SBS Resolution No. 03718-2021: Modifying Annex I of the Regulation for the Evaluation and Classification of Debtors and the Requirement of Provisions and Substituting Annex No. 5-A Summary of Procyclical Provisions

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Lima, December 7, 2021

SBS Resolution
No. 03718 - 2021

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

CONSIDERING:

That, through Resolution SBS No. 11356-2008 and its amendments, the Regulation for the Evaluation and Classification of Debtors and the Requirement of Provisions (hereinafter the Regulation) was approved, in which the provision rates for credit risk applicable to different types of credit are established, based on the credit classification of debtors;

That, through Annex I of the Regulation, the procyclical rule is established, which determines the period in which procyclical provisions must be constituted for the portfolio that is in the Normal risk category, according to the minimum rates of the procyclical component of provisions set forth in said Annex;

That, it is necessary to modify certain provisions of the procyclical rule in order to ensure better risk sensitivity of the procyclical provisioning regime, which contemplates the preventive accumulation of provisions during the expansionary part of the economic cycle, establishing guidelines consistent with current market practices and international standards, and taking into account expectations regarding the long-term growth of the Peruvian economy;

That, likewise, it is necessary to modify Annex No. 5-A “Summary of Procyclical Provisions” of Chapter V of the Accounting Manual for Financial System Companies, approved by Resolution SBS No. 895-98 and its amendments, in order to adapt said Annex to the provisions of this Resolution;

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000

That, for the purpose of collecting opinions from the general public regarding the proposed modifications to the regulations applicable to supervised companies, the prepublication of this norm was ordered under the provisions of the Thirty-second Final and Complementary Provision 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 General Law, and Supreme Decree No. 001-2009-JUS and its amendments;

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 numerals 7, 9 and 13 of article 349 of the General Law.

RESOLVES:

Article First.- Modify Annex I of the Regulation for the Evaluation and Classification of Debtors and the Requirement of Provisions, approved by Resolution SBS No. 11356-2008 and its amendments, in the following terms:

1. Substitute the table of minimum rates of the procyclical component for each type of credit contemplated in numeral 2 of Chapter I, as well as the second paragraph of said numeral, with the following:

“2. Procyclical component of the provision rate for the Normal category (…)

Types of credit	Procyclical component
Corporate credits	0.10%
Large company credits	0.40%
Medium company credits	0.60%
Small company credits	1.00%
Microenterprise credits	1.00%
Revolving consumer credits	1.50%
Non-revolving consumer credits	1.00%
Housing mortgage credits	0.40%

“In the event that the credits have self-liquidating preferred guarantees, the procyclical component will be 0% for the portion covered by such guarantees.”
(…)

2. Substitute numeral 1 of Chapter II, with the following:

(…)

“1. Activation of the procyclical rule

Companies must constitute procyclical provisions for the portfolio in Normal Category, when any of the following situations occur:

a) The average of the annualized percentage variation of GDP over the last 30 months goes from a level lower than 4% to one greater than or equal to this threshold.

b) When the average of the annualized percentage variation of GDP over the last 30 months is above 4% and the average of the annualized percentage variation of GDP over the last 12 months is greater by 2 percentage points than this same indicator evaluated one year before.

c) When the average of the annualized percentage variation of GDP over the last 30 months is above 4% and 18 months have elapsed since the procyclical rule was deactivated due to the situation contemplated in numeral (3.b).

The calculation of the moving averages will be performed using the monthly information of the annualized percentage variation of GDP published by the Central Reserve Bank of Peru (BCRP).”

3. Substitute the table of minimum rates of the procyclical component of numeral 2 of Chapter II, with the following:

Types of credit	Month 2	Month 4	Month 6
Corporate credits	0.04%	0.08%	0.10%
Large company credits	0.10%	0.25%	0.40%
Medium company credits	0.25%	0.40%	0.60% Small company credits

4. Substitute letter a) of numeral 3 of Chapter II, with the following:

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000

“3. Deactivation of the procyclical rule
(…)

a) The average of the annualized percentage variation of GDP over the last 30 months goes from a level equal to or greater than 4% to one lower than this threshold.”
(…)

5. Incorporate as numeral 6 “Special conditions for activation and deactivation of the procyclical rule” in Chapter II, the following text:

“6. Special conditions for activation and deactivation of the procyclical rule

The Superintendency may activate or deactivate the procyclical rule, by Circular, in exceptional situations not contemplated in numerals 1 and 3 of Chapter II of this Annex, such as force majeure or fortuitous events; or prudential situations, duly justified, such as the need to preserve the stability conditions of the financial system, or when extraordinary circumstances cause excessive volatility in the variables that determine the activation and deactivation of the procyclical rule; among others.”

Article Second.- Substitute Annex No. 5-A “Summary of Procyclical Provisions” of Chapter V of the Accounting Manual for Financial System Companies, approved by Resolution SBS No. 895-98 and its amendments, with the format attached as Annex to this Resolution and published on the institutional portal (www.sbs.gob.pe), in accordance with the provisions of Supreme Decree No. 001-2009-JUS and its amendments.

Article Third 1
.- This Resolution enters into force the day following its publication in the Official Gazette El Peruano. The procyclical rule may be activated, in accordance with the guidelines established in this Resolution, from June 30, 2024.

Register, communicate and publish.

MARIA DEL SOCORRO HEYSEN ZEGARRA
Superintendent of Banking, Insurance and Private Pension Fund Administrators

1 Article modified by Resolution SBS No. 03954-2022, dated 22.12.2022, effective from 01.01.2023.