RESOLUTION No. CD-SIBOIF-665-4-FEB17-2011
Dated 17 February 2011

STANDARD FOR THE REFORM OF ARTICLES 5 and 6 OF THE STANDARD ON CAPITAL ADEQUACY

The Board of Directors of the Superintendency of Banks and Other Financial Institutions,

WHEREAS

I That Article 2 of Law No. 316, Law of the Superintendency of Banks and Other Financial Institutions, empowers the Superintendency to safeguard the interests of depositors who entrust their funds to financial institutions.

II That in order to preserve the security and confidence of the public in said financial institutions, the Superintendency must promote and monitor their solvency, establishing a relationship between the calculation base of capital and credit and notional risk assets.

III That it is necessary to regulate the provisions of Articles 19 and 20 of Law No. 561, General Law of Banks, Non-Bank Financial Institutions and Financial Groups, in relation to the minimum required capital and credit and notional risk assets.

IV That Article 10 of Law 316, Law of the Superintendency of Banks and Other Financial Institutions, and its reform contained in Law 552, Law of Reforms to the aforementioned Law 316, empowers the Board of Directors of the Superintendency to issue the rules and provisions necessary for compliance with the aforementioned laws;

In use of its powers,

HAS ISSUED

The following:

RESOLUTION No. CD-SIBOIF-665-4-FEB17-2011

STANDARD FOR THE REFORM OF ARTICLES 5 and 6 OF THE STANDARD ON CAPITAL ADEQUACY

FIRST: Reform Articles 5 and 6 of the Standard on Capital Adequacy contained in Resolution No.
CD-SIBOIF-651-1-OCTU27-2010, of 27 October 2010, which shall read as follows:

Art. 5 Deductions.- The following items shall be deducted from the calculation of Capital Adequacy:

a) The following shall be deducted from the sum of the components of primary capital:

1) The book value of purchased goodwill, derived from mergers or acquisitions of institutions, both those assigned to fixed assets and those not assigned (recorded in deferred charges).

2) Accumulated results from previous periods in case of losses.

b) The following shall be deducted from the sum of the components of secondary capital:

1) The Results of the Current Period, in case of losses.

2) The valuation deficits of investments available for sale.

c) The following shall be deducted from the Calculation Base of Capital:

1) Any adjustment pending constitution;

2) The book value of investments in capital instruments issued by subsidiaries, if the investing financial institution exercises direct or indirect control over the majority of the capital of the issuing entity; and associates, if the investing financial institution exercises direct or indirect control over a percentage equal to or greater than 20% of the capital of the issuing entity. These investments shall also not be counted in the computation of risk assets contained in Article 6 of this standard.

For the purposes of the application of this literal, capital instruments shall mean any of the following: current or common shares, preferred shares, other securities of participation in the capital of the issuing entity, and subordinated debt instruments.

Art. 6 Assets weighted by credit risk.- Risk assets shall be weighted according to the following:

A) With a weighting of zero percent (0%) of their value, the following items:

1) Cash, legal reserve deposits and other deposits in the Central Bank of Nicaragua, as well as the balances of items in collection and local remittances in transit.

2) Investments in securities issued in national currency by the Central Government or the Central Bank of Nicaragua, all this in accordance with the Law.

3) Credits granted in national currency to the Central Government or the Central Bank of Nicaragua, all
this in accordance with the Law.

4) Investments in securities issued by Multilateral Credit Organizations of which the country is
a member, qualified as first-order institutions in accordance with the provisions of the standard that regulates the matter on limits in deposits and investments.

5) The balances of credits and contingent operations of third parties, guaranteed with securities issued
in national currency by the Central Government or the Central Bank of Nicaragua.

6) Investments in securities issued by third parties, guaranteed with securities issued in national
currency by the Central Government or the Central Bank of Nicaragua.

7) The balances of credits and contingent operations guaranteed with deposits in the same
financial institution endorsed in favor of the latter.

B) With a weighting of twenty percent (20%) of their value, the following items:

1) Investments in securities issued in foreign currency by the Central Government or the Central
Bank of Nicaragua, all this in accordance with the Law.

2) Credits granted in foreign currency to the Central Government or the Central Bank of Nicaragua,
all this in accordance with the Law.

3) The balances of credits and contingent operations of third parties, guaranteed with securities
issued in foreign currency by the Central Government or the Central Bank of Nicaragua.

4) Investments in securities issued by third parties, guaranteed with securities issued in foreign
currency by the Central Government or the Central Bank of Nicaragua.

5) Short-term self-liquidating contingent operations (documentary letters of credit).

C) With a weighting of fifty percent (50%) of their value, housing mortgage loans granted in national currency.

D) With a weighting of between zero and one hundred fifty percent of their value (0% to 150%), the following items:

1) The assets (credits, deposits and investments), guarantees, bonds and other contingent operations net of provisions, depreciations and amortizations, carried out with financial institutions of the country or abroad. Likewise, demand deposits and remittances of documents payable on demand to be deposited in said entities. All of the foregoing in accordance with the long-term risk rating of the issuer.

2) Credits and contingent operations of third parties guaranteed by guarantees, bonds and other contingent operations of foreign financial institutions in accordance with the long-term risk rating of the issuer.

3) Investments in securities issued by foreign states or central banks in accordance with the long-term sovereign risk rating of the issuer.

The long-term issue risk rating shall be in accordance with the ratings of the following Risk Rating Agencies:

Weighting	Risk Rating Agencies
	Fitch IBCA	Moody´s Investors Services	Standard & Poor´s Corporation	Dominion Bond Rating Services Limited	Sociedad Calificadora Centroamericana, S.A.
0%	AAA to AA-	Aaa1 to Aa3	AAA to AA-	AAA to AA-	AAA to AA-
20%	A+ to A-	A1 to A3	A+ to A-	A+ to A-	A+ to A-
50%	BBB+ to BBB-	Baa1 to Baa3	BBB+ to BBB-	BBB+ to BBB-	BBB+ to BBB-
100%	BB+ to B- and not rated	Ba1 to B3 and not rated	BB+ to B- and not rated	BB+ to B- and not rated	BB+ to B- and not rated
150%	Lower than B-	Lower than B3	Lower than B-	Lower than B-	Lower than B-

In the event that there is more than one risk rating, to determine the corresponding weighting, the lower rating among those published by the risk rating agencies shall be applied.

E) With a weighting of sixty to one hundred twenty-five percent (60% to 125%) of their value, the following credit operations, exposed to credit foreign exchange risk:

1) Consumer credits granted in foreign currency shall be weighted at one hundred twenty-five percent (125%) of their value.

2) Mortgage housing loans granted in foreign currency shall be weighted at sixty percent (60%) of their value. Housing loans granted in foreign currency for amounts equal to or less than thirty thousand dollars (US$30,000.00) are excepted, and shall be weighted at fifty percent (50%) of their value.

3) Commercial credits and microcredits granted in foreign currency and whose source of income is not in the same currency in which the credit was granted, duly evidenced by the institution; shall be weighted at one hundred twenty-five percent (125%) of their value. Income from financing operations of export products in which there is a purchase-sale contract between the marketing entity and the producer, in which the corresponding payment is established in national currency with maintenance of value, is considered as a source of income in the same currency.

F) With a weighting of one hundred percent (100%) of their value:

1) Credits (commercial, consumer or personal, microcredit) including contingent operations (Bonds, guarantees, guarantees granted, standby letters of credit) granted in national currency; accounts receivable and any other obligation.

2) Investments in publicly offered debt securities issued by legal entities of the country made in accordance with the regulations governing deposit and investment limits.

3) Items corresponding to assets not mentioned in this article.

SECOND: The Reform Standard of Articles 5 and 6 of the Standard on Capital Adequacy contained in Resolution No. CD-SIBOIF-662-1-ENE26-2011 is repealed.

THIRD: This standard shall enter into force upon its notification without prejudice to its publication in the Official Gazette, La Gaceta.

(f) A. Rosales B. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) F. Reyes Báez (f) illegible (Silvio Moisés Casco Marenco) (f) U. Cerna B.

ANTONIO MORGAN PÉREZ
Secretary Ad hoc
SIBOIF Board of Directors