Technical Standards for Establishing and Operating Savings and Credit Societies and Converting Existing Entities into Savings and Credit Societies

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-11/2023 NRP-47
TECHNICAL STANDARDS FOR ESTABLISHING AND OPERATING SAVINGS AND CREDIT SOCIETIES AND FOR CONVERTING EXISTING ENTITIES INTO SAVINGS AND CREDIT SOCIETIES.
Approval: 12/14/2023
Validity: 01/02/2024

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

CONSIDERING:
I. That Article 2, letter b) of the Law on Cooperative Banks and Savings and Credit Societies establishes that Savings and Credit Societies are financial entities regulated by said Law.
II. That Article 157 of the Law on Cooperative Banks and Savings and Credit Societies establishes that the provisions of the Banking Law contained in Title Second, relating to organization, administration, and functioning, shall apply to savings and credit societies, with the modifications established in said article of the Law.
III. That Article 4, letter a) of the Law on Supervision and Regulation of the Financial System establishes that the Financial System Superintendence has the authority to issue pertinent resolutions for supervised entities, within the powers conferred by the laws.
IV. That Article 4, letter d) of the Law on Supervision and Regulation of the Financial System establishes that the Financial System Superintendence shall have the authority to authorize public promotion, constitution, functioning, and commencement of operations, modifications of social agreements 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, letter 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 Financial System Superintendence.

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:

TECHNICAL STANDARDS FOR ESTABLISHING AND OPERATING SAVINGS AND CREDIT SOCIETIES AND FOR CONVERTING EXISTING ENTITIES INTO SAVINGS AND CREDIT SOCIETIES

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the legal and administrative requirements and procedures required to establish and operate savings and credit societies, as well as to uniform the presentation of information.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are persons interested in establishing a savings and credit society.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Central Bank: Central Reserve Bank of El Salvador; b) Law: Law on Cooperative Banks and Savings and Credit Societies; c) Society/Societies: Savings and Credit Societies; and d) Superintendence: Financial System Superintendence.

CHAPTER II
REQUIREMENTS AND PROCEDURE FOR THE APPLICATION

Application for the establishment of a savings and credit society Art. 4.- Interested parties in establishing a Society shall submit an authorization request to the Superintendence accompanied by the following:
a) Draft of the deed of establishment of the Society in which the statutes will be incorporated. This draft must contain the requirements indicated in Articles 22 and 194 of the Commercial Code and those mentioned in the Notary Law.
Societies must incorporate the expression "Savings and Credit Society" in their corporate name, in compliance with what is provided in Article 4 of the Banking Law.
The social deed must stipulate that the Society will also issue treasury shares at nominal value, for the necessary number so that the total value of said issued shares is equivalent to the equity fund possessed by the Society or the required equity fund, whichever is greater, as of December 31 of each year. Societies that will dedicate themselves to promoting small and micro-enterprises and to the capture of deposits exclusively from their beneficiaries must express this in the aforementioned draft deed, for the purposes established in the final clause of Article 157 of the Law; b) Business Plan, which must include the financial bases of the operations projected to be developed in two years, the commercial plans, and the market segment they will serve. This study must be prepared by professionals with experience in the formulation and evaluation of projects or by a company backed by professionals of that category; c) List of future shareholders, who cannot be fewer than ten, with specification of their general information and shareholding. When future shareholders are natural persons, they must present the following:
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. Copy of passport, in the case of foreigners;
iv. Audited financial statements corresponding to the last accounting period, when required by law;
v. Request for authorization to acquire and be owner of shares in excess of one or ten percent onwards, with specification of the source of funds for their acquisition. This request must be made in accordance with what is established in Annex No. 1 of these Standards;
vi. Valid certificate issued by the General Directorate of Penal Centers, stating no criminal record;
vii. Sworn declaration of not being in a situation of bankruptcy or insolvency; and
viii. Description of the source of resources for the acquisition of the shares.
When future shareholders are legal entities, they must present the following information:
i. Name or corporate 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 corresponding to the last accounting period;
v. Testimony of the deed of establishment 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 the shares is authorized;
viii. Request for authorization to acquire and be owner of shares in excess of one or ten percent onwards, with specification of the source of funds for their acquisition. This request must be made in accordance with what is established in Annex No. 5 of these Standards;
ix. Description of the source of resources for the acquisition of the shares; and
x. Foreign legal entities must prove their existence with documents in the Spanish language, which may be admitted without the need for legalization or apostille, provided they allow reasonable verification of their authenticity, integrity, and content, in accordance with what is provided in Article 4-A of the Administrative Procedures Law. When these are supervised financial entities, they must promote cooperation agreements between the Superintendence and the supervisory body of their country of origin. (1)
Repealed (1) d) List and general information of the directors, with the following information:
i. Sworn declaration of not having the disqualifications indicated in Article 15 of the Law, according to the model in Annex No. 8 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. The application and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first clause of Article 5 of these Standards will begin to run from the next business day after the application has been submitted.
Likewise, the Superintendence may require interested parties, within a period of thirty days counted from the date of submission of the application, other information it considers pertinent, which must be presented 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 applicant when there are reasons justifying it. The Superintendence in the same notice will indicate to the applicant that if the information is not completed within the aforementioned period, it will proceed without further procedure to archive the application, leaving him/her the right to submit a new application, which will give rise to a new procedure.

Authorization procedure to establish a savings and credit society Art. 5.- Upon receipt of the authorization request to establish a Society, in accordance with what is established in Article 4 of these Standards, and after the periods established in the third and fourth clauses of said Article have elapsed, the Superintendence will proceed to verify compliance with the requirements defined in the Law, the Banking Law, and these Standards, having one hundred twenty days counted from the date of submission of the application, for the authorization or denial of the authorization request to establish the society. If after the analysis of the documentation presented according to Article 4 of these Standards, the Superintendence has observations or when the documentation or information presented does not result sufficient to establish the facts or information intended to be proven, the Superintendence will notify the applicants to remedy the deficiencies communicated or present additional documentation or information requested. 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 Superintendence. The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous clause, when the nature of the observations or deficiencies notified so requires.

Extension period
Art. 6.- Interested applicants in establishing a Society may submit to the Superintendence a request for extension of the period indicated in the third clause of Article 5 of these Standards, before the expiration of said period, must express the grounds on which it is based and propose, if applicable, the pertinent proof. The extension period cannot exceed ten business days and will start from the next business day after the expiration date of the original period.

Suspension of the period
Art. 7.- The periods of thirty and one hundred twenty days indicated in the third clause of Article 4 and in the first clause of Article 5 of these Standards, respectively, will be suspended for the days that elapse between the notification of the request for information or documentation referred to in Article 4 and the second clause of Article 5 of these Standards, until the observations required by the Superintendence are remedied.

Resolution
Art. 8.- Once the complete documentation has been presented in due form, the Superintendence, within a maximum period of five business days, must publish in two printed media of national circulation or another digital publication platform with greater or equal coverage or on its website, in accordance with what is established in the current legal framework, for one single time and at the expense of the interested parties, the following:
a) List of shareholders in more than one percent of the social capital. In the case that the shareholders are other Societies, the list of shareholders of these must be published, when they are holders of more than five percent of the social capital; and b) List of the initial directors of the Society, so that any person who has knowledge of any of the circumstances expressed in Article 15 of the Law and Article 33 of the Banking Law may object to the quality of the future shareholders or directors. In the case that the Superintendence receives objections from the public, within a period not greater than fifteen days after the publication mentioned in the first clause of this article, upon verification of its truthfulness, it must make it known to the applicants so that within a period of thirty days they make the substitutions in question.

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

Art. 9.- The Superintendence will grant the authorization to establish the Society, when in its judgment the projected financial bases, as well as the honorability and personal responsibility of the shareholders in more than one percent of the social capital, directors, and administrators of the Society, offer protection to the interests of the public; regarding this, it must consider the following:
a) Prove the good financial situation and solvency of shareholders of more than one percent, including the consolidated analysis for each of them, of the set of companies, businesses, assets, and debts affecting them. In any case, the equity of each of them must be at least equivalent to the capital they commit to contribute to the new institution. Interested parties must demonstrate the legitimate origin of the funds to be invested. Furthermore, they must not be in any of the circumstances mentioned in Article 11 of the Banking Law; and b) The financial projections and business plans presented satisfactorily support the feasibility of the new Society. Art. 10.- If the decision is favorable, the Superintendence will issue a resolution of authorization for the establishment of the Society, indicating in it the period within which the constitutive deed must be executed. In said deed, the certificates of the sums deposited in the Central Bank will be listed, which accredit the shares subscribed and paid by the partners. The minimum paid social capital to found a Society will be that established in Article 157, letter d) of the Law, except those Societies that will dedicate themselves exclusively to financing the micro and small enterprise and to capturing deposits exclusively from their beneficiaries, in which case they will require a minimum paid social capital as established in the final clause of Article 157 of the Law. To define the size of enterprises, the definition of the economic size of enterprises established in the "Law on Promotion, Protection and Development for Micro and Small Enterprises" has been taken as a basis, which defines the following classification:

Concept according to Size of Economic Unit or Business Segment Indicators (Dimensions) Establishment Laboral (Permanent remunerated workers) Financial (Annual Gross Sales) Micro-enterprises "Natural or legal person that operates in the various sectors of the economy, through an economic unit, with a level of income from annual gross sales of goods or services up to 500 minimum monthly salaries of the commerce and services sector and that has up to 10 workers" (1) Fixed Up to 10 Annual gross sales of goods or services up to 500 minimum monthly salaries of the commerce and services sector. (1) According to their development state, micro-enterprises are subclassified as follows: (1)

Subsistence: level of income from annual gross sales of goods or services up to 57 minimum monthly salaries of the commerce and services sector and up to 2 workers. (1)
Fixed (1)
Up to 2 (1)
Annual gross sales of goods or services up to 57 minimum monthly salaries of the commerce and services sector (1)
Accumulation: level of income from annual gross sales of goods or services greater than 57 up to 300 minimum monthly salaries of the commerce and services sector and from 3 to 4 workers. (1)
Fixed (1)
From 3 to 4 (1)
Annual gross sales of goods or services greater than 57 and up to 300 minimum monthly salaries of the commerce and services sector (1)
Expansion: level of income from annual gross sales of goods or services greater than 300 up to 500 minimum monthly salaries of the commerce and services sector and from 5 to 10 workers. (1)
Fixed (1)
From 5 to 10 (1)
Annual gross sales of goods or services greater than 300 and up to 500 minimum monthly salaries of the commerce and services sector (1)

Small Enterprise
"Natural or legal person that operates in the various sectors of the economy, through an economic unit with a level of income from annual gross sales of goods or services greater than 500 and up to 5,000 minimum monthly salaries of the commerce and services sector and from 11 to a maximum of 50 workers" (1) Fixed From 11 to 50 (1) Annual gross sales of goods or services greater than 500 and up to 5,000 minimum monthly salaries of the commerce and services sector. (1) When a natural or legal person does not meet any of the previously established conditions, its classification will be determined according to its levels of income from annual gross sales of goods or services. (1)

Art. 11.- Prior to the presentation of the testimony of the deed of establishment in the Commercial Registry, it must be presented to the Superintendence 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 integrated according to the authorization. The Superintendence will have a period of ten business days to carry out said verification. If there are differences between the public deed of establishment and the draft thereof authorized by the Superintendence, it must communicate this to the applicant within the period indicated in the previous clause, so that the authorizing notary proceeds to make the respective adjustments, and the testimony of the public deed must be presented again before the Superintendence, within a period of twenty business days from the date of communication of the inconsistencies or differences for verification. In the deed of establishment, the deposit of the social capital in the Central Bank must be listed, which must be paid entirely in legal tender currency or by certified check.

Art. 12.- If it is determined that there are no inconsistencies between the public deed of establishment and the draft 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 Superintendence will proceed within a period of five business days to extend

a certificate signed by the Financial System Superintendence, which contains the favorable qualification of said deed, with the object that it can be presented in the Commercial Registry for the corresponding inscription.

Procedure if the Commercial Registry makes observations to the Testimony of the public deed of social establishment, or denies its inscription Art. 13.- When the Commercial Registry notifies the authorizing notary or any other interested person, the denial or the making of observations to the testimony of the public deed of establishment of a society, that person or those persons must, in turn, notify said circumstance to the Superintendence in writing and no later than the next business day after having received the respective notification. In said writing, the interested party or the authorizing notary must list at least, the presentation number of the respective instrument in the Commercial Registry and manifest whether they will interpose any type of appeal

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Technical Standards for Establishing and Operating Savings and Credit Societies and Converting Existing Entities into Savings and Credit Societies

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