Technical Standards for the Recognition and Accounting Registration of Commissions on Loans of Insurance Companies

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 NCF-04
TECHNICAL STANDARDS FOR THE RECOGNITION AND
ACCOUNTING REGISTRATION OF COMMISSIONS ON
LOANS OF INSURANCE COMPANIES
Approval: 05/06/2024
Validity: 20/06/2024

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

CONSIDERING:

I. That Article 85 of the Insurance Companies Law stipulates that the Superintendence shall establish the manner in which the accounting of insurance companies shall be kept, as well as the criteria for consolidating their operations and financial statements; a regulatory 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 Committee of Standards.

II. That Article 2, first paragraph, of the Law on Supervision and Regulation of the Financial System establishes that the Financial Supervision and Regulation System aims to preserve the stability of the financial system and ensure its efficiency and transparency, as well as to ensure the safety 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.

III. That Article 3, letter c), of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Financial System Superintendence to proactively monitor the risks of the members of the financial system and the manner in which they manage them, ensuring the prudent maintenance of their solvency and liquidity.

IV. That Article 35, letter f), of the Law on Supervision and Regulation of the Financial System establishes that it is the obligation of the supervised entities to adequately disclose the economic and financial reality, and to have the backing of their internal and external audits.

V. That Article 99, third paragraph, letter c), of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Committee of Standards of the Central Reserve Bank of El Salvador to approve technical standards for the preparation, approval, presentation, and dissemination of financial statements and supplementary information of the members of the financial system; for the determination of accounting obligations and the principles in accordance with which they shall keep their accounting, and the establishment of criteria for the valuation of assets, liabilities, and the constitution of provisions and reserves for risks, all of the foregoing in accordance with what is established in this Law and other applicable laws, with the aim that the real liquidity and solvency situation of the referred members be reflected.

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 RECOGNITION AND ACCOUNTING REGISTRATION OF COMMISSIONS ON LOANS OF INSURANCE COMPANIES

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the criteria for the recognition and accounting registration of the commissions that insurance companies charge in advance to their clients for the granting of loans.

Not within the scope of the object of these Standards are commissions for services provided that, although related to loans, are autonomous from said operation, such as those charged or accrued for appraisals of goods received as collateral and others similar, as well as commissions derived from loans with terms of up to 180 days.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Insurance companies incorporated in El Salvador; b) Branches of foreign insurance companies established and authorized in the country; and c) Cooperative associations that provide insurance services incorporated in the country.

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; and b) Entities: Subjects obligated to comply with the provisions established in these Standards.

CHAPTER II
RECOGNITION AND ACCOUNTING APPLICATIONS

Registration of commissions for operations with a term of up to 180 days Art. 4.- Commissions derived from loan operations with terms of up to 180 days shall be recognized as income in the corresponding income statement account, on the date they are collected or accrued.

Registration of commissions on loans
Art. 5.- Entities shall account with a credit to the corresponding cash collections made in concept of commissions for the granting, administration, or other income different from interest, related to loans.

The aforementioned account shall be segregated into short-term, medium-term, and long-term operations.
Short-term operations are considered those up to one year; medium-term operations, those of more than one year and up to five years; and long-term operations, those of more than five years.

For the collection of these commissions, entities must observe compliance with what is established in the Consumer Protection Law and its respective regulation.

Recognition of income
Art. 6.- The recognition of these commissions as income shall be made monthly, according to the following:
a) Thirty percent (30%) of the sum of the accounting applications made each month; and b) The value resulting from dividing by 12 for short-term loans, by 36 for medium-term loans, and by 84 for long-term loans, the residue obtained by subtracting thirty percent of the previous letter a) from the accounting applications with a credit character to each of the corresponding

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Establishment of controls
Art. 7.- In order to comply with the procedures described in these Standards, entities must establish controls that allow them to perform amortizations in a timely and accurate manner. To this effect, a model is attached on how such records must be kept in accordance with what is established in Annex No. 1 of these Standards.

Sanctions
Art. 8.- Non-compliance with the provisions contained in these Standards shall be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

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 NCF-04
TECHNICAL STANDARDS FOR THE RECOGNITION AND
ACCOUNTING REGISTRATION OF COMMISSIONS ON
LOANS OF INSURANCE COMPANIES
Approval: 05/06/2024
Validity: 20/06/2024

Derogation
Art. 9.- These Standards derogate the Standards for the Accounting of Commissions on Loans of Insurance Companies CS-014), approved by the Board of Directors of the Financial System Superintendence in Session No. CD-59/2000 of November 8, 2000, whose Organic Law was derogated 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 390, dated February 2, 2011.

Unforeseen Aspects
Art. 10.- Aspects not provided for in regulatory matters in these Standards shall be resolved by the Central Bank through its Committee of Standards.

Validity
Art. 11.- These Standards shall enter into force on the twentieth day of June of two thousand twenty-four.

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 NCF-04
TECHNICAL STANDARDS FOR THE RECOGNITION AND
ACCOUNTING REGISTRATION OF COMMISSIONS ON
LOANS OF INSURANCE COMPANIES
Approval: 05/06/2024
Validity: 20/06/2024

Annex No. 1
Table to perform monthly amortizations of bank commissions whose total value is distributed over one year.

MONTHS
Sum debits acct. 2901
(1)
30% on debits
Monthly
Sum debits monthly
(-) 30%
(2)
MONTHS OF THE YEAR (Accumulated monthly amortizations) Amortizations Pending JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEPT. OCT. NOV. DEC.
JANUARY 25.00 7.50 17.50 1.458 2.917 4.375 5.833 7.292 8.750 10.208 11.667 13.125 14.583 16.042 17.500 - FEBRUARY 25.00 7.50 17.50 1.458 2.917 4.375 5.833 7.292 8.750 10.208 11.667 13.125 14.583 16.042 (1.458) MARCH 30.00 9.00 21.00 1.750 3.500 5.250 7.000 8.750 10.500 12.250 14.000 15.750 17.500 (3.500) APRIL 40.00 12.00 28.00 2.333 4.667 7.000 9.333 11.667 14.000 16.333 18.667 21.000 (7.000) MAY 35.00 10.50 24.50 2.042 4.083 6.125 8.167 10.208 12.250 14.292 16.333 (8.167) JUNE 25.00 7.50 17.50 1.458 2.917 4.375 5.833 7.292 8.750 10.208 (7.292) JULY 20.00 6.00 14.00 1.167 2.333 3.500 4.667 5.833 7.000 (7.000) AUGUST 20.00 6.00 14.00 1.167 2.333 3.500 4.667 5.833 (8.167) SEPTEMBER 35.00 10.50 24.50 2.042 4.083 6.125 8.167 (16.333) OCTOBER 30.00 9.00 21.00 1.750 3.500 5.250 (15.750) NOVEMBER 18.00 5.40 12.60 1.050 2.100 (10.500) DECEMBER 12.00 3.60 8.40 0.700 (7.700) ACCUMULATED AMORTIZATION
315.00 94.50 220.50 1.45800 4.37500 9.04200 16.04200 25.08300 35.58300 47.25000 60.08300 74.95800 91.58300 109.25800 127.63300 (92.867)
MONTHLY AMORTIZATION 1.45833 2.91667 4.66667 7.00000 9.04167 10.50000 11.66667 12.83333 14.87500 16.62500 17.67500 18.37500

(1) Monthly sum of the debits of the provision accounts 29 01 "Deferred Income" 29 01 03 "Deferred Commissions" (2) Monthly sums of the debits minus the 30% recognized as income