Technical Standards for Qualifying Savings and Credit Cooperative Federations — SSF — SV

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-03/2024
NRP-60
TECHNICAL STANDARDS FOR QUALIFYING SAVINGS AND CREDIT COOPERATIVE FEDERATIONS Approval: 02/29/2024 Validity: 03/15/2024

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

CONSIDERING:
I. That Article 2, letter c) of the Law of Cooperative Banks and Savings and Credit Societies establishes that qualified cooperative bank federations, accredited by the Superintendence of the Financial System, are regulated financial entities authorized to carry out intermediation operations with their affiliates as indicated in said Law.
II. That Article 149 of the Law of Cooperative Banks and Savings and Credit Societies establishes that federations interested in obtaining the eligibility qualification will present their application to the Superintendence of the Financial System accompanied by the information established in the referred article of the law.
III. That Article 4, letter a) of the Law of Supervision and Regulation of the Financial System establishes that the Superintendence of the Financial System has the authority to issue pertinent resolutions for supervised entities, within the powers conferred by the laws.
IV. That Article 7, letter g) of the Law of Supervision and Regulation of the Financial System establishes that the supervision of cooperative banks, savings and credit societies, and federations regulated by the Law of Cooperative Banks and Savings and Credit Societies corresponds to the Superintendence of the Financial System.

THEREFORE,

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR QUALIFYING SAVINGS AND CREDIT COOPERATIVE FEDERATIONS

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the procedure and requirements that savings and credit cooperative federations interested in obtaining the eligibility qualification at the Superintendence of the Financial System must comply with.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the federations interested in obtaining the qualification established in Article 149 of the Law of Cooperative Banks and Savings and Credit Societies.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Shareholder: Shareholders of a cooperative society, as well as members of a savings and credit cooperative association; b) Central Bank: Central Reserve Bank of El Salvador; c) Cooperative: Savings and credit cooperative associations and societies, including rural credit unions and workers' banks; d) Federations: Cooperative societies or associations, whose members are cooperative banks or savings and credit societies respectively; and e) Superintendence: Superintendence of the Financial System.

CHAPTER II
REQUIREMENTS AND APPLICATION PROCEDURE

Application
Art. 4.- Savings and credit cooperative federations interested in obtaining the eligibility qualification to carry out activities regulated by the Law of Cooperative Banks and Savings and Credit Societies will present an application to the Superintendence, accompanied by the following information:
a) Deed of incorporation and bylaws, or the agreement of the corresponding body, regarding modifications to their deed of incorporation and bylaws, and the draft of said reforms; b) Economic-financial feasibility study, which contemplates changes in the business scope in accordance with the Law of Cooperative Banks and Savings and Credit Societies. This plan must include the financial bases of the operations to be developed, financial projections of at least two years, the organization and administration scheme of the federation, and other topics considered important.

This study must be prepared by professionals experienced in the formulation and evaluation of projects or by a company backed by professionals of that category; c) List of the federation's shareholders with their shareholding participation, with the following information:
i. Name or corporate name;
ii. Nationality and domicile;
iii. Copy of the Tax Identification Number (NIT), which must be in accordance with what is established by the Tax Administration;
iv. Audited financial statements of the last fiscal year;
v. Notarized copy of the deed of incorporation and bylaws, 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 the shares.
d) List and details of the directors, with the following information:
i. Sworn declaration of not having the disqualifications indicated in Article 15 of the Law of Cooperative Banks and Savings and Credit Societies, according to the model in Annex No. 1 of these Standards;
ii. 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 of Cooperative Banks and Savings and Credit Societies.
e) Opinion and financial statements of the last three fiscal years; f) Detail of the portfolio of risk assets qualified in accordance with current standards for cooperative banks and savings and credit societies, with reference to the last day of the month immediately preceding the date of the application. This detail must also include the regularization reserves that will be required according to said Standards; g) Name or corporate name of the audit firm that will conduct the external audit of the federation. This must be registered in the Register of External Auditors kept by the Superintendence; h) Name or corporate name of the audit firm that will conduct the tax audit of the federation, when applicable. List of managers and other persons authorized to decide on the granting of loans, with the same information referred to in letter d); i) Presentation of the manuals of functions and administrative procedures, with the requirements contained in Annexes No. 2 and No. 3 of these Standards;

j) Regularization plan to liquidate within a maximum period of one year from the validity of the Law, the current balances of savings and time deposits that are not from affiliated cooperatives, as well as the balances of negotiable obligations; and k) Description of the furniture and equipment to be used, surveillance systems, and insurance to be contracted.

Likewise, the Superintendence may require interested parties, within a period of thirty days counted from the date of presentation 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 federation when there are reasons justifying it. The Superintendence, in the same notice, will indicate to the federation that if it does not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, reserving its right to present a new application. The application and documentation may be presented through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first paragraph of Article 5 of these Standards will begin to count from the next business day after all required information has been presented, in accordance with the first and second paragraphs of this article.

Application for Qualification
Art. 5.- Upon receipt of the qualification application, in accordance with what is established in Article 4 of these Standards, and after the periods established in the second and third paragraphs of the referred article have elapsed, the Superintendence will proceed to verify compliance with the requirements defined by the Law of Cooperative Banks and Savings and Credit Societies and in these Standards, having sixty days for its review. If after the analysis of the documentation presented in accordance with Article 4 of these Standards, the Superintendence has observations or when the documentation or information presented does not prove sufficient to establish the facts or information intended to be accredited, the Superintendence may notify the federation to remedy the deficiencies communicated or present additional documentation or information required. The federation 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 paragraph, when the nature of the observations or deficiencies notified so requires.

Extension Period
Art. 6.- The federation may present to the Superintendence a request for extension of the period indicated in the third paragraph of Article 5 of these Standards, before the expiration of said period, stating the grounds for the request and proposing, if applicable, the relevant proof. The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period.

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

Art. 8.- Once the complete documentation is presented in due form, and in the judgment of the Superintendence, the economic-financial viability of the project, the honorability and personal responsibility of the shareholders, directors, and administrators of the company are met, such that they offer protection to the interests of the public. The Superintendence will proceed to notify the resolution to the federation within a maximum period of three business days, from the date of issuance. In the case that the resolution is denying, the notification must contain the causes for which the request is denied. In the case that said resolution is conditioned to modifications to the deed of incorporation, the Superintendence should indicate the period within which the modifications to it must be granted.

Art. 9.- Having met all the requirements established in the Law of Cooperative Banks and Savings and Credit Societies, Standards, regulations, and applicable instructions, as well as having verified its internal controls and procedures and registered the modification of the corporate deed in the Registry kept by the Salvadoran Institute of Cooperative Promotion or in the Commercial Registry, as applicable, the Superintendence will certify within a period not greater than fifteen business days from when the federation has met the requirements, that it may begin operations in accordance with what is regulated in the Law of Cooperative Banks and Savings and Credit Societies. The Superintendence will proceed to notify the certification to the federation within a maximum period of three business days, from the date of issuance of the resolution. This certification will be valid for a period of six months. If the period indicated in the previous paragraph has elapsed and the federation has not initiated its operations, the Superintendence may grant, based on the justifications presented, an extension of up to three months. This must be requested at least one month prior to the original expiration.

Art. 10.- The certification issued by the Superintendence, indicating the name of the federation, the amount of paid-in social capital, and the names of the directors, will be made known through publication at the expense of the federation, once, in the Official Diary and in a printed medium 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.

CHAPTER III
REGISTRATION OF MODIFICATIONS TO THE SOCIAL PACT

Art. 11.- Prior to presenting the modifications to the bylaws to the Commercial Registry or to the registry kept by the Salvadoran Institute of Cooperative Promotion, they must be presented to the Superintendence to qualify if the stipulated terms adhere to the projects that were previously authorized. The Superintendence will have a period of ten business days to carry out this verification. If there are differences between the modifications to the bylaws and the project of the same authorized by the Superintendence, 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 modifications to the bylaws must be presented again to the Superintendence, within a period of twenty business days from the date of communication of the inconsistencies or differences for verification.

Art. 12.- If it is determined that there are no inconsistencies between the modifications to the bylaws and the revised modification project, or in the case that the inconsistencies communicated in accordance with 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 Superintendence of the Financial System, which contains the

favorable qualification of said modification, with the object that it may be presented to the Commercial Registry or to the registry kept by the Salvadoran Institute of Cooperative Promotion.

Procedure if the Salvadoran Institute of Cooperative Promotion or the Commercial Registry makes observations or denies the modifications

Art. 13.- In the case that the Salvadoran Institute of Cooperative Promotion or the Commercial Registry, as applicable, notifies the authorizing notary or any other interested person of the denial or the making of observations to the presentation of the bylaws modifications of the federation, that person or entity must, in turn, notify said circumstance to the Superintendence 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 copy or, in its case, the way in which they intend to remedy the respective observations, as well as the result of said type of actions, having to notify this last point to the Superintendence in the manner provided in the previous paragraph. If for the presentation of the instrument in question it is necessary to modify the conditions under which the Superintendence ordered its favorable qualification, it may, at the written request of the shareholders of the federation or their proxies, proceed to modify the certificate related in Article 12 of these Standards. Once the modifications to the bylaws are registered in the Salvadoran Institute of Cooperative Promotion or in the Commercial Registry, as applicable, the federation will send a copy of said instruments to the Superintendence.

Art. 14.- The modifications to the bylaws cannot be presented for registration in the Commercial Registry or registry kept by the Salvadoran Institute of Cooperative Promotion, without carrying a reason signed by the Superintendence, in which the favorable qualification of said copy is stated.

CHAPTER IV
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 15.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law of Supervision and Regulation of the Financial System.

Repeals
Art. 16.- The
-04), approved by the Board of Directors of the Superintendence of the Financial System in Session No. CD-40/2001 of September 5, 2001, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law of Supervision and Regulation of the Financial System, published in the Official Diary No. 23, Volume No. 390, dated February 2, 2011.

Transitory
Art. 17.- Applications related to the eligibility qualification presented by Cooperatives of -04) and that were in process at the time of entry into force of these Standards, will continue and conclude in accordance with the regulation with which they began.

Unforeseen Aspects
Art. 18.- Aspects not provided for in the matter of regulation in these Standards will be resolved by the Central Bank through its Committee of Standards.

Validity
Art. 19.- These Standards will enter into force on the fifteenth day of March of two thousand twenty-four.

Annex No. 1

MODEL OF SWORN DECLARATION FOR DIRECTORS OF FEDERATIONS SUBJECT TO THE LAW OF COOPERATIVE BANKS AND SAVINGS AND CREDIT SOCIETIES

To the Superintendence of the Financial System Present.

I, ________________________________, of _______ years of age, profession or trade ________________________, nationality _________________________, domicile of ___________________________, with Unique Identity Document No. _______________ and Tax Identification Number (NIT) No. _____________________, in view of having been proposed to form part of the governing body of the federation _____________________, declare under oath that:

I am not a director, official, or employee of any other institution of the financial system, of the institutions regulated by the Law of Cooperative Banks and Savings and Credit Societies, or of persons who engage in activities similar to those of cooperative banks and savings and credit societies, including the placement of assets among private parties of those not exempted by the Law of Cooperative Banks and Savings and Credit Societies.
I have not obtained in my favor, being a director of a financial institution, the approval of a credit without the unanimous vote of the Governing Body or that said credit was approved without my withdrawal from the corresponding session having been recorded.
I am not in a situation of bankruptcy, suspension of payments, or creditors' agreement and have never been judicially qualified as responsible for a fraudulent or negligent bankruptcy.
I am not a debtor of credits in the financial system, to which a regularization reserve of fifty percent or more of the balance has been constituted.

For a better analysis of my debtor situation, I detail below the credits that I currently have in the financial system:

Credit No. Amount Granted Financial Entity

I also declare that I am a shareholder of twenty-five percent or more of the social capital of the entities detailed below:

Annex No. 1

During my function as director, official, or administrator of an institution of the financial system, from the validity of the Law of Privatization of Commercial Banks and Savings and Loan Associations, the same did not incur in patrimonial deficiencies of twenty percent or more of the minimum required by the Law, nor did it receive contributions from the State, the Deposit Guarantee Institute, or was intervened by the supervisory body.

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