Technical Standards for the Management of the Guarantee of Debt Securities Issuances When Constituted with Mortgage Loans

NDMC-35
DEBT SECURITIES ISSUANCES WHEN CONSTITUTED WITH MORTGAGE LOANS Approval: 01/31/2024 Validity: 02/15/2024

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

CONSIDERING:
I. That Article 2, second paragraph, of the Law on Supervision and Regulation of the Financial System establishes that for the proper functioning of the Financial Supervision and Regulation System, it is required that the members of the financial system and other supervised entities comply with current regulations and adopt the highest standards of conduct in the development of their business, acts, and operations, in accordance with what is established in the aforementioned Law, in other applicable laws, in regulations, and in the technical standards issued for such effect.
II. That Article 3, letter c), of the Law on Supervision and Regulation of the Financial System establishes that it is the competence of the Superintendency of the Financial System to proactively monitor the risks of the members of the financial system and other supervised entities, and the manner in which they manage them, ensuring the prudent maintenance of their solvency and liquidity.
III. That Article 7, fourth paragraph, of the Law on Supervision and Regulation of the Financial System establishes that issuers of public offer securities are subject to the supervision of the Superintendency, with special emphasis on compliance with the obligations imposed on them by laws, regulations, and stock market technical standards.
IV. That Article 1 of the Securities Market Law establishes that the Superintendency of the Financial System will oversee compliance with the provisions contained in said Law and will supervise stock exchanges, brokerage houses, companies specialized in the deposit and custody of securities, and risk rating companies.
V. That Article 3 of the Securities Market Law establishes that every security that is the subject of a public offer must be recorded in the Public Stock Registry, which the Superintendency of the Financial System will maintain for such effect, and subsequently registered in a stock exchange.
VI. That Article 9, third paragraph, letter h), of the Securities Market Law establishes that the issuance prospectus signed by an authorized person, which must contain audited financial statements, consolidated where applicable, the auditor's report, and all pertinent information regarding the guarantees of the issuance, rights, and duties of the issuer.
VII. That Article 9, third paragraph, letter i), of the Securities Market Law establishes that when the issuance is guaranteed with movable or immovable property, the documents proving the existence, valuation, and document of constitution of the guarantee must be presented.

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 MANAGEMENT OF THE GUARANTEE OF DEBT SECURITIES ISSUANCES WHEN CONSTITUTED WITH MORTGAGE LOANS

CHAPTER I
OBJECTIVE, SUBJECTS, AND TERMS

Objective
Art. 1.- These Standards aim to establish the provisions that guarantees securing debt securities issuances constituted with mortgage loans must comply with.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are issuers of debt securities when such issuances are constituted with mortgage loan guarantees.
For the purposes of these Standards, the State and the Central Reserve Bank of El Salvador are exempted.

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) Issuing Entity: issuers of securities subject to these Standards; and c) Superintendency: Superintendency of the Financial System.

CHAPTER II
GENERAL PROVISIONS

Regarding the guarantee and management of loans Art. 4.- The guarantee constituted with mortgage loans of debt securities issuances must comply with the following:
a) When they are guarantees granted by issuing entities, constituted partially or entirely by mortgage loans, these must comply with the "Standards for Classifying Credit Risk Assets and Establishing Sanitation Reserves (NCB-022), and when they are agricultural credits, in accordance with [Reference to NCB-026]; b) The sum of the mortgage loans that make up the guarantee must be equal to or greater than one hundred twenty-five percent (125%) of the current amount of the issuance; c) The term of the loans must be equal to or greater than the current term of the issuance; d) The loans must not simultaneously guarantee any other type of obligation; and e) The issuing entity must have internal control mechanisms that allow adequate monitoring and facilitate the rapid and timely consultation of the loans; these must be physically separated at all times from the institution's global portfolio so that they are perfectly identifiable. The term of the loans referred to in letter c) of this article may be shorter, in accordance with the special approval conditions of issuances that finance housing social security programs.

Formality of the documents constituting the guarantee Art. 5.- The documents sent to the Superintendency by the issuing entity may be through electronic or printed media.
Documents sent in printed media must be duly legalized and signed by the legal representative or attorney-in-fact specifically authorized for this purpose.
The submission of documents must comply with the formalities of the current legal framework applicable to them.

Art. 6.- The information regarding the mortgage loan portfolio that constitutes the guarantee, which issuing entities must submit and its periodicity, is as follows:

Information	Periodicity	Format for Submission
Lists of mortgage loan portfolios guaranteeing the issuances.	Monthly, within ten business days of the following month.	Electronic Loan List (For the case of subjects obligated to the Technical Standards on the procedure for Information Collection from the Central System [Reference to NDMC-41], this information will be subject to the technical specifications defined by the Committee of Standards of the Central Bank).
Certification by the external auditor.	Quarterly, within twenty business days following the close of each quarter.	Printed certification format that must be signed by the responsible External Auditor, supporting the quarterly loan list, which in turn must be signed by the Legal Representative, External Auditor, and Notary (See format in Annexes No. 1 and No. 2)
Certification by the external auditor of the balances of each issuance of certificates and the cancellation of obligations derived in the established period.	Monthly, within ten business days of the following month.	Printed Certification. (See format in Annex No. 3)
Certification by the Risk Unit or the internal auditor of the rating of the added mortgage loans, that they meet the requirements to constitute a guarantee for securities issuances.	Monthly, within ten business days of the following month.	Printed Certification and printed report containing the detail of added and substituted loans (See certification format in Annex No. 4 and electronic format in Annex No. 5).
Declaration of Will manifested in a public deed or notarial act granted by the legal representative of the issuer, through which they grant the encumbrance of the new loans affected to the obligation, as well as the release of substituted loans.	Every two months, within ten business days of the month following the bimestral period. This information must be sent for the periods of January and February; March and April; May and June; July and August; September and October and November and December of each year)	Printed format signed by the Legal Representative or attorney-in-fact specifically authorized for this purpose, duly legalized.

Art. 7.- Notwithstanding the periodicity indicated in the previous article, for the submission of the declaration of will, the Superintendency may require its formalization at any time, which refers to the fact that said declaration of will is signed by a notary.

Art. 8.- All information sent to the Superintendency, by any means, is the responsibility of the issuing entity, which is subject to the corresponding sanctions, in case that it is false and not updated in a timely manner.
This is without prejudice to any additional information that, by virtue of its legal powers, the Superintendency requests.

Art. 9.- In the Public Deed of Issuance, in the part related to the guarantee, it must [Text cut off in source, likely referring to specific inclusion requirements].

Art. 10.- External auditors who certify the status of the loans guaranteeing debt securities issuances must:
a) Evaluate the sample of loans in a number whose amount represents at least 50% of the amount of the issuance guarantee; b) Confront their rating with that established in accordance with the "Standards for Classifying Credit Risk Assets and Establishing Sanitation Reserves (NCB-022). If the rating is not updated, the auditor must confront their rating with those of the issuer. In the case of agricultural credits, observe [Reference to NCB-026]; c) If there are differences between both ratings, the auditor must inform the Superintendency and the corresponding issuing entity. The latter must take the necessary measures to immediately correct such observations; d) Base their analysis on the loan portfolio sent by the issuing entity to the Superintendency; and e) Have available at all times the documentation supporting the certification issued. The minimum percentage of 50% of the sample to be evaluated referred to in letter a) of this article may be lower, in accordance with the special approval conditions of issuances that finance housing social security programs.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 11.- 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. 12.- These Standards, Regulations for the Management of the Guarantee of Debt Securities Issuances when this is constituted with Mortgage Loans (RCTG-32/2010), approved by the Board of Directors of the Superintendency of the Financial System in Session No. CD-25/2010 of December 16, 2010, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law on Supervision and Regulation of the Financial System, published in Official Diary No. 23, Volume No. 390, dated February 2, 2011.

Unforeseen Aspects
Art. 13.- Aspects not provided for in regulatory matters in these Standards will be resolved by the Central Bank through its Committee of Standards.

Validity
Art. 14.- These Standards will enter into force as of February 15, two thousand twenty-four.

Annex No. 1

MODEL OF QUARTERLY CERTIFICATION OF THE MORTGAGE LOAN PORTFOLIO GUARANTEING ISSUANCES OF INVESTMENT CERTIFICATES

The undersigned external auditor of _________, certifies that from the examination of the documentation and accounting records, it is confirmed that as of (date)__________, the attached list of loans guaranteeing the issuance (name), for an amount of (in letters and numbers) ____________________, corresponds to mortgage loans classified as Root and Mortgages. The validity of said loans adjusts to the special conditions of their approval or, if applicable, is equal to or greater than the term of the issuance they guarantee. Likewise, said loans do not simultaneously guarantee any other obligation that is the responsibility of the issuing entity. The aforementioned issuance complies with the instructions and guidelines approved by the Central Reserve Bank of El Salvador for the management of investment certificates applicable to it. (In the case that issuances of investment certificates correspond to Banks regulated by the Bank Law; Cooperative Banks, Savings and Credit Societies and Federations of Cooperative Banks regulated by the Cooperative Banks and Savings and Credit Societies Law). San Salvador, _____of __of Name and signature of the responsible auditor:
Registration number and seal:

Annex No. 2

QUARTERLY LIST OF MORTGAGE LOAN INFORMATION GUARANTEING DEBT SECURITIES ISSUANCES

Column Number	Column	Description
1	DENOEMISION	Issuance Name. E.g. CIBAC$1
2	FECHACORTE	Date to which the data of the information refers. Format: dd/mm/yy Example: 31/01/2023
3	NUMREFEREN	It is the reference number that the debtor possesses for the acquired debt
4	CODDEUDOR	Unique Identification Number of the Debtor within the Institution Example: 02101812671012 or 016892813 (Without dashes or spaces).
5	TIPIDENTIF	Type of identifier with which the Institution sends the data: N=NIT (Tax Identification Number), U=NIU (Unique Identification Number)
6	PRIMAPELL	First Surname of the Debtor
7	SEGUAPELL	Second Surname of the Debtor
8	APECASADA	Married Surname of the Female Debtor
9	PRIMNOMB	First Name of the Debtor
10	SEGUNOMB	Second Name
11	NOMSOCIE	Name of the Debtor (Legal Entity)
12	MONTOREFER	Amount of the Original Loan Balance
13	SALDOREFER	Total Balance of the Reference
14	FECOTORGAM	Date on which the Loan was granted
15	FECVENCIMI	Maturity date of the reference
16	TASAINTE	Current Interest Rate
17	PAGOCAPI	Capital Payment Method D: Daily, S: Weekly, Q: Bi-weekly, M: Monthly, T: Quarterly, E: Semi-annual, A: Annual, E: Eventual
18	PAGOINTE	Interest Payment Method D: Daily, S: Weekly, Q: Bi-weekly, M: Monthly, T: Quarterly, E: Semi-annual, A: Annual, E: Eventual
19	NUREGISTRO	Mortgage Registration Number in the National Registry Center
20	FEREGISTRO	Date of Mortgage Registration in the National Registry Center

__________ _______________ ___________________ Signature and Seal Signature and Seal Signature and Seal Legal Representative External Auditor Notary

Annex No. 3

MODEL OF MONTHLY CERTIFICATION OF BALANCES OF OBLIGATIONS DERIVED FROM THE ISSUANCE OF DEBT SECURITIES

The undersigned external auditor of____________________, certifies that based on the examination of the documentation and accounting records as of__________ of__________, it is confirmed that:

1. The current obligations amount to (value in letters and numbers) ___________________ and, that through the Stock Exchange, the (s) (number) issuances referred to below have been negotiated:

Name	Amount	Placement Date	Maturity Date	Balance

2. The payment for interest for the period from ________to _______, relative to the issuances detailed above, were made on their respective maturity dates.
   San Salvador, ______of _of
   Name and signature of the responsible auditor:
   Registration number and seal:

Annex No. 4

MODEL OF MONTHLY CERTIFICATION BY THE INTERNAL AUDITOR ON ADDITIONS IN MORTGAGE LOANS GUARANTEING DEBT SECURITIES ISSUANCES

The undersigned internal auditor of ________________________, certifies that the(quantity) mortgage loans for the amount of ________(in number and letters), which were added during the month of to the list of mortgage loans guaranteeing the issuances of Investment Certificates named, corresponds to loans classified by management as Root and Mortgages. The validity of said loans adjusts to the special conditions of their approval or, if applicable, is equal to or greater than the term of the issuance they guarantee. Likewise, said loans do not simultaneously guarantee any other obligation that is the responsibility of the issuing entity. The aforementioned issuance complies with the instructions and guidelines approved by the Central Reserve Bank of El Salvador for the management of investment certificates applicable to it. (In the case that issuances of investment certificates correspond to Banks regulated by the Bank Law; Cooperative Banks, Savings and Credit Societies and Federations of Cooperative Banks regulated by the Cooperative Banks and Savings and Credit Societies Law). San Salvador, _____of __of Name and signature of the responsible person of the Risk Unit or the internal auditor:
Registration number and seal:

Annex No. 5

LIST OF ADDED AND ELIMINATED LOANS GUARANTEING DEBT SECURITIES ISSUANCES

Column Number	Column	Description
1	DENOEMISION	Issuance Name. E.g. CIBAC$1
2	FECHACORTE	Date to which the data of the information refers. Format: dd/mm/yyyy Example: 31/01/2023
3	NUMREFEREN	It is the reference number that the debtor possesses for the acquired debt
4	CODDEUDOR	Unique Identification Number of the Debtor within the Institution Example: 02101000000000 or 016800000 (Without dashes or spaces)
5	TIPIDENTIF	Type of identifier with which the Institution sends the data: N=NIT (Tax Identification Number), U=NIU (Unique Identification Number)
6	PRIMAPELL	First Surname of the Debtor
7	SEGUAPELL	Second Surname of the Debtor
8	APECASADA	Married Surname of the Female Debtor
9	PRIMNOMB	First Name of the Debtor
10	SEGUNOMB	Second Name
11	NOMSOCIE	Name of the Debtor (Legal Entity)
12	MONTOREFER	Amount of the Original Loan Balance
13	SALDOREFER	Total Balance of the Reference
14	FECOTORGAM	Date on which the Loan was granted
15	FECVENCIMI	Maturity date of the reference
16	TASAINTE	Current Interest Rate
17	PAGOCAPI	Capital Payment Method D: Daily, S: Weekly, Q: Bi-weekly, M: Monthly, T: Quarterly, E: Semi-annual, A: Annual, E: Eventual
18	PAGOINTE	Interest Payment Method D: Daily, S: Weekly, Q: Bi-weekly, M: Monthly, T: Quarterly, E: Semi-annual, A: Annual, E: Eventual
19	NUREGISTRO	Mortgage Registration Number in the National Registry Center
20	FEREGISTRO	Date of Mortgage Registration in the National Registry Center
21	ESTADOPRES	Loan Condition A=Added Loan, E=Eliminated Loan