Technical Standards for Real Estate Lease Contracts by Cooperative Banks and Federations

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-05/2024 NRP-71
TECHNICAL STANDARDS FOR REAL ESTATE LEASE CONTRACTS BY COOPERATIVE BANKS AND FEDERATIONS Approval: 28/06/2024 Validity: 16/07/2024

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

CONSIDERING:

I. That Article 50 of the Law of Cooperative Banks and Savings and Credit Societies establishes that related persons include members of the Governing Body, managers, and other employees of the cooperative, as well as directors, managers, and employees of the federation of which the cooperative is a shareholder. Also considered related are companies whose ownership falls under any of the circumstances established in letters a) and b) of said article.

II. That Article 124 of the Law of Cooperative Banks and Savings and Credit Societies establishes that the Superintendence of the Financial System may object, with grounds, to a cooperative entering into or having entered into service provision contracts, leases, or any other commercial operation not prohibited by this Law that harm the cooperative's patrimony.

III. That Article 3, second paragraph, letter c) of the Law of Supervision and Regulation of the Financial System establishes that it is the responsibility of the Superintendence of the Financial System to proactively monitor the risks of the members of the financial system and how they manage them, ensuring the prudent maintenance of their solvency and liquidity.

IV. That Article 7, letter g) of the Law of Supervision and Regulation of the Financial System establishes that the supervision of Cooperative Banks and Federations regulated by the Law of Cooperative Banks and Savings and Credit Societies corresponds to the Superintendence of the Financial System.

V. That Article 99, third paragraph, letter a) of the Law of Supervision and Regulation of the Financial System establishes that it is the responsibility of the Standards Committee of the Central Bank of Reserve of El Salvador to approve technical standards on any other aspect inherent to risk management by the supervised entities.

VI. That in accordance with Article 101, fourth paragraph of the Law of Supervision and Regulation of the Financial System, the powers to approve, modify, and repeal technical standards that must be complied with by the members of the financial system and other supervised entities are transferred to the Central Bank of Reserve of El Salvador.

THEREFORE,

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR REAL ESTATE LEASE CONTRACTS BY COOPERATIVE BANKS AND FEDERATIONS

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the requirements and procedures that obligated subjects must comply with when signing real estate lease contracts with any person, related or not.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Cooperative Banks; and b) Federations regulated by 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) Central Bank: Central Bank of Reserve of El Salvador; b) Entity: Subjects obligated to comply with these Standards; c) Related Parties: Those referred to in Article 50 of the Law of Cooperative Banks and Savings and Credit Societies; and d) Superintendence: Superintendence of the Financial System.

CHAPTER II
GROUNDS FOR OBJECTION OF CONTRACTS

Art. 4.- To obtain the approval of the Superintendence for the celebration of contracts with related parties, the entity must submit a request indicating the following:
a) The object and justification of the contract, to which the project must be attached; b) The agreement of the board of directors, shareholders' assembly, or competent body to decide on the contracting; c) General information of the lessor and the type of link with the entity; and d) Budget for investments to be made in adaptations and renovations.

Art. 5.- The Superintendence will object to contracts with all types of persons in the following cases:
a) When the terms are more favorable to the lessor than those signed with third parties in similar operations within the financial system; b) When the financial analysis of the contract terms concludes that it will harm the entity's patrimony. It is considered that the patrimony is affected when the annual lease rents exceed five percent of the equity fund; and c) When it is determined that the contract was made with the intention of favoring the lessor.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 6.- 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.

Repeal
Art. 7.- These Standards repeal

(NPNB4-05), approved by the Board of Directors of the Superintendence of the Financial System in Session No. CD-43/2001 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 Journal No. 23, Volume No. 390, dated February 2, 2011.

Transitory
Art. 8.- The requests presented
Real Estate Lease Contracts by Intermediaries
-05), and which were pending at the time of entry into force of these Standards, will continue in accordance with the regulations under which they began.

Unforeseen Aspects
Art. 9.- Aspects not provided for in the regulatory matter of these Standards will be resolved by the Central Bank through its Standards Committee.

Validity
Art. 10.- These Standards will enter into force as of the sixteenth of July of two thousand twenty-four.

Lineage: No known changes

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