Technical Standards on the Minimum Content of the Securitization Contract

NDMC-28
OF SECURITIZATION
Approval: 14/12/2023
Validity: 02/01/2024

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

CONSIDERING:

I. That Article 44 of the Asset Securitization Law establishes that the Securitization Fund shall be constituted by operation of law at the moment of granting the Securitization Contract, as an independent estate from the estate of the Securitization Company.

II. That Article 47 of the Asset Securitization Law establishes that the Securitization Contract shall be granted in a public deed by the Representative of the Security Holders and the Securitization Company; it shall comprise the act of constitution of the Fund and the act of issuance of the securities, and shall contain at least the clauses established in said article and Article 71 of the same law.

III. That Article 72 of the Asset Securitization Law establishes that the Securitization Contract shall be the public instrument that must be recorded in the Superintendence of the Financial System; therefore, said instrument shall be the one that incorporates the rights and duties of issuers and investors.

IV. That Article 3, letter h) of the Law on Supervision and Regulation of the Financial System establishes that it is the competence of the Superintendence of the Financial System to authorize the registrations, registry entries, modifications, and cancellations of persons, institutions, and operations subject to such requirement, in accordance with the laws on the matter.

V. That Article 5, letter a) 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 authorize, suspend, or cancel the public offering of securities and the operation of persons or transactions carried out in the stock market, in accordance with the provisions established in the applicable regulations.

VI. That Article 7, letters q) and u) of the Law on Supervision and Regulation of the Financial System establishes that securitization companies and other operations specified by the laws are subject to the provisions of said Law and therefore to the supervision of the Superintendence of the Financial System.

THEREFORE,

by virtue of the normative 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 ON THE MINIMUM CONTENT OF THE SECURITIZATION CONTRACT

NDMC-28
OF SECURITIZATION
Approval: 14/12/2023
Validity: 02/01/2024

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These standards regulate the minimum content of the Securitization Contract entered into between the Securitization Company and the Representative of the Security Holders.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the Securitization Companies.

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) Securitization Fund: Independent estate, different from that of the Securitization Company and the Originator, formed by a set of assets and liabilities that result from or are integrated as a consequence of the development of the respective securitization process. The assets of the Fund shall have as their main purpose, generating the payments of the securities issued against it; c) Law: Asset Securitization Law; d) Representative of the Security Holders: Legal entity responsible for representing the owners of the securities of each Fund according to what is established in the Law; e) Superintendence: Superintendence of the Financial System; and f) Securitization Company: Legal entity that administers the Securitization Funds.

CHAPTER II
ON THE MINIMUM CONTENT OF THE ASSET SECURITIZATION CONTRACT

Securitization Contract
Art. 4.- The Securitization Contract must be granted in a public deed before a Salvadoran notary, by the Representative of the Security Holders and the Securitization Company. Said contract shall comprise the act of constitution of the Fund and the act of issuance of securities, and must in all cases comply with the formalities indicated by the applicable legislation.

Minimum information of the Securitization Company Art. 5.- The information regarding the Securitization Company that the Securitization Contract must contain at a minimum is the following:
a) General information of the securitization society; b) Tax Identification Number; and c) Number of the registry entry in the Public Stock Registry.

NDMC-28
OF SECURITIZATION
Approval: 14/12/2023
Validity: 02/01/2024

On the constitution of the fund
Art. 6.- The clauses that the act of constitution of the Fund must contain at a minimum are the following:
a) Followed by a name or designation that individualizes it from any other Fund authorized by the Superintendence; b) The individualization or determination of the assets or rights that constitute or will constitute the Fund. If they cannot be individualized in the contract, the corresponding complementary deeds must be listed, indicating their main characteristics and conditions and at least the following background:
i. Nature of the assets to be securitized and general description thereof;
ii. Originators;
iii. Number of assets to be securitized;
iv. Timeframe in which they will be acquired;
v. Acquisition value;
vi. Range of value of the assets to be acquired, where applicable; and
vii. Regarding securities of credit content or credit portfolios, each one must be individualized, indicating all their specific and general characteristics or conditions, in which case the corresponding complementary deeds will be granted.
If, by the date the Securitization Contract is executed, the asset transfer contract between the originator and the Securitization Company acting as administrator of the Fund has not been executed, the obligation of the former to respond for the legitimacy and existence of the rights over the assets to be securitized must be listed. The individualization or determination of each of the assets comprising the Fund may be recorded in an annex that forms an integral part of the deed, which must be signed by at least the authorizing notary and the contracting parties; c) List of the documents in which the services agreed upon between the Securitization Company and the Originator are recorded, and their responsibilities, if any; d) Form of administration of the securitized assets; e) Term of the Contract; f) Administration criteria, both for the financial flows generated by the Fund, and for the money flows resulting before the Representative of the Security Holders certifies the Securitization Company's compliance with fully integrating the Fund. In the latter case, the obligation of the Representative of the Security Holders to keep the resources received in bank deposits or in investments in liquid, fixed-income securities with a low risk level must be recorded, in accordance with what is established in the Technical Standards for the Management of Resources of a Securitization Fund by the Representative of the Security Holders, approved by the Central Bank through its Committee of Standards; g) The rights and attributes of the Securitization Company; h) Maximum commissions and emoluments for the agreed services;

NDMC-28
OF SECURITIZATION
Approval: 14/12/2023
Validity: 02/01/2024

i) Causes of termination of the Securitization Contract and its effects on the Fund, considering its transfer to another Securitization Company, in accordance with what is established in Article 38 of the Law and the respective agreement taken in the Extraordinary General Meeting of Security Holders; j) Mention of the initial auditors of the Fund, External and Fiscal, if any, appointed by the Securitization Company and the conditions of their hiring; k) Regime for the withdrawal of extraordinary assets from the Fund, which shall be carried out in accordance with what is established in Articles 23 and 46 of the Law; l) The manner of disposing of remaining assets of the Fund after fulfilling obligations with the Security Holders and other third parties. In all cases, what Article 50 of the Law establishes regarding this matter must be considered; m) Clauses regarding the substitution of assets of the Securitization Fund. At least the characteristics of the assets that may substitute the assets already incorporated into the Fund must be included, including their credit quality, amount, term, and maximum percentages. The Securitization Contract must state that the substitution of assets will only proceed with the prior approval of the Representative of the Security Holders. For these purposes, the timeframe that said representative will have to give approval for the substitution of assets must be recorded in the Securitization Contract, understanding that if they do not pronounce themselves within said timeframe, it will be understood that they agree with the respective substitution. Once the substitution is carried out, the said Representative of the Security Holders will be obligated to notify this circumstance to the Superintendence within five days following it; n) Standards related to additional contributions to the Securitization Fund; o) Standards on the administration of excesses; p) The determination of the securities or investments in which the financial flows from the Securitization Fund may be kept by the Securitization Company, taking into consideration what is provided in Article 63 of the Law; q) Additionally, provisions may be incorporated that have the purpose of regulating the liquidation process of the Fund and the manner of administering this process, as well as the obligations of the liquidator. In the case where provisions regarding the administration process of the Fund are incorporated, these must necessarily comprise the manner of alienation of the assets of the Fund and the continuation of the administration of the Fund until the extinction of the assets comprising it. r) Establish the payment priority of the Fund in Liquidation that must be made during said process, taking into consideration what is provided in Article 70 of the Law; s) Criteria for the constitution of reserves charged to the Fund, if applicable; t) In the case that the Fund is constituted by a credit portfolio, the treatment to be given to partial
prepayments of the credits, if any, must be specified; u) Debt policy that the Fund will apply, which must include the definition of aspects such as: levels, causes, and the administration of debt; and v) Other rights or responsibilities of the Securitization Company not contemplated in the Law. Likewise, in the case of a Real Estate Securitization Fund, the Securitization Contract must contain the clauses referred to in the Technical Standards for Real Estate Securitization Funds (NDMC-20), approved by the Central Bank through its Committee of Standards.

Administration and custody
Art. 7.- Regarding the administration and custody of the securitized assets, the following must be listed:
a) Identification of the entity designated as administrator of the assets comprising the Securitization Fund and the maximum remuneration to be paid for this concept; and b) Identification of the entity designated for the custody of the assets comprising the Securitization Fund and the maximum remuneration to be paid for this concept.

Representative of the holders
Art. 8.- Regarding the Representative of the Security Holders, the following information must be detailed:
a) Identification of the Representative of the Security Holders, at least their corporate name, the abbreviation of said name, their nationality, domicile, number of their registration in the Commerce Registry, and Tax Identification Number; b) List the certification of the point in the minutes by virtue of which the Securitization Company agreed on the designation of the Representative of the Security Holders; c) In the case where the Representative of the Security Holders is not a Bank or a Stockbrokerage House, the number of the resolution by virtue of which the Superintendence agreed to authorize said representative to act as such must be recorded; d) Procedures for election, resignation, replacement, and removal; e) Grounds for cessation of their office; f) The general powers granted to them, especially the oversight powers they will have over the Securitization Company; g) Duties and responsibilities, especially the information obligations they will have with the holders of securitized securities, in accordance with what is provided in Article 80 of the Law; and h) Indication of the links or roles of the Representative of the Security Holders in other securitized issuances, if applicable.

Security Holders' Assemblies
Art. 9.- The standards governing the operation of the Security Holders' Assemblies must be stipulated, in addition to what is specified in the Law, which may be subject to modifications.

NDMC-28
OF SECURITIZATION
Approval: 14/12/2023
Validity: 02/01/2024

On the issuance of securities
Art. 10.- The Securitization Contract, regarding the act of issuance of securities, must contain at a minimum the following provisions:
a) Description of the securities to be issued, their characteristics, and the rights they incorporate; b) Maximum amount of the issuance, explicitly stating the type of currency in which the issuance will be made; c) The values corresponding to each series or tranche must recognize equal rights to the Security Holders, with differences in the rights assigned to different tranches being able to be established; d) Negotiability (form or transferability of the securities); e) Number of securities comprising each tranche and maximum amount of each tranche of the issuance; f) Payment priority of the securities, by their tranche, and payments to other creditors of the Fund; g) Minimum and maximum nominal value of the securities of the tranches; h) Placement term of the issuance; i) Form and place of payment; j) Financial services of the issuance, detailing the name and domicile of the entities that, once the placement of the securities is completed, will attend the financial service derived from the issuance (payment of interest and settlement of the securities at maturity, as well as any other that might arise during their validity); k) Indication of whether there will or will not be additional guarantees or coverage mechanisms to the assets backing the securitized securities. In the case that there are credit enhancement mechanisms, the description and indication of their legal nature, estimated amount, and basis for the estimation must be listed; their specific purpose must be explicit, indication of the procedure and timeframe for their constitution, procedures for substitution, modification, or renewal, indication of whether there are insurance policies contracted on the assets of the Fund or on the guarantees. In the case of guarantees granted by third parties, the place where the investor can obtain information must be indicated. The record of the constitution of the guarantees must be presented as an annex to the Securitization Contract. For the purposes of this letter, the existence of the guarantees must be recorded by attaching to the Securitization Contract the instrument by virtue of which said guarantee is covered, where applicable; l) Identification of the Risk Classifier that will perform the first classification of the issuance, and the general conditions of its hiring; m) Initial Risk Classification of the issuance; n) Rights and attributes of the General Meeting of Security Holders over the Securitization Company and the issuance, in addition to those established in the Law; o) Procedure to be followed in the case of early redemption of all or part of the placed securities; p) In the case where the issuance consists of securities of credit content, the following additional information must be available:

NDMC-28
OF SECURITIZATION
Approval: 14/12/2023
Validity: 02/01/2024

i. Maturity term thereof;
ii. Method of calculating the interest rate that will generate the value, as well as its calculation basis, the determination of late interest, the payment periodicity, the estimated start date of the payments, and the mechanism or procedure that the Securitization Company will use to make said payment. If the payment is made via coupons, indicate periods, place, entities, and procedure for the payment of coupons, explicitly stating if there is an exception period (holidays and bank holidays, among others). If the interest is not fixed, the variable or indicator with which it is related and the method used must be clearly described. For these purposes, the reference from which it originates, the scope, the timeframe over which it applies or has validity, and the place, form, and moment in which it is announced and made known to the public must be indicated;
iii. Adjustability of the securities;
iv. Estimated date from which the value begins to generate interest and adjustments;
v. Form of capital amortization to be paid. It must be indicated, for each series, the maximum and minimum amount of capital amortization to be paid in each coupon, the payment periodicity, the estimated start date of the payments, and the mechanism or procedure that the Securitization Company will use to make said payment. If the payment is made via coupons, indicate dates, place, entities, and procedure for the payment of coupons, explicitly stating if there is an exception period (holidays, bank holidays, among others);
vi. If it is a fixed interest rate issuance, a development table must be included, which must contain at least the following information regarding the respective values:

1. Number of interest installments;
2. Number of amortization installments;
3. Payment date for interest and amortizations;
4. Amount of interest to be paid in each installment;
5. Amount of capital amortization to be paid in each installment;
6. Total installment to be paid in interest and amortizations; and
7. The outstanding capital balance after paying the total installment, respectively. This information will be presented in the form of an annex to the Securitization Contract; and
   vii. Date or period of extraordinary amortization. It must be indicated, for each series, the date from which extraordinary amortizations or early redemptions by the issuer may be carried out, if applicable.
   q) In the case where the issuance consists of titles representing participation in the Fund's equity, the form and modalities of the distribution of dividends must be indicated.

Costs and remunerations
Art. 11.- The costs and expenses charged to the Fund must be determined, as applicable, in the following manner:

NDMC-28
OF SECURITIZATION
Approval: 14/12/2023
Validity: 02/01/2024

a) Remuneration of the Securitization Company; b) Remuneration of the specific services contracted for the administration of the securitized assets; c) Remuneration of the Representative of the Security Holders; d) Maximum remuneration for the custody of the assets; e) Remuneration for the risk classification of the securitized securities issuance; f) Emoluments of the external and fiscal auditors of the Fund; g) Detail of the expenses associated with the issuance; h) Remuneration of expert appraisers in the case of Funds integrated by real estate assets; i) Remuneration of specialized agents in the valuation of securities; and j) Other necessary expenses in the securitization process. In the case of modifications to the amounts of costs and expenses charged to the Fund, the Securitization Company must have the approval of the Representative of the Security Holders prior to such modifications. For these purposes, the Representative of the Security Holders will have a period of ten business days; if the aforementioned timeframe elapses without them pronouncing themselves, it will be understood that they agree with the modifications. Likewise, these modifications must be reported to the Security Holders in the monthly report, and the Representative of the Security Holders must report on such changes to the Security Holders' Assembly that takes place immediately thereafter. The foregoing circumstances must be recorded in the Securitization Contract.

Other mandatory clauses
Art. 12.- The Securitization Contract must additionally include, when applicable, the following information:
a) Clearly define the calculation method, concept, and nature of all those indicators and technical terms used in the Securitization Contract; b) It must be indicated that the Securitization Contract will remain valid as long as the Fund's liabilities have not been extinguished or when the Representatives of the Security Holders so stipulate according to what is established in the Law; c) Dispute resolution mechanism to which the differences arising in connection with the issuance, validity, or extinction of the Securitization Contract may be submitted; and d) Include any other stipulation that the parties deem convenient for the better regulation of the rights and protection of the Securitization Security Holders, provided that the legal framework and applicable regulations are not violated. Additionally, the domicile to which the Securitization Company and the Representative of the Security Holders will submit in the case of a judicial action must be included, without prejudice to being able to solve any kind of controversy by any of the means established for such effect in the Law on Mediation, Conciliation, and Arbitration.

On the registration of the securitization contract Art. 13.- Regarding the registration of the Securitization Contract in the corresponding Registry at the Superintendence, what is established in the Technical Standards for the Authorization of Registration of Issuers and Public Offering Securities Issuances (NRP-10), approved by the Central Bank through its Committee of Standards, and the Asset Securitization Law must be considered.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 14.- 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.

Repeal
Art. 15.- These Standards repeal the Standard on the Minimum Content of the Securitization Contract and its Inscription in the Public Stock Exchange Registry RCTG7/2008), approved by the Board of Directors of the Securities Superintendence in Session No. CD-20/2008 on May 27, 2008, whose Organic Law was repealed by Legislative Decree No. 592 which contains the Law on Supervision and Regulation of the Financial System, published in the Official Gazette No. 23, Volume No. 390, on February 2, 2011.

Unforeseen Aspects
Art. 16.- Aspects not provided for in regulatory matters in these Standards shall be resolved by the Central Bank through its Standards Committee.

Validity
Art. 17.- These Standards shall enter into force as of January 2, 2024.