Technical Standards on Credit Limits for Cooperative Bank Federations

CNBCR-06/2024
Approval: 15/08/2024	NRP-76; TECHNICAL STANDARDS ON CREDIT LIMITS FOR COOPERATIVE BANK FEDERATIONS
Validity: 30/08/2024

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

CONSIDERING:

I. That Article 2, letter c) of the Cooperative Banks and Savings and Credit Societies Law establishes that regulated financial entities are the Federations of Cooperative Banks qualified by the Superintendence of the Financial System to carry out intermediation operations with their affiliates as set forth in said Law.

II. That Article 3 of the Cooperative Banks and Savings and Credit Societies Law establishes that entities subject to said law shall be governed by their respective legal frameworks regarding their constitution, organization, and administration, provided they do not contradict what is established by that Law; in matters not provided for, the Banks Law shall apply.

III. That Article 152 of the Cooperative Banks and Savings and Credit Societies Law establishes that federations may not grant credits or assume risks for more than twenty percent of their equity with a single Cooperative Bank, and must define in their credit policies the special provisions for the granting and control of credits granted to the same cooperative when they exceed ten percent of their equity.

IV. That Article 3, letter c) of the Supervision and Regulation of the Financial System Law establishes that it is the responsibility of the Superintendence of the Financial System 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.

V. That Article 7, letter g) of the Supervision and Regulation of the Financial System Law establishes that among the entities subject to the supervision of the Superintendence of the Financial System are cooperative banks and federations regulated by the Cooperative Banks and Savings and Credit Societies Law.

VI. That Article 99, letter a) of the Supervision and Regulation of the Financial System Law stipulates that it shall be the responsibility of the Standards Committee of the Central Reserve Bank of El Salvador to approve technical standards, instructions, and provisions that the laws regulating the supervised entities establish must be issued to facilitate their application, including aspects inherent to risk management by the supervised entities.

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CNBCR-06/2024
Approval: 15/08/2024	NRP-76; TECHNICAL STANDARDS ON CREDIT LIMITS FOR COOPERATIVE BANK FEDERATIONS
Validity: 30/08/2024

THEREFORE,

by virtue of the regulatory powers conferred upon it by Article 99 of the Supervision and Regulation of the Financial System Law,

AGREES to issue the following:

TECHNICAL STANDARDS ON CREDIT LIMITS FOR COOPERATIVE BANK FEDERATIONS

CHAPTER I
OBJECTIVE, SUBJECTS, AND TERMS

Objective
Art. 1.- These Standards aim to establish the minimum guidelines that federations must use for the application of credit limits referred to in the Cooperative Banks and Savings and Credit Societies Law.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the Federations of Cooperative Banks.

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) Cooperative Bank: Cooperative Associations and Cooperative Savings and Credit Societies, including Rural Credit Caisses and Workers' Banks; c) Federations of Cooperative Banks: Federations of Cooperative Savings and Credit Associations and Cooperative Savings and Credit Societies, or only one of them; d) Law: Cooperative Banks and Savings and Credit Societies Law; and e) Superintendence: Superintendence of the Financial System.

CHAPTER II
CREDIT LIMITS AND CREDITS SUBJECT TO LIMITS

Credit Limit
Art. 4.- Federations may not have in their portfolio credits granted to the same cooperative bank that exceed twenty percent of their equity.

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CNBCR-06/2024
Approval: 15/08/2024	NRP-76; TECHNICAL STANDARDS ON CREDIT LIMITS FOR COOPERATIVE BANK FEDERATIONS
Validity: 30/08/2024

Federations must define in their credit policies the special provisions for the granting and control of credits granted to the same cooperative bank when they exceed ten percent of their equity.

Credits Subject to the Limit
Art. 5.- For the purposes of calculating the limit referred to in the previous article, the following instruments must be considered:
a) Overdraft balances; b) Loan balances; c) Discounted documents; d) Investments in obligations issued by affiliated cooperative banks; and e) Sureties, guarantees, and collateral granted to affiliated cooperative banks, at their request, with prior authorization from the Governing Body of the federation.

To all the aforementioned obligations, the value of accessories such as interest, commissions, surcharges, and other similar items, including those accounted for in off-balance sheet accounts, shall be added.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Art. 6.- Federations must maintain an updated record of credits granted to affiliated cooperative banks, according to the model described in Annex No. 1 of these Standards.

Art. 7.- The federation must review its credit granting policies every two years and must take into consideration the current regulations related to credit risk.

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

Repeal
Art. 9.- These Standards repeal the "Standards on Limits in the Granting of Credits of the Federations of Cooperative Banks and also of Savings and Credit Societies" (NPNB3-03), approved by the Board of Directors of the Superintendence of the Financial System in Session No. CD-43/2001 of September 5, 2001, whose Organic Law was repealed in accordance with Legislative Decree No. 592 containing the Supervision and Regulation of the Financial System Law, published in Official Diary No. 23, Volume 390, dated February 2, 2011.

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CNBCR-06/2024
Approval: 15/08/2024	NRP-76; TECHNICAL STANDARDS ON CREDIT LIMITS FOR COOPERATIVE BANK FEDERATIONS
Validity: 30/08/2024

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

Validity
Art. 11.- These Standards will enter into force as of August 30, two thousand twenty-four.

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CNBCR-06/2024
Approval: 15/08/2024	NRP-76; TECHNICAL STANDARDS ON CREDIT LIMITS FOR COOPERATIVE BANK FEDERATIONS
Validity: 30/08/2024

Annex No. 1

UPDATED RECORD OF CREDITS GRANTED TO AFFILIATED COOPERATIVE BANKS

Client Correlative No.	Legal Name	Credit Reference Number	Credit Term	Granting Date	Maturity Date	Amount Granted (USD)	Amount Disbursed (USD)	Amount Cancelled (USD)

Note: Client correlative number is according to the entity's internal control.
Amount cancelled: Values that fully cancel a credit, either in advance or at the agreed term.

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