Resolution No. 1081-99: Mortgage Bond Regulations

Lima, December 7, 1999
Superintendence of Banking and Insurance Resolution No. 1081-99

The Superintendent of Banking and Insurance

CONSIDERING:

That, Article 221 of the General Law of the Financial System and of the Insurance System and the Organic Law of the Superintendence of Banking and Insurance, Law No. 26702, modified by Laws No. 27008 and No. 27102, hereinafter the General Law, authorizes companies in the financial system to grant mortgage loans and, in relation to them, to issue securities and mortgage instruments, both in national and foreign currency;

That, it is necessary to provide companies in the financial system with instruments that can be used by them to finance their mortgage operations;

That, said financial instruments must contribute to said supervised companies maintaining an adequate correspondence between the terms of their deposits and the respective mortgage placements as required by Article 178 of the General Law;

That, in this sense, it is convenient to establish a regulatory framework that promotes the issuance and placement of mortgage bonds as a mechanism that allows companies in the financial system to achieve the objectives set forth in the preceding paragraphs as well as to dynamize the mortgage market in Peru;

That, under the protection of Article 235 of the General Law, this Superintendence is authorized to establish the regulations under which the different mortgage instruments contained in said Law are issued;

Being in accordance with the opinion of the Deputy Superintendencies of Banking, of Insurance and of Legal Advice, as well as the Economic Studies Management;

And, in exercise of the powers conferred by paragraphs 7, 9 and 13 of Article 349 of said General Law.

RESOLVES:

First Article.- Approve the Mortgage Bond Regulations, which form an integral part of this Resolution.

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

Register, communicate and publish,

MARTÍN NARANJO LANDERER
Superintendent of Banking and Insurance

MORTGAGE BOND REGULATIONS

CHAPTER I
GENERAL ASPECTS

Article 1.- Definition
The mortgage bond is a security that confers on its holders credit rights that are backed by existing or future credits with mortgage guarantee, and where the raised resources are destined exclusively to the financing of the acquisition, construction and/or improvement of real estate.

Article 2.- Authorized Companies 1
Banking companies, financial companies and other multiple-operation companies that obtain authorization in accordance with the Regulation for the Expansion of Operations in force, as well as Mortgage Administration Companies, hereinafter companies, are authorized to issue mortgage bonds.

Article 3.- Backing 2
Mortgage bonds must be backed by existing or future credits with mortgage guarantee. Said credits will have preferential first-rank mortgage guarantee. Said guarantee is included in the exception provided for in the first paragraph of Article 172 of the General Law.

Mortgage bonds may have other guarantees, except for the fixed assets of the companies, in accordance with what is established in paragraph 6 of Article 217 of the General Law.

Article 4.- Mortgage Guarantee 3
The exception established in the first paragraph of Article 172 of the General Law regarding the mortgage guarantee must be recorded in the respective contract or through any other instrument that accredits said exception treatment.

Article 5.- Execution of the mortgage guarantee 4
The execution of the mortgage guarantee will be carried out in accordance with the regulations established in the Civil Procedural Code for the execution of guarantees.

Article 6.- Additional Characteristics
Mortgage bonds, in addition to the characteristics established in the preceding articles, present the following:

1. They may be issued through series or issuance programs.

2. They must be issued for an amount lower than the mortgage-backed credits that back them. The difference is determined based on the projection of the delinquency and prepayment of said credits, on the expenses linked to the issuance, placement and negotiation of the mortgage bonds, as well as on any other aspect that could affect the possibility of payment to the holders of the referred bonds.

3. The principal and coupons of the mortgage bonds can be negotiated at the option of the holder, jointly or independently, as established in the public deed of issuance.

4. The assets backing the mortgage bonds and their corresponding liabilities form part of the concepts excluded from the mass, in accordance with what is provided in paragraph 2 of Article 118 of the General Law. In the event that a company is subjected to the intervention regime, this Superintendence will order the transfer of the assets and liabilities linked to the issuance of mortgage bonds, including the credits with mortgage guarantee that back them with their corresponding guarantees and, if applicable, the other guarantees of the mortgage bonds, through contests to another company or companies.

CHAPTER II
OF THE ISSUANCE AND PLACEMENT

Article 7.- Authorization of the Superintendence 5
The issuance of mortgage bonds requires the prior favorable opinion of this Superintendence in accordance with what is provided by Article 232 of the General Law. For this purpose, companies must present to this Superintendence a request with the information and documentation indicated in the following article. This Superintendence has a period of 30 business days following the presentation of said request with complete information and documentation to issue its pronouncement.

Article 8.- Requirements for the issuance of mortgage bonds 6
Companies must attach to the request referred to in the previous article, a certified copy of the agreement of the corresponding corporate body; a technical study of the issuance and a copy of the draft issuance contract.

Article 9.- Technical Study 7
The technical study will comprise an evaluation report on the impact of the financial instrument on the risk profile of the issuing company, which will consist of:

1. Executive Summary
   Main aspects of the impact study on the company's risk profile.

2. Background
   2.1. Objectives of the issuance and destination of resources.
   2.2. Risk classification of the company.
   2.3. Previous issuances of the company and their risk classifications.
   2.4. Legal framework and tax treatment.

3. Description of the Program / Issuance.
   3.1 Characteristics of the issuance and of the financial instrument.
   3.2 Projected schedule for the issuances.

4. Market Analysis

5 Article 7 modified by SBS Resolution No. 12878-2009 of 10/09/2009.
6 Article 8 modified by SBS Resolution No. 12878-2009 of 10/09/2009.
7 Article 9 modified by SBS Resolution No. 12878-2009 of 10/09/2009.

4.1 Situation and perspectives of the credit market.
4.2 Analysis of the company's credit portfolio.
4.3 Analysis of the supply and demand of the financial instrument. Potential Investors.

5. Economic and Financial Evaluation.
   5.1 Risk analysis:
   Impact on interest rate risk: gains at risk and equity at risk.
   Impact on exchange rate risk: limits on the global position of overselling and overbuying.
   Impact on liquidity risk: liquidity ratio, liquidity gaps and concentration of liabilities for structured financial products: design, yield, risks and hedging mechanisms.

5.2 Impact on financial indicators:
Effective equity and leverage
Other financial indicators.
Asset and liability structure.

5.3 Financial Projections.
Assumptions of the projections.
Estimation of issuance rates.
Projected cash flow of the issuances (monthly flows).
Impact on income statement.
Net present value – Sensitivity analysis (scenarios).

Article 10.- Placement
Mortgage bonds may be placed through public or private offering. For the purposes of placement through public offering, companies must adhere to what is established by Article 232 of the General Law, the provisions issued by this Superintendence, the Securities Market Law, those established by the National Commission for the Supervision of Companies and Securities (CONASEV) and the other provisions in force on the matter.

Article 11.- Supplementary Application Rules
The provisions of the General Law of Companies will be applicable in a supplementary manner to this chapter.

CHAPTER III
OF THE INVESTORS

Article 12 - Preferred Guarantees 8
Financial system companies will consider as preferred guarantees in accordance with what is provided in the Regulation for the Evaluation and Classification of the Debtor and the Requirement of Provisions in force, the following:

1. The first movable guarantee on mortgage bonds issued in accordance with the provisions of this regulation; and,
2. The guarantee trust constituted by mortgage bonds issued in accordance with the provisions of this regulation.”

Article 13.- Investment limit for multiple-operation companies
The investment in mortgage bonds made by the multiple-operation companies indicated in letter A of Article 16 of the General Law is included within the global limit indicated in paragraph 4 of Article 200 of the General Law.

Article 14.- Investments made by insurance and reinsurance companies 9

CHAPTER IV
OF ACCOUNTING REGISTRY AND FINANCIAL STATEMENTS

Article 15.- Modifications to the Chart of Accounts and Financial Statements 10

Article 16.- Modifications to the Accounting Manual 11
The accounting of Mortgage Bonds is subject to the provisions established in the Accounting Manual for companies in the Financial System, approved by Resolution No. 895-98 of September 1, 1998 and its modifying norms.

FINAL AND TRANSITIONAL PROVISIONS

Article 17.- Modification to the Regulation on Eligible Investments of Companies in the Insurance System 12

Article 18.- Adaptation Period 13

1 Article modified by SBS Resolution No. 12878-2009 of 10/09/2009.
2 Modified by SBS Resolution No. 0250-2000 of 07.04.2000 3 Modified by SBS Resolution No. 023-2001 of 16.01.2001 4 Modified by SBS Resolution No. 023-2001 of 16.01.2001

5 Article 7 modified by SBS Resolution No. 12878-2009 of 10/09/2009.
6 Article 8 modified by SBS Resolution No. 12878-2009 of 10/09/2009.
7 Article 9 modified by SBS Resolution No. 12878-2009 of 10/09/2009.

8 Article 12 modified by SBS Resolution No. 12878-2009 of 10/09/2009.

9 Article 14 repealed by SBS Resolution No. 039-2002 of 16.01.2002 and SBS Resolution No. 12878-2009 of 10/09/2009.
10 Article 15 eliminated by SBS Resolution No. 12878-2009 of 10/09/2009.
11 Article 16 modified by SBS Resolution No. 12878-2009 of 10/09/2009.
12 Article 17 eliminated by SBS Resolution No. 12878-2009 of 10/09/2009.
13 Article 18 eliminated by SBS Resolution No. 12878-2009 of 10/09/2009.