Resolution SBS No. 5790-2014: Regulation of Reporting Operations Applicable to Financial System Companies

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 Lima, September 1, 2014 Resolution S.B.S.
No. 5790-2014

The Superintendent of Banking, Insurance and Private Pension Fund Administrators:

CONSIDERING:

That, by Resolution SBS No. 1067-2005 of July 19, 2005 and its modifying norm, the Regulation of Reporting Operations and Repurchase Agreements was approved, establishing the regulatory framework applicable to reporting operations and repurchase agreements;

That, by Law No. 30052 promulgated on June 26, 2013, the Law on Reporting Operations was approved, establishing that the Superintendence of Banking, Insurance and AFP, within the scope of its competence, must publish the regulatory provisions and minimum characteristics of the framework contracts referred to in said law;

That, by Legislative Decree No. 1028 promulgated on June 21, 2008, the General Law of the Financial System and the Insurance System and Organic Law of the Superintendence of Banking and Insurance - Law No. 26702 and its modifying norms, hereinafter General Law, were modified, to allow the implementation in our country of the standards recommended by the Basel Committee on Banking Supervision referred to capital measures and norms;

That, by Resolution SBS No. 6328-2009 of June 18, 2009 and its modifying norm, the Regulation for the Requirement of Effective Equity for Market Risk was approved, in which the methodology that companies must apply, as well as the requirements they must meet to calculate the requirement of effective equity for market risk under the standard method or under the internal models method, are established;

That, by Resolution SBS No. 14354-2009 of October 30, 2009 and its modifying norms, the Regulation for the Requirement of Effective Equity for Credit Risk was approved, in which the methodology that companies must apply, as well as the requirements they must meet to calculate the requirement of effective equity for credit risk under the standard method or under methods based on internal ratings, are established;

That, by Resolution SBS No. 7033-2012 of September 19, 2012, the new Regulation for the Classification and Valuation of Investments of Financial System Companies was approved, with the aim of harmonizing the regulations with International Financial Reporting Standards (IFRS);

That, by Circular No. B-2148-2005, F-0488-2005, S0613-2005, CM-0335-2005, CR-0204-2005, EAF-0231-2005, EDPYME-0119-2005, FOGAPI-0026-2005 of July 22, 2005 and its modifying norms, the regulations for the application of operational limits referred to in articles 201 to 212 of the General Law were approved;

That, by Resolution SBS No. 1737-2006 of December 28, 2006 and its modifying norms, the Regulation for the Negotiation and Accounting of Financial Derivative Products in Financial System Companies was approved;

That, by Circular SBS No. G-155-2011 of January 14, 2011, the Minimum Conditions of Framework Contracts for the Purpose of Offsetting Operations were approved;

That, it is necessary to modify the Regulation of Reporting Operations and Repurchase Agreements to allow the development of sale operations with commitment to repurchase, simultaneous sale and purchase of securities and temporary transfer of securities; as well as to adapt it to what is provided in Law No. 30052, to IFRS and to the standards recommended by the Basel Committee on Banking Supervision referred to capital measures and norms;

That, likewise, it is necessary to modify the Regulation for the Classification and Valuation of Investments of Financial System Companies; Circular No. B-2148-2005, F-0488-2005, S-0613-2005, CM-0335-2005, CR-0204-2005, EAF-0231-2005, EDPYME0119-2005, FOGAPI-0026-2005 and its modifying norms; the Regulation for the Negotiation and Accounting of Financial Derivative Products in Financial System Companies and its modifying norms; the Regulation for the Requirement of Effective Equity for Market Risk and its modifying norm; the Regulation for the Requirement of Effective Equity for Credit Risk and its modifying norms; as well as Circular SBS No. G-155-2011; to adapt them to the Regulation approved by means of this Resolution;

That, in order to collect the opinions of the general public regarding the proposed modifications to the financial system regulations, the pre-publication of the draft resolution was ordered on the electronic portal of the Superintendence, under the provisions of Supreme Decree No. 001-2009-JUS;

Having the approval of the Adjunct Superintendencies of Banking and Microfinance, Risks, Economic Studies and Legal Advice; and,

In exercise of the powers conferred by numbers 7, 9 and 13 of article 349 of the General Law;

RESOLVES:

Article First.- Approve the Regulation of Reporting Operations applicable to Financial System Companies, as indicated below.

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“REGULATION OF REPORTING OPERATIONS APPLICABLE TO FINANCIAL SYSTEM COMPANIES”

TITLE I
GENERAL PROVISIONS

Article 1°.- Scope
This regulation applies to the companies included in letters A and B of article 16 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 and its modifying norms, to the Development Financial Corporation (COFIDE), to the National Bank, to the Agricultural Bank and to the MIVIVIENDA S.A. Fund, hereinafter companies.

Article 2º.- Definitions
For the purposes of this Regulation, the following definitions shall be considered:
a) Law on Reporting Operations: Law on Reporting Operations – Law No. 30052. b) 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 and its modifying norms. c) Regulation for the Requirement of Effective Equity for Credit Risk: Regulation for the Requirement of Effective Equity for Credit Risk approved by Resolution SBS No. 14354-2009 and its modifying norms. d) Regulation for the Requirement of Effective Equity for Market Risk: Regulation for the Requirement of Effective Equity for Market Risk approved by Resolution SBS No. 6328-2009 and its modifying norm. e) Security: Comprises securities, other securities and financial instruments of equity, credit (other than loans) or representative of products content.

TITLE II
REPORTING OPERATIONS

Article 3° Reporting Operations
Reporting operations comprise sale operations with commitment to repurchase, simultaneous sale and purchase of securities, and temporary transfer of securities. The legal regime of reporting operations implies the temporary transfer of ownership, both of the securities subject to the operation, and of the sum of money or securities that are granted in exchange (initial agreed amount), reciprocally and simultaneously, as appropriate.

Article 4°.- Sale operations with commitment to repurchase
Operation by which the seller transfers to the buyer the ownership of certain securities in exchange for a sum of money (initial amount) and obligates itself, in that same act, to repurchase the same securities or others of the same species and characteristics, on a later date, against an agreed price (final amount).

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Article 5°.- Simultaneous sale and purchase operations of securities
Operation by which two opposite sale and purchase operations of securities are agreed upon at the same moment. The seller transfers to the buyer the ownership of certain securities in exchange for a sum of money (initial amount) and obligates itself, in a simultaneous but distinct act from the first, to buy the same securities or others of the same species and characteristics, on a later date, against the payment of a sum of money (final amount).

Article 6°.- Temporary transfer operations of securities
Operation by which the buyer receives from the seller the ownership of certain securities in exchange for a sum of money or other securities (initial amount) and obligates itself, in that same act, to retransfer ownership in favor of the latter the acquired securities or others of the same species and characteristics, on an agreed date, against the reciprocal and simultaneous payment of an agreed sum or of the originally delivered securities or others of the same species and characteristics (final amount). When the buyer has granted money to the seller, the latter may recognize the buyer a yield for such resources during the validity of the operation. The manner in which the payment of such yields will be made will be defined in the contract.

Article 7º.- Prerequisites necessary to carry out reporting operations
Prior to carrying out reporting operations, the company must:

• Approve at the Board of Directors or Risk Committee level the carrying out of reporting operations, including details of permitted securities.
• The risk unit must prepare a risk report on new products, which according to what is stipulated in Circular No. G-165-2012, will contain: description of the new product, description of identified risks, treatment measures to manage the risk, among others. The aforementioned report will be available to the Superintendence.
• Elaborate the applicable accounting dynamics for these operations.
• Establish internal limits proposed by the risk unit.

Article 8°.- Permitted underlying assets to carry out reporting operations
Companies may not carry out reporting operations with securities in which they are not authorized to invest directly or indirectly.

TITLE III
ACCOUNTING ASPECTS AND PRUDENTIAL MEASURES

Article 9°.- Accounting Recording
For the accounting recording of reporting operations, the economic substance of these operations must be taken into account.

I. Sale operations with commitment to repurchase and simultaneous sale and purchase operations of securities:
Seller
The seller will record the cash inflow and a liability for the obligation to return said cash at the maturity of the contract, for the initial amount. Likewise, it will reclassify the security subject to the operation to an account corresponding to securities delivered in reporting operations.

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The accounting recording of the yields of the security subject to the operation will depend on what is agreed for said yields between the parties. Likewise, the difference between the final amount and the initial amount will be recognized as an expense against a liability, over the term of the operation applying the effective interest rate method. Buyer The buyer will record the cash outflow and an account receivable for the right to receive said cash at the maturity of the contract, for the initial amount. Likewise, it will record in off-balance sheet accounts the securities subject to the operation. The accounting recording of the yields of the security subject to the operation will depend on what is agreed for said yields between the parties. Likewise, the difference between the final amount and the initial amount, will be recognized as income against an account receivable over the term of the operation applying the effective interest rate method.

II. Temporary transfer operations of securities:
Seller
The seller will reclassify the security subject to the operation to an account corresponding to securities delivered in reporting operations. Likewise, it will record in off-balance sheet accounts the securities received from the buyer, or in balance sheet accounts the cash received from the buyer. In the latter case, it will record the cash inflow and a liability for the obligation to return said cash at the maturity of the contract. Likewise, it will record the accrual of interest that it has agreed to pay the buyer for the money received, if applicable. The accounting recording of the yields of the securities will depend on what is agreed for said yields between the parties. Likewise, the difference between the final amount and the initial amount will be recognized as income against an account receivable, over the term of the operation applying the effective interest rate method. Buyer The buyer will record in off-balance sheet accounts the securities subject to the operation. Likewise, it will reclassify the securities delivered to the seller to securities delivered in reporting operations, or it will record the cash outflow and an account receivable for the right to receive the cash delivered to the seller at the maturity of the contract. The accounting recording of the yields of the securities will depend on what is agreed for said yields between the parties. Likewise, the difference between the final amount and the initial amount will be recognized as an expense against a liability, over the term of the operation applying the effective interest rate method.

Article 10°.- Subsequent measurement, valuation and impairment of securities
For securities that are recorded by participating in reporting operations (whether they are recorded in balance sheet accounts or off-balance sheet accounts), the criteria on subsequent measurement, valuation and impairment established in the Regulation for the Classification and Valuation of Investments of Financial System Companies apply.

Article 11°.- Provisions for impairment of accounts receivable
For accounts receivable that are recorded by carrying out reporting operations, the corresponding impairment provisions must be constituted in accordance with IAS 39.

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The provisions will be calculated based on the counterparty or based on the brokerage company that executes the operation, as appropriate.

Article 12°.- Global limit to investment in equity securities and limits to financing
The calculation of the global limit to investment in equity securities and of the limits to financing indicated in Chapter II of Title II of Section Two of the General Law, will be carried out taking into account the following criteria:

I. Sale operations with commitment to repurchase and simultaneous sale and purchase operations of securities:
Global Limits by operations

• In the case of the seller, the equity securities subject to sale operations with commitment to repurchase and simultaneous sale and purchase operations of securities, must be included for the calculation of the global limit referred to in number 4 of article 200 of the General Law.
• In the case of the buyer, the global limit referred to in number 4 of article 200 of the General Law does not apply.
  Limits to financing
• In the case of the seller, the securities subject to sale operations with commitment to repurchase and simultaneous sale and purchase operations of securities, must be included for the calculation of the limit to financing granted to the issuer of said securities.
• In the case of the buyer, the account receivable that is recorded for the right to receive cash at the maturity of the contract, must be included for the calculation of the limit to financing granted to the counterparty or to the brokerage company that executes the operation, as appropriate.
  When the securities subject to the operation are considered in article 36 of the Regulation for the Requirement of Effective Equity for Credit Risk, the aforementioned accounts receivable will be adjusted as indicated in article 37 of the same Regulation, taking into account the adjustments indicated in articles 38, 39, 40 and/or 41, as appropriate.

II. Temporary transfer operations of securities:
Global Limits by operations

• In the case of the seller, the equity securities subject to temporary transfer operations of securities must be included for the calculation of the global limit referred to in number 4 of article 200 of the General Law.
• In the case of the buyer, the equity securities delivered to the seller, if any, must be included for the calculation of the global limit referred to in number 4 of article 200 of the General Law.
  Limits to financing
• In the case of the seller, the securities subject to temporary transfer operations of securities, must be included for the calculation of the limit to financing granted to the issuer of said securities.

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• In the case of the buyer, the securities delivered to the seller, if any, must be included for the calculation of the limit to financing granted to the issuer of said securities. If the buyer has delivered cash, the account receivable that is recorded for the right to receive cash at the maturity of the contract, must be included for the calculation of the limit to financing granted to the counterparty or to the brokerage company that executes the operation, as appropriate.
  When the securities subject to the operation are considered in article 36 of the Regulation for the Requirement of Effective Equity for Credit Risk, the aforementioned accounts receivable will be adjusted as indicated in article 37 of the same Regulation, taking into account the adjustments indicated in articles 38, 39, 40 and/or 41, as appropriate.

Article 13°.- Effective equity requirements
I. Sale operations with commitment to repurchase and simultaneous sale and purchase operations of securities:
Seller
For the securities that make up the trading portfolio that are reclassified to an account corresponding to securities delivered in reporting operations, what is provided in the Regulation for the Requirement of Effective Equity for Market Risk will apply.
For the securities that do not make up the trading portfolio that are reclassified to an account corresponding to securities delivered in reporting operations, what is provided in the Regulation for the Requirement of Effective Equity for Credit Risk will apply.
Buyer
For the accounts receivable that are recorded for the right to receive cash at the maturity of the contract in sale operations with commitment to repurchase and simultaneous sale and purchase operations of securities, what is provided in the Regulation for the Requirement of Effective Equity for Credit Risk will apply. The calculation of the requirement of effective equity for credit risk will be carried out based on the counterparty or based on the brokerage company that executes the operation, as appropriate. When the securities subject to the operation are considered in article 36 of the Regulation for the Requirement of Effective Equity for Credit Risk, the aforementioned accounts receivable will be adjusted as indicated in article 37 of the same Regulation, taking into account the adjustments indicated in articles 38, 39, 40 and/or 41, as appropriate.

II. Temporary transfer operations of securities:
Seller
For the securities that make up the trading portfolio that are reclassified to an account corresponding to securities delivered in reporting operations, what is provided in the Regulation for the Requirement of Effective Equity for Market Risk will apply.

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For the securities that do not make up the trading portfolio that are reclassified to an account corresponding to securities delivered in reporting operations, what is provided in the Regulation for the Requirement of Effective Equity for Credit Risk will apply.
Buyer
For the securities that make up the trading portfolio that are reclassified to an account corresponding to securities delivered in reporting operations, if any, what is provided in the Regulation for the Requirement of Effective Equity for Market Risk will apply.
For the securities that do not make up the trading portfolio that are reclassified to an account corresponding to securities delivered in reporting operations, if any, what is provided in the Regulation for the Requirement of Effective Equity for Credit Risk will apply.
On the other hand, for the accounts receivable that are recorded, if any, for the right to receive cash at the maturity of the contract in temporary transfer operations of securities, what is provided in the Regulation for the Requirement of Effective Equity for Credit Risk will apply. The calculation of the requirement of effective equity for credit risk will be carried out based on the counterparty or based on the brokerage company that executes the operation, as appropriate. When the securities subject to the operation are considered in article 36 of the Regulation for the Requirement of Effective Equity for Credit Risk, the aforementioned accounts receivable will be adjusted as indicated in article 37 of the same Regulation, taking into account the adjustments indicated in articles 38, 39, 40 and/or 41, as appropriate.

FINAL AND COMPLEMENTARY PROVISIONS

First.- Application of international accounting standards The provisions established in this Regulation are in concordance with the criteria contained in IAS 39 “Financial Instruments: Recognition and Measurement” and its application guide. Therefore, said IAS and its application guide are applicable insofar as they do not contradict what is established in this Regulation and other norms issued by the Superintendence.

Second.- Currency reporting operations
Reporting operations of currencies carried out by the Central Reserve Bank of Peru are considered within the scope of the Law on Reporting Operations – Law No. 30052, in exercise of the power established in the Third Complementary Final Provision of said Law, in accordance with what is established in Circular No. 017-2014-BCRP or the norm that replaces it. Such operations will be subject to what is provided in this Regulation insofar as it is pertinent.

Third.- Contracts
The reporting operations carried out by companies must be backed by contracts celebrated for the carrying out of said operations.”

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Article Second.- Modify the Regulation on Classification and Valuation of Investments of Financial System Companies approved by Resolution SBS No. 7033-2012, in the following terms:

1. Substitute letter a) of the last paragraph of Article 5 "Investments at fair value with changes in profit or loss", with the following:

"a) Subject to Article 15, investment instruments delivered as collateral;"

2. Substitute the second paragraph of letter a) of Article 15 "Changes in classification category", with the following:

"Exceptionally, those investment instruments classified as investments at fair value with changes in profit or loss that are delivered as collateral, must be reclassified as available for sale. Upon completion of the collateral contract, the aforementioned instruments must be reclassified to their initial category, transferring the unrealized results to the current year's results."

3. Substitute the penultimate paragraph of Article 16 "Sales or transfer of investments at maturity", with the following:

"Nor does it contradict the company's intention and capacity to hold to maturity those investment instruments classified as investments at maturity, when such instruments are delivered as collateral, or are transferred through a repo operation, provided that in the cases described, the company maintains the intention and remains contractually and financially in a position to maintain the investment until maturity."

Article Third.- Modify Circulars No. B-2148-2005, F0488-2005, S-0613-2005, CM-0335-2005, CR-0204-2005, EAF-0231-2005, EDPYME-0119-2005, FOGAPI-0026-2005 and their amendments, in the following terms:

1. Substitute letter c) of item 5-D "Financing in favor of the same person – limit of 15% of effective equity referred to in Article 207 of the General Law", with the following:

"c) Securities subject to repo operations in which receivables are generated. The aforementioned securities must correspond to capital or debt instruments indicated in the previous letter."

2. Substitute letter c) of item 5-E "Financing in favor of the same person – limit of 20% of effective equity referred to in Article 208 of the General Law", with the following:

"c) The repo operations referred to in item 2 of Article 208 of the General Law are those repo operations in which receivables are generated, and in which the securities subject to said operations correspond to the instruments indicated in the previous letter and in items 1.b and 1.c of Article 208."

3. Substitute letter c) of item 5-F "Financing in favor of the same person – limit of 30% of effective equity referred to in Article 209 of the General Law", with the following:

"c) The repo operations referred to in item 3 of Article 209 of the General Law are those repo operations in which receivables are generated, and in which the securities subject to said operations correspond to the debt instruments indicated in the previous letter."

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4. Substitute letter c) of item 5-G "Financing to persons residing abroad – limit of 10% of effective equity referred to in Article 211 of the General Law", with the following:

"c) Repo operations in which receivables are generated, and in which the securities subject to said operations correspond to the debt instruments indicated in the previous letter."

5. Substitute item 8, with the following:

"8. Financial derivative instruments and repo operations For the calculation of financial derivative instruments within the limits subject to this regulation, the equivalent exposure to credit risk of said operations must be estimated previously in accordance with what is established in Article 26 of the Regulation for the Requirement of Effective Equity for Credit Risk. For the calculation of repo operations within the limits subject to this regulation, the provisions issued by the Superintendency on the matter must be taken into account."

6. Delete item 12.

Article Fourth.- Modify the Regulation for the Requirement of Effective Equity for Market Risk approved by Resolution SBS No. 6328-2009 and its amending norm, in the following terms:

1. Delete item 20 of Article 2 "General Definitions".
2. Delete the last paragraph of Article 4 "Definition of trading portfolio".

Article Fifth.- Modify the Regulation for the Requirement of Effective Equity for Credit Risk approved by Resolution SBS No. 14354-2009 and its amending norms, in the following terms:

1. Delete Article 29.

Article Sixth.- Modify the Regulation for the Negotiation and Accounting of Financial Derivative Products in Financial System Companies approved by Resolution SBS No. 1737-2006 and its amending norms, in the following terms:

1. Delete letter b) of Article 21 "Exceptions to the Authorization to Operate with Financial Derivative Products."

Article Seventh.- Modify SBS Circular No. G-155-2011 referred to minimum conditions of master contracts for the purpose of netting of operations, in the following terms:

1. Replace the first paragraph, with the following:

"Please take note that, in exercise of the powers conferred by Article 116 and items 2, 7 and 9 of Article 349 of the General Law of the Financial System and the Insurance System and Organization of the Superintendency of Banking, Insurance and Private Pension Fund Administrators, Law No. 26702 and its amendments (hereinafter, "General Law"), with the object of regulating the minimum requirements that repo operations and operations with financial derivative products to be recognized by the Superintendency must comply with under item ii) of item 4 of Article 116 of the General Law, and for the netting of reciprocal obligations and margins described in items ii) and iii) of item 4 of said Article 116; having complied with the pre-publication of norms established in Supreme Decree No. 001-2009-JUS, the Superintendency orders the publication of this Circular:"

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2. Replace letter a) of item 2, with the following:

"a) SMV.- Securities Market Superintendency."

3. Replace letter b) of item 2, with the following:

"b) Master Contracts.- Master contract formats for the execution of repo operations or operations with financial derivative products, which enjoy general acceptance in financial markets."

4. Replace letter c) of item 2, with the following:

"c) Global Netting.- Obligation to net the total of reciprocal obligations that are due and pending fulfillment, under all contracts subscribed between the parties under a master contract, up to the lesser amount and the portion that results as debtor pays only said difference to the other party unconditionally and irrevocably. The netting will include the margins granted in support of said operations. Global Netting arises when one or more contracts between the parties, celebrated under a master contract recognized by the Superintendency, are due and pending fulfillment, either on the agreed dates, upon the occurrence of early termination events or default events, or for any other cause."

5. Incorporate as letters g) and h) of item 2, the following:

"g) Repo Operations.- Comprises sale with commitment to repurchase, simultaneous sale and purchase of securities, and temporary transfer of securities. The legal regime of repo operations implies the temporary transfer of ownership, both of the securities subject to the operation, and of the sum of money or securities that are given in exchange (initial agreed amount), reciprocally and simultaneously, as applicable. h) Central Counterparty Entities.- Clearing institutions that intermediate between the counterparties of contracts negotiated in one or several financial markets, acting as buyers against every seller and as sellers against every buyer."

6. Replace item 4, with the following:

"4. Netting of reciprocal obligations and margins of operations with financial derivative products and repo operations referred to in item ii) of item 4 of Article 116 of the General Law The netting of reciprocal obligations and margins generated from repo operations and financial derivative products will be valid for the purposes of what is established in item ii) of item 4 of Article 116 of the General Law, provided that such netting is carried out under contracts that meet the following conditions:

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a) It is a contract signed under one of the master contracts recognized by the Superintendency, as established in item 3; and b) That the contract is made known to the Superintendency by sending a copy of said contract (by counterparty) through the Supervised Entity Portal application, including the schedule and other annexes that complement what is established in the contract, if applicable. It is not necessary to send the confirmations for each operation carried out under the contract concluded. Netting will only proceed if the contracts have been made known to the Superintendency prior to the date of submission of the financial system companies and insurance and reinsurance companies to the intervention or dissolution and liquidation regime. In the case of contracts signed between financial system companies and local insurance and reinsurance companies, both parties must send the contract, as established in letter b) of this item. The counterparties of the financial system companies and insurance and reinsurance companies may request a receipt certificate from the Superintendency, confirming that the subscribed contracts have been sent through the aforementioned Supervised Entity Portal."

7. Replace item 7, with the following:

"7. Financial institutions described in item ii) of item 4 of Article 116 of the General Law For the purposes of what is established in item ii) of item 4 of Article 116 of the General Law, financial institutions will be considered as institutions or companies that are:
a) Authorized to do business and that are regulated and supervised by reason of their financial activity by the Superintendency, the SMV or an equivalent body, in accordance with the law of the country in whose territory they are located. This term includes financial system companies, insurance and reinsurance companies, stockbroker agencies, administrators of collective investment schemes (including Pension Fund Administrators), central counterparty entities, and other companies that are authorized to capture, invest or administer financial resources; and, b) Empowered to effect netting of reciprocal operations and margins (close out netting), when they are subjected to an intervention or dissolution and liquidation process, in accordance with the law applicable to them. In the case of administrators of collective investment schemes, netting applies both to operations of the administrator itself, as well as to those carried out with managed funds, provided that their legislation allows it. The term financial institutions also includes the Central Reserve Bank of Peru and the central banks of other countries when they comply with what is established in item ii) of item 4 of Article 116 of the General Law."

8. Replace item 8, with the following:

"8. Recognized master contracts
The Attached Annex lists the master contracts recognized by the Superintendency:"

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9. Incorporate as item 8.1 the following:

" 8.1 Netting of reciprocal obligations and margins of repo operations referred to in item iii) of item 4 of Article 116 of the General Law The netting of reciprocal obligations and margins generated from repo operations will be valid for the purposes of what is established in item iii) of item 4 of Article 116 of the General Law, provided that the contract is made known to the Superintendency by sending a copy of said contract (by counterparty) through the Supervised Entity Portal application. Netting will only proceed if the contracts have been made known to the Superintendency prior to the date of submission of the financial system companies and insurance and reinsurance companies to the intervention or dissolution and liquidation regime. The provisions of this Circular do not apply to the repo operations referred to in item iii) of item 4 of Article 116 of the General Law, except for what is established in this item and item 9."

10. Replace item 9, with the following:

"9. Sanctions
Financial system companies and insurance and reinsurance companies that net reciprocal obligations and margins under items ii) and iii) of item 4 of Article 116 of the General Law without complying with the conditions required in this Circular, or that fail to comply with any of the provisions established therein applicable to them, will be sanctioned in accordance with what is established in the Sanctions Regulation."

11. Modify the Annex of Master Contracts Recognized by the Superintendency in the following terms:
    a. Replace the reference to "Repurchase Operations" with "Repo Operations". b. Incorporate as letter c) of "Repo Operations", the following:
    Master Securities Loan Agreement (MSLA) - The Bond Market Association

Article Eighth.- This Resolution will enter into force the day after its publication in the Official Journal El Peruano, from which date the Regulation of Repo Operations and Repurchase Agreements approved by Resolution SBS No. 1067-2005 and its amending norm will be repealed.

Register, communicate and publish.

DANIEL SCHYDLOWSKY ROSENBERG
Superintendent of Banking, Insurance and Private Pension Fund Administrators