the Cooperative is declared. This term may be extended by up to one (01) additional year, if there is a justified cause at the discretion of the Superintendence, prior to the opinion of the Federation. If the liquidation process is not concluded within the timeframes established in this subsection, the Superintendence, prior to the proposal of the Federation, will order the conversion of the voluntary liquidation process into a judicial one. e) The Federation is authorized to formulate objections against the designation of the members of the Liquidation Commission when their designation or appointment has occurred in contravention of the norms provided in subsection c) of this article and other pertinent provisions.

Article 36º.- Extinction
The agreement of dissolution and liquidation does not terminate the legal existence of the cooperative, which subsists until the liquidation process concludes and, as a consequence, the extinction is registered in the relevant Public Registry.

TITLE IV
SUPERVISION

CHAPTER I
SUPERVISION OF THE FEDERATION OVER COOPERATIVES

Article 37º.- Scope of Supervision
The supervision of cooperatives is the responsibility of the Federation, which regulates its functions in accordance with the General Law, the norms of this Regulation, and other provisions issued in the exercise of its powers by the Superintendence. Each cooperative must be supervised by only one Federation whose characteristics are compatible with the supervision requirements appropriate to its size and complexity of operations and services. Cooperatives are obligated to comply with the provisions issued by the Federation for the adequate fulfillment of said functions and powers, as well as to provide all information that it considers pertinent to request.

Article 38º. Purpose and Scope of Supervision
It is the responsibility of the Federation to safeguard the economic and financial solidity of cooperatives, ensuring that they and their governing bodies comply with the legal, regulatory, and statutory norms that govern them, exercising for this purpose the widest supervision of their operations and services in order to fulfill the objectives set by the Law and other applicable norms.

Article 39°.- Powers
In the development of its supervision functions, the Federation has the following powers:
a) Order the realization of special external audits of cooperatives, with the cost borne by them. b) Approve in advance of their implementation, the establishment of cooperative offices, as well as their relocation and closure. c) Conduct inspection visits to cooperatives. d) Require cooperatives to establish specific provisions for credits and other assets that so require according to general norms issued by the Superintendence, particularly those related to the evaluation and classification of the debtor and the requirement of provisions or to write off such assets totally or partially. e) Require cooperatives to present financial statements, their corresponding accounting annexes, and necessary reports to assess their economic-financial situation, according to the form, periodicity, and timeframes established by the Superintendence or the Federation itself. f) Require cooperatives that the value of real estate and other assets appearing in their books be adjusted in accordance with current legal provisions on the matter. g) Prohibit cooperatives from distributing surpluses to their members until they comply with the requirements of the nature mentioned in the preceding subsections. h) Establish a contingency fund for the financial support of cooperatives and administer it subject to the norms issued by the Superintendence. i) Order any cooperative to adopt, within the timeframe and conditions determined by the Federation itself, necessary measures to restore an adequate level of solvency, possibly varying the financial structure and/or reorganizing the administration of the cooperative with the modifications required in its governing bodies and management, applying, when applicable, what is provided in Article 49° of this regulation. j) Review the internal operational and administrative regulations of the cooperative and formulate the corresponding observations and/or order necessary corrections. k) Receive complaints and claims regarding supervised cooperatives, as a complementary modality to detect non-compliance with applicable norms. l) 10 m) Periodically disseminate information on the main indicators of the situation of cooperatives. n) Participate as an observer in the meetings of the Boards of Administration, when deemed necessary for the adequate exercise of its supervision duties. o) Others provided in this Regulation and others indicated by the Superintendence.

Article 40°.- Appearance

10 Subsection repealed by SBS Resolution No. 621-2003 of 05.20.2003

The Federation is authorized to summon one or more directors and/or managers of cooperatives, in order to receive verbal or written explanations, when in its judgment there are sufficient indications of economic-financial instability of the cooperative, or when it has committed any of the following offenses:
a) Violating a legal norm or a provision issued by the Superintendence in the exercise of its powers, as well as failing to comply with the Federation's requirements. b) Conducting its business or operations in a prohibited or unauthorized manner. c) Having reduced equity to a level that puts the continuity of the cooperative in danger. d) Having exceeded in its operations the limits established in this Regulation. e) Keeping its books and accounting in such a way that it does not allow the exact appreciation of the true state of the cooperative or that the relevant records do not provide the due security. f) Having provided false information to the Federation. g) Others deemed pertinent by the Federation.

Article 41º.- Distribution of Surpluses
Cooperatives are obligated to present to the Federation an explanatory report of the agreements they may have adopted regarding the distribution of surpluses. The maximum deadline for this purpose is fifteen (15) days counted from the date the agreement is adopted.

Article 42º.- Supervision of Voluntary Liquidations
It is the responsibility of the Federation to supervise and control the voluntary liquidation processes of cooperatives, in accordance with what is established by this Regulation and the norms issued by the Superintendence.
The liquidation commissions designated within the aforementioned liquidation processes must present to the Federation a detailed report on the progress of the process under their charge, within a timeframe that cannot exceed fifteen (15) days following the end of each bimonthly period. Likewise, the Federation may request any additional information from the liquidation commissions that it requires for the adequate exercise of the supervision under its charge. The monitoring of judicial liquidation processes is the exclusive competence of the Judiciary.

SUB-CHAPTER I
INSPECTION

Article 43°.- Inspection Modalities
The Federation may conduct, without prior notice and as frequently as it deems necessary or upon request of the Superintendence, general and special inspections aimed at examining the economic-financial and administrative situation of cooperatives.

Article 44°.- General Inspections
In general inspections, the following will be evaluated preferably:
a) The observance of obligations established by the Law, the General Law, this Regulation, and other provisions of the Superintendence or the Federation. b) The fulfillment of their purposes. c) The placement and investment of their funds. d) The management of risks faced by the cooperative. e) The adequate accounting recording of operations and the correct presentation of financial statements. f) The accuracy of reports presented to the Federation. g) Internal controls. h) Other aspects related to their economic-financial, administrative progress, and compliance with their associative life. The Federation will bring to the attention of the Public Ministry facts that could be considered criminal and that it has detected during the course of the inspections it conducts, sending a copy of said report to the Superintendence.

Article 45º.- Special Inspections
Special inspections can be conducted at any time and aim to analyze and evaluate situations and cases that demand particular attention.

Article 46º.- Inspection Requirements
The cooperative subject to inspection must provide duly accredited inspectors from the Federation, under the responsibility of its directors and managers, all facilities required to fulfill their duties.
Inspectors are authorized to require, verbally or in writing, from directors and managers, the exhibition of books, documents, and reports of all types, including reports from the Supervisory Council and external auditors. Such inspectors may request information on companies in which the cooperative has equity participation. The information provided has the character of a sworn declaration. The refusal, resistance, or non-compliance by the obligated parties, provided it is duly accredited, gives rise to the imposition of any of the sanctions established in Article 49º of this Regulation.

Article 47º.- Inspection Reports
The inspections referred to in the preceding articles will result in the preparation of written reports. The content of these, in the manner established by the Federation, will be made known to the respective cooperative, so that the Board of Administration adopts the appropriate corrective measures within the timeframe specified for this effect.

Article 48º.- Confidentiality
It is prohibited for Federation personnel and members and officials of auditing societies to reveal any details of the reports referred to in the previous article or to give notice of any fact, business, or situation that they became aware of due to the fulfillment of their functions. The provisions of the preceding paragraph are excepted:
a) Information and documentation requests made by the Superintendence. b) Information requests from the Public Ministry or the Judiciary for the investigation and clarification of illegal acts. c) The part of the reports that is strictly relevant for the resolution of judicial disputes, provided there is a mandate from the competent judicial authority.

SUB-CHAPTER II

SANCTIONS 11

Article 49°.- Levels of Sanctions (10)
Article 50°.- Fines (10)
Article 51º.- Classification of Offenses (10)

Article 52°- Compliance with Sanctions (10)
Article 53º.- Reconsideration (10)

CHAPTER II
SUPERVISION OF THE SUPERINTENDENCE OVER THE FEDERATION

Article 54º.- Supervision of the Federation
The Superintendence exercises supervision and control over Federations recognized in accordance with what is provided in item 6 of the Twenty-Fourth Final and Complementary Provision of the General Law, carrying out all necessary actions to fulfill this function.

Article 55º.- Recognition
The Federation seeking to obtain recognition and exercise the supervision powers referred to in item 3 of the Twenty-Fourth Final and Complementary Provision of the General Law, must submit a request to the Superintendence attaching the following documentation:
a) List of Cooperatives affiliated with the requesting Federation. b) Copy of the statutes of the requesting Federation. c) Financial information of the requesting Federation. d) Organization, functions, and supervision procedure manuals. e) Documented curriculum vitae of the members of the Board of Administration, the General Manager, and the members of the supervision team. f) Sworn declaration of the persons indicated in the preceding subsection stating that they are not included in the impediments indicated in Article 11° of this regulation. Once recognized, the Federation will communicate to the Superintendence, within a timeframe not exceeding fifteen (15) days, any election of directors of its Administrative Council, as well as vacancies and appointment of replacements, attaching the corresponding documented curriculum vitae. Likewise, the sworn declarations referred to in subsection f) of this article must be updated and sent annually to the Superintendence, within fifteen (15) days following the holding of the Ordinary General Assembly of Members at the end of the economic year.

Article 56º.- Evaluation
The Superintendence will evaluate Federations, based on the training, specialization, suitability, and experience of their members and the efficiency and effectiveness of their supervision work, among other factors, which contribute to effective supervision of cooperatives. The provisions established in Articles 10° and 11° of this Regulation apply to the directors of the Federation and the General Manager, where pertinent.

11 Articles repealed by SBS Resolution No. 621-2003 of 05.20.2003

Article 57º.- Supervision Team 12
The Federation must adopt necessary measures to perform independently and efficiently the supervision function assigned to it by item 3 of the Twenty-Fourth Final and Complementary Provision of the General Law. This function must be exercised by an organizational unit duly differentiated that has suitable professionals for the development of said function, as well as the infrastructure and resources established by the competent body of the Federation in accordance with its Statute. The person in charge of said organizational unit and the supervision team personnel under their charge must be persons who meet conditions of professional and moral suitability, as well as have adequate experience for the development of such functions. The appointment and removal of the person in charge of said unit must be communicated to the Superintendence within five days following its occurrence, attaching the corresponding curriculum vitae in the case of appointment, as well as indicating the reasons supporting the separation in the case of removal.

Article 58º.- Reports to the Superintendence
The Federation will present to the Superintendence, with the periodicity and form it determines, information on its functioning and results of its supervision work.

Article 59º.- Audits
The Federation must have an Internal Audit Unit, which will be subject, where pertinent, to internal audit norms issued by the Superintendence.
The Federation must be audited annually by an External Audit Society registered in the Unique Registry of Audit Societies – RUNSA, in accordance with the provisions on the matter established by the Superintendence.

Article 60º.- Federation Budget 13

Article 61º.- Contingency Fund
Resources of the Contingency Fund referred to in subsection h) of Article 39° of this regulation are:
a) Fines imposed by the Federation in accordance with Article 49° of this regulation. b) Deposits without movement for more than 10 years by members of cooperatives. c) Favorable balances resulting from the liquidation of the cooperative not claimed for more than five (5) years by interested parties. d) The yield of its assets. e) Premiums paid by cooperatives in accordance with respective regulations. f) Others determined by the regulation issued by the Superintendence for the adequate functioning of the Contingency Fund.

Article 62º.- Other Provisions
The following provisions apply to the Federation:
a) The Federation may submit proposals to the Superintendence for the approval of norms applicable to the operations and supervision of cooperatives.

12 Article substituted by SBS Resolution No. 621-2003 of 05.20.2003 13 Article repealed by SBS Resolution No. 621-2003 of 05.20.2003

b) If, as a result of the supervision and control actions carried out by the Superintendence on the Federation, the commission of faults or negligence in their functions by any director, General Manager, or employee of the Federation is detected, the sanctions established in Article 361 of the General Law will be applicable, as appropriate and according to the severity of the fault.

c) The Superintendence may appoint a representative to attend as an observer to the meetings of the Administration Council of the Federation, when deemed appropriate.

FINAL PROVISIONS

FIRST:
The norms contained in these Regulations also apply, where pertinent, to “Cooperative Central Savings and Credit Federations” (Centrales Cooperativas de Ahorro y Crédito).

SECOND:
These Regulations also apply to multiple-service cooperatives that are predominantly carrying out savings and credit activities, which must modify their statutes to adapt their activities and operations to the provisions of these Regulations.

THIRD:
Cooperatives may transfer from one supervised Federation to another only after having remained for at least one complete economic year under the supervision of the Federation they originally chose or in the last transfer, as appropriate, prior to the favorable opinion of the Superintendence.

Likewise, they may not change the Federation chosen for the registration procedure referred to in Article 3 of these Regulations, during the year following the denial of registration, counted from the corresponding notification by the relevant registry office.

TRANSITIONAL PROVISIONS

FIRST:
Until there is another Federation recognized by this Superintendence, the supervision of all savings and credit cooperatives not authorized to operate with public funds will be the responsibility of FENACREP. This supervision includes the multiple-service cooperatives referred to in the second final provision of these Regulations.

SECOND:
Until the Contingency Fund referred to in Article 39, subsection h), is constituted and regulated, the Federation will open intangible accounts in multiple-operation companies of the financial system rated in category A, where it will deposit amounts resulting from sanctions imposed under these Regulations and other resources of the Fund.

THIRD:
The statutory and functional modifications that must be made in accordance with the provisions of the Second Final Provision of these Regulations must be carried out within a period of 180 days of its entry into force and communicated to the Federation.

FOURTH:
Cooperatives will adapt to the global limit referred to in Article 23, subsection a), within a period not exceeding December 31, 2000, reducing by December 31, 1999, and by June 30, 2000, at least 50% and 75%, respectively, of the excess over said limit recorded at the time of entry into force of these Regulations. Likewise, the level of excess over said limit existing at the date of entry into force of these Regulations may not be increased. For this purpose, they will submit a compliance program to the Federation within 15 days following the entry into force of these Regulations.

FIFTH:
Cooperatives will adapt to the limits referred to in Article 23, with the exception of subsections a) and d), within a period not exceeding December 31, 1999.

In the case of the limit indicated in subsection d) of the aforementioned article, the compliance period will not exceed December 31, 2000, and a schedule of progressive compliance must be submitted for the Federation's approval within 15 days following the entry into force of these Regulations.

The levels of limit excess existing at the date of publication of these Regulations may not be increased.

SIXTH:
Cooperatives that are in operation at the time this regulation is issued must adapt their operations and statutes to the provisions contained in these Regulations within a period of one hundred eighty (180) calendar days from the date of its approval(1).

SEVENTH:
FENACREP must modify its statutes in accordance with the provisions of these Regulations within 60 days following the start of their entry into force.

EIGHTH: 14

(1) Deadline extended until 04.30.2000 by SBS Resolution No. 022-2000 of 01.11.2000

14 Provision repealed by SBS Resolution No. 621-2003 of 05.20.2003