Technical Standards to Authorize Savings and Credit Cooperatives to Collect Public Savings and for Gradual Adaptation of Cooperatives Exceeding Deposit Limits

TECHNICAL STANDARDS TO AUTHORIZE SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Validity: 06/29/2022

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

CONSIDERING:

I. That Article 2 of the Law on Cooperative Banks and Savings and Credit Companies establishes that Savings and Credit Cooperatives are regulated by said Law when the sum of their deposits and contributions exceeds six hundred million colones, updated value in accordance with Article 173 of the aforementioned Law.

II. That Articles 5 and 6 of the Law on Cooperative Banks and Savings and Credit Companies establish that cooperatives wishing to collect public deposits must request authorization from the Financial System Superintendence.

III. That Article 5, second paragraph, of the Law on Cooperative Banks and Savings and Credit Companies establishes that an instruction must be issued for the authorization to collect public deposits, a faculty that, in accordance with Article 101 of the Law on Supervision and Regulation of the Financial System, has been transferred to the Standards Committee of the Central Reserve Bank of El Salvador.

IV. That Article 164 of the Law on Cooperative Banks and Savings and Credit Companies establishes that cooperatives that exceed the amount mentioned in Article 2 of the aforementioned Law must report this to the Superintendence and present a Regularization Plan to adjust their social capital to that referred to in Article 16 of the cited Law, and to the other requirements established therein.

V. That Article 99, letter a), of the Law on Supervision and Regulation of the Financial System establishes that it will 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 regulate supervised entities must issue to facilitate their application.

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 SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Validity: 06/29/2022

TECHNICAL STANDARDS TO AUTHORIZE SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the procedure to be followed before the Financial System Superintendence for the authorization to collect public deposits for Cooperative Banks, as well as the gradual adaptation of savings and credit cooperatives that reach the amount established in the Law on Cooperative Banks and Savings and Credit Companies.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are:
a) Savings and credit cooperatives constituted, which request authorization from the Financial System Superintendence to collect public deposits; and b) Savings and credit cooperatives whose deposits and contributions reach the amount established in Article 2 of the Law on Cooperative Banks and Savings and Credit Companies, which is updated every two years in accordance with Article 173 of the cited Law.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Shareholders of a cooperative: Owners of the shares of the subjects obliged to the application of these Standards; the term will also serve to refer to the members of Cooperative Associations subject to the application of these Standards; b) Central Bank: Central Reserve Bank of El Salvador; c) Cooperative Bank: Savings and credit cooperatives that, in addition to collecting money from their members, also collect from the public; as well as savings and credit cooperatives when the sum of their deposits and contributions exceeds the amount established in letter a), a.2, of Article 2 of the Law on Cooperative Banks and Savings and Credit Companies; d) Cooperative: Associations and cooperative societies of savings and credit, including Credit Unions and Workers' Banks; e) Law: Law on Cooperative Banks and Savings and Credit Companies; and f) Superintendence: Financial System Superintendence.

TECHNICAL STANDARDS TO AUTHORIZE SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Validity: 06/29/2022

CHAPTER II
PROCEDURE FOR APPLICATION AND AUTHORIZATION TO COLLECT PUBLIC DEPOSITS

Application for authorization to collect public deposits Art. 4.- If a cooperative or cooperative bank wishes to collect public deposits, it must submit an application for authorization to the Superintendence accompanied by the following documentation:
a) Deed, minutes, or bylaws of the cooperative's constitution, as applicable; b) Agreements of the corresponding body, regarding modifications to its deed of constitution and bylaws, as well as the draft of said reforms; and c) List of the cooperative's shareholders, with specification of their general data, nationality, and shareholding participation; which shall not be less than one hundred and none shall subscribe to more than ten percent of the paid-up social capital. When future shareholders are natural persons and hold more than 1% of the paid-up social capital, they must present the following information:
i) Copy of the Unique Identity Document (DUI); ii) Copy of the Tax Identification Number (NIT), which shall be in accordance with what is established by the Tax Administration; (1) iii) Certified copy of passport or residence card, in the case of foreigners; and iv) Sworn declaration of not being in a situation of bankruptcy or insolvency. When shareholders are legal entities, they must present the following information:
i) Name or corporate name; ii) Nationality and domicile; iii) Documentation accrediting legal personality; iv) Copy of the Tax Identification Number (NIT), which shall be in accordance with what is established by the Tax Administration; (1) v) Audited financial statements of the last fiscal year; vi) Testimony of the deed of constitution and bylaws, or creation law, as applicable, in both cases with their reforms; vii) Power of attorney granted to be represented as a shareholder; and viii) Certification of the minute point, where the acquisition of shares is authorized; d) Description of the source of resources for the acquisition of the shares; e) List and general data of the directors, with the following information:
i) Sworn declaration of not having the disqualifications indicated in Article 15 of the Law, according to the model in Annex No. 1 of these Standards;

TECHNICAL STANDARDS TO AUTHORIZE SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Validity: 06/29/2022

ii) Certificate issued by the Directorate of Penal Centers stating no criminal record or sworn declaration to that effect; and iii) Curriculum vitae and testimonials accrediting their experience, as well as the presentation of documents supporting their knowledge in financial and administrative matters in accordance with what is stated in Article 15 of the Law. (1) f) Scheme of organization and administration of the cooperative; g) Opinion and audited financial statements of the last three fiscal years and financial projections of its operations; h) Detail of the portfolio of risk assets qualified in accordance with the applicable norms currently in force for Cooperative Banks with reference to the last day of the immediately preceding month, which must include the regularization reserves that will be required according to said norms; i) Detail of the collection from its members or associates carried out in the last two years; j) Detail of the number of shares subscribed and paid by each of its members or of the total contributions of the associates as applicable; k) Name or corporate name of the audit firm that will conduct the external audit of the cooperative bank. This must be registered in the Register of External Auditors kept by the Superintendence; l) List of managers and other persons who have authorization to decide on the granting of loans, with the same information referred to in letter e) of this article; and m) Business Plan that contemplates the changes in the business scope that arise as a consequence of the operations of collecting funds from the public. Said plan must include the financial bases of the operations planned to be developed, financial projections of at least two years, the scheme of organization and administration of the cooperative, and other topics considered important. This business plan must include compliance with the requirements of the Information on Equipment and Declared Computing Programs and the Manuals of Functions and Operational Procedures, as indicated in Annexes Nos. 2 and 3 of these Standards. The application and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first paragraph of Article 5 of these Standards will begin to run from the next business day after the application has been submitted.

Authorization procedure for the collection of public deposits Art. 5.- Upon receipt of the application for authorization to start collecting public deposits in accordance with what is established in Article 4 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined by the Law and in these Standards, having a period of up to sixty days for the authorization or denial of the corresponding application. If the application is not accompanied by the information detailed in Article 4 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the requesting 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 interested entities when there are reasons justifying it. The Superintendence 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 application, leaving its right to present a new application intact. If after analyzing the documentation presented in accordance with Article 4 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited as requested, the Superintendence may notify the respective requesting entity to remedy the deficiencies communicated or present additional documentation or information required. The requesting 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 Superintendence. The Superintendence 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 deficiencies notified so requires.

Extension period
Art. 6.- The requesting entity may submit to the Superintendence an application for extension of the period indicated in the fifth paragraph of Article 5 of these Standards, expressing the grounds on which it is based and proposing, if applicable, the pertinent proof.
The extension period cannot exceed ten business days and will start from the next business day after the expiration date of the original period.

Suspension of the period
Art. 7.- The sixty-day period indicated in the first paragraph of Article 5 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 of these Standards, until the observations required by the Superintendence are remedied.

Art. 8.- The Superintendence within the period established in the first paragraph of Article 5 of these Standards will analyze the cooperative's capacity to carry out collection operations, as well as the honorability and personal responsibility of its shareholders, directors, and administrators, with the purpose of offering protection to the interests of the public.

Resolution
Art. 9.- Once the documents are presented complete and in due form, the Superintendence will proceed to respond whether it authorizes or denies the application for authorization to collect public deposits, which it will notify within a maximum period of three business days from the date the resolution is issued. In the case that the resolution is denying, the notification must contain the causes for which the request is denied.

Qualification of modification of the deed of constitution Art. 10.- Prior to the presentation of the reforms of the deed of constitution or its bylaws as applicable, in the Registry kept by the Salvadoran Institute of Cooperative Promotion in the case of cooperative associations, or in the Commerce Registry in the case of cooperative societies, these must be presented to the Superintendence so that it qualifies whether the terms stipulated in the modification of the social pact are in accordance with the previously authorized projects, and if the social capital has been effectively integrated according to the authorization. Art. 11.- The modification referred to in the preceding article cannot be presented for its inscription in the registry kept by the Salvadoran Institute of Cooperative Promotion or in the Commerce Registry, without carrying a reason signed by the Superintendence, in which the favorable qualification of said testimony is recorded.

Start of operations with the public
Art. 12.- Having met the requirements established in the Law and these Standards, the Superintendence will certify within a period not greater than fifteen business days from when the cooperatives have met the requirements, that they can start their operations in collecting public deposits in accordance with the regulations of the Law. The Superintendence will notify the cooperatives within a maximum period of three business days from the date the certification is issued.

TECHNICAL STANDARDS TO AUTHORIZE SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Validity: 06/29/2022

Publication of Superintendence certification
Art. 13.- The certification issued by the Superintendence, indicating the name of the cooperative, the amount of paid-up social capital, and the names of the directors, will be made known through publication at the expense of the cooperative, once, in the Official Diary and in a printed medium of national circulation or another digital publication platform with greater or equal coverage, or on its website, in accordance with what is established in the current legal framework. From this certification, the cooperative will be authorized to use the expression "THIS ENTITY HAS BEEN AUTHORIZED BY THE FINANCIAL SYSTEM SUPERINTENDENCE TO COLLECT FUNDS FROM THE PUBLIC", contemplated in Article 35 of the Law.

CHAPTER III
ON THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Art. 14.- When the sum of the deposits and contributions of savings and credit cooperatives reaches the limit established in Article 2 of the Law, they must inform the Superintendence that they have exceeded said limit within ten business days following the occurrence of such circumstance. Additionally, these cooperatives must present to the Superintendence within thirty days thereafter the information contained in the letters of Article 4 of these Standards; as well as a regularization plan to comply with the requirements of the Law, which must be fulfilled within a maximum period of three years, counted from its presentation. (1) The limit of the sum of deposits and contributions referred to in the previous paragraph is updated every two years in accordance with Article 173 of the Law.

Art. 14-A.- The regularization plan referred to in Article 14 of these Standards must be signed by the Legal Representative of the entity accompanied by the following information: (1) a) Economic-financial projections demonstrating the entity's capacity to meet the capital requirements established in the Law. The study will take as a base the audited financial information as of December 31 of the year immediately preceding the presentation of the plan and will include the most recent financial statements; (1) b) Enumeration of activities other than financial intermediation and subject to accounting separation; (1) c) Names of debtors whose balances exceed the risk assumption limits according to Article 48 of the Law; (1)

TECHNICAL STANDARDS TO AUTHORIZE SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Validity: 06/29/2022

d) List of related persons whose balances exceed the risk assumption limits according to Article 49 of the Law; (1) e) Calendarization of compliance with the capital, solvency, and liquidity requirements indicated in the Law, as well as the provisions established in the technical norms related to these and the regulations related to risk management, which have been issued by the Standards Committee of the Central Bank. Detailing at minimum, the norms to be complied with, the activities to be carried out with their respective responsible persons and deliverables or evidence of compliance, in addition, establishing the estimated completion dates, submission to the Superintendence, and degree of advancement as of the date of presentation. (1) Art. 14-B.- Upon admitting the application with the information described in Articles 14 and 14-A of these Standards, the Superintendence may require the interested parties other information it deems pertinent to establish the facts or information intended to be accredited as requested, within a period of twenty business days counted from the date of presentation of the documents. (1) Once all the requirements established in Chapter III of these Standards are met, the Superintendence will issue a resolution authorizing the Regularization Plan, which will be notified to the requesting cooperative within a maximum period of three business days from the date the resolution is issued. (1)

Non-compliance with the regularization plan (1) Art. 14-C.- Cooperatives that have initiated the gradual adaptation process and presented the regularization plan and that do not finish it within the maximum period of three years referred to in Article 14 of these Standards, will be subject to the application of what is provided in Article 350 of the Code of Commerce, from the date on which the Superintendence notifies that the period established in Article 164 of the Law on Cooperative Banks and Savings and Credit Companies was not complied with. (1)

CHAPTER IV
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 15.- 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.

Repeals
Art. 16.- These Standards repeal the "Standards to Authorize Savings and Credit Cooperatives to Collect Public Savings" (NPNB1-01), approved in Session CD-43/2001, on September 5, 2001, by the Board of Directors of the

TECHNICAL STANDARDS TO AUTHORIZE SAVINGS AND CREDIT COOPERATIVES TO COLLECT PUBLIC SAVINGS AND FOR THE GRADUAL ADAPTATION OF COOPERATIVES THAT EXCEED THE DEPOSIT AND CONTRIBUTION LIMIT

Validity: 06/29/2022

Financial System Superintendence, whose Organic Law was repealed in accordance with Legislative Decree number 592 which contains the Law on Supervision and Regulation of the Financial System, published in the Official Diary No. 23, Volume No. 390, dated February 2, of