Technical Standards for the Publication of Risk Ratings of Banks, Investment Banks, and Savings and Credit Societies

SOCIEDADES DE AHORRO Y CRÉDITO
Approval: 09/23/2024
Validity: 10/09/2024

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

CONSIDERING:

I. That Article 235, first paragraph, of the Banking Law, and Article 64, first paragraph, of the Investment Banking Law establish that banks and investment banks, respectively, must be rated annually by a risk rating agency registered in the Public Stock Registry maintained by the Superintendent of the Financial System. The Superintendent may require another rating when it is presumed that the first has inadequately applied the rating methodology, has violated the respective Law in rating, or has manipulated the information. (1)

II. That Article 235, second paragraph, of the Banking Law establishes that, when it comes to branches of foreign banks, the rating of the bank will be accepted when it has been carried out by an internationally recognized risk rating agency.

III. That Article 235, third paragraph, of the Banking Law establishes that the entities providing the rating service must update and make public the ratings in the manner and with the periodicity determined by the Superintendent, a power that by virtue of the entry into force of the Law on Supervision and Regulation of the Financial System was transferred to the Central Reserve Bank, through its Technical Committee.

IV. That Article 64, second paragraph, of the Investment Banking Law establishes that the entities providing the rating service must update and make public the ratings in the manner and with the periodicity determined by the technical standards issued for this effect by the Central Bank through its Technical Committee. (1)

V. That Articles 155 and 161 of the Cooperative Banks and Savings and Credit Societies Law establish that Savings and Credit Societies will be subject to the provisions of the Banking Law insofar as they are pertinent. (1)

VI. That Article 7, letter b), of the Law on Supervision and Regulation of the Financial System establishes that banks incorporated in El Salvador, their offices abroad and their subsidiaries; the branches and offices of foreign banks established in the country, are subject to the provisions of the Law on Supervision and Regulation of the Financial System and, therefore, to the supervision of the Superintendent of the Financial System. (1)

SOCIEDADES DE AHORRO Y CRÉDITO
Approval: 09/23/2024
Validity: 10/09/2024

VII. That Article 7, letter f), of the Law on Supervision and Regulation of the Financial System establishes that risk rating agencies are subject to the provisions of the Law on Supervision and Regulation of the Financial System and, therefore, to the supervision of the Superintendent of the Financial System. (1)

VIII. That Article 7, letter g), of the Law on Supervision and Regulation of the Financial System establishes that savings and credit societies regulated by the Cooperative Banks and Savings and Credit Societies Law are subject to the provisions of the Law on Supervision and Regulation of the Financial System and, therefore, to the supervision of the Superintendent of the Financial System. (1)

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 PUBLICATION OF THE RISK RATING OF BANKS, INVESTMENT BANKS, AND SAVINGS AND CREDIT SOCIETIES (1)

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to regulate the publications of the risk rating of the entities that must be carried out by the risk rating agencies contracted by them, as well as the publications made by the entities themselves.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are:
a) Banks incorporated in the country; b) Branches of foreign banks established in the country; c) Savings and Credit Societies; d) The Development Bank of the Republic of El Salvador, insofar as it does not contradict its creation law; e) The Agricultural Development Bank, insofar as it does not contradict its Creation Law; f) The Mortgage Bank of El Salvador, S.A.; (1) g) Investment Banks; and (1)

SOCIEDADES DE AHORRO Y CRÉDITO
Approval: 09/23/2024
Validity: 10/09/2024

h) Risk Rating Agencies registered in the Public Registry of the Superintendent of the Financial System, which provide the risk rating service to the entities indicated in the preceding letters. (1)

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) Rating Agency(ies): Risk Rating Agency; c) Entity(ies): Subjects referred to in Article 2 of these Standards, in the letters included from a) to g); and (1) d) Superintendent: Superintendent of the Financial System.

CHAPTER II
ON PUBLICATIONS

Publication by rating agencies and content
Art. 4.- Rating Agencies must publish, no later than April 30 based on the financial statements of December 31, on their website, the ratings granted to the entities in their last evaluation.

Likewise, Rating Agencies with respect to the content of the rating reports, as well as the updates of the ratings granted to the entities, must comply with the provisions of the Technical Standards (NCF-07), issued by the Central Bank through its Technical Committee.

In addition, Rating Agencies must send the rating reports and their updates to the Superintendent in the manner and deadlines referenced in the Standards mentioned in the second paragraph of this article.

Publication by the entities
Art. 5.- The entities must publish the most recent rating on the same dates they publish their financial statements, including it in a note to the financial statements. Such note must be in accordance with the Manual (NCF-01) (NCF-12), issued by the Central Bank through its Technical Committee. (1)

Publications made by international rating agencies Art. 6.- Foreign bank branches, if they opt to use the rating granted by a foreign rating agency recognized internationally, must directly comply with the publication and information submission obligations established in these Standards, which they will carry out using the attestations that the foreign rating agency provides to its parent company.

In the event that the nomenclature used abroad is different from that defined in national legislation, they will publish the rating as it was granted by the respective rating agency and its definition, in Spanish.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Internationally recognized rating agencies
Art. 7.- For the purposes indicated in Article 235, second paragraph, of the Banking Law, those recognized by the Securities and Exchange Commission of the United States of America and those that can demonstrate their quality as a rating agency before the Superintendent will be considered as internationally recognized Rating Agencies.

Other obligations of the entities
Art. 8.- The entities must ensure that the rating agencies they hire to provide them with the rating service comply with the rating publication requirements granted to them, authorizing them to disclose their ratings.

Requirement of other ratings
Art. 9.- The Superintendent may require the entity to obtain another rating when it is presumed that the rating methodology has been inadequately applied, the current legislation has been violated in rating, or the information has been manipulated.

Sanctions
Art. 10.- 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. 11.- These Standards repeal the Standards for the Publication of the Risk Rating of Banks NPB4-25), approved by the Board of Directors of the Superintendent of the Financial System in Session No. CD-50/2000 of September 27, 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 Journal No. 23, Volume No. 390, of February 2, 2011.

SOCIEDADES DE AHORRO Y CRÉDITO
Approval: 09/23/2024
Validity: 10/09/2024

Unforeseen aspects
Art. 12.- Aspects not foreseen in regulatory matters in these Standards will be resolved by the Central Bank through its Technical Committee.

Validity
Art. 13.- These Standards will enter into force on October 9, 2024.

MODIFICATIONS:
(1) Modifications in the name of the Standards, in the considerations I, IV, V, VI and VII, and incorporation of consideration VIII, and modifications in articles 2, 3 and 5, approved by the Central Bank through its Technical Committee, in Session No. CN-08/2025, of September 30, 2025, with validity from October 15, 2025.