Technical Standards for Valuation of Assets and Liabilities Excluded from Financial Entities in Resolution

NCF-15
EXCLUDED FROM FINANCIAL ENTITIES IN RESOLUTION Approval: 19/03/2026 Validity: 06/04/2026

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

CONSIDERING:

I. That Article 42, first paragraph, of the Law for the Stability of the Financial System and Deposit Guarantee, establishes that the Resolution Authority shall carry out a valuation of the assets of the entity in resolution with the objective of establishing the value of the composition of the excluded mass that may be transferred or for the purpose of applying any resolution measure.

II. That Article 43 of the Law for the Stability of the Financial System and Deposit Guarantee, establishes that the Financial System Superintendence may order the exclusion of assets, as well as the respective liabilities, of a financial entity in resolution.

III. That Article 2, first paragraph, of the Law for the Supervision and Regulation of the Financial System, establishes that the Financial Supervision and Regulation System has the objective of preserving the stability of the financial system and ensuring its efficiency and transparency, as well as ensuring the security and solidity of the members of the financial system in accordance with what this Law, other applicable laws, regulations, and technical standards issued for this purpose establish, all in concordance with international best practices on the matter.

IV. That Article 3, letter g), of the Law for the Supervision and Regulation of the Financial System establishes that it is the competence of the Financial System Superintendence to agree on the intervention of any member of the financial system in whose applicable laws such a measure is contemplated.

V. That Article 4, letter h), of the Law for the Supervision and Regulation of the Financial System establishes that it is the faculty of the Financial System Superintendence to authorize the suspension of operations, revocation of authorization to operate, and the closure of the members of the financial system, when legally appropriate. In the latter case, it will coordinate the actions established by the laws with other involved institutions.

VI. That Article 4, letter k), of the Law for the Supervision and Regulation of the Financial System establishes that it is the faculty of the Financial System Superintendence to supervise the liquidation of the members of the financial system in accordance with what specific laws determine.

VII. That Article 99, third paragraph, letter a), of the Law for the Supervision and Regulation of the Financial System, establishes that it corresponds to the Committee of Standards of the Central Reserve Bank of El Salvador the approval of technical standards, instructions, and provisions that the laws regulating the supervised establish must be issued to facilitate their application, especially those related to solvency requirements, liquidity, provisions, reserves, classification of risky assets, criteria to establish the need for consolidation, good corporate governance practices, information transparency, and on any other aspect inherent to risk management by the supervised.

VIII. That in accordance with Article 101, fourth paragraph, of the Law for the Supervision and Regulation of the Financial System, the faculties to approve, modify, and repeal technical standards that must be complied with by the members of the financial system and other supervised entities, which were attributed to the Superintendences or the Boards of Directors of the Superintendences, whose organic laws were repealed by the aforementioned Law, are transferred to the Central Reserve Bank of El Salvador.

THEREFORE,

in virtue of the normative faculties conferred by Article 99 of the Law for the Supervision and Regulation of the Financial System,

AGREES to issue the following:

TECHNICAL STANDARDS FOR VALUATION OF ASSETS AND LIABILITIES EXCLUDED FROM FINANCIAL ENTITIES IN RESOLUTION

CHAPTER I
OBJECTIVE AND TERMS

Objective
Art. 1.- These Standards have the objective of establishing the procedure that the Financial System Superintendence must follow, for the valuation of the assets and liabilities that may be excluded from a financial entity in resolution.

Scope of Application
Art. 2.- These Standards shall apply to the Financial System Superintendence when a financial entity is in the process of resolution.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Board of Directors: Board of Directors of the Financial System Superintendence; b) Entity/entities: Financial entities in a state of resolution listed in Article 2 of the Law for the Stability of the Financial System and Deposit Guarantee; c) Institute: Deposit Guarantee Institute; d) Law: Law for the Stability of the Financial System and Deposit Guarantee; e) Resolution: process by which the necessary measures are executed so that an entity can exit the financial system in an orderly manner or, if applicable, facilitate the continuity of its essential functions, in such a way as to minimize the impact on financial stability and economic order, making the public interest prevail, in accordance with the objectives, principles, and other applicable provisions by virtue of the Law for the Stability of the Financial System and Deposit Guarantee; and f) Superintendence: Financial System Superintendence as the resolution authority.

CHAPTER II
VALUATION METHODOLOGY

Art. 4.- The Superintendence shall carry out a valuation of the assets and liabilities of the entity in resolution with the objective of establishing the value of the composition of the excluded mass that may be transferred or for the purpose of applying any resolution measure.

Cleaned Financial Statements
Art. 5.- The exclusion of assets and liabilities as a resolution measure of the entity shall be based on their financial statements duly cleaned by the Superintendence. For this purpose, it must have carried out the valuations of the different assets as appropriate, and also the administrative supervisor or the Legal Representative must have registered the accounting entries corresponding to losses due to exchange effects, estimates of uncollectibility, depreciations, impairments, and amortizations; so that the established book value is the fair value of the assets.

The Superintendence may authorize that the valuation of the assets be carried out by independent valuation experts whose fees will be covered by the entity in resolution; such valuation is subject to subsequent verification by the Superintendence.
The Superintendence, in its capacity as Resolution Authority, may consider the provisional valuation of the assets and liabilities of the entity in resolution, provided that the final valuation is completed subsequently.
The date of the cleaned financial statements shall be that fixed by the Board of Directors; consequently, accounting adjustments for determined losses shall be applied as of the aforementioned date.
If the Superintendence or the valuation expert determines that the fair value of the assets differs from those presented in the financial statements by the entity in resolution with the objective of hiding its true situation, the Superintendence must immediately inform the Attorney General's Office for the corresponding legal effects. Without prejudice to the foregoing, the Superintendence may impose administrative sanctions on the persons responsible for the preparation and approval of the financial statements as well as on external auditors, imposing any of the sanctions contained in Article 42, first paragraph, Article 45, and Article 46 of the Law for the Supervision and Regulation of the Financial System.

Valuation Methods
Art. 6.- The measurement of the monetary amounts by which the elements comprising the excluded assets and liabilities will be recognized must be prudent and realistic and may be carried out by any or a combination of the following methods:
a) Realizable (or liquidation) value: assets shall be recorded at the amount of cash and other equivalents thereto that could be obtained, at the present moment, by the non-forced sale of the same. Liabilities shall be carried at their liquidation values, that is, the undiscounted amounts of cash or other equivalents thereto, that are expected to cancel the debts, in the normal course of operation; b) Present value: assets shall be carried at the present value by discounting the net cash inflows expected to be generated by the item in the normal course of operation. Liabilities shall be carried at the present value, discounting the net cash outflows expected to be needed to pay the debts, in the normal course of operation; c) Recoverable amount: the higher of the fair value less costs to sell of an asset and its value in use. Fair value is understood as the expert appraisal of the goods, when pertinent, and carried out by an expert duly registered with the Superintendence. Value in use is understood as the present value of estimated future cash flows expected to be derived from the continued use of an asset over time and from its sale or disposal by another means at the end of its useful life. When the application of more than one valuation method is possible, the one that results in the most conservative shall prevail, understood as such the one that provides the lowest amount and in coherence with the principles of prudence.

Valuation of Assets
Art. 7.- The following types of assets shall be valued as follows:
a) Liquidity: the amount appearing in the cleaned balance sheet is representative of the monetary values, therefore, except for exchange adjustments and the respective confirmations and reconciliations of local banks and local and foreign financial entities, the reflected amounts do not require further valuation; b) Investment Financial Instruments: the valuation shall be carried out in accordance with the current Accounting Standards applicable to such assets; each financial instrument shall be evaluated according to its inherent characteristics and stock market perspectives, exhausting the following order of valuation: market value, estimated value under a pricing determination methodology, and present value; c) Loans: the valuation shall be carried out in accordance with the current Accounting Standards for these assets; the amount to be transferred to the excluded mass shall be the book amount, considered this value as reflecting the balance sheet, once the respective health reserves have been deducted; d) Assets received in payment or adjudicated: assets received in payment or adjudicated, regardless of the legal form in which they were transferred to the entity (adjudication, dation in payment, sale and purchase, or cancellation of financial lease contracts), shall be valued at their net realizable value, determined by their fair value (expert appraisal) less selling costs (costs directly attributable to the alienation or realization of the asset); e) Investments in shares, rights, and participations: these investments shall be valued at their market value, estimated value under a pricing determination methodology, and if there is no market price, the acquisition cost adjusted for the issuer's accumulated losses shall be used; e) Diverse assets: depending on the type of asset, they shall be valued with any of the methods used for the previous assets, under the rule of the asset with which it has the most similarities; g) Physical and intangible assets: for movable goods, the book value from the cleaned balance sheet shall be used, understood as the result of subtracting the respective depreciations, amortizations, and impairments from the cost of the assets. For real estate, the net realizable value (fair value less selling costs) shall be used.

Valuation of Liabilities
Art. 8.- The following types of liabilities shall be valued as follows:
a) Financial Liabilities at Amortized Cost - Deposits: they shall be valued at their monetary amount duly proven in the respective entity records as of the date of suspension of operations and the documentation supporting their enforceability; b) Labor Provisions: taking personal files and relevant labor provisions as a basis, the calculation of salaries and labor benefits pending payment up to the date of suspension of operations of the entity shall proceed; c) Other Liabilities: they shall be valued at their monetary amount proven in the entity's accounting records as of the date of suspension of operations and the documentation supporting their enforceability.

Expert Valuation
Art. 9.- In cases where an expert report is needed for the valuation of excluded assets, the date of issuance of this report must not exceed one calendar year with respect to the date of suspension of operations of the entity in resolution, and its issuer must be registered with the Superintendence. If a new expert report is needed and payments for these services are incurred, they shall be at the expense and cost of the entity in resolution.

CHAPTER III
EXCLUSION OF ASSETS AND LIABILITIES

Determination of Liabilities
Art. 10.- The exclusion of liabilities shall be carried out by the Superintendence, of which a report shall be presented to the Board of Directors, so that it adopts the agreement on the exclusion of the obligations owed by the entity, initially integrated by the minimum labor obligations established in the Labor Code and by deposits according to the provisions of Articles 91, 92, and 93, with deposits regulated in Article 94 of the Law excluded. The amount determined shall serve as the basis for the choice of assets.

Determination of Assets
Art. 11.- In the same report indicated in Article 10 of these Standards and under the same procedure, the excluded assets of the entity shall be presented, so that the Board of Directors adopts the agreement by which it approves the excluded assets, which must have been selected based on attributes of liquidity, negotiability, maintenance of value over time, and security in their ownership and disposition. The amount of the selected assets shall be an amount that maintains an equivalent or superior relationship to the value of the corresponding excluded liabilities for the minimum labor obligations established in the Labor Code and to all or part of the deposits.

Other Excluded Liabilities
Art. 12.- The Board of Directors may agree to add other liabilities other than those mentioned in Article 10 of these Standards, provided that they correspond to creditors who have guarantees originating from pledge and mortgage credits, whose credit rights are less than the value of the goods or rights that guarantee them, in such a way that such difference is necessary for the payment of the excluded liabilities referred to in Article 10 of these Standards. Once other liabilities and their respective assets are incorporated, their creditors shall not be recognized with more rights than those generated by the specifically encumbered assets.

Excluded Liabilities Greater Than Excluded Assets Art. 13.- If the amount of the determined excluded liabilities is greater than the amount of assets available to the entity, the Superintendence shall request support from the Institute to eliminate the aforementioned difference, in accordance with the support measures regulated in Article 59 of the Law. In the event that the value of the assets plus the contributions from the Institute allow it, the Superintendence may add to the excluded liabilities the total or partial value of the deposits that exceed the legal limit of the deposit guarantee established in Article 91 of the Law. However, when it is only possible to incorporate part of the deposits into the excluded liabilities, the exclusion shall be made by determining the same maximum value per depositor and not proportional to their deposits, in accordance with the criteria established by the Board of Directors of the Superintendence.

Opinion on Excluded Assets and Liabilities
Art. 14.- The Board of Directors shall authorize the Superintendent to issue an opinion indicating that:
a) The procedures used to determine the values of the excluded assets and liabilities of the entity do not provide all the evidence required in a financial statement audit; however, the values of the excluded assets and liabilities are presented reasonably in accordance with these Standards; b) The review carried out by the Superintendence was made in accordance with these Standards and the guidelines of the Board of Directors, so that the conclusions regarding the information subject to review are free from material misstatement. The aforementioned opinion issued by the Superintendent and the annexes detailing the integration of the excluded assets and liabilities shall constitute the basis for granting the necessary instruments to transfer the excluded mass to other entities.

CHAPTER IV
OTHER PROVISIONS AND VALIDITY

Supporting Documentation of the Excluded Mass
Art. 15.- The Superintendent or the Administrative Supervisor, once the assets and liabilities to be excluded have been determined, shall proceed to collect the supporting documentation that guarantees ownership and rights over them, maintaining custody until they are transferred to whoever assumes the payment of the liabilities.

Granting of Transfer Deed of the Excluded Mass Art. 16.- The entity in resolution shall carry out the transfer of the excluded mass by granting a public deed in accordance with what is established in the second paragraph of Article 44 of the Law.

Rights on Excluded Goods
Art. 17.- The transfer of the goods and their corresponding guarantees and accessory rights shall operate by full right, without the need for endorsements, notifications, or registrations, except in the case of real estate and real guarantees, whose deed of transfer must be registered in the corresponding registry. Additionally, notification regarding the transfer of deposits and the assignment of credits will be required, which may be made through publication of an extract of the transfer, if applicable, once in two newspapers of national circulation and through technological, digital, or virtual means that cause the same effect, in accordance with the special legal regulation on the matter, by whoever assumes the ownership of the transferred assets and liabilities.

Treatment of Excluded Assets
Art. 18.- The special treatment of excluded assets must be carried out in accordance with Article 45 of the Law.

Repeal
Art. 19.- These Standards repeal the "Standards for the Valuation of Assets and Liabilities Excluded from Banks in Restructuring" (NCB-023), approved by the Board of Directors of the Financial System Superintendence in Session No. CD-08/2006 of February 22, 2006, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law for the Supervision and Regulation of the Financial System, published in Official Gazette No. 23, Volume No. 390, of February 2, 2011.

Unforeseen Aspects
Art. 20.- The aspects not provided for in the matter of regulation in these Standards shall be resolved by the Central Reserve Bank of El Salvador through its Committee of Standards.

Validity
Art. 21.- These Standards shall enter into force as of the sixth day of April two thousand twenty-six.