Resolution No. 445-2000: Special Rules on Linkage and Economic Groups

Lima, June 28, 2000
SBS Resolution
No. 445-2000
The Superintendent of Banking and Insurance

CONSIDERING:

That, by SBS Resolution No. 001-98 of January 2, 1998, special rules on linkage and economic groups applicable to companies supervised by this Superintendency were approved for the application of the provisions of the General Law of the Financial System and the Insurance System and the Organic Law of the Superintendence of Banking and Insurance, Law No. 26702, modified by Laws No. 27008 and 27102, hereinafter General Law;

That, it is necessary to clarify the definitions of linkage and economic groups taking into account the experience obtained in the supervision of the application of the aforementioned rules, as well as the provisions of Article 203 of the General Law;

That, furthermore, it is necessary to regulate the information requirements regarding the economic groups of debtors of financial system companies for the purpose of supervising the concentration limits provided for in the General Law and other provisions issued by this Superintendency;

That, consequently, it is convenient to adapt the special rules on linkage and economic groups;

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

And, in exercise of the powers conferred by numbers 7, 9, 11 and 13 of Article 349 of the General Law;

RESOLVES:

Article First.- Approve the special rules on linkage and economic group, which form an integral part of this Resolution.

Article Second.- This Resolution enters into force on July 1, 2000, from which date SBS Resolution No. 001-98 of January 2, 1998 is repealed.

Register, communicate and publish,

MARTÍN NARANJO LANDERER
Superintendent of Banking and Insurance

SPECIAL RULES ON LINKAGE AND ECONOMIC GROUP

CHAPTER I
GENERAL ASPECTS

Article 1.- Scope
This rule establishes the definitions of single-risk linkage, economic group, financial conglomerate, mixed conglomerate and non-financial conglomerate, which will apply to what is established in the General Law and in the rules issued by this Superintendency for the purpose of regulating it.

Article 2.- Definitions
For the application of this device, the following definitions shall be considered:

a. Advisors: Natural or legal persons who provide temporary or permanent advisory services to a legal person and have influence in the decisions of its governing bodies.

b. Clients: Natural or legal persons who have received financing from companies in the financial system or the insurance system. Financing received from financial system companies is understood to mean credits, investments, contingencies and financial leasing operations. In the case of financing received from insurance system companies, guarantees and mortgage loans are considered.

c. Holding company: A legal person whose main activity is the holding of shares or participations in the share capital of other legal persons, over which it exercises control as provided in Article 8 of this rule.

d. Relatives: Relatives up to the second degree of consanguinity and the first degree of affinity.

e. Persons: Natural and/or legal persons.

f. Key officials: Officials who have decision-making capacity on matters of relevance within a legal person.

CHAPTER II
SINGLE-RISK LINKAGE

Article 3.- Definition
Single-risk linkage is understood as the relationship between two or more natural and/or legal persons where the financial or economic situation of one person affects the other or others, such that when one of them has financial or economic problems, the other or others could find themselves in difficulties to meet their obligations.

There is single-risk linkage between legal persons belonging to the same economic group, and between them and the natural persons who exercise control over said economic group, as provided in Articles 8 and 9 of this rule; as well as in other cases where the provisions of the previous paragraph are met.

Likewise, it is presumed that single-risk linkage exists between spouses, between natural and/or legal persons who have a relationship of ownership and/or management in accordance with Articles 4 and 5 of this rule, unless proof to the contrary is provided.

Article 4.- Ownership relationships
An ownership relationship exists when the shares or participations with voting rights that a person owns directly and indirectly represent 4% or more of the shares or participations with voting rights of a legal person. Likewise, it is considered that the ownership relationship involves the persons through whom the aforementioned indirect ownership is held.

It is considered that a person has indirect ownership of a legal person in the following cases:

a) When the spouse or relatives of a natural person are direct owners of shares or participations with voting rights of a legal person.

b) When a person has ownership of a legal person through another or other legal persons in accordance with Annex A of this rule.

Article 5.- Management relationships
Management relationships exist in the following cases:

a) Between the natural persons who exercise control of an economic group as provided in Article 8 of this rule.

b) Between the director, manager, advisor or key official of a legal person and the shareholder or partner of the latter as established in the previous article.

c) When a person is the ultimate beneficiary of the financing granted to another person.

d) When a person is represented by another person.

e) Between legal persons that have common directors, managers, advisors or key officials.

f) When it can be affirmed from the official documentation of a legal person that it acts as a division or department of another legal person.

g) Between legal persons when there is direct commercial dependence that is difficult to substitute in the short term.

h) When the obligations of a person are guaranteed or financed by another person, provided that it is not a financial system company.

i) When the same guarantee backs the obligations of two or more persons or there is a transfer of guarantees between them.

j) When the resources for the development of the activities of a legal person come directly or indirectly from another legal person.

k) Between legal persons that have common shareholders or partners who have the possibility of appointing, vetoing or removing at least one member of the board of directors or equivalent body of said persons.

l) Between a person and a legal person when the former is a director, manager, advisor or key official of the latter or has held any of these positions at any time during the last twelve (12) months.

m) Between a person and an economic group when the former is a director or manager of a legal person belonging to said economic group or has held any of these positions at any time during the last twelve (12) months.

The Superintendency may presume the existence of management relationships between natural and/or legal persons due to the volume, periodicity or other conditions of the operations between them, unless proof to the contrary is provided.

Article 6.- Individual limits
For the calculation of the individual limits established in the General Law, the definition of single-risk linkage shall be considered in accordance with the provisions of this chapter.

Companies must control these limits permanently by monitoring operations carried out with all their clients.

Article 7.- Application of the limit of Article 202 of the General Law 1

1 Article modified by SBS Resolution No. 472-2006 of 06/04/2006

For the purposes of applying the limit referred to in Article 202 of the General Law, natural or legal persons who have direct and indirect ownership in the company in accordance with Article 4 of this rule are considered linked by ownership.

Likewise, the following persons are considered to have significant influence in management:

a) Those natural or legal persons that maintain management relationships with the company according to letters c), d), e), j), k), l) and m) of Article 5 of this rule; unless proof to the contrary of the existence of such influence is provided;

b) Those legal persons that belong to their economic group.

The Superintendency may apply other presumptions of significant influence in management based on the results of supervision work, such as those contemplated in the last paragraph of Article 5 of this rule.

It will also be presumed that there is linkage by ownership or significant influence in management with those legal persons that have received financing whose shares are bearer shares or whose shareholders are themselves legal persons with bearer shares, unless proof to the satisfaction of the Superintendency is provided.

CHAPTER III
ECONOMIC GROUP

Article 8.- Definition
An economic group is understood as the set of national or foreign legal persons, composed of at least two legal persons, when any of them exercises control over the other or others, or when control over the legal persons corresponds to one or more natural persons who act as a decision-making unit.

Economic groups are classified into financial conglomerate, mixed conglomerate and non-financial conglomerate.

Article 9.- Control
Control is defined as the preponderant and continuous influence in the decision-making of the governing bodies of a legal person.

Control can be direct or indirect. Control is direct when a person exercises more than half of the voting power in the general meeting of shareholders or partners of a legal person through direct or indirect ownership, usufruct contracts, pledge, trust, syndication or other means.

Likewise, control is indirect when a person has the power to appoint, remove or veto the majority of the members of the board of directors or equivalent body, to exercise the majority of votes in board of directors or equivalent body meetings, or to govern operational and/or financial policies; even if it does not exercise more than half of the voting power in the general meeting of shareholders or partners.

Article 10.- Presumptions of control
It is presumed, unless proof to the contrary is provided, that an economic group exercises control over a legal person when the majority of the members of the board of directors or equivalent body of this legal person are linked by single risk to the economic group.

Likewise, this Superintendency may, for prudential reasons, establish additional presumptions to those considered in this article.

Article 11.- Financial conglomerate
The financial conglomerate is the economic group integrated by legal persons that are included in Articles 16 and/or 17 of the General Law, and/or by the following persons:

• Holding companies.
• Intermediary agents in the securities market.
• Mutual fund and investment fund management companies.
• Securitization companies.
• Special purpose companies.
• Pension fund management companies.
• Health service providers.
• Others, whose corporate object, in the judgment of this Superintendency, is compatible with that of the aforementioned ones.

Article 12.- Mixed conglomerate
The mixed conglomerate is the economic group composed of at least two legal persons, when one of them is included in Articles 16 or 17 of the General Law; and the other is not included in Article 11 of this rule.

Article 13.- Non-financial conglomerate
The non-financial conglomerate is the economic group integrated by legal persons that are not included in Article 11 of this rule.

Article 14.- Incorporation of a person into an economic group
The incorporation of a legal person into an economic group is determined based on the date of acquisition of its shares or participations with voting rights with which direct control is reached or the date of validity of the agreements, contracts, regulations or existence of other means with which indirect control is obtained as referred to in Article 9 of this rule.

CHAPTER IV
SUBMISSION OF INFORMATION

Article 15.- Information on economic groups of supervised companies
The companies indicated in Articles 16 and 17 of the General Law must submit to this Superintendency, within a period not exceeding January 15 of each year, Report No. 19 "Information on the Economic Group of the Company" (which includes Reports No. 19-I and No. 19-II) and No. 19-A "Information on legal persons that are part of the company's economic group", in accordance with the established formats. 2

In the case that two or more companies that are part of an economic group are obliged to present such information, it must be presented only by the one that has majority participation in the assets of the economic group.

Likewise, when it is not possible to determine said company, the Superintendency will indicate the responsible party.

Article 16.- Information on persons representing single risk
Multiple operations, financial leasing, insurance and reinsurance companies must submit semi-annually to this Superintendency, within a period not exceeding January 15 and July 15 of each year, Report No. 20 "Information on Clients Representing Single Risk" and Report No. 20-A "Information on Persons Representing Single Risk Clients", in accordance with Annexes D and E (*) of this rule.

For the purposes of submitting the information referred to in the previous paragraph, said companies must consider at least their two hundred (200) largest clients. Likewise, they will not consider in the submission of information the clients reported for the purposes of Articles 15 and 18 of this rule.

2 Paragraph modified by SBS Resolution No. 272-2014 of January 16, 2014.
(*) Modified by Errata published on 13.07.2000

Article 17.- Modification of the composition of the economic groups of supervised companies. 3

3 Article modified by SBS Resolution No. 272-2014 of January 16, 2014.

Any modification with respect to the information presented in accordance with the provisions of Article 15 of this chapter, will result in the reports being resubmitted within fifteen (15) calendar days following the close of the month in which said modification occurred.

Article 18.- Report on financing to linked parties of supervised companies
Multiple operations companies and financial leasing companies must submit to this Superintendency, within fifteen (15) calendar days following the close of each quarter, Report No. 21 "Financing to Linked Parties to the Company" and No. 21-A "Information on Legal Persons Linked to the Company", whose formats are attached in Annexes F and G (*) of this rule.

Article 19.- Character of sworn declaration
The information required in this chapter has the character of a sworn declaration, with the board of directors and management of the company responsible for the presentation being responsible for the truthfulness and timeliness of its presentation, in accordance with Articles 87 and 92 of the General Law.

CHAPTER V
SUPERVISION AND ITS COLLABORATORS

Article 20.- Investigation on linkage and/or economic groups
This Superintendency is empowered to establish the existence of financial or mixed conglomerates, in accordance with number 11 of Article 349 of the General Law, and for this purpose, ex officio or at the instance of a party, may initiate investigations to determine the existence of economic groups, as well as to determine the existence of linkage.

To this end, it may also request information it deems pertinent from companies subject to its supervision, their shareholders, directors, managers, advisors and key officials, risk rating companies, audit firms, experts registered in the REPEV and insurance auxiliaries, and any other natural or legal person, even if they are not included within the scope of its competence, in accordance with Article 356 of the General Law.

Article 21.- Internal Audit Unit
The internal audit unit must incorporate into the Annual Work Plan the evaluation of compliance with the provisions of this rule.

Article 22.- External Audit Firm
External audit firms must issue in their Report on the Internal Control System an opinion regarding compliance with the provisions of this rule.

Article 23.- Coordination with Supervisory Bodies
This Superintendency will coordinate with other national or foreign supervisory bodies for the purpose of obtaining information that allows determining the existence of linkage or economic group.

(*) See Reports Nos. 21 and 21-A referred to in Article 18 of this rule in Accounting Manual (Chap. V)

FINAL AND TRANSITORY PROVISIONS

First Provision.- Kinship relationship
The reference to kinship relationship in other provisions issued by this Superintendency prior to this rule shall be understood to refer to spouses and relatives, as stated in Article 2 of this rule, unless contrary provision of this control body.

Second Provision.- Reference to SBS Resolution No. 001-98 Any reference to SBS Resolution No. 001-98, as well as to the special rules on linkage and economic group, shall be understood as referring to this rule. Likewise, any reference to the term linkage in rules issued by this control body prior to this rule shall be understood in accordance with the definitions established in this rule.

Third Provision.- Commercial Report
The Complementary Provision of SBS Circular No. B-1931-92, F-274-92, M-273-92, EAF-131-92, CM-126-92, CR-017-92 of December 29, 1992 is repealed from August 1, 2000.

Fourth Provision.- Deadline for submission of information Supervised companies must submit to this Superintendency the information established in Article 18 of this rule starting from the information corresponding to the third quarter of the current year. The information required in Article 16 must be presented starting from January 15, 2001.

ANNEX A
CALCULATION OF INDIRECT OWNERSHIP

The indirect ownership of a natural or legal person through a legal person is determined as follows:

PN1 --> PJ2 --> PJ3 ...... PJ(n-1)% --> PJ(n)
P1% P2% P(n-1)%

PJ1 --> PJ2 --> PJ3 ...... PJ(n-1)% --> PJ(n)
P1% P2% P(n-1)%

Where K% is the percentage of participation of PN1 or PJ1 in PJ(n)

1. If P1 % <= 50%:
   K% = P1% * P2% * .... * P(n - 1)%

2. If P1% > 50%, P1% is considered 100%:

a) Where P2 % <= 50%
K% = 100% * P2% * .... * P(n - 1)%

b) Where P2 % > 50% P2% is considered 100%:
K% = 100% * 100% * P3% * .... * P(n - 1)%, and so on.

PJ: Legal person
PN: Natural person
Pi%: Percentage of participation of the natural or legal person “i” in the share capital of legal person “i+1”. For i = 1, 2, 3, ... , n-1.