TECHNICAL STANDARDS TO AUTHORIZE OPERATIONS WITH RELATED ENTITIES

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

CONSIDERING:

I. That Article 203 of the Banks Law establishes that banks, as well as their subsidiaries, may not have in their portfolio credits, guarantees, and sureties granted to natural or legal persons directly related to the administration or directly or indirectly related to the ownership of the respective institution, nor acquire securities issued by them in a global amount exceeding five percent of the paid-in social capital and capital reserves of said institution.

II. That Article 209, subsection i) of the Banks Law establishes that the Superintendence of the Financial System may authorize certain operations with banks or financial institutions established abroad whose ownership or administration, directly or through third parties, is linked to their shareholders or to the business group to which the bank belongs, provided that those institutions are duly supervised by the authorities of the country where they are incorporated.

III. That Articles 155 and 161 of the Law of Cooperative Societies and Savings and Credit Societies establish that Savings and Credit Societies shall be subject to the provisions of the Banks Law insofar as pertinent.

IV. That Article 3, subsection c) of the Law of 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 manner in which they manage them, ensuring the prudent maintenance of their solvency and liquidity.

V. That Article 7, subsection b) of the Law of Supervision and Regulation of the Financial System establishes that it is the responsibility of the Superintendence of the Financial System to supervise banks established in El Salvador.

THEREFORE,

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

AGREES, to issue the following:

CHAPTER I

OBJECT, SUBJECTS, AND TERMS

Object

Art. 1.- These Standards aim to determine the operations that obligated subjects may carry out with foreign entities when, being banks or financial institutions established abroad, their ownership or administration is linked, directly or through third parties, to the shareholders or to the business group to which the obligated subjects belong.

Subjects

Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Banks established in El Salvador; and b) Savings and credit societies;

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) Entity/entities: Subjects obligated to comply with these Standards; c) Foreign entities: Foreign banks or financial institutions referred to in Article 209, subsection i) of the Banks Law; and d) Superintendence: Superintendence of the Financial System.

CHAPTER II

GENERAL PROVISIONS

Supervision of the country of origin

Art. 4.- The foreign entities with which the entity will carry out the operations authorized to it must be duly supervised by the authorities of the country where they are domiciled and incorporated.

It will be understood that foreign entities are duly supervised when they have similar or superior regulatory and supervisory requirements compared to those of El Salvador.

Authorized operations

Art. 5.- The Superintendence may previously authorize an entity to contract with a foreign entity, linked to its ownership or administration in accordance with what is established in Article 1 of these Standards, the following operations:
a) The alienation of its portfolio of non-performing loans, the litigious rights of the credits, and extraordinary assets; b) The purchase of credit portfolios, prior to the evaluation of said portfolio, in accordance with the "Standards to Classify Risk Credit Assets and Establish Sanitation Reserves" (NCB-022), must comply with the risk assumption limits established in Articles 197 and 203 of the Banks Law; and c) The celebration of Contracts for Administration and Collection of Portfolios, for which the entity must previously present to the Superintendence the following:
i. Object of the contract;
ii. Inventory of the credit portfolio subject to administration, detailing the name, amount, balance, date of issuance, maturity date, delinquency, overdue portfolio, guarantees, and others;
iii. Define the method of collection, whether administrative and/or judicial; and
iv. Copy of the contract draft.

Likewise, the Superintendence may authorize other specific operations with the foreign entities referred to in this article, provided that those institutions are duly supervised by the authorities of the country where they are incorporated, in accordance with what is established in the second paragraph of Article 4 of these standards.

Accounting treatment

Art. 6.- The accounting treatment for the withdrawal of an asset due to sale, whether in cash or with financing, shall be carried out in accordance with the Accounting Manual for Deposit-Gathering Institutions and Holding Company (NCF-01).

CHAPTER III

OTHER PROVISIONS AND VALIDITY

Sanctions

Art. 7.- Non-compliance with the provisions contained in these Standards shall be sanctioned in accordance with what is established in the Law of Supervision and Regulation of the Financial System.

Repeal

Art. 8.- These Standards repeal the "Standard to Authorize Operations with Related Entities" (NPB4-29), approved by the Board of Directors of the Superintendence of the Financial System in Session No. CD-67/2000 of December 21, 2000, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law of Supervision and Regulation of the Financial System, published in the Official Journal No. 23, Volume No. 390, of February 2, 2011.

Unforeseen aspects

Art. 9.- Unforeseen aspects regarding regulation in these Standards shall be resolved by the Central Bank through its Committee of Standards.

Validity

Art. 10.- These Standards shall enter into force as of November 15, two thousand twenty-four.

Alameda Juan Pablo II, between 15 and 17th Avenue North, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv

Technical Standards to Authorize Operations with Related Entities