TECHNICAL STANDARDS FOR THE COLLECTION OF DEMAND DEPOSITS WITHDRAWABLE BY CHECK OR OTHER MEANS FOR ENTITIES REGULATED UNDER THE COOPERATIVE BANKS AND SAVINGS AND CREDIT SOCIETIES LAW

Approval: 12/12/2011
Validity: 16/01/2012

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

CONSIDERING:

I. That Articles 34, 151, and 158, letter a), of the Cooperative Banks and Savings and Credit Societies Law, respectively authorize cooperative banks, federations, and savings and credit societies to receive demand deposits withdrawable by check or other means, prior to compliance with requirements.

II. That Article 34, third paragraph, of the Cooperative Banks and Savings and Credit Societies Law, establishes that norms must be issued for the adequate management of such operations.

III. That consequently, it is necessary to issue the norms that regulate the information requirements and procedures to be followed by cooperative banks, federations, and savings and credit societies interested in carrying out the aforementioned operation.

IV. That Article 7, letter g), of the Law on Supervision and Regulation of the Financial System, establishes that the Superintendence of the Financial System is responsible for the supervision of cooperative banks, savings and credit societies, and federations regulated by the Cooperative Banks and Savings and Credit Societies Law.

THEREFORE,

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE COLLECTION OF DEMAND DEPOSITS WITHDRAWABLE BY CHECK OR OTHER MEANS FOR ENTITIES REGULATED UNDER THE COOPERATIVE BANKS AND SAVINGS AND CREDIT SOCIETIES LAW

CHAPTER I

OBJECT, SUBJECTS, AND TERMS

Object

Art. 1. These Norms aim to establish the requirements and procedures to be followed by interested entities in carrying out the operation of collecting deposits in the modality of demand deposits withdrawable by check or other means. (2)

Subjects

Art. 2. The subjects obligated to comply with the provisions established in these Norms are: (2) a) Cooperative banks; b) Savings and credit societies; and c) Federations of cooperative banks.

Terms

Art. 3. For the purposes of these Norms, the terms indicated below have the following meaning:
a) Entity or entities: subjects obligated to comply with these Norms; b) Superintendent: Superintendent of the Financial System; c) Superintendence: Superintendence of the Financial System; and d) Central Bank: Central Reserve Bank of El Salvador.

CHAPTER II

PROCESSING AND PROCEDURE

Request for Verification (2)

Art. 4. To carry out the operation of collecting demand deposits withdrawable by check or other means, entities must request from the Board of Directors of the Superintendence the verification of compliance with the requirements established in the Cooperative Banks and Savings and Credit Societies Law and in these Norms. This request must be signed by the person designated to execute the corresponding agreement, by the legal representative or legal proxy, accompanied by the following:

a) Certification of the minutes point from the session of the Board of Directors or Administrative Council, as applicable, where the operation of collecting demand deposits withdrawable by check or other means was agreed upon; b) Certification issued by the entity's external auditor, stating that it has verified that the entity has an equity fund greater than or equal to six million United States dollars (US$6,000,000.00); (2) c) Copy of its collection norms, which regulate the characteristics, modalities, and conditions under which demand deposits will be established, which were approved by the Board of Directors of the Central Bank, regarding term and negotiability; d) Description of the technological tools that will be used for the development of said operations; e) Functions Manual, in which the modifications to the organizational structure originated by the new operation must be indicated, and the description of the profiles and functions of each of the positions related to the demand deposit collection operation, in accordance with what is established in Annex No. 1;

f) Operational Procedures Manual, in which the administrative, accounting, and computer systems internal control procedures that each of the components related to the demand deposit collection operation will develop are described, in accordance with what is established in Annex No. 1; g) Manual for the prevention of money laundering and asset laundering risk, terrorism financing, and financing of the proliferation of weapons of mass destruction, which describes the controls designed applicable to demand deposit collection operations; (2) h) Analysis of the risks that would be assumed by the entity, resulting from the new operation, detailing the way in which they will identify, measure, control, and mitigate them; i) Certification of the instrument, duly registered, containing the bylaws and the act of constitution or modification thereof, if applicable; and j) Models of the respective contracts for review and their corresponding deposit. (2)

The request and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the term referred to in the first paragraph of Article 5 of these Norms will begin to run from the next business day after the request has been presented. (2)

Procedure for Verification of Documentation (2)

Art. 5. Upon receipt of the request to carry out demand deposit collection operations withdrawable by check or other means, in accordance with what is established in Article 4 of these Norms, the Superintendence will proceed to verify compliance with the requirements defined by the Cooperative Banks and Savings and Credit Societies Law and in these Norms, having a term of twenty business days for its review. (2)

If the request is not accompanied by the complete and duly formatted information detailed in Article 4 of these Norms, the Superintendence, due to the lack of necessary requirements, may require said entity to present the missing documents within a term of ten business days counted from the day following notification, a term that may be extended at the request of the interested entity when there are reasons justifying it. (2)

The Superintendence in the same notice will indicate to the entity that if it does not complete the information within the aforementioned term, it will proceed without further formality to archive the request, reserving its right to present a new request. (2)

If after the analysis of the documentation presented in accordance with Article 4 of these Norms, 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 will notify the entity to remedy the deficiencies communicated or present additional documentation or information requested. (2)

The requesting entity will have a maximum term of ten business days counted from the day following notification to resolve the observations or present the additional information required by the Superintendence. (2)

The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the term indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires. (2)

Extension Term (2)

Art. 5-A. The requesting entity may present to the Superintendence a request for extension of the term indicated in the fifth paragraph of Article 5 of these Norms before the expiration of said term, stating the grounds on which it is based and proposing, if applicable, the pertinent proof. (2)

The extension term may not exceed ten business days and will begin from the next business day following the expiration date of the original term. (2)

Suspension of Term (2)

Art. 5-B. The twenty-business-day term indicated in the first paragraph of Article 5 of these Norms, will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said Article of these Norms, until the observations required by the Superintendence are remedied. (2)

Art. 6. Upon completion of the required information, the Superintendence will analyze and verify the information, to ensure that the entity has robust computer systems, adequate physical infrastructure, trained personnel, a risk evaluation unit, and an internal control system that provides administrative and accounting security, as well as the necessary measures to prevent being used in money laundering and asset laundering operations, terrorism financing, and financing of the proliferation of weapons of mass destruction. (2)

Resolution of the Request

Art. 7. Once the requirements established in Article 4 of these Norms are met, and the internal controls and procedures referred to in Article 6 of these Norms are verified, the Superintendence will issue the resolution, in which compliance with the requirements to carry out the operation of collecting demand deposits withdrawable by check or other means will be stated. The Superintendence will proceed to notify the resolution to the requesting entity within a maximum term of three business days from its issuance. (2)

CHAPTER III

OTHER PROVISIONS AND VALIDITY

Art. 8. Repealed (1)

Deposit of Contract Models

Art. 9. In accordance with what is established in the Consumer Protection Law and its Regulations, the models of contracts related to the operation of collecting demand deposits must be deposited by the entities with the Superintendence. (2)

Complementary Regulations for Operations

Art. 10. Entities authorized to collect demand deposits withdrawable by check or other means are obligated to participate in the check clearing carried out at the Central Bank; therefore, they must comply with the Instructions, regulations, and other provisions issued for such effect by the Board of Directors of the Central Bank. (2)

Sanctions

Art. 11. Non-compliance with the provisions contained in these Norms will be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Unforeseen Aspects

Art. 12. Aspects not provided for in these Norms will be resolved by the Norms Committee of the Central Bank.

Validity

Art. 13. These Norms will enter into force on the sixteenth day of January of the year two thousand twelve.

MODIFICATIONS:

(1) Modifications approved by the Norms Committee of the Central Reserve Bank of El Salvador, in Session No. CN-08/2016 dated September 2, two thousand sixteen, with validity from September 2, 2016.

(2) Modifications in Articles 1, 2, 4, 6, 9, and 10, substitution of Articles 5 and 7, and incorporation of Articles 5-A and 5-B, approved by the Central Reserve Bank of El Salvador through its Norms Committee, in Session CN-05/2022, of June 10, two thousand twenty-two, with validity from June 29, two thousand twenty-two.

Annex No. 1

MINIMUM REQUIREMENTS OF THE FUNCTIONS MANUAL AND OPERATIONAL PROCEDURES

Functions Manual:
a) Must contain the organizational chart and describe the functions of each of the components related to the operation of collecting demand deposits withdrawable by check or other means; and, b) Must include a section referring to the administration of the Manual, which must have modification procedures.
Operational Procedures Manual:
Must describe the administrative, accounting, and computer systems internal control procedures, for each of the operations related to the collection of demand deposits withdrawable by check or other means, that the entity will carry out.

2.1 Administrative Procedures: a) Must describe transaction cycles, preferably using the flowchart technique combined with narrative, and must comprise the following aspects:
i. Adequate segregation of functions;
ii. Description of the distribution of the original and copies of accounting documents;
iii. Timeliness in which transactions or accounting operations will be recorded;
iv. Quantification of transactions and operations;
v. Authorization and approval systems for transactions and operations;
vi. Computer procedures, which must generally describe the activities to be carried out by electronic means, indicating the base documents to introduce information into the system and the reports that will be issued;
vii. The form of organization of document files.
b) Must include a section referring to the administration of the Manual, which must have modification procedures.

2.2 Accounting Procedures:
Procedures must be designed on the following aspects:
a) The way in which accounting operations will be recorded in legalized books and generally in auxiliary accounting records; b) The manner of relating accounting vouchers to entries in the books and previous records; c) The authorization processes of accounting vouchers; and, d) The calculation and accounting of interest and commissions, if the entity has designed it so.

2.3. Computer Systems
This section of the Manual must deal with the data processing systems that will be used in the different events related to the collection of demand deposits withdrawable by check or other means, and must contain as a minimum the following:

Annex No. 1 a) General description of the system and main processes; b) Relational design of files; c) Detailed description and design of files and fields (data dictionary); d) User manual; e) List of users who will have access, indicating the user's hierarchical level and the type of access they will have to each of the options; f) Detail of the reports generated by the system, specifying for each one the frequency with which it is generated, the number of copies, and how they are distributed; g) If the systems are being developed, describe the procedure to test and approve the programs, as well as the responsibilities of these activities.

Additionally, the following information must be added:
a) Characteristics of the central and peripheral equipment; b) Detailed characteristics of development tools; c) Printed copy of source programs or tape backup copy; d) Copy of the guarantee or maintenance contract for central and peripheral equipment; e) Copy of the guarantee or maintenance contract for the programs, if they have been contracted to consultants; f) Procedures to perform backups; g) Contingency plan in case of information loss and/or failures in the computer equipment; h) Procedure for handling access keys; i) Hygiene standards for computer equipment and its peripherals; j) Standards for system maintenance; k) Graphical scheme on the interrelation and data communication of the central system and its peripheral systems such as agencies.
Other Annexes

This section must contain the different forms that the entity will use to contract with the public, to attend transactions with its clients, and to register accounting operations, but especially those related to contract forms, remittances, withdrawals, and other documents that will be used in demand deposit operations, forms of accounting documents for income and expenses such as credit notes, receipts, cash summaries, checks, debit notes, journal entries, and others.