Technical Standards on Financial Relationships of Stockbrokerage Houses

CNBCR-09/2023 Approval: 09/26/2023 Effective Date: 10/11/2023

NRP-43 TECHNICAL STANDARDS ON THE FINANCIAL RELATIONSHIPS OF STOCKBROKERAGE HOUSES

CENTRAL RESERVE BANK OF EL SALVADOR GOVERNMENT OF EL SALVADOR

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

CONSIDERING:

I. That Article 62 of the Securities Market Law establishes that stockbrokerage houses must maintain and comply with debt, placement, and other liquidity and net worth solvency conditions that are set, considering the nature of the operations they carry out, their magnitude, and the type of instruments they trade.

II. That Article 3, letter c) of the Law on Supervision and Regulation of the Financial System, 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 way in which they manage them, ensuring the prudent maintenance of their solvency and liquidity.

III. That Article 7, letter f) of the Law on Supervision and Regulation of the Financial System, establishes that the Superintendence of the Financial System is responsible for the supervision of stockbrokerage houses.

IV. That Article 99, letter c) of the Law on Supervision and Regulation of the Financial System, establishes that it is the responsibility of the Norms Committee of the Central Reserve Bank to approve the Technical Standards for the preparation, presentation, and dissemination of Financial Statements and supplementary information of the members of the financial system.

V. That in accordance with Article 101, fourth paragraph of the Law on Supervision and Regulation of the Financial System, the powers 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were attributed to the Superintendencies or to the Boards of Directors of the Superintendencies whose organic laws were repealed by this Law, are transferred to the Central Reserve Bank of El Salvador.

THEREFORE,

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

AGREES to issue the following:

TECHNICAL STANDARDS ON THE FINANCIAL RELATIONSHIPS OF STOCKBROKERAGE HOUSES

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CNBCR-09/2023 Approval: 09/26/2023 Effective Date: 10/11/2023

NRP-43 TECHNICAL STANDARDS ON THE FINANCIAL RELATIONSHIPS OF STOCKBROKERAGE HOUSES

CENTRAL RESERVE BANK OF EL SALVADOR GOVERNMENT OF EL SALVADOR

CHAPTER I OBJECTIVE, SUBJECTS, AND TERMS

Objective Art. 1.- These Standards aim to establish the minimum placement, debt, liquidity, and net worth solvency relationships that Stockbrokerage Houses must maintain and comply with.

Subjects Art. 2.- The subjects obliged to comply with the provisions established in these Standards are the Stockbrokerage Houses.

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) House(s): Stockbrokerage Houses, authorized and registered with the Superintendence of the Financial System; c) Law: Securities Market Law; d) Relationships: Relationships, ratios, or financial coefficients; and e) Superintendence: Superintendence of the Financial System;

CHAPTER II FINANCIAL RELATIONSHIPS

Liquidity Relationships Art. 4.- Houses must comply with a liquidity ratio not less than one between current assets and current liabilities. The liquidity ratio measures the House's capacity to respond with its available funds to short-term obligations.

Debt Relationships Art. 5.- The maximum debt ratio of Houses for commitments related to the primary subscription and placement of securities shall be five to one, which means that these entities cannot have pending commitments greater than five times their net worth.

Net worth shall be composed of the sum of share capital, capital reserves, revaluations authorized by the Superintendence, accumulated results from previous fiscal years, and results from the current fiscal year.

The debt ratio is described below: Securities operations accounts: divide the total value of securities operations accounts by the total net worth.

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CNBCR-09/2023 Approval: 09/26/2023 Effective Date: 10/11/2023

NRP-43 TECHNICAL STANDARDS ON THE FINANCIAL RELATIONSHIPS OF STOCKBROKERAGE HOUSES

CENTRAL RESERVE BANK OF EL SALVADOR GOVERNMENT OF EL SALVADOR

Art. 6.- In addition to what is provided in Article 5 of these Standards, the debt ratio for other operations that Houses must comply with shall be two to one, which means that total liabilities cannot be greater than double the net worth.

Net Worth Solvency Ratio Art. 7.- The minimum net worth ratio that Houses must comply with shall be equal to or greater than one, that is, the value of net worth divided by the capital required by the Securities Market Law must be equal to or greater than one.

The Net Worth established by the Law shall be equal to the sum of paid-in share capital plus the legal reserve and other capital reserves derived from received profits, plus surplus accounts and retained earnings, plus fifty percent of the net profits after provision for income tax of the current fiscal year, plus fifty percent of the revaluations that the Superintendence had authorized, deducting losses if any.

This ratio means that the sum of the equity components cannot be less than what is established in Article 56 of the Securities Market Law.

Placement Ratio Art. 8.- Investments in fixed assets made by Houses must be at most half of their net worth, that is, fifty percent of their total net worth.

CHAPTER III OTHER PROVISIONS AND EFFECTIVE DATE

On the calculation of financial relationships Art. 9.- Houses must observe the minimum required relationships according to the following Annexes: a) Annex No. 1 Financial Relationships; and b) Annex No. 2 Method for the Calculation of Financial Relationships.

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 "Regulation on Financial Relationships of Stockbrokerage Houses" (RSSF.CB.53/1995), approved on October 18, 1995, by the Board of Directors of the Superintendence of the Financial System, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law on Supervision and Regulation of the Financial System, published in the Official Diary No. 23, Volume No. 390,

Alameda Juan Pablo II, between 15th and 17th Norte Avenue, San Salvador, El Salvador. Tel. (503) 2261-8000 www.bcr.gob.sv Page 3 of 6

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CNBCR-09/2023 Approval: 09/26/2023 Effective Date: 10/11/2023

NRP-43 TECHNICAL STANDARDS ON THE FINANCIAL RELATIONSHIPS OF STOCKBROKERAGE HOUSES

CENTRAL RESERVE BANK OF EL SALVADOR GOVERNMENT OF EL SALVADOR

dated February 2, 2011.

Unforeseen Aspects Art. 12.- Aspects not provided for in the matter of regulation in these Standards will be resolved by the Central Bank through its Norms Committee.

Effective Date Art. 13.- These Standards will enter into force as of October 11, 2023.

Alameda Juan Pablo II, between 15th and 17th Norte Avenue, San Salvador, El Salvador. Tel. (503) 2261-8000 www.bcr.gob.sv Page 4 of 6

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CNBCR-09/2023 Approval: 09/26/2023 Effective Date: 10/11/2023

NRP-43 TECHNICAL STANDARDS ON THE FINANCIAL RELATIONSHIPS OF STOCKBROKERAGE HOUSES

CENTRAL RESERVE BANK OF EL SALVADOR GOVERNMENT OF EL SALVADOR

Annex No. 1

FINANCIAL RELATIONSHIPS

Relationship	Description	Balances	Required Relationship
Liquidity	General	Current Assets / Current Liabilities	1 to 1
Debt	a) Net Worth	Total Liabilities / Net Worth	2 to 1
	b) Securities Operations Accounts	Securities Subscription and Placement Operations / Net Worth	5 to 1
Net Worth Solvency	Minimum Net Worth	Net Worth calculated according to what is established in Art. 99 of the Securities Market Law / Capital required by the Securities Market Law	1 or greater than 1
Placement	Immobilization of Assets	Fixed Assets / Net Worth	0.5 to 1

Alameda Juan Pablo II, between 15th and 17th Norte Avenue, San Salvador, El Salvador. Tel. (503) 2261-8000 www.bcr.gob.sv Page 5 of 6

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CNBCR-09/2023 Approval: 09/26/2023 Effective Date: 10/11/2023

NRP-43 TECHNICAL STANDARDS ON THE FINANCIAL RELATIONSHIPS OF STOCKBROKERAGE HOUSES

CENTRAL RESERVE BANK OF EL SALVADOR GOVERNMENT OF EL SALVADOR

Annex No. 2

METHOD FOR THE CALCULATION OF FINANCIAL RELATIONSHIPS

Types of Relationships	Description	Formula	Affected Accounts
Liquidity	General	Current Assets / Current Liabilities	From 110 to 118<br>From 210 to 219
Debt	a) Net Worth	Total Liabilities / Net Worth	All liability accounts<br>All equity accounts
	b) Securities Operations Accounts	Securities Subscription and Placement Operations / Net Worth	Securities operations accounts that register subscriptions<br>All equity accounts
Net Worth Solvency	Minimum Net Worth	Net Worth / Capital required by the Securities Market Law	Net Worth calculated according to what is established in Art. 99 of the Securities Market Law<br>Share Capital required by the Securities Market Law
Placement	Immobilization of Assets	Fixed Assets / Net Worth	Accounts 120 to 122 and 127<br>Net Worth calculated according to what is established in Art. 99 of the Securities Market Law

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