Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-04/2024 NRP-62

TECHNICAL STANDARDS FOR THE APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

Approval: 05/06/2024
Validity: 20/06/2024

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

CONSIDERING:

I. That Article 127, first paragraph, of the Banks Law establishes that, taking into consideration the solvency requirements of the companies in which the exclusive-purpose controlling company invests, this company shall be subject to Equity Capital requirements at the consolidated level. In any case, the consolidated Equity Capital cannot be less than the sum of the equity capitals required by the corresponding regulations for each of the companies in which the exclusive-purpose controlling company has an investment, in proportion to its participation.

II. That Article 128 of the Banks Law establishes that, in order to avoid the pyramiding of share capital of the conglomerate's companies and of the companies in which the controlling company has a minority participation, excluding the exclusive-purpose controlling company, to determine the Equity Capital or Net Equity of said companies, the value of investments in shares of any other company shall be deducted.

III. That Article 68, first paragraph, of the Investment Banks Law establishes that Investment Banks may be part of a Financial Conglomerate, and shall be subject to the provisions on Financial Conglomerates established in the Banks Law, with the exception that Investment Banks cannot be Controlling Banks. (1)

IV. That Article 2, first paragraph, of the Law on Supervision and Regulation of the Financial System establishes that the Financial Supervision and Regulation System has the objective of preserving the stability of the financial system and ensuring its efficiency and transparency, as well as ensuring the security and solidity of the members of the financial system in accordance with what is established in said Law, other applicable laws, regulations, and technical standards issued for this purpose, all in concordance with international best practices on the matter. (1)

V. That Article 99, third paragraph, letter a), of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Standards Committee of the Central Reserve Bank of El Salvador to approve technical standards, instructions, and provisions that the laws regulating the supervised entities establish must be issued to facilitate their application, especially those related to solvency requirements, liquidity, provisions, reserves, classification of risk assets, criteria for establishing the need for consolidation, good corporate governance practices, information transparency, and on any other aspect inherent to risk management by the supervised entities. (1)

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-04/2024 NRP-62

TECHNICAL STANDARDS FOR THE APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

Approval: 05/06/2024
Validity: 20/06/2024

VI. That in accordance with Article 101, fourth paragraph, of the Law on 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 Reserve Bank of El Salvador. (1)

THEREFORE,

in 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 APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards have as their objective to establish the provisions that allow the calculation of the equity capital requirement for subjects obligated to their compliance.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Controlling banks; b) Exclusive-purpose holding companies; c) Subsidiaries of controlling banks; and d) Subsidiaries of exclusive-purpose holding companies.

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) Conglomerate or Financial Conglomerate: is the set of companies characterized by the fact that more than fifty percent (50%) of their respective share capitals are owned by a controlling company, which is also a member of the conglomerate. The controlling company of the conglomerate may be an exclusive-purpose company or a bank constituted in the country; c) Holding Company: Refers to controlling bank and exclusive-purpose holding company; d) Entity: Subjects obligated to comply with these Standards; and e) Superintendency: Superintendency of the Financial System.

CHAPTER II
CONSOLIDATED EQUITY CAPITAL

Calculation Date
Art. 4.- Holding companies must establish the consolidated equity capital on March 31, June 30, September 30, and December 31 of each year and when required by the Superintendency.

Equity Capital
Art. 5.- The equity capital will be the sum of Primary Capital plus Complementary Capital. When the equity capital calculation is performed using consolidated financial statements, the participation in the capital of any other non-consolidated company shall be deducted from them.

Primary Capital
Art. 6.- The components of primary capital are the following:
a) Paid-in share capital; b) Legal reserve; and c) Other capital reserves, derived from received profits.

Complementary Capital
Art. 7.- The components of complementary capital are the following:
a) Results from previous exercises, on which no decision has been taken; b) Undistributable profits; and c) Fifty percent (50%) of the profits of the current exercise, net of the Income Tax provision.

From the sum of all the aforementioned components, the value of accumulated losses and current exercise losses, if any, shall be deducted.
For the purposes of determining the equity capital, complementary capital will be accepted up to a sum equal to primary capital.

Calculation of the equity capital requirement on interim dates Art. 8.- On March 31, June 30, and September 30 of each year, holding companies must establish the consolidated equity capital, using non-consolidated financial statements, in the following manner:
a) The sum of the equity capitals of all entities in the conglomerate is obtained; b) The sum of the shareholdings of the holding company in the subsidiaries at book value in the records of the first is obtained; c) To the sum obtained in the previous letter a), the sum from previous letter b) is subtracted; the result obtained will be the conglomerate's equity capital; d) The sum of the equity capital requirements of the subsidiaries is obtained; and e) To the result of the previous letter c), the result of the previous letter d) is subtracted; the positive or negative difference will be the surplus or deficiency of equity capital of the holding company.

In the case of entities that must weight assets to determine the equity capital requirement, those that in turn represent debts of other companies in the conglomerate shall be excluded, when such assets have been subtracted for the purposes of the equity capital calculation.

The equity capital calculation described in the aforementioned letters shall be presented in accordance with the model of Annex No. 1 of these Standards.

Calculation of the equity capital requirement at the end of the fiscal year Art. 9.- Based on the consolidated financial statements as of December 31 of each year, when the value of the conglomerate's consolidated equity capital is equal to or greater than the sum of the equity capital required for each of its subsidiaries, it will have complied with the equity capital requirement; otherwise, it will be understood that the conglomerate is in a deficit situation.

The equity capital requirements of the subsidiaries that must be taken into account for this calculation will be determined in proportion to the holding company's participation in those companies.

The equity capital calculation described above shall be presented in accordance with the model of Annex No. 2 of these Standards.

Consolidatable subgroups
Art. 10.- When consolidatable subgroups exist, as in the cases of insurance companies and their subsidiaries or affiliates, and subsidiaries that are holding companies of other companies, they must comply with the provisions contained in this Chapter.

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-04/2024 NRP-62

TECHNICAL STANDARDS FOR THE APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

Approval: 05/06/2024
Validity: 20/06/2024

CHAPTER III
FINANCIAL SITUATION OF THE CONGLOMERATE

Calculation Date
Art. 11.- Financial conglomerates must determine their financial situation on March 31, June 30, September 30, and December 31 of each year or when required by the Superintendency.

The calculation bases for equity capitals and their requirements will be the individual financial statements of each of the subsidiaries.

Determination of the financial situation
Art. 12.- The calculation of the financial situation is determined by summing the equity capitals of all entities in the conglomerate and deducting from the value obtained the sum of the equity capital requirements of each of them.

When the sum of the equity capitals is equal to or greater than the sum of the requirements, compliance with this measurement will be deemed achieved; otherwise, it will be understood that the conglomerate as a whole is in a deficit situation.

The equity capital calculation described above shall be presented in accordance with the model of Annex No. 3 of these Standards.

CHAPTER IV
GENERAL PROVISIONS

Art. 13.- The calculation of equity capitals, asset weighting, and the corresponding requirements will be made based on what is provided by the regulations governing each entity. In the case where no regulations exist on this matter, the "Technical Standards for the Application of the Equity Capital Requirement for Financial Entities" (NRP-44), or in the case of Investment Banks, the "Technical Standards for the Application of the Equity Capital Requirement for Investment Banks" (NRP-90), issued by the Central Reserve Bank of El Salvador through its Standards Committee, shall apply. (1)

Art. 14.- When dealing with subsidiaries constituted abroad, for the purposes of these Standards, they must calculate their equity capital, asset weighting, and the corresponding equity capital requirements, based on the norms applicable to entities of the same kind constituted in El Salvador; but additionally, they must comply with the provisions on this matter established in the country of origin.

Art. 15.- Holding companies must submit the calculation of their financial situation to the Superintendency, according to the models in Annexes Nos. 1, 2, and 3 of these Standards, with the entity's seal and the signature of the manager or the person holding an equivalent position, within the first fifteen business days of the month following the reference date of the calculation; with the exception of the one corresponding to the month of December of each year, which may be submitted within the first sixty calendar days of the immediately following month.

The calculation of the financial situation corresponding to the month of December of each year must be accompanied by the consolidated financial statements and the external auditor's report.

Art. 16.- Entities must keep in their files, for a period of no less than two years, the documents used for the respective calculations.

Art. 17.- With the objective of safeguarding the stability of the bank or investment bank constituted in El Salvador, the Superintendency, based on Article 124 of the Banks Law, may require the holding company to transfer, outside the conglomerate, the participation in those subsidiaries that present solvency problems. (1)

CHAPTER V
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 18.- 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. 19.- These Standards repeal the "Standards for the Application of the Equity Capital Requirement to Financial Conglomerates" (NPB3-05), approved by the Board of Directors of the Superintendency of the Financial System in Session No. CD45/2000, on September 6, 2000, whose Organic Law was repealed by Legislative Decree No. 592, which contains the Law on Supervision and Regulation of the Financial System, published in the Official Diary No. 23, Volume 390, on February 2, 2011.

Unforeseen Aspects
Art. 20.- Aspects not provided for in the regulatory matter in these Standards will be resolved by the Central Bank through its Standards Committee.

Validity
Art. 21.- These Standards will enter into force as of June 20, 2024.

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-04/2024 NRP-62

TECHNICAL STANDARDS FOR THE APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

Approval: 05/06/2024
Validity: 20/06/2024

MODIFICATIONS:
(1) Modifications in considerations III, IV, and V and incorporation of consideration VI, and modifications of articles 13 and 17, approved by the Central Bank through its Standards Committee, in Session No. CN-09/2025, on November 10, 2025, with validity as of November 25, 2025.

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-04/2024 NRP-62

TECHNICAL STANDARDS FOR THE APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

Approval: 05/06/2024
Validity: 20/06/2024

Annex No. 1

CONSOLIDATED EQUITY CAPITAL CALCULATION OF THE HOLDING COMPANY (Based on Non-Consolidated Financial Statements) (In thousands of US$)

I. Equity capital of:
a) Holding Company b) Subsidiary "a" c) Subsidiary "b" ______________ Total $

II. Less: Shareholdings of the holding company in:
a) Subsidiary "a" b) Subsidiary "b" ______________ Total S

III. Conglomerate Equity Capital (I-II) S

IV. Equity capital requirements of:
a) Subsidiary "a" b) Subsidiary "b"

---

Total S

V. Equity Capital Surplus or Deficit (III-IV) S

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-04/2024 NRP-62

TECHNICAL STANDARDS FOR THE APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

Approval: 05/06/2024
Validity: 20/06/2024

Annex No. 2

CONSOLIDATED EQUITY CAPITAL CALCULATION OF THE HOLDING COMPANY (Based on Consolidated Financial Statements) (In thousands of US$)

I. Primary Capital
a) Paid-in share capital $ b) Legal reserve c) Other Capital Reserves ____________ $

II. Complementary Capital
a) Results from previous exercises $ b) Undistributable profits c) Current exercise losses d) Current exercise profits (at 50% of its value) _____________ $

III. Total Primary plus Complementary Capital (I+II) $

IV. Less the following deductions:
a) Participations in non-consolidated companies $ b) Accumulated losses ____________ $

V. Equity Capital (III-IV) $

VI. Equity capital requirements of the conglomerate's subsidiaries
a) Company "X" Requirement $____ *% participation $ b) Company "Y" Requirement $____ *% participation ______________

VII. Surplus or Deficit (V-VI) $

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-04/2024 NRP-62

TECHNICAL STANDARDS FOR THE APPLICATION OF THE EQUITY CAPITAL REQUIREMENT TO FINANCIAL CONGLOMERATES

Approval: 05/06/2024
Validity: 20/06/2024

Annex No. 3

CALCULATION OF THE FINANCIAL SITUATION OF THE FINANCIAL CONGLOMERATE (In thousands of US$)

I. Equity Capitals of:
a) Company "X" $ b) Company "Y" c) Company "Z" ______________ $

II. Equity Capital Requirements of:
a) Company "X" $ b) Company "Y" c) Company "Z" ______________ $

III. Surplus or Deficit (I-II) $