Technical Standards to Authorize Banks, Investment Banks, and Exclusive Purpose Holding Companies to Make Equity Investments in Subsidiaries and Offices in Foreign Countries

MAKE EQUITY INVESTMENTS IN SUBSIDIARIES AND OFFICES IN FOREIGN COUNTRIES Approval: 12/19/2024 Validity: 01/03/2025

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

CONSIDERING:
I. That Article 23, first paragraph, of the Banks Law, establishes that banks with prior authorization from the Superintendency of the Financial System may carry out financial operations in other countries through offices and banking subsidiaries, provided that in these there is regulation and prudential supervision in accordance with international practices on this matter, and in conformity with what is provided by the laws of the country in which they are installed.
II. That Article 144 of the Banks Law, establishes provisions related to investments abroad that controlling companies may make, which will require the approval of the Superintendency of the Financial System.
III. That Article 145 of the Banks Law, establishes the requirements that the Superintendency of the Financial System will verify, to authorize controlling companies for the investments abroad contemplated in Article 144 of said Law.
IV. That Article 71 of the Investment Banks Law establishes that what is provided in Article 23 of the Banks Law will apply to Investment Banks, insofar as it does not contravene the Investment Banks Law, nor the nature or purpose of Investment Banks. (1)

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

AGREES to issue the following:

TECHNICAL STANDARDS TO AUTHORIZE BANKS, INVESTMENT BANKS AND EXCLUSIVE PURPOSE HOLDING COMPANIES TO MAKE EQUITY INVESTMENTS IN SUBSIDIARIES AND OFFICES IN FOREIGN COUNTRIES (1)

CHAPTER I
OBJECT, SUBJECTS AND TERMS

Object
Art. 1.- These Standards aim to establish the minimum requirements and procedures that banks, investment banks, and exclusive purpose holding companies incorporated in the country must comply with so that the Superintendency of the Financial System authorizes them to invest in subsidiaries in foreign countries. Likewise, the requirements to authorize banks to establish offices abroad. (1)

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are:
a) Banks incorporated in the country; (1) b) Exclusive purpose holding companies, incorporated in the country; and (1) c) Investment banks. (1)

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) Holding Company: Companies owning at least fifty percent of the shares of other companies in the financial system; the holding company can be a bank or a company whose exclusive purpose is investment in other companies in the financial system; c) Exclusive purpose holding company: Companies that own at least fifty percent of the shares of other companies and whose purpose is solely investment in shares of other companies in the financial system; d) Entities: Subjects obliged to comply with these Standards; e) Board of Directors: Collegiate body in charge of the administration of the entity, with functions of supervision, direction, and control or equivalent body; f) General Shareholders' Meeting or its equivalent: It is the highest authority of the entity. In the Social Pact or Bylaws, this attribution must be recognized along with its fundamental functions and competencies to adopt all kinds of agreements regarding its governance and in general, all measures that require compliance with the Social Pact and the common interest of the shareholders; g) AML/CFT/CPF: Anti-Money Laundering and Countering the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction; h) Repealed; (1) i) Office: Those dependencies physically separate from the head office or central office that form an integral part of the same legal entity, which can carry out the operations authorized by the Superintendency of the Financial System and the tax authority of the host country; j) Subsidiary: Companies in which a controlling bank or exclusive purpose holding company is the holder of more than fifty percent of the social participation; and k) Superintendency: Superintendency of the Financial System.

CHAPTER II
CONDITIONS AND INFORMATION REQUIREMENTS FOR AUTHORIZATION

Investment in shares of companies
Art. 4.- Entities will request authorization from the Superintendency when they carry out financial operations in other countries through offices and banking subsidiaries, provided that in these there is regulation and prudential supervision in accordance with international practices on that matter, through equity participation in entities such as stockbrokerage houses of a nature similar to those that carry out that business in El Salvador, holding companies of regulated financial groups, companies specialized in the deposit and custody of securities, credit card issuers, financial leasing companies, and general warehouses. Exclusive purpose holding companies may also invest in subsidiaries that have the business of insurance companies and Pension Fund Administrators.

Investment in companies in the process of incorporation or in offices Art. 5.- Entities interested in investing in a company to be incorporated abroad must submit a request signed by the legal representative and addressed to the Superintendency, accompanied by the following information:
a) Certification of the agreement of the General Shareholders' Meeting or Board of Directors, as required by the entity's social pact, for the opening of the office or banking subsidiary abroad; b) Draft deed of incorporation and bylaws of the company; c) Economic and financial feasibility study that includes the following: background, objectives, advantages and benefits of making the investment, two-year business projections, and perspectives with the company or office to be incorporated; d) List of future shareholders of the company with their shareholding and their link with the entity. In the case where there are shareholders with a participation equal to or greater than ten percent of the capital of the subsidiary, they must comply with the provisions on relevant shareholders or direct relevant shareholders, as established by the Banks Law and the Investment Banks Law, respectively. To determine that percentage, the shares of the holder, those of the spouse, those of relatives within the first degree of consanguinity, and the proportional part corresponding to them in companies in which they are shareholders of said entity, will be added to the holder's shares. In order to establish the aforementioned percentage, a sworn declaration of future relevant shareholders or direct relevant shareholders, as applicable, must be included, containing the list of the full names of their spouses, those of their first-degree relatives, and those of the entities where they have a patrimonial participation. (1) Also, a relevant shareholder or direct relevant shareholder, as applicable, is anyone who directly or through a joint action agreement with one or more other shareholders has the power to elect one or more directors; (1) e) Request to acquire shares in excess of ten percent, in the case of relevant shareholders, in accordance with the models established in Annexes No. 1 and 2 of these Standards; f) Resume of the future top executives of the office or subsidiary, understood as such, the general manager and managers or deputy managers of areas or, in any case, those who hold positions equivalent to the aforementioned; g) Effect on the entity's equity fund of the investment to be made, both individually and consolidated, in accordance with the Banks Law and the Investment Banks Law, respectively; (1) h) Declaration of will of the promoters of the office or subsidiary to submit to the regulatory provisions of El Salvador; i) Report issued by the Risk Unit, on the analysis of the risks that will be assumed in making the investment and of the operations of the new company; and j) Description of the systems or mechanisms for monitoring related to the Prevention, Detection, and Control of Anti-Money Laundering and Countering the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction. When it comes to the investment to establish an office, instead of what is provided in letter c) of the first paragraph of this article,
commercial plans, the market segment to be served, the services to be provided, the amount of the investment, and the name of the office representative(s) and their executives must be presented.

Investments in operating companies
Art. 6.- Entities interested in investing in companies operating abroad must submit a request signed by the legal representative and addressed to the Superintendency, accompanied by the following information:
a) Certification of the agreement of the General Shareholders' Meeting or Board of Directors, as required by the entity's social pact, for the investment in the foreign company; b) Deed of incorporation and bylaws of the company in which the investment will be made, with its modifications if any; c) Economic and financial feasibility study that includes the following: background, objectives, advantages and benefits of making the investment, two-year business projections, and perspectives of the company in which the investment will be made; d) List of current shareholders of the company with their shareholding and their link with the entity; e) Request to acquire shares in a percentage equal to or greater than ten percent, in the case of relevant shareholders; in accordance with the models established in Annexes No. 1 and 2 of these Standards. In the event that there are shareholders with a participation equal to or greater than ten percent of the capital of the subsidiary, they must comply with the provisions on relevant shareholders or if there are direct relevant shareholders as established by the Banks Law and the Investment Banks Law, respectively. To determine that percentage, the shares of the holder, those of the spouse, those of relatives within the first degree of consanguinity, and the proportional part corresponding to them in companies in which they are shareholders of said entity, will be added to the holder's shares. In order to establish the aforementioned percentage, a sworn declaration of shareholders or direct relevant shareholders, as applicable, who have a participation of ten percent or more, must be included, containing the list of the full names of their spouses, those of their first-degree relatives, and those of the entities where they have a patrimonial participation. (1) Also, a relevant shareholder or direct relevant shareholder, as applicable, is anyone who directly or through a joint action agreement with one or more other shareholders has the power to elect one or more directors; (1) f) Indicate the way in which the entity intends to direct and control the management of the company, such as the setting of policies and risk management, degree of autonomy, internal control systems, planned information flows, etc.; g) Resume of the top executives of the subsidiary, understood as such, the general manager and managers or deputy managers of areas or, in any case, those who hold positions equivalent to the aforementioned; h) Effect on the entity's equity fund of the investment to be made, both individually and consolidated, in accordance with the Banks Law and the Investment Banks Law, as applicable; (1) i) Audited financial statements of the last two years with the external auditor's reports; j) Offered price of the shares and possible sellers; k) Amount of the equity investment and the list of new shareholders, if any; l) Declaration of will of the subsidiary company to submit to the regulatory provisions of El Salvador
applicable to it; m) Report issued by the Risk Unit, on the analysis of the risks that will be assumed in making the investment and of the operations carried out by the company; and n) Description of the systems or mechanisms for monitoring related to the Prevention, Detection, and Control of Anti-Money Laundering and Countering the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction. All those written documents in a language other than Spanish that are required from the entity proposing to open an office or subsidiary entity in foreign countries or invest in an operation, to take effect in El Salvador, must be translated into Spanish by an interpreter appointed by a competent judge or before a notary public in El Salvador, in accordance with the Law on Notarial Practice of Voluntary Jurisdiction and Other Proceedings. The requests and documentation referred to in Articles 5 and 6 of these Standards may be submitted through the means made available by the Superintendency, which may be electronic. In any case, the period referred to in the first paragraph of Article 7 of these Standards will begin to run from the next business day after the request has been submitted.

CHAPTER III
PROCEDURE FOR THE REQUEST

Authorization request for the opening abroad of an office or subsidiary entity Art. 7.- Upon receipt of the authorization request for the opening abroad of an office or subsidiary entity, in accordance with what is established in Articles 5 and 6 of these Standards, the Superintendency will proceed to verify compliance with the requirements defined by the Banks Law, Investment Banks Law, and these Standards, having a maximum period of two months for the authorization or denial of the authorization request for the opening abroad of an office or subsidiary entity. (1) If the request is not accompanied by the complete and duly formatted information detailed in Articles 5 and 6 of these Standards, the Superintendency, due to the lack of necessary requirements, may require the entity to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the entity when there are reasons justifying it. The Superintendency in the same notice will indicate to the entity that if it does not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, reserving its right to submit a new request. If after the analysis of the documentation presented in accordance with Articles 5 and 6 of these Standards, the Superintendency has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be evidenced, the Superintendency will notify the entity to remedy the deficiencies communicated or present additional documentation or information required by the Superintendency. The entity will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the additional information required by the Superintendency. The Superintendency may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous paragraph, when the nature of the observations or notified deficiencies so requires.

Extension period
Art. 8.- The entity interested in the authorization for the opening abroad of an office or subsidiary entity may submit to the Superintendency a request for extension of the period indicated in the fifth paragraph of Article 7 of these Standards, before the expiration of said period, stating the grounds on which it is based and proposing, if applicable, the relevant proof. The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period.

Suspension of the period
Art. 9.- The two-month period indicated in the first paragraph of Article 7 of these Standards will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article, until the observations required by the Superintendency are remedied.

Regarding agreements with the supervisory authority Art. 10.- Prior to the authorization of the opening abroad of an office or subsidiary entity, the Superintendency must conclude agreements with the supervisory authority of the country where the investment will be made, in order to coordinate the exchange of information and the mechanisms that enable consolidated supervision, ensuring the confidentiality of such information, in accordance with Articles 23 and 145 of the Banks Law, and Article 71 of the Investment Banks Law, as applicable. (1)

Resolution
Art. 11.- Once the documents have been presented in due form and the corresponding analyses have been carried out and the feasibility of the investment and the solvency requirements of the entity and the company in which the investment will be made have been evaluated, the Superintendency will proceed to issue a resolution authorizing or denying the authorization request for the opening abroad of an office or subsidiary entity, which it will notify within a maximum period of three business days from the day the resolution is issued. Art. 12.- If the resolution mentioned in Article 11 of these Standards is favorable, the entity will have a period of one month to make the investment; when it comes to future companies, these must be incorporated within the following four months. At the request of the entity, the period may be extended once and for no more than one month. In the event that the established periods are not met, the Superintendency may revoke the authorization. Art. 13.- If the resolution is denying, the notification will contain the reasoned causes for the denial.

Start of operations
Art. 14.- The office or subsidiary entity must present to the Superintendency the certificate of authorization from the host country and inform it, one month in advance of the start of operations, the following:
a) The day on which it will start its operations with the public; b) Public service hours; and c) The list of executive personnel and the registry of authorized signatures.

CHAPTER IV
OTHER PROVISIONS AND VALIDITY

Modifications in the social pact
Art. 15.- Modifications subsequently introduced to the social pact of the company in which the investments were made must be reported to the Superintendency.

Supervision
Art. 16.- Offices and banking subsidiaries are subject to the supervision of the Superintendency, with all the powers conferred by the Law on Supervision and Regulation of the Financial System, without prejudice to the powers of other foreign supervisory bodies regarding the oversight of such companies.

Applicable AML/CFT/CPF Regulation
Art. 17.- When investing in subsidiaries or offices abroad, it must be required that such subsidiaries or offices of a bank, investment bank, or holding company incorporated in El Salvador observe, monitor, and comply with all measures in prevention of AML/CFT/CPF, in concordance with the requirements of the country and the Recommendations of the Financial Action Task Force (FATF). (1) Entities must pay particular attention to the fact that this principle is observed with respect to their branches and subsidiaries in countries that do not apply the FATF Recommendations or do so insufficiently.

Art. 18.- When the minimum requirements in prevention of AML/CFT/CPF of El Salvador and the State where the branch or subsidiary is located differ, they must apply, in addition to local regulation, the highest standard to the extent that the laws and regulations of the State where the branch or subsidiary is located allow it. Art. 19.- Entities must inform the Superintendency when the case arises that a foreign branch or subsidiary cannot observe the measures in prevention of AML/CFT/CPF, because they are prohibited by laws, regulations, and other

REALIZE EQUITY INVESTMENTS IN SUBSIDIARIES AND OFFICES IN FOREIGN COUNTRIES Approval: 19/12/2024 Validity: 03/01/2025 measures in force in the state where the branch or subsidiary is located. Sanctions Art. 20.- 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. 21.- These Standards repeal the "Standards to Authorize Banks and Exclusive Purpose Holding Companies to Make Equity Investments in Subsidiaries and Offices in Foreign Countries" (NPB1-11), approved by the Board of Directors of the Superintendence of the Financial System in Session No. CD-53/2000 on October 12 of 2000, 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, dated February 2, 2011. Transitory Art. 22.- Applications submitted in accordance with what is established in the "Standards for Authorize Banks and Exclusive Purpose Holding Companies to Make Equity Investments in Subsidiaries and Offices in Foreign Countries (NPB1-11), and which were pending at the time these Standards enter into force, will be continued and concluded in accordance with the regulations under which they began. Unforeseen Aspects Art. 23.- Aspects not provided for in regulatory matters in these Standards, will be resolved by the Central Bank, through its Standards Committee. Validity Art. 24.- These Standards will enter into force as of January three, two thousand twenty-five. MODIFICATIONS:
(1) Modifications in the denomination of the Standards, articles 1, 2, 5, 6, 7, 10 and 17 and in Annexes Nos. 1 and 2 and incorporation of Considerando IV, approved by the Central Bank through its Standards Committee, in Session No. CN-09/2025 of November 10, two thousand twenty-five, with effect from November 25 two thousand twenty-five.

REALIZE EQUITY INVESTMENTS IN SUBSIDIARIES AND OFFICES IN FOREIGN COUNTRIES Approval: 19/12/2024 Validity: 03/01/2025
Annex No. 1
APPLICATION FOR AUTHORIZATION TO ACQUIRE AND BE OWNER OF SHARES IN EXCESS OF 1% OR 10% (Natural Persons) Dear Financial System Superintendence Present.
I, _____________________, of _______ years of age, profession or occupation ______________, of nationality ________________ , from the domicile of ______________________ with Unique Identity Document (or passport) No. ___________________, request authorization to acquire and be owner of ________________ shares in _________________ in excess of 1% or 10% of its social capital. For the purpose of the regulations established in Art. 11 of the Banks Law (or Art. 17 of the Investment Banks Law), I declare under oath the following personal information: (1)
I. THAT I OWN THE FOLLOWING INVESTMENTS IN SHAREHOLDER ENTITIES OF
BANKS (OPERATING OR IN FORMATION)
Society Tax ID Name of
Partners
Tax ID Value
Nominal each.
Total of
Shares
Value
Nom. Total
% of
Partic.
Bank

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II. THAT I AM A DEBTOR IN THE FOLLOWING INSTITUTIONS OF THE FINANCIAL SYSTEM.
Institution Amount Maturity Destination Guarantee Financial __________________ _____________ _______________ _______________ __________ __________________ _____________ _______________ _______________ __________ __________________ _____________ _______________ _______________ __________ __________________ _____________ _______________ _______________ __________ __________________ _____________ _______________ _______________ __________ __________________ _____________ _______________ _______________ __________

REALIZE EQUITY INVESTMENTS IN SUBSIDIARIES AND OFFICES IN FOREIGN COUNTRIES Approval: 19/12/2024 Validity: 03/01/2025
Annex No. 1
III. THAT I HAVE BEEN AN OFFICIAL, DIRECTOR OR MANAGER (FACTOR) IN THE FOLLOWING
INSTITUTIONS OF THE FINANCIAL SYSTEM:
Financial Institution Position Held Period

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IV. POSSIBLE TRANSFERORS OR SOURCES OF ACQUISITION OF THE SHARES
The names of the people who will transfer their shareholding to me are:
______________________________________________________________________________________________ ______________________________________________________________________________________________ or the acquisition of shares I plan to carry out through a public offering of shares.
V. AMOUNT OF THE TRANSACTION
The transaction or transactions will amount to (Amount in United States dollars in numbers and letters).
And for the purposes of the prior authorization required by the Banks Law or Investment Banks Law, I sign this in ________________, on the ____________ of the month of _____________ of _________.(1) Signature of the Applicant

REALIZE EQUITY INVESTMENTS IN SUBSIDIARIES AND OFFICES IN FOREIGN COUNTRIES Approval: 19/12/2024 Validity: 03/01/2025
Annex No. 2
APPLICATION FOR AUTHORIZATION TO ACQUIRE AND BE OWNER OF SHARES IN EXCESS OF 1% OR 10% (Legal Entities) Dear Financial System Superintendence Present.
I, _________________, of ___________ years of age, profession or occupation ________________, of nationality _____________________, from the domicile of _____________________, with Unique Identity Document (or passport) No. ___________________________, in the capacity of legal representative of the Society _________________________, of nationality _____________, with Tax ID No. ________________, registered under No. ________ Folio __________ Book __________, of date , from the Commercial Registry of ____________________, I request authorization for my represented entity to be owner of ________________ shares of ______________________ in excess of 1% or 10% of its social capital. I declare under oath the following information about my represented entity:
I. INVESTMENTS IN ENTITIES THAT WILL BE (OR ARE) SHAREHOLDERS OF THE BANK OR
EXCLUSIVE PURPOSE HOLDING COMPANY (OPERATING OR IN FORMATION) Art. 11 of the Banks Law (or Art. 17 of the Investment Banks Law) (1) Name Tax ID Quantity of Value Value Nominal % of Partic. Bank Society Shares. Nominal each. Total ___________ ________ _____________ ___ ______________ ______________ ____________ _____________ ___________ ________ _____________ ___ ______________ ______________ ____________ _____________ ___________ ________ _____________ ___ ______________ ______________ ____________ _____________ ___________ ________ _____________ ___ ______________ ______________ ____________ _____________ ___________ ________ _____________ ___ ______________ ______________ ____________ _____________ ___________ ________ _____________ ___ ______________ ______________ ____________ _____________
II. THAT IT IS A DEBTOR IN THE FOLLOWING INSTITUTIONS OF THE FINANCIAL SYSTEM.

Financial Institution Tax ID Maturity Destination Guarantee ______________________ ___________ ______________ ___________________ _______________ ______________________ ___________ ______________ ___________________ _______________ ______________________ ___________ ______________ ___________________ _______________ ______________________ ___________ ______________ ___________________ _______________ ______________________ ___________ ______________ ___________________ _______________ ______________________ ___________ ______________ ___________________ _______________ ______________________ ___________ ______________ ___________________ _______________

REALIZE EQUITY INVESTMENTS IN SUBSIDIARIES AND OFFICES IN FOREIGN COUNTRIES Approval: 19/12/2024 Validity: 03/01/2025
Annex No. 2
III. LIST OF PARTNERS OR SHAREHOLDERS OF MY REPRESENTED ENTITY:
Name Tax ID Nationality Qty. Shares. Value Value Nominal. Total % of Partners in the Society Nominal. Total Participation ____________ ______ ______________ ______________ ____________ __________ ____________ ____________ ______ ______________ ______________ ____________ __________ ____________ ____________ ______ ______________ ______________ ____________ __________ ____________ ____________ ______ ______________ ______________ ____________ __________ ____________ ____________ ______ ______________ ______________ ____________ __________ ____________ ____________ ______ ______________ ______________ ____________ __________ ____________ ____________ ______ ______________ ______________ ____________ __________ ____________ ____________ ______ ______________ ______________ ____________ __________ ____________
IV. POSSIBLE TRANSFERORS OR SOURCES OF ACQUISITION OF THE SHARES
The names of the people who will transfer their shareholding to me are:
____________________________________________________________________________________ or the acquisition of shares I plan to carry out through a public offering of shares.
V. AMOUNT OF THE TRANSACTION
The transaction or transactions will amount to (Amount in United States dollars in numbers and letters).
And for the purposes of the prior authorization required by the Banks Law or Investment Banks Law, I sign this in San Salvador, on the __________ days of the month of _____________ of two thousand_________________________. (1) Signature of the Legal Representative