Technical Standards for Transparency and Disclosure of Information on Banking Financial Services — SSF — SV

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
NBCR-15/2018
NCM-02
TECHNICAL STANDARDS FOR THE TRANSPARENCY AND DISCLOSURE OF INFORMATION ON BANKING FINANCIAL SERVICES Approval: 12/20/2018 Validity: 01/07/2019

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

CONSIDERING:
I. That Article 2 of the Law on Supervision and Regulation of the Financial System establishes that the Financial Supervision and Regulation System aims to ensure the efficiency and transparency of the financial system, as well as the adoption of the highest standards of conduct in the development of their business.

II. That Article 32 of the Law on Supervision and Regulation of the Financial System establishes that the Superintendence may require supervised entities direct access to all data, reports, or documents regarding their operations through the means and form it defines.

III. That Article 35 of the Law on Supervision and Regulation of the Financial System establishes that directors, managers, and other officials holding management or administrative positions in the members of the financial system must conduct their business, acts, and operations complying with the highest ethical standards of conduct, and must ensure the efficient functioning of systems for recording, processing, storage, transmission, production, security, and control of information flows.

IV. That Article 99 of the Law on Supervision and Regulation of the Financial System, in subsection a), establishes that it is the responsibility of the Committee of Standards of the Central Reserve Bank to approve technical norms and provisions that must be issued in accordance with the laws regulating supervised entities, especially those related to information transparency requirements.

V. That Article 99 of the Law on Supervision and Regulation of the Financial System, in subsection b), establishes that it is the responsibility of the Committee of Standards of the Central Reserve Bank to approve technical norms that provide the public with sufficient and timely information about the products and services offered by members of the financial system.

VI. That the transparency of financial services information seeks to improve access to it, so that the general public can make decisions with adequate information regarding the banking financial products and services they wish to acquire or contract.

VII. That it is necessary to establish minimum conditions to promote a framework of transparency for the benefit of the general public.

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 TRANSPARENCY AND DISCLOSURE OF INFORMATION ON BANKING FINANCIAL SERVICES

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to define the minimum transparency measures that the obligated subjects of these Standards must comply with, as a mechanism for users of financial services and the general public to make informed decisions responsibly regarding the operations and services they wish to contract.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Banks incorporated in El Salvador; b) Branches of foreign banks established in El Salvador; c) Offices of foreign banks authorized by the Superintendence of the Financial System to place funds in El Salvador; d) Cooperative banks; e) Savings and credit societies; and f) Development Bank of the Republic of El Salvador, insofar as it does not contradict its creation law or what is provided by the Court of Accounts. (4)

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) Third-party charges: amounts of money that the obligated subjects in these Standards charge the user or client for services provided by third parties to fulfill requirements linked to operations that, according to the agreement, will be borne by the user or client; c) Client: is the natural or legal person with whom the obligated subjects in these Standards establish legal or contractual relationships for the supply of products or services, in the development of their activities; d) Commission: amount of money that the obligated subjects in these Standards charge the client for the provision of an operation or an additional service effectively provided, identified and described in the contract, and which is not inherent to the contracted product or service; e) Contract: is an adhesion contract drafted unilaterally by the entity, which regulates legal relationships between the entities and their clients; f) Disclosure: publications in newspapers, websites, any other medium or electronic device, as well as displays in physical or electronic bulletin boards by the obligated subjects in these Standards; g) Entity: subjects referred to in Article 2 of these Standards; h) Administrative Body: a collegial body that performs the administration function of the entity; for the purposes of these Standards, it refers to the Board of Directors or Administrative Council as applicable; i) Surcharge: is the economic penalty that the entity applies to the client for failing to fulfill contractual obligations, due to facts attributable to the same; the description or definition of the surcharge must be included in the contract; j) Superintendence: Superintendence of the Financial System; k) Interest rate: the price paid or received for the use of money, which is established as a percentage of the capital based on the days the debtor or depositor has it or makes it available from the date of disbursement or deposit; l) Effective Interest Rate or EIR: the annualized interest rate that allows equalizing the present value of all installments and other payments to be made by the client with the amount they will effectively receive as a loan; m) Nominal interest rate: the annualized active or passive interest rate established freely by the entity and accepted by the client; n) Reference rate: a single rate that will serve as the basis for contracting operations with adjustable interest rates and will be established by each entity; and o) Users: any natural or legal person who operates with the entities or makes use of the services they provide to the general public, without any contractual relationship with the entity.

CHAPTER II
TRANSPARENCY OF INFORMATION

Principle of information transparency
Art. 4.- The principle of transparency aims to strengthen the relationships between entities and clients, in order to generate mutual trust between them, through the disclosure of information regarding the application and modification of interest rates, commissions, surcharges, third-party charges, associated with active and passive operations carried out, as well as the services provided by the entities. This information must be accessible to the general public in formats that allow for easy comprehension.

Information to users
Art. 5.- The entity must provide users and clients with all the information they request prior to the celebration of any contract.
The foregoing may be carried out by physical delivery or making available by electronic means the information referred to interest rates, commissions, third-party charges, and surcharges of the products and services offered by the entity. As well as whether they enjoy or not the benefit of deposit insurance. In order to facilitate the comparison of similar products offered by other entities.

Regarding the formal service of attention
Art. 6.- The entity must inform the public about the formal service of attention, to handle by any means, complaints and inquiries from its clients. Likewise, it must inform about the mechanisms and procedures for attention, as well as response times.
The most frequent questions that users and clients may have, with their respective answers, relative to the product or service, or to user attention, must be available on the Website and visible at all times in the entity's branches, as part of the dissemination of the products and services they offer. Art. 7.- The entity will ensure that in its branches and other channels of public attention, a notice is placed, with legible typography visible to the naked eye and containing information about the mechanism the entity has implemented to handle complaints and inquiries from its clients, specifying the schedule for public attention and communication means, such as: attention telephone; email; physical address of the attention office, among others. Training of personnel related to the formal service of attention Art. 8.- The entity must train employees related to the attention of clients and users, or placement of products, on the matter of these provisions, the operational procedures, interest calculations of the financial products they offer. The training program and the training provided to the aforementioned personnel must be duly documented in the personnel information files, which must be available to the Superintendence at all times.

Information on promotional conditions
Art. 9.- Promotional conditions that incentivize the contracting of certain active, passive operations, or services, must be informed to the public and maintained by the entity during the offered period, and if applicable, for the number of units offered or for some other circumstance subject to the promotional condition; likewise, these promotional conditions must be informed adequately and timely, including the nominal and effective rate of credit operations, as well as commissions, third-party charges, and surcharges.

CHAPTER III
ON ADHESION CONTRACTS

Deposit of contract models
Art. 10.- The entity must submit to the Superintendence, prior to its offer to the public, the model of adhesion contract and its annexes, for their respective review, deposit, and registration, complying with what is stipulated in subsection l) of Article 56 of the Banks Law, third paragraph subsection h) of Article 37 of the Cooperative Banks and Savings and Credit Societies Law, Article 22 of the Consumer Protection Law, Articles 22 to 28 of the Regulation of the Consumer Protection Law, and considering the content of Annex No. 1 of these Standards. (6)

Regarding the deposit of adhesion contract models, the entity must expressly indicate whether it corresponds to a new contract model or a modification of a previously deposited model in the Superintendence. (6)

In the case of modifications to previously deposited contract models, the entity must clearly and visibly identify the provisions or clauses that have been the object of modification, for the corresponding review by the Superintendence, without prejudice to the powers of comprehensive review that correspond to it. (6)

Deadline for the authorization of adhesion contracts Art. 11.- The Superintendence will verify jointly with the Consumer Ombudsman that the adhesion contracts comply with current legislation and for their deposit, they will have a deadline not exceeding thirty days counted from the submission thereof by the entity to the Superintendence. When the entity intends to modify the adhesion contract or its annexes, it must previously submit it to the Superintendence for review jointly with the Consumer Ombudsman, for the deposit and registration of the modifications and the substitution of the previously deposited one. In accordance with what is established in Article 22 of the Consumer Protection Law, if after thirty days of presenting the adhesion contract models and their annexes or modifications and they have not been objected or observed, it will be understood that they comply with the corresponding regulations and consequently can be used.

Content of the contract
Art. 12.- The contract and its annexes must provide clear, truthful, sufficient, and easy-to-understand information, allowing full knowledge of the duties and rights of the entity and the client. The contract, in addition to what is established in Article 10 of these Standards, will contain as a minimum, the following: (6) a) Amount of credit granted, expressed in letters and numbers; b) Nominal interest rate, effective interest rate, overdue interest rate, or surcharge for failure to pay; and c) Any information that is useful and important for the client.

CHAPTER IV
CREDIT APPROVAL LETTER AND INFORMATION ON PASSIVE OPERATIONS

Information on the credit approval letter
Art. 13.- The entity, prior to the celebration of adhesion contracts, at the request of the credit applicant, will deliver by physical or electronic means, a credit approval letter in the terms and conditions established in subsection "p" of Article 19 of the Consumer Protection Law. The approval letter will be an extract of the contract, so its content must not differ from it. For the purposes that the credit approval letter is clear and complies with the principle of information transparency and to facilitate the user's understanding, the entity must create a format that includes distinguishable sections between each other, ordered in rows, whose type and size of letter is legible to the naked eye, not less than 3 millimeters.

Documents to include in the active operations file Art. 14.- The credit approval letter together with the copy of the contract will form part of the client's file as well as the corresponding scheduled amortization table, if applicable. The client's acceptance may be documented by physical or electronic means. (4)

Art. 15.- The entity will make available to the general public through its physical or electronic bulletin boards, the information indicating the place or means by which complaints can be filed, the hours of attention, and the steps to follow in case of not obtaining a response or not considering it satisfactory.

Minimum information in passive operations
Art. 16.- The entity, prior to the celebration of contracts for passive operations, must deliver a form in physical or electronic format, according to the indications of the users, with the following minimum information:
a) Nominal interest rate that will be applied for the deposit; (1) b) The cutoff dates or periodicity for the crediting of interest; c) The amount and detail of any commission charge, expense, or charge that is passed on to the client except taxes or special contributions; d) Penalties that will be applied for failure to fulfill contracted obligations; e) Warnings about penalties for minimum movements in debit cards when applicable, provided that they have been agreed upon in the contract; and f) Other information that the entity considers relevant. In addition to what is established in this article, the entity must inform the maturity date of the deposit, if applicable, and the time the user has to cancel it before its automatic renewal. Notwithstanding what is established in this article, physical delivery of the form is exempted for accounts for the payment of wages to workers, including labor indemnities, through fund transfer from a special deposit account of the employer, in which the special account of the employer and the holder of the deposit account are identified. If this type of account is associated with the use of a debit card, the entity must inform about what is established in subsection e) of this article. The information required in this article must be complete, accurate, truthful, clear, and timely.

CHAPTER V
ON INTEREST RATES

On active interest rates
Art. 17.- The entity must establish and make public a single reference rate expressed in percentage, for its loan operations in legal tender currency and another for its loan operations in foreign currency, in accordance with legal requirements. The calculation methodology must be documented and available to the Superintendence when requested.

Regarding the nominal interest rate, it must be clearly differentiated, in the disclosure of the products offered and in the contractual document, whether it is fixed or variable or a combination of both; which must consider the Maximum Legal Rates, in accordance with what is established in the Law Against Usury and its technical regulations. The entity must inform the effective interest rate or EIR within the credit approval letter, contractual documents, and in all advertising of credit operations carried out by any mass or individual medium, with similar emphasis in the publication of other financial variables such as the amount and term of the credit, installment amount, and total amount to be paid at the end of the term. In order to facilitate the decision-making of users regarding products offered by entities, they may disclose on their website, the corresponding formula for the calculation of periodic interest, the formula and the method of calculation of the EIR, the method of amortizing credits with the corresponding payments to capital, interest, and other applicable expenses, making available to users and clients, examples of such calculations and financial calculators for simulation purposes.

Method of calculation of interest
Art. 18.- For the computation of interest on active or passive operations, the entity must apply the method of exact simple interest, which consists of counting the days of use of money based on the calendar year and using the divisor of 365 or 366 days, as applicable, using the following formula:
I = P * i * n
Where:
I = Interest to be paid
P = Capital owed i = Current nominal interest rate percentage n = The factor established of the relationship of time elapsed divided by 365 or 366 if the year is a leap year For the calculation of interest on active and passive operations carried out through computer systems, six decimals must be used to compute interest, the last retained digit must be rounded up to the immediate upper one when the first lost digit is equal to or greater than five; the same criteria will be used for the storage of information.

Effective interest rate
Art. 19.- The calculation of the EIR will be made taking into account the total charges that the entity will charge the client, including third-party charges mandatory for financing according to the contract models deposited in the Superintendence, except notary expenses, payment of tax, fees, and contributions, incorporating the term and modalities to redeem the obligation and expressing it in percentage terms on the principal. The entity must calculate the annualized EIR, for each type of operation, according to the following methodology:
a) Determination of the maximum effective interest rate for publication purposes:
For active operations, the maximum annualized effective interest rate will be understood as that which takes into account the total charges that the entity will charge the client, incorporating the term and modalities to redeem the obligation and expressing it in percentage terms on the principal. For each type of active operation financial product offered to the public, the entity must publish monthly the maximum annualized effective rate, which in terms of amounts and term represents the highest effective rate. The publication must contain a clarification of the parameters considered for the calculation of the referred rate, based on what is established in the second subsection of this article. b) Determination of the annualized effective interest rate for contract purposes:
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