Technical Standards for Constituting and Operating Savings and Credit Cooperatives to Capture Public Savings

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Approval: 12/14/2023
Validity: 01/02/2024

THE NORMS COMMITTEE OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:

I. That Article 2, literal a.1 of the Law on Cooperative Banks and Savings and Credit Societies establishes that regulated financial entities under said Law are Savings and Credit Cooperatives that, in addition to collecting money from their members, do so from the public.

II. That Article 5 of the Law on Cooperative Banks and Savings and Credit Societies establishes that the cooperative wishing to capture public deposits must present its authorization application to the Superintendency of the Financial System accompanied by the documentation established in said article.

III. That Article 4, literal a) of the Law on Supervision and Regulation of the Financial System establishes that the Superintendency of the Financial System has the authority to issue pertinent resolutions for supervised entities, within the powers conferred by the laws.

IV. That Article 4, literal d) of the Law on Supervision and Regulation of the Financial System establishes that the Superintendency of the Financial System will have the authority to authorize public promotion, constitution, functioning, and start of operations, modifications of bylaws and statutes where applicable, and merger of the members of the financial system in accordance with what is provided in the special laws on the matter.

V. That Article 7, literal g) of the Law on Supervision and Regulation of the Financial System establishes that the supervision of cooperative banks, savings and credit societies, and federations regulated by the Law on Cooperative Banks and Savings and Credit Societies corresponds to the Superintendency of the Financial System.

THEREFORE,

by virtue of the regulatory powers conferred by Article 99 of the Law on Supervision and Regulation of the Financial System,

AGREES to issue the following:

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CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the legal and administrative requirements and procedures to constitute and operate new cooperatives subject to the Law on Cooperative Banks and Savings and Credit Societies; likewise, to uniform the presentation of information.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are persons interested in constituting a cooperative that proposes to collect money from its members and the public.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Shareholder of a Cooperative: The shareholders of a cooperative society, as well as the members of a savings and credit cooperative association; b) Central Bank: Central Reserve Bank of El Salvador; c) Cooperatives: Savings and credit cooperative associations and societies, including rural credit unions and workers' banks; d) Executive: Members of the board of directors or equivalent body; e) Law: Law on Cooperative Banks and Savings and Credit Societies; and f) Superintendency: Superintendency of the Financial System.

CHAPTER II
REQUIREMENTS AND PROCEDURE FOR THE APPLICATION

Application
Art. 4.- Those interested in constituting a cooperative whose purpose is to carry out activities regulated by the Law, will present an authorization application to the Superintendency accompanied by the following:
a) Draft of the deed of constitution and statutes. This draft must contain the requirements indicated in articles 22 and 194 of the Commercial Code and those mentioned in the Notary Law;

NRP-46

Approval: 12/14/2023
Validity: 01/02/2024

b) Business Plan, which must include the financial bases of the operations to be developed, commercial plans, market segment to be served, financial projections of at least two years, the organization and administration scheme of the cooperative, and other topics considered important; This study must be prepared by professionals with experience in project formulation and evaluation or by a company backed by professionals of that category; c) List of future shareholders of the cooperative, with specification of their general details and shareholding; there must be no fewer than one hundred, and none may subscribe to more than ten percent of the paid-up social capital. When future shareholders are natural persons and hold more than 1% of the paid-up social capital, they must present the following information:
i) Copy of the Unique Identity Document; ii) Copy of the Tax Identification Number (NIT), which will be in accordance with what is established by the Tax Administration; iii) Certified photocopy of passport, in the case of foreigners; iv) Valid certificate issued by the General Directorate of Penal Centers stating no criminal record. In the case of foreign shareholders, they must present the document accrediting that they have no criminal record issued by the competent authority in their country of origin; v) Sworn declaration of not being in a situation of bankruptcy or insolvency; and vi) Description of the source of resources for the acquisition of shares. When future shareholders are legal entities, they must present the following information:
i) Name or trade name; ii) Nationality and domicile; iii) Copy of the Tax Identification Number (NIT), which will be in accordance with what is established by the Tax Administration; iv) Audited financial statements, of the last fiscal year; v) Testimony of the deed of constitution and statutes, or creation law, as applicable, in both cases with their reforms and legal representation; vi) Power of attorney granted to be represented as a shareholder; vii) Certification of the minute point, where the acquisition of shares is authorized; and viii) Description of the source of resources for the acquisition of shares. d) List and general details of future directors, with the following information:

NRP-46

Approval: 12/14/2023
Validity: 01/02/2024

i) Sworn declaration of not having the disqualifications indicated in Article 15 of the Law, according to the model in Annex No. 1 of these Standards; ii) Valid certificate issued by the General Directorate of Penal Centers, stating no criminal record; and iii) Curriculum Vitae and accreditation of experience indicated in Article 15 of the Law; e) Name or trade name of the audit firm that will perform the external audit of the cooperative. This must be registered in the Register of External Auditors kept by the Superintendency; and f) List of managers and other persons authorized to decide on the granting of loans, with the same information referred to in literal d).

The application and documentation may be submitted through the means made available by the Superintendency, which may be electronic. In any case, the deadline referred to in the first paragraph of Article 5 of these Standards will begin to run from the next business day after the application has been submitted.

Authorization to constitute a cooperative
Art. 5.- Upon receiving the application for authorization to constitute a cooperative to capture public deposits, in accordance with what is established in Article 4 of these Standards, the Superintendency will proceed to verify compliance with the requirements defined in the Law on Cooperative Banks and Savings and Credit Societies and these Standards, having a period not exceeding sixty days. If the application is not accompanied by complete and proper information, as detailed in Article 4 of these Standards, the Superintendency, due to the lack of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the interested parties when there are reasons justifying it. The Superintendency in the same notice will indicate to the applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, leaving them free to present a new application. If after analyzing the documentation presented according to Article 4 of these Standards, the Superintendency has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited, the Superintendency

NRP-46

Approval: 12/14/2023
Validity: 01/02/2024

will notify the applicants to remedy the deficiencies communicated to them or present additional documentation or information requested by the Superintendency.
The applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the additional information required by the Superintendency.
The Superintendency may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires.

Extension Period
Art. 6.- Applicants interested in constituting a cooperative to capture public deposits may present to the Superintendency an application for extension of the period indicated in the fifth paragraph of Article 5 of these Standards, before the expiration of said period, expressing the grounds on which it is based and proposing, if applicable, the pertinent proof. The extension period may not exceed ten business days and will begin from the next business day after the expiration date of the original period. Suspension of the Period Art. 7.- The sixty-day period indicated in the first paragraph of Article 5 of these Standards will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article of these Standards, until the observations required by the Superintendency are remedied. Art. 8.- Once the complete and proper documentation has been presented, the Superintendency will respond to the application for authorization to constitute a cooperative to capture public deposits through a resolution, prior to analyzing the economic-financial viability of the project and the honorability and personal responsibility of the shareholders, directors, and administrators of the company, so as to offer protection to the interests of the public.

The Superintendency will proceed to notify the resolution to the applicants within a maximum period of three business days, from the date the resolution is issued.

NRP-46

Approval: 12/14/2023
Validity: 01/02/2024

Art. 9.- If the resolution mentioned in Article 8 of these Standards is favorable, the applicants will have one hundred twenty days counted from the respective notification, to constitute the society. If the aforementioned period is not met, the resolution will become void.
At the request of the interested parties, the aforementioned period may be extended once and for a maximum of ninety days; such request must be presented before the first period expires, containing the reasons justifying the extension.
In the case that the resolution is negative, the notification must contain the causes for which the request is denied.

CHAPTER III
CONSTITUTION OF THE COOPERATIVE
Art. 10.- Prior to the presentation of the testimony of the deed of constitution or its statutes as applicable, in the Registry kept by the Salvadoran Institute of Cooperative Promotion in the case of cooperative associations or in the Commercial Registry in the case of cooperative societies. These must be presented to the Superintendency so that it qualifies whether the terms stipulated in the social agreement adhere to the projects that were previously authorized, and verifies if the social capital has been effectively paid in accordance with the authorization. The Superintendency will have a period of ten business days to carry out this verification. If there are differences between the public deed of constitution and the draft thereof authorized by the Superintendency, it must communicate this to the applicant within the period indicated in the previous paragraph, so that the authorizing notary proceeds to make the respective adjustments, and the testimony of the public deed must be presented again to the Superintendency, within a period of twenty business days from the date of communication of the inconsistencies or differences for verification. The deed of constitution must relate the deposit of the social capital in the Central Bank, which must be paid entirely in legal currency or by certified check.

NRP-46

Approval: 12/14/2023
Validity: 01/02/2024

Art. 11.- If it is determined that there are no inconsistencies between the public deed of constitution and the draft of the deed reviewed, or in the case that the inconsistencies that had been communicated according to what is established in the previous article have been overcome; the Superintendency will proceed within a period of five business days to extend a certificate signed by the Superintendent of the Financial System, which contains the favorable qualification of said deed, with the object that it may be presented in the Salvadoran Institute of Cooperative Promotion in the case of cooperative associations or in the Commercial Registry in the case of cooperative societies, for the corresponding registration. Procedure if the Salvadoran Institute of Cooperative Promotion or the Commercial Registry makes observations to the Testimony of the public deed of constitution, or denies its registration Art. 12.- When the Salvadoran Institute of Cooperative Promotion or the Commercial Registry, as applicable, notifies the authorizing notary or any other interested person, the denial or the making of observations to the testimony of the public deed of constitution of the association or cooperative society, that person must, in turn, notify such circumstance to the Superintendency in writing and no later than the next business day after receiving the respective notification. In said writing, the interested party or the authorizing notary must relate at least, the presentation number of the respective instrument in the Salvadoran Institute of Cooperative Promotion or in the Commercial Registry and state whether they will file any type of appeal aimed at achieving the registration of the testimony or, in its case, the manner in which they intend to remedy the respective observations, as well as the result of such actions, which must be notified to the Superintendency in the manner provided in the previous paragraph. If for the registration of the instrument in question it is necessary to modify the conditions under which the Superintendent ordered its favorable qualification, he may, at the written request of the future shareholders of a cooperative or their proxies, proceed to modify the certificate related in Article 11 of these Standards. Once the testimony is registered and the statutes are deposited in the Salvadoran Institute of Cooperative Promotion or in the Commercial Registry, as applicable, the association or cooperative society will send a copy of said instruments to the Superintendency. Art. 13.- The testimony of the constitutive deed of a cooperative may not be presented for registration in the Registry kept by the Salvadoran Institute of Cooperative Promotion or in the Commercial Registry, as applicable, without carrying a reason

NRP-46

Approval: 12/14/2023
Validity: 01/02/2024

signed by the Superintendency, in which the favorable qualification of said testimony is recorded.

CHAPTER IV
START OF OPERATIONS

Art. 14.- From the constitution of the cooperative, within a period of one hundred eighty days thereafter, the application for authorization for the start of operations must be presented, incorporating the manuals of functions and operational procedures with the requirements contained in Annexes Nos. 2 and 3 of these Standards, description of the furniture and equipment to be used, of the surveillance systems and of the insurance to be contracted. The application and documentation may be submitted through the means made available by the Superintendency, which may be electronic. In any case, the deadline referred to in the first paragraph of Article 15 of these Standards will begin to run from the next business day after the application has been submitted.

Procedure for authorization of the start of operations Art. 15.- Upon receiving the application for authorization for the start of operations of the cooperative, in accordance with what is established in Article 14 of these Standards, the Superintendency will proceed to verify compliance with the requirements defined in the Law on Cooperative Banks and Savings and Credit Societies and these Standards, having a period not exceeding fifteen business days, from when the requirements to start operations with the public have been met. If the application is not accompanied by complete and proper information, as detailed in Article 14 of these Standards, the Superintendency, due to the lack of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the interested parties, when there are reasons justifying it. The Superintendency in the same notice will indicate to the applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, leaving them free to present a new application. If after analyzing the documentation presented according to Article 14 of these Standards, the Superintendency has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendency

NRP-46

Approval: 12/14/2023
Validity: 01/02/2024

will notify the applicants to remedy the deficiencies communicated to them or present additional documentation or information requested by the Superintendency.
The applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information required by the Superintendency.
The Superintendency may, through a reasoned resolution, extend by up to another ten business days the period indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires.
Extension Period
Art. 16.- Applicants may present to the Superintendency an application for extension of the period indicated in the fifth paragraph of Article 15 of these Standards, before the expiration of said period, expressing the grounds on which it is based and proposing, if applicable, the pertinent proof. The extension period may not exceed ten business days and will begin from the next business day after the expiration date of the original period. Suspension of the Period Art. 17.- The fifteen business days period indicated in the first paragraph of Article 15 of these Standards will be suspended for the days that elapse between the notification of the request to complete information or documentation referred to in the second and fifth paragraphs of said article, until the interested parties remedy the observations required by the Superintendency.

Resolution
Art. 18.- Once the complete and proper documentation has been presented, complying with all the requirements established in the Law on Cooperative Banks and Savings and Credit Societies and its regulations and technical standards, its internal controls and procedures verified, and the social deed registered in the corresponding Registry, the Superintendency will certify that the cooperative can start its operations with the public. The Superintendency will notify the certification to the cooperative within a maximum period of three business days from the date the resolution is issued. This certification will be valid for a period of one hundred eighty days from its issuance. If the period indicated has elapsed and the cooperative has not started its operations, the S