Technical Standards to Qualify Savings and Credit Cooperative Federations

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024

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

CONSIDERING:
I. That Article 2, letter c) of the Law of Cooperative Banks and Savings and Credit Companies establishes that the entities regulated by said Law are the federations of cooperative banks qualified by the Superintendence of the Financial System to carry out with their affiliates the intermediation operations indicated in said Law.
II. That Article 149 of the Law of Cooperative Banks and Savings and Credit Companies establishes that federations interested in obtaining the eligibility qualification will present their application to the Superintendence of the Financial System accompanied by the information established in the aforementioned article of the law.
III. That Article 4, letter a) of the Law of Supervision and Regulation of the Financial System establishes that the Superintendence of the Financial System has the authority to issue the pertinent resolutions for the supervised entities, within the powers conferred by the laws.
IV. That Article 7, letter g) of the Law of Supervision and Regulation of the Financial System establishes that it corresponds to the Superintendence of the Financial System the supervision of cooperative banks, savings and credit companies, and federations regulated by the Law of Cooperative Banks and Savings and Credit Companies.

THEREFORE,

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

AGREES to issue the following:

TECHNICAL STANDARDS TO QUALIFY SAVINGS AND CREDIT COOPERATIVE FEDERATIONS

CHAPTER I
OBJECT, SUBJECTS AND TERMS

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024

Object
Art. 1.- These Standards aim to establish the procedure and the requirements that savings and credit cooperative federations interested in obtaining the eligibility qualification at the Superintendence of the Financial System must comply with.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are the federations interested in obtaining the qualification established in Article 149 of the Law of Cooperative Banks and Savings and Credit Companies.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Shareholder: Shareholders of a cooperative society, as well as the members of a savings and credit cooperative association; b) Central Bank: Central Bank of Reserve of El Salvador; c) Cooperative: Savings and credit cooperative associations and societies, including rural credit unions and workers' banks; d) Federations: They are cooperative societies or associations, whose members are cooperative banks or savings and credit companies respectively; and e) Superintendence: Superintendence of the Financial System.

CHAPTER II
REQUIREMENTS AND APPLICATION PROCEDURE

Application
Art. 4.- Savings and credit cooperative federations interested in obtaining the eligibility qualification to carry out the activities regulated by the Law of Cooperative Banks and Savings and Credit Companies will present an application to the Superintendence, accompanied by the following information:
a) Deed of incorporation and its bylaws, or the agreement of the corresponding body, regarding the modifications to its deed of incorporation and bylaws, and the draft of the aforementioned reforms; b) Economic-financial feasibility study, in which changes in the business scope are contemplated in accordance with the Law of Cooperative Banks and Savings and Credit Companies. This plan must include the financial bases of the operations to be developed, financial projections of at least two years, the organization and administration scheme of the federation, and other topics considered important.

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024

This study must be prepared by professionals experienced in the formulation and evaluation of projects or by a company backed by professionals of that category; c) List of the federation's shareholders with their shareholding participation, with the following information:
i. Name or corporate name;
ii. Nationality and domicile;
iii. Copy of the Tax Identification Number (NIT), which must be in accordance with what is established by the Tax Administration;
iv. Audited financial statements of the last accounting year;
v. Testimony of the deed of incorporation and bylaws, or creation law, as applicable, in both cases with their reforms and legal representation;
vi. Power of attorney granted to be represented as a shareholder;
vii. Certification of the minute point where the acquisition of the shares is authorized; and
viii. Description of the source of resources for the acquisition of the shares.
d) List and general information of the directors, with the following information:
i. Sworn declaration of not having the disqualifications indicated in Article 15 of the Law of Cooperative Banks and Savings and Credit Companies, according to the model in Annex No. 1 of these Standards;
ii. Certificate issued by the General Directorate of Penal Centers, stating no criminal record; and
iii. Curriculum vitae and accreditation of experience indicated in Article 15 of the Law of Cooperative Banks and Savings and Credit Companies.
e) Opinion and financial statements of the last three years; f) Detail of the portfolio of risk assets qualified in accordance with the current standards for cooperative banks and savings and credit companies, with reference to the last day of the month immediately preceding the date of the application. This detail must also include the restructuring reserves that will be required according to said Standards; g) Name or corporate name of the audit firm that will carry out the external audit of the federation. This must be registered in the Register of External Auditors kept by the Superintendence; h) Name or corporate name of the audit firm that will carry out the tax audit of the federation, when applicable. List of managers and other persons authorized to decide on the granting of loans, with the same information referred to in letter d); i) Presentation of the manuals of functions and administrative procedures, with the requirements contained in Annexes No. 2 and No. 3 of these Standards;

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024

j) Regularization plan to liquidate within a maximum period of one year from the validity of the Law, the current balances of savings and time deposits that are not from affiliated cooperatives, as well as the balances of negotiable obligations; and k) Description of the furniture and equipment to be used, the surveillance systems, and the insurance to be contracted.

Likewise, the Superintendence may require interested parties, within a period of thirty days counted from the date of presentation of the application, other information it considers pertinent, which must be presented 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 federation when there are reasons justifying it. The Superintendence, in the same notice, will indicate to the federation that if it does not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, reserving its right to present a new application. The application and documentation may be presented 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 all required information has been presented, in accordance with the first and second paragraphs of this article.

Qualification Application
Art. 5.- Upon receipt of the qualification application, in accordance with what is established in Article 4 of these Standards, and after the periods established in the second and third paragraphs of said article have elapsed, the Superintendence will proceed to verify compliance with the requirements defined by the Law of Cooperative Banks and Savings and Credit Companies and in these Standards, having sixty days for its review. If after the analysis of 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, the Superintendence may notify the federation to remedy the deficiencies communicated or present additional documentation or information required. The federation 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.

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024

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 federation may present to the Superintendence an application for extension of the period indicated in the third paragraph of Article 5 of these Standards, before the expiration of said period, stating the grounds for the request and proposing, if applicable, the relevant evidence. The extension period may not exceed ten business days and will start from the next business day following the expiration date of the original period.

Suspension of the Period
Art. 7.- The period of thirty days and sixty days indicated in the second paragraph of Article 4 and in the first paragraph of Article 5 of these Standards, respectively, will be suspended for the days that elapse between the notification of the request to complete information or documentation referred to in the second paragraph of Article 4 and the third paragraph of Article 5 of these Standards, until the observations required by the Superintendence are remedied. Art. 8.- Once the complete documentation has been presented in due form, and in the judgment of the Superintendence, the economic-financial viability of the project, the honorability and personal responsibility of the shareholders, directors, and administrators of the company are met, such that it offers protection to the interests of the public. The Superintendence will proceed to notify the resolution to the federation within a maximum period of three business days, from the date of issuance. In the case that the resolution is denying, the notification must contain the reasons for which the requested is denied. In the case that said resolution is conditioned to modifications to the deed of incorporation, the Superintendence should indicate the period within which the modifications to it must be granted. Art. 9.- Having met all the requirements established in the Law of Cooperative Banks and Savings and Credit Companies, Standards, regulations, and applicable instructions, as well as having verified its internal controls and procedures and registered the modification of the corporate deed in the Registry kept by the Salvadoran Institute of Cooperative Promotion or in the Registry of Commerce, as applicable, the Superintendence will certify within a period not greater than fifteen business days from when the federation has met the requirements, that it may begin operations in accordance with what is regulated in the Law of Cooperative Banks and Savings and Credit Companies. The Superintendence will proceed to notify the certification to the federation within a maximum period of three business days, from the date of issuance of the resolution. This certification will be valid for a period of six months. If the period indicated in the previous paragraph has elapsed and the federation has not initiated its operations, the Superintendence may grant, based on the justifications presented, an extension of up to three months. This must be requested at least one month in advance of the original expiration. Art. 10.- The certification issued by the Superintendence, indicating the name of the federation, the amount of paid-up social capital, and the names of the directors, will be made known through publication at the expense of the federation, 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.

CHAPTER III
REGISTRATION OF MODIFICATIONS TO THE SOCIAL PACT Art. 11.- Prior to presenting the modifications of the bylaws to the Registry of Commerce or to the registry kept by the Salvadoran Institute of Cooperative Promotion, it must be presented to the Superintendence so that it qualifies whether the stipulated terms adhere to the projects that were previously authorized. The Superintendence will have a period of ten business days to carry out this verification. If there are differences between the modifications of the bylaws and the project of the same authorized by the Superintendence, it must communicate this to the applicant within the period indicated in the previous paragraph, so that the authorizing notary proceeds to make the respective adjustments, and the modifications of the bylaws must be presented again before the Superintendence, within a period of twenty business days from the date of communication of the inconsistencies or differences for verification. Art. 12.- If it is determined that there are no inconsistencies between the modifications of the bylaws and the revised modification project, or in the case of having overcome the inconsistencies that had been communicated in accordance with what is established in the previous article; the Superintendence will proceed within a period of five business days to extend a certificate signed by the Superintendence of the Financial System, which contains the favorable qualification of said modification, with the object that it can be presented to the Registry of Commerce or to the registry kept by the Salvadoran Institute of Cooperative Promotion.

Procedure if the Salvadoran Institute of Cooperative Promotion or the Registry of Commerce makes observations or denies the modifications Art. 13.- In the case that the Salvadoran Institute of Cooperative Promotion or the Registry of Commerce, as applicable, notifies the authorizing notary or any other interested person, the denial or the making of observations to the presentation of the bylaws modifications of the federation, that person must, in turn, notify said circumstance to the Superintendence in writing and no later than the next business day after receiving the respective notification. In said writing, the interested party or the authorizing notary must relate at least, the number of presentation of the respective instrument in the Salvadoran Institute of Cooperative Promotion or in the Registry of Commerce and state whether they will file any type of appeal aimed at achieving the inscription of the testimony or, in its case, the way in which they intend to remedy the respective observations, as well as the result of said type of actions, must notify this last to the Superintendence in the manner provided in the previous paragraph. If for the presentation of the instrument in question it is necessary to modify the conditions under which the Superintendence ordered its favorable qualification, it may, at the written request of the shareholders of the federation or their proxies, proceed to modify the certificate related in Article 12 of these Standards. Once the modifications of the bylaws are inscribed in the Salvadoran Institute of Cooperative Promotion or in the Registry of Commerce, as applicable, the federation will send a copy of said instruments to the Superintendence. Art. 14.- The modifications to the bylaws cannot be presented for inscription in the Registry of Commerce or registry kept by the Salvadoran Institute of Cooperative Promotion, without carrying a reason signed by the Superintendence, in which the favorable qualification of said testimony is recorded.

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024

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 of Supervision and Regulation of the Financial System.

Repeals
Art. 16.- These Standards repeal the "Standards to Qualify Federations of Savings and Credit Cooperatives" (NPNB1-04), approved by the Board of Directors of the Superintendence of the Financial System in Session No. CD-40/2001 of September 5, 2001, 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 Diary No. 23, Volume No. 390, dated February 2, 2011.

Transitory
Art. 17.- Applications related to the eligibility qualification presented in accordance with what is established in the "Standards to Qualify Federations of Savings and Credit Cooperatives" (NPNB1-04) and that were in process at the time of entry into force of these Standards, will continue and conclude in accordance with the regulation with which they began.

Unforeseen Aspects
Art. 18.- Aspects not provided for in regulatory matters in these Standards will be resolved by the Central Bank through its Committee of Standards.

Validity
Art. 19.- These Standards will enter into force from the fifteenth day of March two thousand twenty-four.

MODIFICATIONS:
(1) Modification in Annex No. 1, approved by the Central Bank through its Committee of Standards, in Session No. CN-05/2026, of June 30, two thousand twenty-six, with validity from July 15, two thousand twenty-six.

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024

Annex No. 1

MODEL OF SWORN DECLARATION FOR DIRECTORS OF FEDERATIONS SUBJECT TO THE LAW OF COOPERATIVE BANKS AND SAVINGS AND CREDIT COMPANIES

To: Superintendence of the Financial System
Present.

I, ________________________________, of _______ years of age, profession or trade ________________________, nationality _________________________, domicile of ___________________________, with Unique Identity Document No. _______________ and Tax Identification Number No. (NIT) _____________________, in view of having been proposed to form part of the governing body of the federation _____________________, declare under oath that:

1. I am not a director, official, or employee of any other institution of the financial system, of the institutions regulated by the Law of Cooperative Banks and Savings and Credit Companies, or of persons who engage in activities similar to those of cooperative banks and savings and credit companies, including the placement of assets among private parties of those not excepted by the Law of Cooperative Banks and Savings and Credit Companies.

2. I have not obtained in my favor, being a director of a financial institution, the approval of a credit without the unanimous vote of the Governing Body or that said credit was approved without my withdrawal from the corresponding session having been recorded.

3. I am not in a situation of bankruptcy, suspension of payments, nor creditor concourse and that I have never been judicially qualified as responsible for a fraudulent or negligent bankruptcy.

4. I am not a debtor of credits in the financial system, to which a restructuring reserve of fifty percent or more of the balance has been constituted.

For a better analysis of my debtor situation, I detail below the credits I currently have in the financial system:

Credit No. Amount Granted Financial Entity

---

I also declare that I am a shareholder of twenty-five percent or more of the social capital of the entities detailed below:

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NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024
Annex No. 1

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5. During my tenure as director, official, or administrator of an institution within the financial system, from the effective date of the Law on Privatization of Commercial Banks and Savings and Loan Associations, the same did not incur equity deficiencies of twenty percent (20%) or more of the minimum required by Law, nor did it receive contributions from the State, the Deposit Guarantee Institute, nor was it intervened by the competent supervisory body.
   For further information regarding that institution, I detail below the entities in which I served as administrator (or official, where applicable) and the period during which I held such position:
   Financial Institution Period

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6. I have never been convicted of crimes or for having participated in the commission of any intentional crime.
7. I have not participated directly or indirectly in activities related to drug trafficking, related crimes, and those typified in the Special Law for the Prevention, Control and Sanction of Money Laundering, Financing of Terrorism and Financing of Proliferation of Weapons of Mass Destruction. (1)
8. I have not been administratively or judicially sanctioned for participation in serious infractions of laws and norms of a financial nature, especially the collection of funds from the public without authorization, the granting or receipt of related loans exceeding the permitted limit, and financial crimes.
9. I do not hold any of the following government positions: President or Vice President of the Republic, Minister or Undersecretary of State, Owner Deputy, Owner Justice of the Supreme Court of Justice or Owner Chamber Justice, nor President of an Autonomous Institution.
   I also declare that my spouse and relatives in the first degree of consanguinity are:
   Name Class of Kinship
   ______________________________ _____________________ ______________________________ _____________________ ______________________________ _____________________ Signature Date

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024
Annex No. 2
REQUIREMENTS FOR INFORMATION ON COMPUTING EQUIPMENT AND PROGRAMS For any computing system designed to operate active and passive transactions and accounting, it is a requirement to present the following basic information to the Superintendence:
General description of the system and the main processes.
Relational Design of the Files.
Description and Detailed Design of the files and fields (Data Dictionary).
User Manual.
List of the types of users who will have access, specifying the user's hierarchical level and the type of access they will have to each of the system options; as well as the frequency with which it is generated and the number of copies and how they are distributed. If the systems are being developed, describe the procedure to test and approve the programs as well as the responsibilities for these activities. Printed copy of the source programs or make a tape back-up copy. Characteristics of the central and peripheral equipment. Detailed characteristics of the development tools. Copy of the warranty or maintenance contract for the central and peripheral equipment. Copy of the warranty or maintenance contract for the programs, if these have been contracted to consultants. Procedures to perform back-up. Contingency plan in case of information loss and/or failures in the computing equipment. Authorized procedures for the handling of access keys. Hygiene standards for the computing equipment and its peripherals. Software license to be used. NOTE: It is necessary that the new institution have an electronic communication system (Example: MODEM or GBNet) for sending and receiving information with the Superintendence.

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024
Annex No. 3

MINIMUM REQUIREMENTS FOR FUNCTION AND OPERATIONAL PROCEDURES MANUALS

1. Function Manual
   It must contain the organizational chart and describe the functions of each of its components, even those of temporary units, such as in the case of credit committees, of which it must also be exposed how they are integrated.
   The organization plan must contain the adequate segregation of operations and the functions necessary for the control and supervision of transactions. For such purposes, it is necessary to create at least the following units or positions:
   a) Cash b) Deposits c) Credit processing d) Loan control e) Loan recovery through judicial means f) Information Technology g) Accounting h) Internal Audit i) Portfolio qualification It must also include a section referring to the administration of the manual, which must have the modification procedures, the subjects who may propose modifications, and those authorized to keep it in their custody.
2. Operational Procedures Manual
   This manual must describe the internal control procedures (administrative and accounting) for each of the active, passive, and complementary operations that the federation will carry out.
   Internal control must be described by transaction cycles, preferably using the flowchart technique combined with narratives.
   It must also include a section referring to the administration of the manual, which must have the modification procedures, the subjects who may propose modifications, and those authorized to keep it in their custody.
   2.1 Main Transaction Cycles
   The cycles considered mandatory, depending on the operations carried out by the federation, are the following:
   a) Cycles for deposits
   It must comprise the following stages: deposit opening, withdrawals and remittances, replacement of passbooks and safeguards, and settlement of the deposit.

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024
Annex No. 3
b) Loan cycles
It must comprise the following stages: processing of the application and its respective controls, processing of deed preparation and its controls, granting, processing of registration of guarantees with their respective controls, and recoveries. In addition to the above, special recovery procedures through judicial means must be prepared, with the description of the corresponding controls; as well as the policies to initiate this process and those related to the recognition of losses when the results of the judicial process determine the uncollectability of the debts. c) Collection cycles From the receipt of documents to the reimbursement of the collected sum. d) Foreign currency purchase-sale cycle It must include the procedures related to the purchase and those of the sale. e) Investment portfolio cycles It must comprise the acquisition, sale, and redemption of securities and repo transactions. Each of the cycles described above must comprise the following aspects:
a) Adequate segregation of functions. b) Description of the distribution of the original and copies of accounting documents. c) Timeliness in which transactions or accounting operations will be recorded. d) Quantification of transactions and operations. e) Authorization and approval systems for transactions and operations. f) Information technology procedures (The activities to be carried out by means of computers must be described in a general manner, indicating the base documents to introduce information into the system, the authorizations to access the system, and the reports that will be issued). g) The way of organizing the document files.
2.2 Accounting Systems and Procedures
In addition to the cycles described above, procedures must be designed on the following aspects:
a) The way in which accounting operations will be recorded, in each of the legalized books and in general in the auxiliary accounting records. b) The way to relate accounting vouchers with entries in the books and previous records. c) The authorization processes for accounting vouchers, generated by each operational department and by the accounting department. d) The calculation and accounting of interest and commissions to be received and to be paid.
2.3 Information Systems
This section of the manual must deal with the data processing systems that will be used in the different activities of an economic nature and must deal at least with the applications of deposits, loan portfolio, accounting, and cash operations.

NRP-60
SAVINGS AND CREDIT COOPERATIVES
Approval: 29/02/2024
Validity: 15/03/2024
Annex No. 3
In each of those programs, at least the following must be described:
a) General description of the system and the main processes. b) Relational design of files. c) Description and detailed design of the files and fields. d) User manual for the systems of:

• Unique client identification number
• Accounting
• Cash
• Loans
• Savings
• Time deposits
  e) List of users who will have access, indicating the user's hierarchical level and the type of access they will have to each of the options. f) Detail of the reports generated by the system, specifying for each one the frequency with which it is generated, the number of copies, and how they are distributed. g) If the systems are being developed, describe the procedure to test and approve the programs as well as the responsibilities for these activities. In addition, the following information must be added:
  a) Characteristics of the central and peripheral equipment. b) Detailed characteristics of the development tools. c) Copy of the warranty or maintenance contract for the central and peripheral equipment. d) Copy of the warranty or maintenance contract for the programs, if these have been contracted to consultants. e) Procedures to perform Back-up. f) Contingency plan in case of information loss and/or failures in the computing equipment. g) Procedure for the handling of access keys. h) Hygiene standards for the computing equipment and its peripherals. i) Authorized standards for the maintenance of the systems. j) Graphical scheme on the interrelation and data communication of the central system and its peripheral systems (Agencies).
  2.4 Annexes
  This section must contain the different forms that the entity will use to contract with the public, to attend transactions with its clients, and for the registration of accounting operations, but especially what is related to:
  a) Forms of applications, contracts, remittances, withdrawals, and other documents that will be used in active and passive operations. b) Models of the legalized accounting books that will be used. c) Forms of the accounting documents of income (credit notes, receipts, cash summaries), expenses (checks, etc.), and journal entries.