Technical Standards for the Administration of Current Accounts of the Pension Institutes of the Public Pension System

CNBCR-01/2023 NSP-78 TECHNICAL STANDARDS FOR THE ADMINISTRATION OF CURRENT ACCOUNTS OF THE PENSION INSTITUTES OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 1 of 6

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

CONSIDERING: I. That by Legislative Decree No. 614, dated December 20, 2022, and published in the Official Journal No. 241, Volume No. 437 on December 21, 2022, the Comprehensive Law of the Pension System was approved. II. That Article 149 of the Comprehensive Law of the Pension System establishes that the Public System, which includes the Pension Unit of the Salvadoran Social Security Institute and the Salvadoran Pension Institute, must provide benefits in accordance with this Law and their own creation Laws. III. That Article 159 of the Comprehensive Law of the Pension System establishes that the Central Reserve Bank of El Salvador will issue the Technical Standards necessary to allow the development of what is established in the aforementioned Law. IV. That in order to maximize the yield of contributions, the period in which they are deposited in current accounts of financial entities must be minimized, as these offer little or no monetary return on deposits. Likewise, it must be considered that the Pension Institutes of the Public Pension System must maintain a certain degree of liquidity to face the payment of pensions and other benefits, their operating expenses, and the management of their investments. V. That defined criteria must be available for the administration of current accounts of financial entities held by the Pension Institutes, in order to regulate excessive balances in them.

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 THE ADMINISTRATION OF CURRENT ACCOUNTS OF THE PENSION INSTITUTES OF THE PUBLIC PENSION SYSTEM

CHAPTER I OBJECT, SUBJECTS, AND TERMS

CNBCR-01/2023 NSP-78 TECHNICAL STANDARDS FOR THE ADMINISTRATION OF CURRENT ACCOUNTS OF THE PENSION INSTITUTES OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 2 of 6

Object Art. 1.- These Standards aim to establish the procedures that the Salvadoran Pension Institute and the Salvadoran Social Security Institute must follow for the management of current accounts.

Subjects Art. 2.- The subjects obliged to comply with the provisions established in these Standards are: a) The Salvadoran Pension Institute; and b) The Salvadoran Social Security Institute. Everything related to the Salvadoran Social Security Institute in these Standards is applicable only with respect to the disability, old age, and death regime administered by the Pension Unit of the Salvadoran Social Security Institute.

Terms Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning: a) Financial Entities: Those financial entities supervised by the Financial System Superintendence and legally authorized by their specific Laws to carry out operations with current accounts, operating within the country and duly registered in the Public Registry of the Superintendence, in accordance with what is established in the Law on Supervision and Regulation of the Financial System; b) Pension Institutes: Refers to the Salvadoran Pension Institute or the Salvadoran Social Security Institute; c) ISP: Salvadoran Pension Institute; d) ISSS: Salvadoran Social Security Institute; and e) Superintendence: Financial System Superintendence.

CHAPTER II ON THE USE OF CURRENT ACCOUNTS

Art. 4.- Every bank account will be opened in financial entities supervised by the Superintendence, and will be exclusively in the name of the corresponding Pension Institute; regional or departmental dependencies will open their accounts following their specific denomination.

The number of accounts will be limited to what is strictly necessary. Art. 5.- The Pension Institutes must administer different bank current accounts, according to the following operations:

CNBCR-01/2023 NSP-78 TECHNICAL STANDARDS FOR THE ADMINISTRATION OF CURRENT ACCOUNTS OF THE PENSION INSTITUTES OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 3 of 6

a) Collection of contributions and bank yields; b) Receipt of government funds or contributions; c) Payment of benefits to pensioners and beneficiaries; d) Payment of salaries and other remunerations to staff; e) Payment of operating expenses and other institutional disbursements; f) Management of own investments; and g) Management of investments in securities

Art. 6.- The Pension Institutes must under no circumstances mix the different resources to which each account is destined in accordance with the concepts or operations referred to in Article 5 of these Standards. The Disability, Old Age, and Death regime of the ISSS will manage its accounts separately from the Health regime of said Institute.

Revenue Accounts Art. 7.- The revenue accounts of the Pension Institutes will be used to collect labor contributions and employer contributions, fines, and other related income; also to receive other income, including government contributions. Art. 8.- The revenue accounts will be exclusively destined for the capture of resources and will be discharged only through transfers to other bank accounts. Art. 9.- The Pension Institutes must control daily the income and other charges and credits applied to their accounts. The funds in said accounts must not be kept for more than three business days after being deposited, and must be invested or transferred to a paying account for prompt availability. Art. 10.- The deadline defined in Article 9 of these Standards is exempted for current accounts that in their contract include the accrual of interest, provided that the conditions to be met by the Pension Institute do not affect the necessary liquidity to face the payment of operating expenses, management of investments, and the payment of pensions and benefits. Benefit Payment Accounts Art. 11.- Benefit payment accounts will be used for the payment of pensions and other monetary benefits to pensioners or beneficiaries. The account will be funded through transfers from revenue accounts or by liquidation of investments. Art. 12.- The amount of benefit accounts will be reduced by payments for pensions and benefits to affiliates and beneficiaries thereof.

CNBCR-01/2023 NSP-78 TECHNICAL STANDARDS FOR THE ADMINISTRATION OF CURRENT ACCOUNTS OF THE PENSION INSTITUTES OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 4 of 6

Art. 13.- Charges to this type of account will be made based on the payment schedule of the corresponding month and its rescheduling, with an advance of no more than five business days. Operational Payment Accounts Art. 14.- Operational payment accounts will comprise those bank accounts destined for the payment of administrative expenses, including the payment of remunerations to staff, financial expenses, acquisition of inventory, assets, depreciable administrative assets, non-depreciable assets, investments in projects and programs, payment of current debt, and financing of third parties that do not correspond to the payment of pensions and benefits to affiliates. Art. 15.- Operational payment accounts will be funded through transfers from revenue accounts or by liquidation of investments. Art. 16.- The amount of said accounts will be reduced by payment through checks or other authorized means, for the concepts mentioned in Article 13 of these Standards. Art. 17.- Charges to said accounts will be made based on the payment schedule of the corresponding month, with an advance of no more than five business days. Investment Account Art. 18.- In own investment accounts, the Pension Institutes will receive the collection of titles representing financial investments, for investment in different instruments, immediately or for a period of less than ten calendar days, from known investment opportunities, if circumstances warrant. In investment accounts in securities, the ISP will manage resources from the issuance of securities, Transition Financing Certificates, and Pension Obligation Certificates. On Financial Programming Art. 19.- The Pension Institutes must present to the Superintendence within the ten days prior to the start of the month corresponding to its execution, the following documents: a) Budgetary Credit Control Report; b) Monthly Cash Flow Budget, with weekly detail, according to the format established in Annex No. 1 of these Standards; c) Availability Report by type of account (savings, current, time deposit); and d) Availability Report of securities issued by the ISP. The initial balance of the Cash Flow Budget will be the sum of the balances in the

CNBCR-01/2023 NSP-78 TECHNICAL STANDARDS FOR THE ADMINISTRATION OF CURRENT ACCOUNTS OF THE PENSION INSTITUTES OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 5 of 6 current accounts projected for the end of the previous month. Art. 20.- The Pension Institutes must at all times maintain an updated Cash Flow Budget as well as the reports referred to in Article 19 of these Standards, which may be requested by the Superintendence. On the control of current accounts Art. 21.- The Pension Institutes must control daily the availability they maintain in all current accounts; in the case of revenue accounts for contributions and worker and employer contributions, they must obtain detail of the daily movements of the corresponding financial entities, in addition, for each current account they will prepare a monthly reconciliation indicating the previous balance, charges and credits to the account, and final balance. From the daily balances, they will prepare a bank availability table; said balances will be reported to the Superintendence through the daily investment report.

CHAPTER III OTHER PROVISIONS AND VALIDITY

Sanctions Art. 22.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Repeal Art. 23.- These Standards repeal the -0004/98), approved on May 28, 1998, by the Pension Superintendence, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law on Supervision and Regulation of the Financial System, published in the Official Journal No. 23, Volume No. 390, dated February 2, 2011. Unforeseen Aspects Art. 24.- Aspects not foreseen in regulatory matters in these Standards will be resolved by the Central Reserve Bank of El Salvador through its Committee of Standards. Validity Art. 25.- These Standards will enter into force from January 26, two thousand twenty-three.

CNBCR-01/2023 NSP-78 TECHNICAL STANDARDS FOR THE ADMINISTRATION OF CURRENT ACCOUNTS OF THE PENSION INSTITUTES Approval: 26/01/2023 Validity: 26/01/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 6 of 6

Annex No. 1 Cash Flow Budget for the month of ________________ 1st Week 2nd Week 3rd Week 4th Week 5th Week Total INCOME Contributions and labor contributions Other charges Redemption of titles Placement of securities Interest collection Coupon collection Transfers from other institutions Total Income EXPENSES Benefits Operating expenses (detail according to Article 14 of these Standards) Investments (purchase of titles) Payment of yields of securities Transfers to other institutions Total Expenses Weekly Income minus Expenses Initial availability in current accounts Final availability in current accounts