SBS Resolution No. 12878-2009: Amendment to the Mortgage Bond Regulation and Circular Letter on the granting of authorization for the issuance of Mortgage Letters

Los Laureles No. 214 - Lima 27 - Peru Tel.: (511)2218990 Fax: (511) 4417760

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Lima, September 10, 2009

S.B.S. Resolution No. 12878 -2009

The Superintendent of Banking, Insurance and Private Pension Fund Administrators

CONSIDERING:

That, by SBS Resolution No. 1081-99 dated December 7, 1999, the Mortgage Bond Regulation was approved.

That, this Superintendency has considered it pertinent to specify and update the aforementioned regulation in order to have the necessary and relevant information to rule on applications for the issuance of securities and mortgage instruments;

With the favorable opinion of the Deputy Superintendencies of Banking and Microfinance, Legal Advisory, and Economic Studies; and,

In exercise of the powers conferred by Article 349 of the General Law of the Financial System and the Insurance System and Organic Law of the Superintendency of Banking and Insurance, Law No. 26702;

RESOLVES:

Article One.- Amend Articles 2; 7; 8, 9; 12 and 16 of the Mortgage Bond Regulation approved by SBS Resolution No. 1081-99, in accordance with the following texts:

“Article 2 Authorized Companies

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

“Article 7 Authorization of the Superintendency.

“The issuance of mortgage bonds requires the prior favorable opinion of this Superintendency in accordance with the provisions of Article 232 of the General Law. For this purpose, the companies

Los Laureles No. 214 - Lima 27 - Peru Tel.: (511)2218990 Fax: (511) 4417760

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must submit to this Superintendency an application with the information and documentation indicated in the following article. This Superintendency has a term of 30 business days following the submission of said application with complete information and documentation to issue its ruling.”

Article 8 Requirements for the issuance of mortgage bonds

Companies must attach to the application referred to in the preceding article a certified copy of the resolution of the corresponding corporate body; a technical study of the issuance; and a copy of the draft issuance contract.

Article 9 Technical Study

“The technical study shall comprise an evaluation report on the impact of the financial instrument on the risk profile of the issuing company, which shall 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 use of funds.

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

4.1 Situation and prospects of the credit market.

4.2 Analysis of the company's loan portfolio.

4.3 Analysis of supply and demand of the financial instrument. Potential Investors.

5. Economic-Financial Evaluation.

5.1 Risk analysis:

Impact on interest rate risk: earnings at risk and equity value at risk.

Impact on foreign exchange risk: limits on the overall oversold and overbought position.

Impact on liquidity risk: liquidity ratio, liquidity gaps and liability concentration 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.

Projection assumptions.

Estimation of issuance rates.

Projected cash flow of the issuances (monthly flows).

Impact on income statement.

Net present value – Sensitivity analysis (scenarios).”

Los Laureles No. 214 - Lima 27 - Peru Tel.: (511)2218990 Fax: (511) 4417760

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Article 12 Preferred Collateral.

“Financial system companies shall consider as preferred collateral, in accordance with the provisions of the current Regulation for the Evaluation and Classification of the Debtor and the Requirement of Provisions, the following:

1. The first movable security interest over mortgage bonds issued in accordance with the provisions of this regulation; and,

2. The security trust formed by mortgage bonds issued in accordance with the provisions of this regulation.”

Article 16 Accounting Manual.

“The accounting of Mortgage Bonds is subject to the provisions established in the Accounting Manual for companies of the Financial System, approved by Resolution No. 895-98 of September 1, 1998 and its amending rules.”

Article Two.- Eliminate Articles 14; 15; 17 and 18 of the Mortgage Bond Regulation approved by SBS Resolution No. 1081-99.

Article Three.- Amend item 7 of Circular Letter No. B-014-94 and F-014-94 referring to the granting of authorization for the issuance of Mortgage Letters, in accordance with the following text:

“7. Once the required information has been submitted, to the satisfaction of this Control Body, and following evaluation of the issuance application and compliance with the limits established by the General Law of the Financial System and the Insurance System and Organic Law of the Superintendency of Banking and Insurance, the corresponding ruling shall be issued within a term not exceeding thirty (30) business days.”

Article Four.- The provisions of this Resolution enter into force as of the day following their publication in the Official Gazette “El Peruano”.

Register, communicate and publish.

FELIPE TAM FOX
Superintendent of Banking, Insurance and
Private Pension Fund Administrators