Resolution No. 0964-2002: Rules for Investment in Instruments Traded Through Non-Centralized Trading Mechanisms

Lima, October 2, 2002
Superintendency of Banking and Insurance Resolution No. 964-2002

The Superintendent of Banking and Insurance

CONSIDERING:

That, Article 8 of the General Law of the Financial System and the Insurance System and the Organic Law of the Superintendency of Banking and Insurance, Law No. 26702 and its amendments, hereinafter the General Law, establishes that companies in the financial system enjoy freedom to allocate the resources of their portfolios, with the limitations set forth in said Law, and must always observe the criterion of risk diversification;

That, Article 221 of the General Law in its items 17, 19, and 27 authorizes companies in the financial system to acquire, hold, and sell instruments representing private debt for the trading portfolio only when they are subject to some centralized trading mechanism in accordance with the relevant law, participation certificates in mutual funds and investment funds as participants, and to participate as investors in securitization processes, subject to the provisions of the Securities Market Law, respectively;

That, item 44 of Article 221 of the General Law states that financial system companies may carry out operations and services not specified in the aforementioned article provided they meet the requirements established by this Superintendency through general rules, with the prior opinion of the Central Reserve Bank of Peru, hereinafter the Central Bank;

That, with the aim of contributing to adequate diversification, as well as promoting greater transparency of the investment portfolios of companies in the financial system, it is necessary to establish the conditions for them to invest in instruments that are traded through non-centralized trading mechanisms;

That, through Letter No. I220-LB-067, dated August 23, 2002, the Central Bank communicated its favorable opinion to this Superintendency regarding the Rules for Investment in Instruments Traded Through Non-Centralized Trading Mechanisms, the subject of the present resolution.

Given the opinion of the Deputy Superintendencies of Banking and Legal Advice, as well as the Economic Studies Department; and,

In exercise of the powers conferred by items 7 and 9 of Article 349 of the General Law;

RESOLVES:

Article First.- Approve the Rules for Investment in Instruments Traded Through Non-Centralized Trading Mechanisms, which forms an integral part of this Resolution.

Article Second.- Substitute Article 9 of the Regulation on the Classification, Valuation, and Provisions of Investments of Companies in the Financial System, approved by SBS Resolution No. 1053-99 and modified by SBS Resolution No. 777-2000, in the following terms:1

Article Third.- Modify Chapter IV “Description and Dynamics of Accounts” of the Accounting Manual for Companies in the Financial System, approved by SBS Resolution No. 895-98 and its amendments, as indicated in the Annex of this rule2.

Article Fourth.- This Resolution shall enter into force the day following its publication in the Official Newspaper “El Peruano”.

Register, communicate, and publish,

JUAN JOSÉ MARTHANS LEÓN
Superintendent of Banking and Insurance

1 The amendment has been incorporated into SBS Resolution No. 1053-99 2 The amendments are already incorporated into the Accounting Manual

RULES FOR INVESTMENT IN INSTRUMENTS TRADED THROUGH NON-CENTRALIZED TRADING MECHANISMS

Scope

Article 1.- The provisions of this rule are applicable to banking and financial companies, as well as to other companies authorized to operate in module 2, referred to in Article 290 of the General Law, hereinafter companies.

Requirements for investing in instruments traded through non-centralized trading mechanisms

Article 2.- Companies may acquire, hold, and sell securities representing private debt, including securitization instruments, as well as participation certificates in mutual funds and investment funds, through non-centralized trading mechanisms, provided the following conditions are met:

a) The intermediaries operating in the aforementioned mechanism must be duly authorized to operate as such, and be regulated and supervised by the competent authorities of the corresponding market.

b) Regarding debt securities, the acquired value must have a current risk classification; if, in the opinion of this Superintendency, the acquisition cost of the security does not reflect its true risk classification, the corresponding provisions will be required. In the case of issuances abroad, the classification must not be lower than BBB- for long-term instruments and A-3 for short-term instruments, in accordance with the equivalences established in Annex B of SBS Resolution No. 1053-99 and its amendments 3.

c) For issuances abroad, the price of the security must continuously appear in Bloomberg, Reuters, or similar electronic information services.

d) In the case of participation certificates in mutual funds and investment funds, the management companies of said funds must be supervised and regulated by the authorities of the corresponding financial or securities market. Likewise, the composition of their portfolio must be made public at least on a monthly basis.

e) Regarding structured instruments, they are exempt from the requirement set forth in item c) of this article, provided that the prices of the underlying assets that allow their valuation appear in said electronic information services and the company has valuation methodologies that capture all their material sources of risk. Without prejudice to this, they must additionally be subject to the rules on investment in structured instruments established by this Superintendency.4

Once the adaptation period referred to in Article 5 of this rule has expired, if, in the opinion of this Superintendency, an instrument does not meet any of the aforementioned requirements, this Control Body will order its liquidation within a determined period. Likewise, if, in the opinion of this Superintendency, the book value of the title does not reflect the market value associated with its risk, additional provisions will be required.

Investment Regulation

Article 3.- Companies must observe, in the operations they carry out with instruments traded through non-centralized trading mechanisms, the provisions of the Regulation on the Classification, Valuation, and Provisions of Investments of Companies in the Financial System, approved by SBS Resolution No. 1053-99 and its amendments.

3 Item modified by SBS Resolution No. 1454-2003 of October 16, 2003 4 Item incorporated by SBS Resolution No. 1349-2008 of May 6, 2008.

The investments referred to in this provision may only be classified in the categories Available-for-Sale Trading Investments and Financial Investments to Maturity.

Internal Limits

Article 4.- Companies must establish internally limits on risk exposure for positions in the investments referred to in this rule, in accordance with Article 13 of the Market Risk Regulation, approved by SBS Resolution No. 509-98.

The approval of these limits must be recorded in the Minutes of the corresponding Committee. Likewise, these limits must be made known to this Superintendency.

Adaptation Period

Article 5.- For the application of Articles 2 and 4 of this rule, companies will have an adaptation period that will expire on December 31, 2002.