GENERAL LAW OF THE FINANCIAL AND INSURANCE SYSTEMS
ORGANIC LAW OF THE SUPERINTENDENCY OF BANKING AND INSURANCE
(Updated to December, 2004)
THE PRESIDENT OF THE REPUBLIC
The Congress of the Republic has decreed the following law:
THE CONGRESS OF THE REPUBLIC;
has decreed the following law:
GENERAL LAW OF THE FINANCIAL AND INSURANCE SYSTEMS
ORGANIC LAW OF THE SUPERINTENDENCY OF BANKING AND INSURANCE
General Principles and Definitions
Article 1: SCOPE OF THE GENERAL LAW
The Law sets forth the regulatory and supervisory framework to which companies operating in the financial and insurance systems will be subject, including those carrying out activities which are similar or complementary to the corporate purpose of such entities.
Unless otherwise expressly provided, the Law does not affect the Central Bank.
Article 2: PURPOSE OF THE LAW
The main purpose of the Law is to provide for the competitive, solid and reliable operation of the financial and insurance systems, so as to contribute to national development.
Article 3: DEFINITIONS
The terms and abbreviations used in the Law shall have the meaning indicated in the glossary annexed hereto.
Article 4: SUPPLEMENTARY APPLICATION OF OTHER PROVISIONS
Commercial law and common law provisions, as well as business customs and practices shall be supplementary applicable.
Article 5: TREATMENT OF FOREIGN INVESTMENT
Foreign investment in the companies shall have the same treatment afforded to local capital, subject if applicable to international agreements on the matter.
When relevant, the Superintendency takes into account certain criteria inspired in the principle of reciprocity, when public interest is affected, as prescribed in Title III of the Economic Regime of the Political Constitution.
Article 6: PROHIBITION OF DISCRIMINATORY TREATMENT
The general provisions issued by the Central Bank or the Superintendency in the exercise of their powers may not include special treatment that will discriminate between:
1. Companies of like nature.
2. Companies of a different nature, concerning the same type of transaction.
3. Companies established in Peru versus similar foreign companies.
4. Resident foreign individuals and legal entities versus Peruvian individuals and legal entities, with respect to the granting of loans.
Article 7: (*) NON-PARTICIPATION OF THE STATE IN THE FINANCIAL SYSTEM
*Amended by Law N° 27603 of December 20, 2001
The State shall not participate in the financial system, except for its investments in COFIDE as a second floor bank, in the Banco de la Nación and in the Banco Agropecuario.
Article 8: FREEDOM OF USE OF RESOURCES AND RISK DIVERSIFICATION CRITERIA
The companies of the financial and insurance systems shall be free to use portfolio resources, with the limitations prescribed in the Law. They must observe at all times the risk diversification criteria, for which reason the Superintendency shall not authorize the incorporation of companies designed to support only one sector of the economy.
Article 9: FREEDOM TO FIX INTEREST RATES, FEES AND CHARGES
Companies of the financial system may freely set interest rates, fees and charges with respect to their loans and deposit transactions and services. Yet, in the case of fixing interest rates, they must observe the limits set forth by the Central Bank from time to time in accordance with its Organic Law. The provisions of the first paragraph of Article 1243 of the Civil Code shall not be applicable to financial brokerage.
The companies of the insurance system may freely determined policy conditions, rates and other fees.
Interest rates, fees and other charges collected by companies of the financial and insurance systems, as well as insurance policy conditions must be made known to the public, in accordance with the regulations issued by the Superintendency.
Article 10: FREEDOM TO CONTRACT INSURANCE AND REINSURANCE ABROAD
Peruvian residents may contract insurance and reinsurance abroad.
Article 11: ACTIVITIES REQUIRING AUTHORIZATION FROM THE SUPERINTENDENCY
Any individual or entity operating under the framework of the Law shall require the authorization of the Superintendency in accordance with the provisions of the Law. Accordingly, any individual or entity lacking such authorization shall be prohibited from the following:
- Engaging in the business proper of companies of the financial system, particularly to normally gather or receive funds from third parties in deposit, exchange, or any other form and to normally place such resources in the form of loans, investment or provision of funds under any contractual method.
- Engaging in the business proper of companies of the financial system, particularly granting insurance coverage on its own and acting as a broker for Peruvian or foreign insurance companies, and other complementary activities.
- Advertising or issuing publications stating or suggesting that it carries out transactions and services which it is prohibited to perform pursuant to the preceding points.
- Using in its name, forms and generally in any means, any wording that would induce the public to believe that its business comprises activities which may only be carried out with the authorization of the Superintendency and under its supervision, in accordance with the provisions of Article 87 of the Political Constitution.
It shall be presumed that an individual or legal entity has incurred in the aforesaid infractions whenever, not having the authorization of the Superintendency, has an establishment which in some way:
a) Invites the public to provide money under any mechanism, or to obtain loans or financing; or
b) Invites the public to directly or indirectly contract insurance coverage, or invites local or foreign insurance companies to hire its brokerage services; and
c) Generally advertises through any medium with the aforesaid purposes.
Those infringing the above prohibitions shall be sanctioned in accordance with Article 246 of the Criminal Code.
The Superintendency shall have the obligation of intervening any establishments suspected of carrying out the activities prescribed in this article without due authorization.
COMMON PROVISIONS FOR THE FINANCIAL
AND INSURANCE SYSTEMS
INCORPORATION OF COMPANIES OF THE
FINANCIAL AND INSURANCE SYSTEMS
METHOD OF INCORPORATION AND MINIMUM CAPITAL
Article 12: COMPANY INCORPORATION
Companies must be incorporated as stock companies, save for those which nature would not allow. In order to commence operations, their organizers must secure an organization permit and business license from the Superintendency, and follow the procedure generally issued by the latter.
In the case of companies seeking transformation, conversion, merger or split, they must apply for the organization permit and business license for the new type of activity.
Article 13: CORPORATE BYLAWS
The deed of incorporation and corporate bylaws must be adapted to the Law in such manner that the companies will be obliged to comply with all its provisions. These must be registered in the corresponding Public Registry.
Municipal savings and loan houses and municipal popular finance entities shall be governed by applicable legislation and by the provisions of the Law.
Article 14: AMENDMENTS TO BYLAWS
All amendments to the corporate bylaws shall be subject to the stipulations of the first paragraph of the preceding article and must have the prior approval of the Superintendency, without which registration with the Public Registry shall not be allowed. Exempted are any amendments required by increases to the capital stock, as prescribed in the first paragraph of Article 62 and which nevertheless must be communicated to the Superintendency.
The ruling must be issued within thirty (30) business days from the date of the application, otherwise, the proposed amendment shall be considered approved.
Article 15: NAME
Names of companies must include specific reference to the activity for which the company is incorporated, even in cases where the name consists of apocopes, abbreviations or is in a foreign language. The use of the word “central” is prohibited, as well as any other words which would cause confusion as to the nature of the company. It shall be mandatory for the name to expressly contain wording that will reflect the nature of the company.
It shall not be required to include the word “Sociedad Anónima” or corresponding abbreviation.
Article 16: MINIMUM CAPITAL
As far as the operation of companies and their subsidiaries, it shall be required that their capital stock, contributed in cash, be at least as follows:
A. Multi-business companies:
1. Banking Institution : S/.14 914,000,00
2. Financial Institution : S/. 7 500,000,00
3. Municipal Savings
and Loan Houses : S/. 678,000,00
4. Municipal Popular
Finance Entities : S/. 4 000,000,00
5. Small Business and
Entities – EDPYME : S/. 678,000,00
6. Savings and Loan
Associations authorized to
take public deposits : S/. 678 000,00
7. Rural Savings and Loan
Houses : S/. 678 000,00
B. Specialized Companies
1. Real Estate Capitalization
Companies : S/. 7 500,000,00
2. Financial Leasing Companies : S/. 2 440,000,00
3. Factoring Companies : S/. 1 356,000,00
4. Surety and Bonding Houses : S/. 1 356 000,00
5. Trust Companies : S/. 1 356 000,00
C. Investment Banks : S/.14 914 000,00
D. Insurance Companies
1. Companies covering only one line
(general risk or life) : S/. 2 712,000,00
2. Companies covering both lines
(general risk and life) : S/. 3 728,000,00
3. Insurance and
Reinsurance companies : S/. 9 491,000,00
4. Reinsurance Companies : S/. 5 763 000,00
Article 17: MINIMUM CAPITAL OF COMPANIES PROVIDING COMPLEMENTARY AND SIMILAR SERVICES
In order to incorporate companies to provide complementary and similar services, it shall be required to have the following minimum capital stock:
1. General Bonded Warehouses : S/. 2 440 000,00
2. Transport, Custody and
Specie Management Companies: S/.10 000 000,00
3. Credit and/or Debit Card
Companies : S/. 678 000,00
4. Exchange Service Companies : S/. 678 000,00
5. Fund Transfer Companies : S/. 678 000,00
Article 18: UPDATING OF LIMITS
The figures stipulated in Articles 16 and 17 are stated in constant value and are updated quarterly on the basis of Wholesale Prices related to the entire country, as published monthly by the National Institute of Statistics and Information. Resulting figures shall be rounded up to the nearest hundred. October 1996 shall be used as base factor.
Article 19: COMPANY ORGANIZERS
All individuals and legal entities applying as organizers of the companies referred to in Articles 16 and 17 must be recognized for their moral integrity and financial capacity. There is no minimum number of organizers prescribed; however, at least one of them must be one to subscribe capital of the corresponding company.
The Superintendency shall be empowered to authorize the organization and the business operation of the companies included in Articles 16 and 17 of the Law. Cases of the companies prescribed in Points A, B and C of Article 16 are subject to the prior opinion of the Central Bank.
Article 20: IMPEDIMENTS TO BE ACCEPTED AS ORGANIZERS
The following may not be organizers of companies:
- Those convicted for illegal drug traffic, terrorism, attempting against national security and treason and other fraudulent crimes, even if they have been rehabilitated.
- Those who by reason of their position, are prohibited from engaging in commerce, in accordance with legal provisions in force.
- Those declared insolvent, while the process is in effect; and those who are bankrupt.
- Members of Congress and of local and regional government bodies.
- Directors and employees of public organizations that regulate or supervise the activities of the companies.
- Directors and employees of a company of the same nature, except for those of insurance companies, to organize another company to operate in a different field.
- Those who have had documents protested during the past five years and which have not been rectified to the satisfaction of the Superintendency.
- Those who during intervention, or during the previous two years, may have been directors or managers of companies intervened by the Superintendency, provided they were found to be administratively responsible for acts deserving sanctions.
- Those who, as directors or managers of a legal entity, have been found to be administratively responsible for acts deserving sanctions.
Article 21: APPLICATION FOR ORGANIZATION
All applications for organization of companies of the financial and insurance systems must include all formal requirements established by the Superintendency in its general provisions, which shall prescribe the procedure to be followed.
The application must be accompanied by a certificate of deposit of guaranty made with any company of the financial system governed by the Law, to the order of the Superintendency, in an amount equivalent to 5% of the minimum capital stock. The appropriately endorsed deposit shall be returned to the organizers in the event that the application is refused.
Once the complete documentation has been received, the Superintendency will inform the Central Bank in cases dealing with companies of the financial system described in Points A, B and C of Article 16 hereof. The Central Bank must issue its opinion within thirty (30) days from the receipt of the said communication.
Within ninety (90) days of the receipt of the opinion of the Central Bank, the Superintendency shall issue a resolution authorizing or refusing the organization of the company. The resolution needs not cite any grounds and may not be challenged through administrative or legal proceedings.
Article 22: VERIFICATION BY THE SUPERINTENDENCY
The Superintendency shall verify the seriousness, responsibility and other personal characteristics of the organizers, and may request any other information it may deem appropriate.
Article 23: CERTIFICATE OF AUTHORIZATION TO ORGANIZE
Once the resolution authorizing organization has been issued, the Superintendency shall grant the corresponding certificate. Having obtained the certificate, the organizers must:
- Publish the certificate once, in the Official Gazette “El Peruano” within thirty (30) days of its issuing, failure of which will imply risking expiry at the end of such term.
- Grant the corresponding public deed, into which the certificate must be mandatorily inserted, under liability of the participating public notary.
- Carry out all other actions required to secure the business license.
The certificate of authorization to organize shall expire two (2) years after it was issued.
Article 24: USE OF CAPITAL
In accordance with the regulations issued by the Superintendency, the initial capital stock may only be used during the organization stage for the following purposes:
- To cover the expenses to be incurred during the process.
- To purchase or build premises to be used by the company.
- To purchase the furniture, equipment and machinery needed to start operations.
- To hire the services necessary to begin operations.
The remainder must be invested in government securities or Central Bank obligations, or deposited in a company incorporated in the country.
Article 25: GUARANTY OF THE ORGANIZERS
Not withstanding the guaranty deposit referred to in Article 21, the organizers shall individually and jointly guarantee to carry out the required capital stock contributions. Both types of guaranties shall remain in effect until thirty (30) days after the board of directors assumes its duties.
Article 26: CHECKS TO BE DONE BEFORE ISSUING THE BUSINESS LICENSE
When the organizers report in writing that they have complied with all the business license requirements, the Superintendency shall proceed to carry out the necessary verification and checks.
Article 27: RESOLUTION AUTHORIZING THE BUSINESS LICENSE
Once the verification and checks referred to in the preceding article have been done and within a term not to exceed thirty (30) days, the Superintendency shall issue the corresponding resolution authorizing the granting of the business license. This certificate must be published twice, the first time in the Official Gazette and the second in a major newspaper of national circulation. In addition, the certificate must be permanently displayed in the head office of the company, in a conspicuous place.
If the company elects the modules system referred to in Article 290, the Superintendency shall issue complementary resolutions, detailing the module in which the company is included.
Article 28: VALIDITY OF THE BUSINESS LICENSE
The business license is valid for an indefinite period and may only be cancelled by the Superintendency as a sanction for a serious offense incurred by the company.
Article 29: LISTING OF THE COMPANY’S SHARES IN THE STOCK EXCHANGE
Banking, financial and financial leasing institutions as well as companies comprising the insurance system must have the shares representative of their stock listed in the stock exchange before they begin their operations with the public.
Whenever it deems it convenient, the Superintendency may request those companies not included in the preceding paragraph to be listed in the stock exchange.
Authorization to Open, Relocate and Close Branches and Other Offices
Article 30: OPENING OF BRANCHES, AGENCIES AND SPECIAL OFFICES
The opening of branches or agencies by a company of the financial system or of the insurance system, whether within the country or abroad, shall require prior authorization by the Superintendency.
In the case of the opening of a branch abroad, before issuing the corresponding authorization, the Superintendency must obtain the opinion of the Central Bank.
The opinion must be given within fifteen (15) days if the office will operate within the country, and within sixty (60) days if its operations will be abroad. This term shall be counted as from the date of receipt of the application, including all supporting documents.
The refusal of any application referred to in this article must state the relevant grounds; but it may not be challenged through administrative or legal proceedings.
Article 31: OBLIGATION TO DISPLAY BUSINESS LICENSE
The original resolution of approval of the business license, as a well as a copy of the business license of the company must be displayed at all branches, agencies or special offices of the company.
Article 32: RELOCATION AND CLOSING DOWN OF BRANCHES, AGENCIES OR SPECIAL OFFICES
Provided they offer services to the public, the relocation or closing down of branches, agencies or special offices of companies comprising the financial system or the insurance system, within the country or abroad, shall also require the prior authorization of the Superintendency. To this effect, the terms prescribed in Article 30 shall apply.
Cases of relocation or closing down of branches of companies of the financial system abroad must be communicated to the Central Bank.
Article 33: ESTABLISHMENT OF SERVICE WINDOWS
Companies of the financial system and of the insurance system may share premises for the provision of their services, including cases involving window contracts and leasing of space. Such contracts and arrangements shall be reported to the Superintendency so as to ensure that control and security requirements are met.
Authorization to Incorporate Subsidiaries
Article 34: INCORPORATION OF SUBSIDIARIES
Companies of the financial system may incorporate subsidiaries for the purposes referred to in Article 224.
General insurance companies may incorporate subsidiaries to operate in the life insurance business – and vice-versa -, or for the purposes prescribed in Article 318.
Article 35: AUTHORIZATION TO INCORPORATE SUBSIDIARIES
For the establishment of subsidiaries to carry out business prescribed in the Law, it shall be required to have the previous corresponding authorization to organize and business license, with an exemption provided for the submission of the certificate of guaranty stipulated in Article 21, as well as the cash contribution to the capital stock in the case of mergers or splits of these companies.
However, in the case of subsidiaries described in Points 3, 4 and 6 of Article 224, it shall be CONASEV the entity to issue the authorization of the business license.
Article 36: RULES FOR THE INCORPORATION OF SUBSIDIARIES
The following rules shall govern the incorporation of subsidiaries by companies of the financial system:
1. The combined investment in subsidiaries may not exceed 40% of the company’s equity, save for subsidiaries of general insurance companies which provide life insurance.
2. The holdings of a company of the financial system or of the insurance system in the capital stock of a subsidiary may not be less than three fifths.
3. Shareholder plurality shall not be required.
4. Directors and employees of the head office may also be directors or employees of the subsidiary, or vice-versa.
5. Subsidiaries may enter into contracts with head office and secure its backing in administrative, data processing and other areas.
Article 37: OTHER PROVISIONS APPLICABLE TO SUBSIDIARIES
As applicable, all other provisions of the Law shall also govern subsidiaries.
Authorization for the Constitution of
Credit Insurance Independent Equities
Article 38: (*) CONSTITUTION OF CREDIT INSURANCE INDEPENDENT EQUITIES
(*) Amended by Law 27102 of May 5, 1999
The Superintendency shall approve the constitution of the credit insurance independent equities referred to in Article 334 or those for the establishment of contingency coverage or funds in favor of depositors and holders or users of credit or debit cards or other services deciding to incorporate companies. In these cases, the Superintendency shall obtain the opinion of the Central Bank.
In cases of liquidation of a company managing an independent equity, the Superintendent may appoint a substitute.
Regulations of independent equities and their coverage and contract transactions shall be contained in the regulatory provisions issued by the Superintendency.
Authorization for the Establishment of Companies
of the Financial System and the Insurance System
Article 39: ESTABLISHMENT OF COMPANIES ABROAD
Companies of the financial system and of the insurance system domiciled abroad seeking to setup an office to serve the public in the country, must secure the authorization of the Superintendency. In the case of companies of the financial system, the Superintendency must request the opinion of the Central Bank within the term prescribed in the third paragraph of Article 21, following the procedure defined by the Superintendency. The provisions of the Law shall be applicable in these cases.
Article 40: VERIFICATION OF INFORMATION SUBMITTED
Once the application has been received and the enclosed documents have been reviewed, the Superintendency shall proceed to verify the soundness and seriousness of the applicant institution; and if so decided, issue the certificate of authorization to organize.
Article 41: AUTHORIZATION OF THE BUSINESS LICENSE
When the Superintendency has confirmed that the required capital stock has been subscribed and contributed and that the relevant requirements have been met, it shall issue the corresponding resolution authorizing the business license.
The said resolution shall be sufficient for the registration of the office with the pertinent Public Registry and must be published once in the Official Gazette, as well as permanently displayed at the office in a conspicuous place.
Article 42: DESIGNATED CAPITAL STOCK
The offices referred to in Article 39 must have designated a minimum capital stock equivalent to that of companies carrying out the same activities in the country, which must be kept in the country.
Authorization of Representatives of Companies
Not Domiciled in the Country
Article 43: APPLICATION TO REPRESENT COMPANIES NOT DOMICILED IN THE COUNTRY
Any representative appointed by a company of the financial system abroad must have the prior authorization of the Superintendency. The representative must submit an application together with the public instrument containing such appointment, as well as all other relevant documents.
Insurance or reinsurance brokers of companies not domiciled in the country shall be subject to the same procedure prescribed in the preceding paragraph.
Article 44: EVALUATION FOR THE AUTHORIZATION OF REPRESENTATION
In order to issue the authorization, the Superintendency must evaluate the seriousness and solvency of the person appointed and of the requesting institution.
The following considerations shall also be taken into account:
- In the case of financial companies from abroad, the convenience of such representation shall be evaluated, as well as any possible favorable effects on the country’s foreign trade and its potential contribution to the possibility of securing foreign loans and capital.
- In the case of insurance or reinsurance companies from abroad, a better level of risk coverage must be analyzed.
Article 45: ACTIVITIES OF THE REPRESENTATIVES
As applicable, representatives of financial companies from abroad and brokers of insurance and reinsurance companies not domiciled in the country shall be limited to have a relationship with:
- Companies of similar nature operating in the country, so as to facilitate foreign trade and provide foreign financing.
- Companies interested in purchasing or selling goods and services in foreign markets.
- Entities potentially demanding foreign financing or capital.
- Entities potentially demanding reinsurance.
- Entities potentially demanding insurance.
Article 46: ACTIVITIES PROHIBITED TO REPRESENTATIVES
Representatives of financial companies from abroad shall be prohibited from:
- Carrying out transactions or offering services proper of their principal.
- Taking in deposits or placing them directly in the country.
- Directly offering or placing within the country foreign securities or instruments.
Article 47: IDENTIFICATION OF REPRESENTATIVES AND BROKERS
Representatives of financial companies from abroad and brokers of insurance companies not domiciled in the country may use any written means that will identify them as such, provided there is an indication that their principal is not domiciled in the Republic of Peru.
Article 48: SUPERVISION OF REPRESENTATIVES AND BROKERS
The acts of representatives of financial companies from abroad and brokers of insurance and reinsurance companies not domiciled in the country shall be subject to the supervision of the Superintendency, which is empowered to revoke the authorization and reject the accreditation of a new representative.
Furthermore, the Superintendency shall require them to submit periodical reports concerning their activities.
Article 49: REVOCATION OF AUTHORIZATION
The authorization may be revoked whenever representatives of financial companies from abroad and brokers of insurance and reinsurance companies not domiciled in the country infringe the limitations and prohibitions prescribed in Articles 45 and 46, or whenever their activities are not beneficial for the country, as expressed in the purposes and objectives indicated in Article 44.
Capital, Reserves and Dividends
Shareholders and Capital
Article 50: MINIMUM NUMBER OF SHAREHOLDERS
Companies of the financial system and of the insurance system incorporated as stock companies must at all times have the minimum number of shareholders set forth in the Business Corporations Act.
Any individual or legal entity directly or indirectly purchasing stock of a company equivalent to 1% of the capital stock throughout a period of twelve months, or which with the said companies attain a share equal to or greater than 3%, shall be under the obligation of supplying the Superintendency any information it may request in order to identify their main economic activities and the structure of their assets. This includes revealing the names of shareholders in the case of companies issuing bearer shares.
Article 51: STOCK HOLDINGS BY A SINGLE PARTY
With respect to holdings in a company of the financial system or of the insurance system by a single party, the only limitation shall be that contained in the preceding article.
Article 52: IMPEDIMENTS TO BECOME A SHAREHOLDER
Those prescribed in Points 1, 8 and 9 of Article 20 of the Law may not be shareholders of companies of the financial system or of the insurance system, nor those who, following the pertinent evaluation, the Superintendency has decided that according to its knowledge, they do not meet the solvency or moral integrity requirements.
Article 53: LIMITATIONS TO HOLDINGS IN A COMPANY BY ANOTHER COMPANY OF THE SAME NATURE
A company may not be a shareholder of another company of the same nature belonging to the financial system or to the insurance system. For these purposes, it shall not be considered that a company is of the same nature, if it is a different type of company forming part of the financial system or of the insurance system, if such type is different from that of the company involved.
Purchases of shares for the purpose of taking over a company issuing shares for the relevant transfer shall be exempted, provided a sworn declaration is issued to the Superintendency. If six (6) months have elapsed since the sworn declaration was issued, and the merger has not been formalized, the holder of the shares issued for such purpose shall be obliged to transfer them and it shall be impeded from exercising voting rights with respect thereto.
Article 54: LIMITATIONS TO SHAREHOLDERS BY REASON OF POSITION
The public officials and employees referred to in Article 39 of the Political Constitution, as well as their spouses, may not hold shares of a company of the financial system or of the insurance system in excess of 5% of the company’s capital stock.
The Chairman of CONASEV, the Superintendent, employees of both institutions as well as their spouses, may not hold shares of a company of the financial system or of the insurance system at all.
Such limitation shall not apply in the case of shares acquired prior to their assuming the position or function, provided this is included in the corresponding sworn declaration of assets and income. Also exempted are shares which, without altering the pre-existing percentage, may be subscribed in the cases of capital increases.
Article 55: LIMITATION FOR MAJORITY SHAREHOLDERS OF A DIFFERENT COMPANY OF THE SAME NATURE
Anyone who is directly or indirectly a majority shareholder of a company of the financial system or of the insurance system, may not directly or indirectly be a holder of more than 5% of the stock of another company of the same nature.
Article 56: SHARE TRANSFERS
All transfers of shares of companies of the financial system or of the insurance system must be registered with the Superintendency. When applicable, securities clearing and settlement institutions, together with the Superintendency, shall establish the most convenient means to offer real time computer access.
In the case of companies which are not listed in the stock exchange; or which if they are, their stock is traded elsewhere, it shall be the responsibility of the General Manager of the company, to submit to the Superintendency within the first ten (10) business days of each month, a list of all transfers that have taken place during the preceding month.
Article 57: TRANSFERS IN EXCESS OF 10% OF THE CAPITAL STOCK
All transfers of shares of a company comprising the financial system or the insurance system made to a single party in excess of 10% of the company’s capital stock, whether accomplished directly or through third parties, shall require the previous authorization of the Superintendency.
The provisions of the preceding paragraph shall govern cases where, between the presumed purchase and the previous holdings of the party involved, the said percentage is reached.
If a legal entity domiciled in Peru was a shareholder of the company in a percentage greater than the aforesaid, its shareholders must have the prior authorization of the Superintendency before assigning any rights or shares of the said legal entity in a proportion higher than 10%. If the shareholder was a non-domiciled legal entity, it shall have the obligation of informing the Superintendency in the event of any changes in its shareholding, in the proportion of the excess of the said percentage, indicating the name of the shareholders of the latter.
The company shall have the obligation to inform the Superintendency in the event that it has learned that a portion of its stock has been purchased by a non-domiciled company, indicating the name of the shareholders of the latter.
Article 58: REFUSAL OF APPLICATION FOR SHARE TRANSFER
The Superintendent shall refuse the authorization requested pursuant to the preceding article, if the individual seeking to purchase the shares, or the shareholders, directors or employees of a legal company with the same corporate purpose form part of the following cases:
- They are subject to the impediments prescribed in Articles 20, 52 and 53, and to the restrictions of Articles 54 and 55.
- They are carrying out activities which are prohibited by Article 11.
The decision cannot be challenged.
Article 59: SANCTION IMPOSED ON THE BUYER INFRINGING REGULATIONS GOVERNING THE LIMITATIONS OF HOLDINGS OF THE CAPITAL STOCK OF COMPANIES
In the event that shares are purchased by infringing the provisions of Articles 52, 53, 54 and 55, the buyer shall be sanctioned with a fine equal to the value of the shares which were to be transferred. Not withstanding the above, the buyers shall have the obligation to sell the shares within thirty (30) days. If the said term expires without the situation being rectified, the fine shall be multiplied. Furthermore, the buyer infringing the provisions of Articles 54 and 55 may not exercise its voting rights in shareholders’ meetings.
If the shareholder refuses to comply with the stipulations of Articles 50 and 57, the Superintendency may suspend its rights as such, including its right to vote and to share in the profits of the company. In addition, the shares owned by the shareholder involved shall not be counted in the calculation of the quorum and majority required in shareholders’ meetings.
Article 60: PREFERRED STOCK
Companies forming part of the financial system and the insurance system may issue preferred stock, with or without the right to vote. Preferred shares may be redeemable or for fixed terms, with rights to cumulative or non-cumulative dividends, as well as of other types, as may be decided by the shareholders’ meetings.
Losses shall be absorbed, first of all, by common shares; and only when the value of the latter has been used, shall preferred shares absorb the remainder. If the losses reduce the book value of the equity by one third or more, shares with no voting rights shall benefit from such right, unless the capital stock is increased through the subscription of new common shares.
Additionally, companies may issue and place shares under par, subject to the following procedure:
1. Charge the placement discount amount to their retained earnings account and/or voluntary reserves account; or
2. Charge the financial expense to profits, to be done during the same fiscal period when the shares were placed.
Article 61: COMPANY MERGERS AND SPLITS – RIGHTS OF DISSIDENT MEMBERS
Once the respective shareholders’ meetings have approved the merger of two or more companies of the financial system or of the insurance system, shareholders shall have the right to sell their shares to the corresponding company, in accordance with the provisions of the Business Corporations Act.
The same right shall be enjoyed by shareholders in the case of the split of a company.
Article 62: INCREASE IN THE CAPITAL STOCK OF A COMPANY
The capital stock of a company comprising the financial system or the insurance system may only be increased by cash contributions, capitalization of profits or capital restatement as a results of global adjustments due to inflation.
On occasion and prior authorization of the Superintendency, the said capital stock may also be increased through mergers, conversions of the company’s obligations into shares or any other method authorized by the Superintendency.
In the cases of contributions through immovable property, the authorization of the Superintendency shall only be possible in cases of capital increases over and above the minimum cash capital required and up to a limit equivalent to 75% of the effective equity as at the date of the contribution.
With respect to insurance companies, once the previous authorization of the Superintendency has been secured, the capital increases referred to in the preceding paragraph may also take place through any of the other assets prescribed in Article 311.
Article 63: TREATMENT OF CAPITAL DEFICIT
The capital deficit resulting from the application of the provisions of Articles 16, 17 and 18 must be covered during the following quarter. In special cases, the Superintendency may grant a ninety (90)-day extension, in order to evaluate whether or not the company has been adequately managed and if reasonable efforts have been made to comply with its obligation.
The said extension may not be granted on two consecutive occasions.
Article 64: REDUCTION OF CAPITAL STOCK
Except for the prescriptions of Article 69, any reductions to the capital stock or legal reserves must be authorized by the Superintendency.
As prescribed and not withstanding the Superintendency’s own opinion, such reduction may not take place:
1. In an amount of the legal reserve which is uncovered, with respect to the minimum capital.
2. In the amount of the existing deficit with respect to provisions ordered by the Superintendency.
3. When, if as a result of the reduction the company’s operational limits would be exceeded.
Application of Profits
Article 65: APPLICATION OF PROFITS
The profits for the fiscal period shall be determined after deductions have been made for all provisions established by the Law, as determined by the Superintendency or as decided by the company itself.
Article 66: PRIORITY IN THE APPLICATION OF PROFITS
The order of priority for the application of profits of companies of the financial system and of the insurance system shall be the following:
- For the replenishment of the minimum capital, as prescribed in Articles 16, 17 and 18.
- For the constitution on the part of companies of the financial system, of the legal reserve; or if applicable, for its replenishment, up to the limit prescribed in the second paragraph of Article 69.
- For the constitution on the part of companies of the insurance system, of the guaranty fund referred to in Article 305; or if applicable, for its replenishment, up to the limit prescribed in the second paragraph of Article 69.
- For the constitution of voluntary reserves or dividend distribution.
Article 67: LEGAL RESERVE
Companies of the financial system and of the insurance system must put aside a reserve of no less than 35% of their capital stock.
The said reserve shall be accomplished by annual transfers of no less than 10% of net after-tax profits, replacing the reserve prescribed in Article 258 of the Business Corporations Act.
Article 68: VOLUNTARY RESERVES
The annual transfer of profits to voluntary reserves may not be decided without first complying with the order of priority established by the Law for the constitution of the legal reserve in the annual percentage set forth in the preceding paragraph or the provisions for the replenishment of the legal reserve stipulated in the following article.
The provisions of this article shall not be applicable to companies of the insurance system with respect to technical reserves.
Article 69: APPLICATION OF RESERVES
If companies of the financial system or of the insurance system record losses, their coverage shall be subject to the amount of undistributed profits and voluntary reserves, if any, and the amount of the legal reserve or guaranty fund detailed in Articles 67 and 305 shall be reduced by the difference.
For as long as the minimum amount or the highest amount obtained during the period when the legal reserve or guaranty fund was constituted is not attained, all of the profits must be applied thereto.
Article 70: INCREASE OF LEGAL RESERVE
The amount of the legal reserve may be increased at any time through contributions made by the shareholders for this purpose.
Article 71: PREFERRED REPLENISHMENT OF THE MINIMUM CAPITAL
Within the term prescribed by Article 63, by priority, any profits obtained must be applied to the replenishment of the minimum capital stock.
Article 72: DISTRIBUTION OF PROFITS
Not withstanding the provisions of Article 355 of the Law, for as long as the shareholders’ meeting has not approved the final balance sheet and the corresponding distribution of profits, companies may not distribute them by charging net profits of an annual fiscal period nor may they share the profits with their directors.
Article 73: LIABILITY FOR NON-COMPLIANCE
Those who may have approved resolutions infringing the provisions of Articles 69, 71 and 72, shall be joint and severally liable for the reimbursement to the company of any monies illegally paid, not withstanding their joint and several liability with respect to the Business Corporations Act.
Article 74: QUORUM
For the celebration of the first shareholders’ meeting of companies of the financial system or of the insurance system, regardless of their purpose, the bylaws of companies incorporated as stock companies may not require a quorum of shareholders representing more than two thirds of the capital stock.
In the case of prorogued meetings, there must be a representation of shareholders constituting no less than one third of the capital stock, provided the meeting will not deal with the issues described in Article 134 of the Business Corporations Act, in which case the provisions of the said legislation shall prevail.
Article 75: REQUIREMENT OF MAJORITY
In the approval of resolutions by shareholders’ meetings of companies, the bylaws may not require a majority higher than those prescribed in Articles 133 and 134 of the Business Corporations Act. Nevertheless, in the case of prorogued meetings as referred to in the first item, the minimum legal requirement shall be the favorable vote of shareholders representing at least one quarter of the paid-in capital stock.
Article 76: REPRESENTATIVES OF SHAREHOLDERS
Company bylaws may not require that someone appointed by a shareholder to represent him in the shareholders’ meeting must also be a shareholder.
Article 77: RIGHT OF THE SUPERINTENDENT TO ATTEND SHAREHOLDERS’ MEETINGS
The Superintendent shall have the right to attend, in person or through his appointee, any shareholders’ meeting.
Article 78: RIGHT OF THE SUPERINTENDENT TO DECLARE THE VALIDITY OF MEETINGS AND SHAREHOLDERS’ MEETING RESOLUTIONS
Upon request or as part of his duties, the Superintendent shall have the right to administratively resolve any issues which may affect the validity of the shareholders’ meetings and resolutions approved thereby, not withstanding the right conferred by the Law to the shareholders to challenge his decision through legal proceedings.
Board of Directors
Article 79: STRUCTURE OF THE BOARD OF DIRECTORS
The board of directors of companies of the financial system and of the insurance system shall consist of no less than five (5) members who meet technical skill and moral integrity requirements, appointed by the shareholders’ meeting.
Article 80: DEPUTY DIRECTORS
Companies may appoint deputy directors, in accordance with the provisions of their bylaws. Their appointment must be confirmed by the Superintendency.
Article 8: IMPEDIMENTS FOR BECOMING A DIRECTOR
The following may not be directors of companies of the financial system or the insurance system:
- Those impeded by the provisions of the Business Corporations Act.
- Those who, in accordance with the provisions of Articles 20, 51 and 52, are prohibited from being organizers or shareholders.
- Those who are known to be insolvent and those whose majority of assets are affected by precautionary measures.
- Those who, being domiciled in the country, are not included in the Single Taxpayers’ Register.
- Employees of the company, except for the General Manager.
- Employees of a company, its subsidiaries and other companies and their subsidiaries, if they are of the same nature.
- Employees of an insurance company, its subsidiaries and other companies and their subsidiaries, if they are of the same nature, or of reinsurance companies with which there is nor shareholding relationship, or vice-versa.
- Those who, directly or indirectly in the same company or in another company of the financial system, have loans overdue for over one hundred and twenty (120) days, or which are subject of legal proceedings.
- Those who, directly or indirectly, are holders, partners or shareholders exercising a significant influence over companies having loans overdue for over one hundred and twenty (120) days, or which are subject of legal proceedings in the same company or another company of the financial system.
A resolution issued because of the existence of any impediments for becoming a director of a company, shall be issued with the corresponding knowledge, shall not be required to cite any grounds and may not be challenged through administrative or legal proceedings.
Article 82: COMMUNICATION OF THE SUPERINTENDENCY
All appointments of directors of companies of the financial system or of the insurance system, as well as any vacancies taking place, shall be reported to the Superintendency within one (1) business day of the occurrence, submitted together with a certified copy of the minutes evidencing the resolution, issued by the board of directors’ Secretary or his substitute.
Article 83: NON-DELEGATION OF THE POSITION OF DIRECTOR
The position of director of a company of the financial system or of the insurance system shall not be subject to delegation.
Article 84: FREQUENCY OF DIRECTORS’ MEETINGS
The board of directors shall hold meetings at least once per month.
Article 85: BOARD OF DIRECTORS QUORUM
Under no circumstances shall the quorum prescribed in the bylaws of companies of the financial system or of the insurance system for board of directors’ meetings may be greater than two thirds of its members. The bylaws may not require either, that the approval of resolutions must have the favorable vote of more than two thirds of attending directors.
Article 86: ATTENDANCE OF DEPUTY DIRECTORS
The attendance of a deputy director as referred to in Article 80 to a meeting, without the presence of the principal director, shall in itself constitute the assumption that the latter is absent or cannot attend the meeting.
Article 87: LIABILITY OF DIRECTORS
The principal and deputy directors referred to in Article 80, joint and severally as prescribed by Article 172 of the Business Corporations Act, shall be liable for:
- Approving transactions or resolutions infringing the provisions of the Law; specifically, the prohibitions or limits set forth in Chapter II of Title II of the Second Section hereof.
- Omission of adopting the necessary measures to correct operational irregularities.
- Non-compliance with the regulations issued by the Superintendency as well as with any requests for information made by the Superintendency or the Central Bank.
- Not supplying information to the Superintendency or supplying false information with respect to facts or transactions which may affect the stability or soundness of a company of the financial system or of the insurance system.
- Abstaining from answering the communications of the Superintendency or of the Central Bank which may be made by in accordance with the provisions of the Law or by prescription of the said bodies.
- Omission of adopting the necessary measures required to guarantee the timely undertaking of internal and independent audits.
The aforesaid infractions shall be sanctioned by the Superintendency in line with their seriousness, not withstanding any civil or criminal actions applicable in accordance with the provisions of Articles 173 and 174 of the Business Corporations Act and the powers conferred upon the Central Bank by its Organic Law.
Article 88: NON-COMPATIBILITY OF THE POSITION OF DIRECTOR
With the exception resulting from Points 5 of Article 81, except for the Chairman, the members of the board of directors may not hold management positions in the same company.
Article 89: DIRECTOR VACANCIES
In addition to the reasons prescribed by the legislation governing stock companies, a director of a company of the financial system or of the insurance system shall vacate the position when:
- He uninterruptedly misses meetings without the permission of the board for a period of three (3) months.
- He is absent from meetings, with or without permission, in excess of one third of all of the meetings held during a period of twelve (12) months ending on the date of the last absence.
The reason stated in Point 2 above shall not apply if the deputy director attends the meetings.
The vacancy of a director shall automatically determine the appointment of its deputy.
Article 90: OBLIGATION TO REPORT TO THE BOARD OF DIRECTORS THE COMMUNICATIONS OF THE SUPERINTENDENCY
All communications of the Superintendency addressed to a company of the financial system or of the insurance system with reference to an inspection or investigation carried out, or which contains recommendations for the company’s business, must be reported to the board of directors or body carrying out a similar function, during the immediately next meeting, under liability of the Chairman of the Board or official of equivalent position.
Article 91: APPOINTMENT OF MANAGERS
Legal entities may not be appointed managers of a company. An entity not forming part of a company of the financial system or of the insurance system or any bodies thereof may not be delegated the faculty to appoint managers.
Article 92: PROVISIONS APPLICABLE TO MANAGERS
As relevant, the provisions of Articles 81, 82 and 87 shall be applicable to companies.
Article 93: OBLIGATION OF THE MANAGER TO INFORM THE BOARD OF DIRECTORS WITH RESPECT TO CREDIT TRANSACTIONS
In companies comprising the financial system or the insurance system, the General Manager or his substitute, must inform the board of directors in each meeting and in writing, with respect to all credits and guaranties granted to each client since the preceding meeting, as well as of any investments made, whenever in either case the limit set forth by the Superintendency has been exceeded.
A copy of the report informing of the excess must be remitted to the Superintendency for the corresponding actions, under liability of the board of directors.
Article 94: OBLIGATION OF THE MANAGER TO INFORM THE BOARD OF DIRECTORS WITH RESPECT TO THE BUSINESS OF THE COMPANY
At least quarterly, the General Manager or his substitute, must inform the board of directors with respect to the financial affairs of the company of the financial system and of the insurance system, comparing the report to that of the previous quarter and with the goals set forth for the quarter. The board of directors shall be responsible for ensuring compliance with this obligation.
Article 95: (*) SUBMISSION TO THE SURVEILLANCE PROCEDURE – GROUNDS
(*) Amended by Law 27102 of May 5, 1999
The Superintendency shall subject all companies comprising the financial system and the insurance system to the surveillance procedure, whenever they incur in any of the following conditions:
- Grounds applicable to companies of the financial system or of the insurance system:
a) Non-compliance with the obligation contained in Article 63;
b) Decrease in the effective equity or capital stock under the prescribed minimum;
c) Granting of loans to their own shareholders for use in covering the company’s capital requirements;
d) Intentionally supplying false information to the Superintendency or to the Central Bank or cause the suspicion of the existence of fraud or significant changes in their financial position;
e) Refusal to make available their ledgers and business records for inspection by the Superintendency, or resist such submission;
f) Refusal of their directors, managers and other officials and employees to make statements to the Superintendency with respect to the transactions and business of the company;
g) It becomes impossible due to the absence of the legal minimum number of votes in favor, as prescribed by Article 75, to secure the timely approval by the shareholders’ meeting, of the resolutions required for the adequate running of the company; and
h) Cases of notorious or repeated violations of the Law, their bylaws or the general or specific regulations issued by the Superintendency or the Central Bank.
- Grounds applicable to companies of the financial system:
a) Non-compliance with the requirements for the legal reserve for all of the consecutive periods comprised within three (3) months, or during periods which, combined, entail a term of five (5) months within a period of twelve (12) months, ending on the date of the last deficit;
b) Need to request the financing of their obligations which in the opinion of the Superintendency constitutes a sign of structural financial insufficiency for complying with regulations governing reserves, or which tend to become permanent;
c) Need to request the financial assistance of the Central Bank for more than ninety (90) days during the last one hundred and eighty (180) days;
d) Excess of the limits set forth in Articles 206, 207, 208 and 209 during three (3) months within a period of twelve (12) months, ending on the date when the last excess took place;
e) Infraction with respect to other individual or OVERALL limits, in a frequency or magnitude which, in the opinion of the Superintendency, reveals an inadequate management of the business by the company, together with the failure to approve and implement corrective actions;
f) Reiterated non-compliance with servicing the public, as prescribed in Article 139;
g) The positions subject to credit risk and market risk described in Article 199 exceed the limit established thereby during a period of three (3) consecutive months or five (5) alternate months during the period of one (1) tear; and
h) Loss or reduction of more than 40% of the effective equity.
- Grounds applicable to companies of the insurance system:
a) Non-compliance with requirements for investments, effective equity and limit of indebtedness during consecutive periods of three (3) months, or during terms which, combined, constitute a duration of more than five (5) months during the period of twelve (12) months ending on the date of the last deficit;
b) Need to request the financing of their obligations which in the opinion of the Superintendency constitutes a sign of structural financial insufficiency for complying with their obligations; and
c) Failure to submit the program prescribed in Articles 302 and 316, or having done so under terms which the Superintendency considers unacceptable.
- Grounds applicable to companies of the insurance system carrying out transactions subject to credit risk: non-compliance with any of the grounds described in Point 2, Items d) and e).
In addition, the Superintendency may subject companies of the financial system or of the insurance system to a surveillance procedure, if it considers that there are justifiable serious grounds not prescribed herein. If this is the case of companies of the financial system, the Superintendency shall report the case to the Central Bank.
The decision of the Superintendency to subject a company to the surveillance procedure shall not cause a resolution to be issued. It shall be informed through a communication and kept under strict confidence. The Central Bank, the Fund and their respective employees, as well as the shareholders, directors and employees of the companies becoming subject of the surveillance procedure shall have the responsibility of keeping the confidentiality thereof, with the provisions of Article 372 being applicable in these cases. Furthermore, the confidentiality obligation shall also apply to third parties described in Point 3 of Article 99. Infraction of this obligation shall be considered a serious offense, not withstanding the liability determined by Article 249 of the Criminal Code.
Article 96: (*) DURATION
(*) Amended by Law 27102 of May 5, 1999.
The surveillance procedure shall have a duration of forty-five (45) days and may be renewed once for an identical term, but only if in spite of the efforts made and improvements accomplished the grounds cited in the preceding article prevail. Such extension shall not apply to cases prescribed in Points 1-c, 2-e and 2-f of the said article.
Article 97: REQUIREMENT FOR COMPANY SUBJECT TO THE SURVEILLANCE PROCEDURE
During the surveillance procedure, the competence and authority of the governing bodies of the company shall be maintained without any limitations other than those resulting from this Title.
Within a term of seven (7) days following the receipt of the pertinent communication the company subject to the surveillance procedure must propose a financial recovery plan to be implemented to the satisfaction of the Superintendency. Such plan must include any good judgement rules considered adequate by the Superintendency. Within seven (7) business days following the approval of the aforesaid plan and not withstanding the commencement of its implementation during the term, the relevant formalization agreement must be subscribed.
Furthermore, the company must demonstrate in the frequency prescribed in the said agreement, an improvement in its position, which must mandatorily include new cash contributions to the capital stock.
Article 98: RECOVERY AGREEMENT
The agreement referred to in the preceding article, to be entered into with companies of the financial system shall be communicated by the Superintendent to the Central Bank, which shall be kept informed of its implementation every fifteen (15) days, as well as of its possible extension.
Article 99: (*) POWERS OF THE SUPERINTENDENCY
(*) Amended by Law 27008 of December 4, 1998.
At any time during the Surveillance Procedure, the Superintendency shall have the power to:
1. Evaluate the effective equity of the company and carry out studies to determine the possibility of rehabilitation;
2. Determine the effective equity of the company and, if applicable, order the offset of losses by charging legal and voluntary reserves and the capital stock; and
3. Require immediate new cash contributions from shareholders. In the event that the shareholders do not make the said contributions, they shall lose their preferred rights. The Superintendency shall have the right to secure the necessary contributions from third parties.
Article 100: POWERS OF THE APPOINTED OFFICIAL
Not withstanding the provisions of the preceding article, the Superintendent may appoint an official, with the following powers:
- In the case of companies of the financial system, he may request any information he may deem necessary, particularly with respect to deposits and loans.
- In the case of companies of the insurance system, he may request any information he may deem necessary, particularly with respect to their operations.
- As an observant, attend board of directors’ and shareholders’ meetings.
Article 101: (*) EFFECTS OF THE SURVEILLANCE PROCEDURE
(*) Amended by Law 27331 of Jul 27, 2000.
The following are unavoidable effects of being subject of the surveillance procedure for as long as it lasts:
1. In the case of companies of the financial system or of the insurance system:
a) The on-going overseeing of the company by the Superintendency, as per the powers conferred upon it by the Law.
b) The prohibition from constituting or accepting trusts.
c) The suspension of voting rights which may be exercised in shareholders’ meeting or other meetings of equivalent bodies, with respect to any shareholders who may have acted as directors or managers at the time the company was made subject to the surveillance procedure.
d) The Superintendency will immediately convene a general shareholders’ meeting for the implementation of the necessary agreements to overcome the causes that provoked the submission to the surveillance procedure and specially for the implementation of the capital contribution referred to in Article 99, Point 3 of the Law. This meeting will take place without the need of any formalities whatsoever. If relevant, the shareholders’ meeting shall proceed to appoint the new board of directors of the company. In this meeting, those who comprised the board of directors or who were managers of the company at the time when the surveillance procedure was instituted, or during the two (2) preceding years, nor anyone related thereto, as established by the Superintendency, shall not be allowed to vote.
e) Other measures deemed necessary by the Superintendency in order to comply with the provisions of this chapter.
2. In the case of companies of the insurance system:
a) The reduction of the reserve term, as determined by the Central Bank.
b) Any increase in deposits or obligations over and above the balance outstanding on the date when the procedure was instituted, as well as any subsequent recovery of loans, must first be used in reducing the reserve deficit, if any. Once the deficit is covered, the said amounts shall be deposited into current accounts opened with the Central Bank, where they will earn the interest rate determined thereby, which shall at least be equivalent to the compensation earned by reserve funds in the corresponding currency.
c) No new credit or market positions may be assumed, unless those authorized by the Superintendency, which shall only authorize new positions subject to market risk required for coverage.
In the case of Point 1, Point d) of this article, the Superintendent shall appoint a new board of directors, only in the event of the following circumstances:
a) The general shareholders’ meeting did not meet on one of the dates for which it was convened;
b) The general shareholders’ meeting did not approve the removal and substitution of the board of directors;
c) None of the shareholders with voting rights individually represents at least 4% of the capital stock, and all of them combined do not account for a 15% share of the said capital stock; and
d) The new board of directors did not comply with the replacement of the General Manager.
When appointing the new board of directors, the Superintendent shall include shareholders who are able to participate in the shareholders’ meetings and major preferred creditors.
Article 102: END OF THE SURVEILLANCE PROCEDURE
The Superintendency shall put an end to the surveillance procedure whenever he is of the opinion that the grounds for institution have disappeared, or when the company has incurred in any of the grounds for intervention prescribed in Article 103 et seq.
The Superintendent shall also have the power to end the surveillance procedure before the expiry of the prescribed term, if he is of the opinion that it will not be possible to overcome the problems detected during the said term.
Article 103: (*) INTERVENTION
(*) Amended by Law 27102 of May 5, 1999.
Any company incurring in the grounds cited in the following article must be intervened by resolution of the Superintendency. In the case of companies of the financial system, the intervention must first be reported to the Central Bank.
Article 104: (*) GROUNDS FOR INTERVENTION
(*) Amended by Law 27102 of May 5, 1999.
The following shall be grounds for intervention of companies of the financial system or of the insurance system:
1. Suspension of payment of their obligations;
2. Non-compliance during the surveillance procedure, with the commitments assumed in the agreed recovery plan or with the regulations of the Superintendency in accordance with the provisions of Title V of this section;
3. In the case of companies of the financial system, whenever positions subject to credit risk or market risk represent twenty-five (25) times more than the total effective equity;
4. Loss or reduction by more than 50% of the effective equity; and
5. In the case of companies of the insurance system, the loss or reduction of the effective equity to under 50% of the solvency equity.
Article 105: (*) DURATION OF THE INTERVENTION
(*) Amended by Law 27102 of May 5, 1999.
An intervention carried out in accordance with the preceding article shall have a duration of forty-five (45) days, extendable once for an identical period. Once this period has expired, the corresponding resolution shall be issued, ordering the dissolution of the company and for the commencement of the relevant liquidation process.
The intervention procedure may end before the end of the term prescribed in the preceding article, whenever the Superintendent deems it convenient. The corresponding resolution must be previously reported to the Central Bank.
Article 106: EFFECTS OF THE INTERVENTION
(*) Amended by Law 27102 of May 5, 1999.
The following are unavoidable effects of the intervention procedure, and they shall prevail for as long as it lasts:
- The competence of the shareholders’ meeting shall be limited exclusively to the issues dealt with in this chapter;
- The suspension of the company’s business;
- The application of the necessary portion of the company’s subordinate debt, if applicable, to absorb the losses, after having complied with the provisions of Point 1 of Article 107;
- The application of the prohibitions contained in Article 116, as from the publication of the resolution determining the submission to the intervention procedure; and
- Other steps which the Superintendency may deem relevant to ensure compliance with the provisions of this chapter.
Article 107: POWERS OF THE SUPERINTENDENCY
(*) Amended by Law 27102 of May 5, 1999.
During the intervention procedure, the Superintendency shall enjoy the following powers:
1. Determine the effective equity and offset of losses by charging legal and voluntary reserves; and if applicable, the capital stock;
2. For the purposes of Point 3 below, order the exclusion of:
a) All or part of the assets of the balance sheet which the Superintendency may decide, including those assets detailed in Article 118;
b) The liabilities described in Article 118, in Point 1 of Point A in Article 117, and the requirements prescribed in Article 152, up to the amount stipulated in Article 153;
c) In the event that there are assets that would allow their transfer, the orders detailed in Article 152 in amounts in excess of those prescribed in Article 153, as well as deposits in addition to those established in Article 152, except for the points referred to in its last paragraph.
3.Totally or partially transfer the assets and liabilities prescribed in the preceding point. In order to effect such transfers, the consent of the debtor or creditor shall not be required, save for the cases provided for in Article 62 of the Political Constitution. If a positive balance resulted from the transfer, it shall be incorporated to the estate, once the costs of the said transfers have been deducted.
Article 108: (*)
Article 109: (*)
Article 110: (*)
Article 111: (*)
Article 112: (*)
Article 113: (*)
Amended by Law 27102 of May 5, 1999.
Dissolution and Liquidation
Article 114: COMPANY DISSOLUTION AND LIQUIDATION
Companies comprising the financial system and the insurance system shall be dissolved by substantiated resolution of the Superintendency due to the following reasons:
1. The case referred to in Article 105 of the Law;
2. The grounds cited in the relevant articles of the Business Corporations Act.
The resolution ordering the dissolution shall not end the legal existence of the company, which shall prevail until the liquidation process is completed; and as a result thereof, the extinction from the corresponding Public Registry is recorded. As from the publication of the resolution, the company shall cease to be subject of credit, shall be exempted from any future taxes and shall not be subject to the obligations prescribed by the Law for active companies, including the payment of fees to the Superintendency.
The Superintendency shall establish the regulations and procedure applicable to the dissolution and liquidation of companies.
Article 115: (*) REHABILITATION OR LIQUIDATION PROCESS
(*) Amended by Law 27102 of May 5, 1999.
Through the relevant contracts, the Superintendency shall trust the liquidation of companies of the financial system and of the insurance system to adequately qualified legal entities, retaining the supervision and control over the process. The contract shall rescue the possibility of rehabilitation of the company, in accordance with the provisions of Articles 124 to 129.
The compensation for the rehabilitation or liquidation shall consist of a percentage of the new contributions or of the recovery. The Superintendency shall establish all other conditions of the process in the corresponding contract. Rehabilitation may also consist of a merger or other form of corporate recovery.
With respect to the contract, a term shall be established in accordance with the anticipated complexity of the process, which must not exceed two (2) years, extendable by up to an equal term, due to justifiable reasons in the opinion of the Superintendency.
Appointment shall be done through a public bidding. In the event that there are no bidders in the second call of the public bidding, the liquidation shall be ordered by the courts, with the provisions of Title II if Section Three of the Business Corporations Act being applicable when pertinent. The Supreme Court shall appoint the liquidators and the corresponding monitoring of the liquidation process shall be the exclusive responsibility of the Judiciary.
Article 116: PROHIBITIONS
As from the date of publication of the resolution ordering the dissolution, of a company of the financial system or of the insurance system it shall be prohibited from:
- Initiating any judicial or administrative processes with respect to collections from the company.
- Pursuing the execution of any court orders issued against it.
- Constituting liens over any of its assets as a guaranty against any existing obligations.
- Making payments or advances or providing compensation or assuming obligations on its behalf, with any funds or assets it owns and which are in the possession of third parties, except for compensation to be made between companies of the system.
Article 117: (*) PRECAUTIONARY MEASURES AND ORDER OF PRIORITY IN THE PAYMENT OF OBLIGATIONS OF A COMPANY UNDERGOING LIQUIDATION
(*) Amended by Law 27102 of May 5, 1999.
The assets of a company undergoing liquidation shall not be subject of any type of precautionary measure whatsoever. Any precautionary measures issued prior to the respective resolution of the Superintendency shall be lifted due to the mere existence of the latter, under liability of the ordering authority.
The obligations of a company of the financial system or of the insurance system undergoing liquidation shall be paid observing the following order of priority:
A. LABOR OBLIGATIONS
1. Compensation; and
2. Social benefits, contributions to the Private Pension System and Social Benefits Regularization Office and other labor obligations with the company being liquidated and which may have accrued up to the date when the dissolution was declared, retirement pension for which it is responsible or the capital required to redeem them or to insure them through the purchasing of annuities.
B. SAVINGS GUARANTY
The funds deriving from financial brokerage activities, such as deposits or other transactions prescribed by the Law, which have not been charged to the Fund. Likewise, the contribution made by the Fund and funds used for making its coverage effective. In addition, any credits of those insured, and if applicable of their beneficiaries and credits of those reinsured with reinsurance companies or those of the latter with the former.
C. TAX OBLIGATIONS
- Those corresponding to the Social Security Insurance (EsSalud) with respect to obligations pertaining to health benefits for which the company is responsible as employer.
D. OTHER OBLIGATIONS
- All other obligations, in the order as they were incurred; and when this is not possible to determine, on a pro-rated basis.
- Interest referred to in Article 120, in the same order of priority as stated in the preceding point.
- Subordinate debt.
The order of priority has been generally prescribed and shall be applied not withstanding the provisions of Article 118. The order of priority implies that some of them exclude others as set forth in this article, for as long as the assets of the company are sufficient.
Any order of priority established by special legislation shall not apply. Excluded from the priority shall be percentage fees agreed with the liquidators to cover their compensation and expenses, as well as any necessary payments assumed by the company in accordance with the provisions of the Reciprocal Payment and Credit Agreement – ALADI, which the Central Bank may not have been able to transfer for collection by a different company of the financial system. Such obligations shall be paid with priority over those listed in the previous points of this article.
Article 118: (*) ITEMS EXCLUDED FROM THE ESTATE
(*) Amended by Law 27331 of Jul 27, 2000.
For the purposes of the liquidation process, the following shall be excluded from the estate of companies of the financial system or of the insurance system:
- Any social benefit contributions and taxes which it may have withheld or collected as a result of any legal obligation or agreement, and which may not have been provided to the principal at the time.
- Any mortgages, obligations represented by bills of exchange, notes and other mortgage-related instruments, as well as assets and liabilities relevant to financial leasing transactions, which shall be transferred to another company of the financial system. To this effect, the Superintendency shall ensure that the minimum absolute difference results between the book values of the assets and liabilities being transferred.
- Any amounts resulting from payments made on behalf of the company by the Central Bank, in accordance with the provisions of the Reciprocal Payment and Credit Agreement – ALADI.
- Any amounts deriving from payments made on behalf of the company to cover balances outstanding at clearing houses.
- Any amounts originated as a result of operations in which the company has exclusively acted as an agent. These operations will be determined throughout norms issued by the Superintendency
For the purposes of Point 2, the Superintendency shall arrange delivery to another company or companies through bidding mechanisms.
Article 119: SUBSISTENCE OF GUARANTIES PLEDGED TO BACK COMPANY LOANS
Any guaranties or collateral pledged before the resolution declaring the company in dissolution was issued and the corresponding liquidation process started, shall prevail in order to guarantee any loans granted thereto. The parties in which favor they may have been pledged shall retain the right to collect from the proceeds of their sale, on a preferred basis, subject however, to the following rules:
1. A separate proceeding shall take place for each asset or group of assets or rights pledged as security or collateral, so as to satisfy with their proceeds the corresponding credits or loans they back. The credits relating to each asset or group of assets shall be recognized and evaluated in the manner prescribed in this chapter.
2. Once any of the assets are sold or the amount of the encumbered credits or securities is received, the proceeds shall be deposited by the liquidator or liquidators separately from other items of the estate, in such manner that the value is preserved and income is produced.
3. Once the valuation of credits relative to the given asset or group of assets or rights is firm, payment shall be reserved by charging the proceeds referred to in the preceding point until such time as, together with the other resources of the estate, the credits included in the order of priority established in Points 1 and 2 of Article 117 are paid-off or adequately insured.
4. In the event that the assets of the estate are not sufficient to cover the preferred credits prescribed in Points 1 and 2 of Article 117, the proceeds from the assets encumbered with guaranties or collateral shall be added to the payment, with all of them being covered on a pro-rated basis with respect to their value.
5. If the proceeds of the sale or liquidation of a particular asset or group of assets or rights was not sufficient to cover the credits guaranteed by the in rem rights to which they are subject, any uncovered balances of such credits shall be included in the general list of credit rating, placing them where they fit according to their nature.
Article 120: DEBTS OF THE COMPANY CONTINUE ACCRUING INTEREST
The obligations of companies of the financial system and of the insurance system undergoing liquidation shall only accrue legal interest. Interest payment shall only take place once the principal has been paid-off, abiding by the classification prescribed in Article 117.
Article 121: PORTFOLIO TRANSFERS
The liquidators may transfer to any other company, whether or not it belongs to the financial system, all or part of the portfolio of a company of the financial system which dissolution has been ordered.
In the case of a portfolio of an insurance company, such transfer shall necessarily be made to a company of the same system.
Article 122: POSSIBILITY OF APPEAL TO THE SUPERINTENDENCY
In the case that a claim supported as provided in Article 118 is declared unfounded by the liquidator or liquidators, the interested party may file an appeal with the Superintendency within fifteen (15) business days from being notified of such decision.
The Superintendency must resolve the case within a term of thirty (30) days.
Article 123: LACK OF LIQUIDITY OF THE COMPANY UNDERGOING LIQUIDATION
If the company of the financial system or of the insurance system did not have sufficient liquidity to serve the reimbursements prescribed in Article 118, after deducting their fees, the liquidators put aside for this purpose the first income obtained from any collection of credits or sale of assets, with the order of priority established in Article 118 being applicable at all times.
Article 124: PROPOSED RESTRUCTURE PLAN
Creditors of a company which combined represent at least 30% of the company’s liabilities may submit to the Superintendency a plan for the rehabilitation of the company. The plan must include the subscription of new capital in the amount necessary for the company to have enough equity that will enable it to comply with the operational limits prescribed in the Law.
The plan shall consider the application of the subordinate debt portion of all types required to absorb the losses; and if a balance remains, its conversion into capital stock and the corresponding issuing of a new series of shares.
The rehabilitation plan to be proposed shall only include contributions or capitalization of liabilities made by the private sector.
Article 125: EVALUATION OF THE REHABILITATION PLAN
In order for the rehabilitation of the company being intervened to succeed, the Plan must be approved by the Superintendency, prior opinion of the Central Bank. The Central Bank shall issue its opinion based on the report prepared by the Superintendency.
Article 126: APPROVAL OF THE REHABILITATION PLAN
If in accordance with the provisions of the preceding article, the Superintendency is of the opinion that the Rehabilitation Plan is feasible, it shall proceed to submit the proposal to the creditors of the company, who may approve it with the favorable vote of the absolute majority of registered creditors.
The approval of the Rehabilitation Plan by the creditors shall not require that a physical meeting take place for this purpose, as the consent of the creditors may be issued by agreement, as prescribed in the procedure established for this purpose by the Superintendency.
Article 127: REVOCATION OF THE DISSOLUTION AND LIQUIDATION RESOLUTION
Any new contributions made as a result of the rehabilitation must be subscribed and paid-up within the term established by the plan for this purpose. Once this has been complied with, the Superintendency shall issue a resolution revoking the dissolution resolution, ending the liquidation process and convening a shareholders’ meeting to appoint a new board of directors and a new manager.
The appointment may not include directors or managers who held such positions when the intervention took place or during the preceding two (2) years.
Article 128: DETERMINATION OF THE PURCHASE PRICE OF SHARES
In the case of stock companies, the following rules shall be observed:
1. Once the new board of directors has been appointed, it shall proceed to appoint a specialized firm to determine the value of the shares after all losses have been absorbed.
2. If hidden losses were found, reducing the value of the shares held by the new subscribers, the Superintendency shall carry out the necessary adjustments.
3. If the hidden losses were of such magnitude that the corporate equity ends up being negative, the Superintendency shall declare null the value of common shares.
4. If the valuation referred to in Points 1 and 2 above shows that there are hidden profits, the new shareholders must, alternately, proceed as follows:
a) Pay the company for the value of the shares received in excess of those corresponding to their contribution; or
b) Return to the company the excess shares received, so that they can be amortized or placed in the stock exchange.
5. If under the leadership of the new board of directors, new losses are produced, the shareholders’ meeting shall decide between approving new capital subscriptions, inviting third parties to undertake such subscriptions, or requesting the Superintendency to declare the company in dissolution and liquidation.
Article 129: ADDITIONAL PROVISIONS FOR CREDITORS’ MEETINGS
All other aspects relevant to the creditors’ meetings referred to in the preceding articles shall be dealt by the Superintendency through general regulations.
Article 130: PROMOTION OF SAVINGS BY THE STATE
In accordance with the provisions of the Political Constitution, the State shall promote savings under a system of free competition.
Article 131: SAVINGS
Regardless of the method used, savings consists of the set of monetary deposits made by individuals and legal entities from within the country or abroad, into the companies of the financial system. This includes deposits and the acquisition of debt instruments issued by such companies. These deposits are protected in the manner prescribed by the Law.
Article 132: (*) WAYS OF LESSENING DEPOSITORS’ RISK
(*) Amended by the Law 27287 of June 17, 2000
In application of Article 87 of the Political Constitution, these are mechanisms through which attempts are made to additionally lessen depositors’ risk:
1. The limits and prohibitions prescribed in Title II of Section Two and other provisions governing companies. The purpose of these limits is to ensure risk diversification and to limit the growth of companies of the financial system up to a given number of times their effective equity.
2. The constitution of the reserve stipulated in Chapter III of Title III of Section One.
3. Maintaining the minimum capital stock at constant actual values, as prescribed in Article 18.
4. The constitution of generic and specific portfolio provisions, both individual and OVERALL prevention provisions by credit groups or categories in the event of unpaid credits, and the constitution of other provisions and charges to profits in the case of positions subject to the various market risks.
5. The promotion of arbitration as a mechanism for the solution of conflicts between companies and between them and the public, using general contract provisions to this effect.
6. The swift recovery of assets of companies of the financial system.
7. The right of execution of settlements of obligations issued by the companies.
8. The execution of Negotiable Mortgage Credit Instruments and Warrants that guarantee obligations with companies of the financial system by its holder, excluding any third party creditor of the debtor, whether or not insolvent. These provisions shall not be applicable to the rights of General Bonded Warehouses to collect storage rentals owed and auction expenses in the execution of the warrants.
9. The securities, funds and other assets guaranteeing obligations with companies of the financial system are thus covered on a preferential basis. Precautionary measures issued with respect to the assets, securities or funds shall only be effective after the company deals with the charges corresponding to obligations due from their principal as of the date when the measure is notified, provided the said assets, securities or funds are not subject to any type of lien in favor of the company of the financial system. The same applies to securities, funds or other assets pledged as guaranty to back third party obligations.
10.The possibility of classifying as due, the terms of obligations which may or not be due from a debtor, faced with a case of non-compliance. Under such circumstances, the company may use its right to compensation, as referred to in the following point.
11.The right to compensation enjoyed by companies, between their assets and any assets of a debtor it may have in its possession, up to the amount thereof, returning the remainder, if any, to the debtor’s estate. Intangible assets which are legally or contractually declared or excluded from this right shall not be subject to compensation.
12.Assets subject to global and floating guaranties related to insurance credit contracts or with approved invoices or other credit contracts may only be executed by the holder of the right, excluding any third parties which may be creditors of the debtor, whether or not the latter is insolvent.
13.The consolidated supervision of financial or mixed conglomerates.
Article 133: PROVISIONS OF COMPANIES SUBJECT TO CREDIT RISK
Charging the profits account, companies engaged in transactions which are subject to credit risk shall implement the necessary general or specific provisions, depending on the credit rating, in accordance with general provisions issued by the Superintendency. Generic provisions shall not exceed 1% of the regular portfolio, except for special situations.
Without deducting the guaranties for the purposes of the constitution of the aforementioned generic or specific provisions, among other factors, credit rating shall take such guaranties under consideration.
Article 134: MEASURES FOR THE ADEQUATE PROTECTION OF DEPOSITORS
In order to provide an adequate protection to depositors, and not withstanding any other powers conferred by the Law, the Superintendency shall enjoy the following powers:
- Order independent audits of companies which have been previously classified and entered in the corresponding register.
- Supervise that companies of the financial system are appropriately organized and managed by suitable personnel.
- Supervise that companies of the financial system comply with the provisions governing individual and OVERALL limits.
- Carry out the consolidated supervision of financial and mixed conglomerates, in accordance with the provisions of Article 138.
- Measure the risk of financial brokers through the system available at the Credit bureau, recording the OVERALL indebtedness within the country and abroad, of any persons requesting credit from companies of the financial system.
Article 135: PUBLIC INFORMATION CONCERNING PERFORMANCE OF COMPANIES
Companies of the financial system must keep their clients informed as to their economic and financial condition. To this effect, not withstanding the annual reports to be adequately published, they shall be obliged to publish their financial statements in the Official Gazette and in a major newspaper of national circulation, at least four times per annum, at the times and with the details established by the Superintendency.
Publications shall be made in the Official Gazette within seven (7) days from the receipt of financial statements, under liability of the Director.
Article 136: RATING OF COMPANIES OF THE FINANCIAL SYSTEM
Every six (6) months, all companies of the financial system accepting deposits from the public must have a rating issued by at least two rating agencies. If two different ratings are given, the lowest rating shall prevail.
On its part, the Superintendency shall rate the companies of the financial system in accordance with generally pre-established technical criteria and factors. These shall take into account, among other aspects, risk measurement and management systems, the quality of credit and trading portfolios, equity soundness, profitability level, financial and management efficiency and liquidity.
Article 137: DISSEMINATION OF INFORMATION CONCERNING THE SITUATION OF COMPANIES
At least quarterly, the Superintendency must make available to the public, information pertaining the main indicators of the situation of companies of the financial system, with respect to their credit and trading portfolios. It may also include the rating referred to in the second paragraph of the preceding article, as well as information relevant to loans, investments and other assets thereof, their rating and evaluation regarding their degree of potential recovery and equity and provisions levels.
Likewise, it may order companies subject to its control, to publish any other information it may deem necessary for public knowledge.
Article 138: CONSOLIDATED SUPERVISION
1. Consolidated supervision of financial conglomerates
In its effort to exercise a consolidated supervision of financial conglomerates, the Superintendency shall require companies under its supervision, to submit financial statements and other relevant financial information both, on a consolidated basis, as well as individual for each company, as it may deem appropriate.
a. In the case of companies domiciled in Peru comprising a financial conglomerate, the Superintendency may request the various companies forming part thereof, to provide any additional information it may require, globally or individually. It may also obtain such information directly from the companies it supervises during inspection visits and through any other in situ procedures it may elect.
b. In the case of companies non-domiciled in Peru comprising a financial conglomerate which main activities are carried out in Peru, it shall be the responsibilities of supervised companies to supply the Superintendency all information required to undertake the functions prescribed in this item.
c. With regard to financial conglomerates which main activities are conducted outside Peru, ideally, the consolidated supervision shall correspond to the supervisory entity of the head office country. The Superintendency shall exercise supervision over the transactions carried out in Peru. Not withstanding the above, the Superintendency shall establish and apply good judgement consolidated supervision regulations for a better undertaking of its function.
In the cases prescribed in Points (a) and (b) above, the Superintendency shall apply the various factors, requirements and limits stipulated by the Law, either globally or individually, as it may determine through general regulations. Consolidated supervision empowers the Superintendency to evaluate the quality of each company’s assets and to consolidate the equities and assets, weighted by risk, in an accumulative basis.
In the cases prescribed in Items (b) and (c) above, the Superintendency shall, among other issues, take into consideration any procedures agreed with similar authorities abroad, being able to request the participation of independent auditors.
2. Consolidated supervision of mixed conglomerates
The powers conferred in the preceding point shall be exercised with respect to mixed conglomerates, so as to determine any effects impacting the companies under its supervision, originated from the financial situation of the non-financial members of the conglomerate.
It shall be the responsibility of the supervised companies to provide to the Superintendency all the information required for the undertaking of its functions as prescribed herein.
3. Sworn Declaration
The information shall be supplied in a faithful and timely manner and shall be provided in the form of a sworn declaration.
As a result of the consolidated supervision, the Superintendency may order companies under its supervision to adopt prevention measures aimed at lessening any risks they may deem inconvenient with respect to their transactions with other entities comprising the conglomerate or their common clients. It may order similar measures in cases where, due to lack of information, it may consider that it is not able to properly evaluate the risk incurred by a company.
Article 139: BUSINES HOURS AND ASSOCIATED RESTRICTIONS
Due to the nature of the services provided, companies of the financial system must provide efficient client service at all of their offices and with a minimum schedule of six (6) hours per day on all business days of the year. The only exceptions shall be due to force majeure circumstances which must be previously reported to the Superintendency, if possible.
Client service on non-business days shall be voluntary, and companies may feel free to establish the business hours to institute, which shall also be reported to the Superintendency.
Any infractions of the obligation prescribed in the first paragraph of this article shall be sanctioned with a fine. Reiterated occurrence of this type of act shall be considered grounds to submission to the surveillance procedure.
No authority shall have the power to order the halting or restriction of the service provided by companies of the financial system to the public.
Bank holidays may only be declared through Supreme Decree under serious circumstances which may affect national interest. The duration of such holidays shall be strictly limited to the time required by the circumstances.
Article 140: (*)SCOPE OF THE PROHIBITION
Amended by Law 27693 of April 11, 2002
Companies of the financial system as well as their directors and employees shall be prohibited from supplying any information with respect to client deposits, unless there is written authorization on their part, or in the cases prescribed in Articles 142 and 143.
The following shall also be obliged to keep bank secrecy:
- The Superintendent and employees of the Superintendency, except for information concerning holders of current accounts which were closed for issuing bad checks.
- Directors and employees of the Central Bank.
- Directors and employees of auditing companies and of risk rating agencies.
This prescription shall not apply to any transactions suspected to be involved with money or property laundering, as referred to in Section Five of the Law, in which cases, the company shall be obliged to report such transactions to the Financial Intelligence Unit.
Exempted from legal liability shall be companies and/or their employees who, in compliance with the provisions hereof, report to the Financial Intelligence Unit, any suspicious dealings or transactions which due to their nature, may serve to render themselves to money laundering. The competent authority shall initiate the corresponding investigations; and under no circumstances, may such information be used as grounds for filing civil or actions or actions seeking compensation from the companies and/or their officials.
Also exempted from such liability shall be those who abstain from supplying any information subject to bank secrecy to persons other than those referred to in Article 143. Any authorities insisting in soliciting such information shall be liable of being charged with abuse of authority, as prescribed in Article 376 of the Criminal Code.
Article 141: SERIOUS OFFENCE BY PERSONS VIOLATING BANK SECRECY LAW
Not withstanding the criminal liability stipulated in Article 165 of the Criminal Code, any infractions to the provisions of this chapter shall be considered to be a serious offense for employment purposes. If this becomes irrelevant, the infraction shall be sanctioned with a fine.
Article 142: INFORMATION EXCLUDED FROM THE BANK SECRECY CONCEPT
Bank secrecy shall not impede the provision of global information, particularly in the following cases:
- Whenever supplied by the Superintendency to the Central Bank or companies of the financial system for:
- Statistical purposes.
- The design of monetary policies and their follow up.
- Whenever supplied to banks and financial institutions abroad with which a correspondence relationship may exist, or which may be interested in establishing such relationship.
- When requested by the auditing firms referred to in Point 1 of Article 134, or specialized risk rating agencies.
- Whenever required by persons interested in purchasing at least 30% of the company’s capital stock.
The dissemination of information relevant to monies deposited by the various clients for the purposes of the liquidation of the company shall not be considered a violation to bank secrecy.
Article 143: LIFTING OF BANK SECRECY
Bank secrecy shall not apply whenever information is required by:
- Courts in the regular undertaking of their business with specific reference to a given proceeding in which the relevant company’s client is involved.
- The Attorney General, in cases connected with suspicion of embezzlement on the part of officials and public servants, or who have managed government funds or organizations to which government provides financial support.
- The Attorney General or the government of a country with which there are agreements to fight, suppress and punish illegal drug traffic or terrorism, or generally, in the cases of suspicion of money or property laundering with respect to financial operations and bank transactions carried out by persons presumably involved in such criminal activities or who may be subject of investigation for being suspected of such acts.
- The Chairman of a Congress Investigation Commission, by resolution of the corresponding commission and with respect to acts which may compromise public interest.
- the Superintendent, in the exercise of his supervision duties.
In the cases prescribed in Points 2, 3 and 4 above, the request for information shall be channeled through the Superintendency.
Any persons gaining access to confidential information by virtue of the provisions of this article shall be obliged to keep the information secret as long as it does not become incompatible with public interest.
Deposit Insurance Fund
Article 144: (*) CHARACTERISTICS AND PURPOSE OF THE FUND
(*) Amended by Law 27331 of Jul 27, 2000
The Deposit Insurance Fund is a special private legal entity governed by the Law, regulations issued through Supreme Decrees and its bylaws. Its purpose is to provide protection to companies of the financial system, except as indicated in Article 152 and within the limits prescribed in this chapter. It shall be empowered to:
- Provide coverage to depositors in accordance with the provisions of Articles 152 and 153;
- Facilitate the attention to depositors and the transfer of assets and/or liabilities of the companies subject to the intervention procedure, pursuant to the provisions established in Article 151; and
- Under exceptional circumstances, execute the measures adopted by the Superintendency aimed at the strengthening of the equity of companies of the financial system whenever a company member of the Fund becomes subject to the surveillance procedure, prior compliance with the stipulations of Points 2 and 3 of Article 99. The basis of exception shall be determined by the Superintendency with the favorable opinion of the Central Bank.
Article 145: MEMBERS OF THE FUND
All of the companies of the financial system authorized to accept deposits from the public, as referred to in Point A of Article 16, are members of the Fund.
Companies joining the Fund shall contribute to it during a period of twenty-four months before their transactions can be covered.
Article 146: (*) MANAGEMENT OF THE FUND
(*) Amended by Law 27102 of May 5, 1999
The Fund consists of an Administrative Council and a Technical Secretariat, with the functions and attributes conferred by its bylaws. The Fund’s bylaws shall be subject to the regulations issued by the Superintendency, which shall approve them through resolution. Furthermore, any statutory amendments shall have the prior approval of the Superintendency. The public registries must register the Fund in the Register of Legal Entities, simply as a result of the provisions hereof.
The Superintendency shall supply the personnel, premises, furniture, equipment and installations it will require. In addition, it shall appoint the Technical Secretary. The Administrative Council shall be comprised of:
- One representative from the Superintendency appointed by the Superintendent, who shall act as chairman.
- One representative of the Central Bank, appointed by its board of directors.
- One representative from the Ministry, appointed by the Minister.
- Three representatives of companies of the financial system, appointed in the manner prescribed by the regulations.
The members of the Administrative Council shall hold such post for a period of three (3) years. This period is renewable. Their compensation shall be the sole responsibility of the entities appointing them. The Administrative Council shall meet at least once per month, adopting its resolutions by the majority of members in attendance. In the event of a tie, the chairman shall cast the deciding vote.
Article 147: (*) RESOURCES OF THE FUNDS
(*) Amended by Law 27102 of May 5, 1999
The following are the resources of the Fund:
1. The initial contribution made by the Central Bank.
2. Premiums paid in by companies of the financial system.
3. Those contributions from the application of Article 182.
4. The yield of its assets.
5. Money, securities and other assets deposited with Banco de La Nación, representing the remainder of liquidation processes, if five (5) years lapse without being claimed.
6. Any income deriving from fines imposed by the Superintendency or the Central Bank.
7. Credit lines from the Public Treasury approved by Urgency Decree.
8. Credit lines obtained through guaranties pledged by the Public Treasury, approved by Urgency Decree.
9. All other funds obtained with the approval of the Administrative Council.
The line of credit referred to in Point 7 above shall be paid by the Fund under the conditions to be agreed by the Fund and the Public Treasury.
These resources are intangible and shall not be subject to any type of precautionary measures, only to be used for the purposes provided herein. For tax purposes, the Fund shall not be subject to any existing or future taxes, including those requiring express provisions to this effect.
Funds deriving from the premiums referred to in Point 2 above and their corresponding yield, may not be applied to the transactions indicated in Point 1 of Article 151. Nevertheless, these funds may be used for the re-payment of any financing obtained. Likewise, these funds may be used in the case prescribed in Point 8 above, when the Public Treasury has honored the guaranty granted to the creditor.
Article 148: PREMIUM AMOUNT AND CALCULATION
The amount of premiums to be paid in by members shall be determined on the basis of the risk rating prescribed in Article 136, from a base of 1.65% and a differential between categories of 0.20%. These factors may be changed by the Superintendency prior opinion of the Central Bank.
Premium payments shall be made quarterly, within ten (10) business days following the end of March, June, September and December, based on the average of the obligations covered by the Fund for the quarter ending in such months and in the manner prescribed in the regulations issued by the Administrative Council.
To this effect, members of the Fund shall prepare and submit their corresponding statements, which shall be verified by the Superintendency.
Article 149: CRITERIA FOR INVESTING THE RESOURCES OF THE FUND
Investment of the resources of the Fund shall be done through the Central Bank, using the assets determined by the Administrative Council, taking into account security, liquidity, profitability and diversification criteria. Preferably, the funds shall be invested in the purchase of:
1. Foreign currency.
2. Obligations of the Public Treasury or the Central Bank.
3. Bonds and securities which purchase id permitted for Pension Fund Management Companies and Mutual Funds, issued by institutions not belonging to the financial system.
4. Mutual fund or investment fund unit certificates, provided their investments are made in securities issued within the country.
The securities in which the Fund’s resources are invested must have a rating of I or II, or equivalent, as issued by risk rating agencies.
Article 150: (*) PROHIBITED INVESTMENTS
(*) Amended by Law 27102 of May 5, 1999
Except as provided in Article 151, it shall be prohibited to invest the assets of the Fund in:
- Deposits or investments made in companies of the Peruvian financial system, regardless of the type; and
- Purchases of machinery, equipment and furniture.
Article 151: (*) TRANSACTIONS OF THE FUND
(*) Amended by Law 27331 of Jul 27, 2000
The Fund may carry out the following transactions:
- In the event that a company member of the Fund which is subject to the surveillance procedure and which participates in the exchange and clearing process, prior compliance with the provisions of Points 2 and 3 of Article 99, and only with respect to situations provided for in Point 3 of Article 144;
a) Carry out temporary capital contributions, provided it assumes control of the company; and
b) Facilitate to companies of the financial system, the take over or acquisition of a company subject to the surveillance procedure, through different financing or capitalization methods, provided the said take over or acquisition implies the control of the company by the company taking over or acquiring it.
- In the event that a company member of the Fund becomes subject to the intervention procedure:
a) Make a cash contribution to facilitate the transfer prescribed in Point 3 of Article 107, in an amount equivalent to a percentage of the covered sum of deposits backed by the Fund, in accordance with the provisions of Article 153, which may never exceed 100% of that amount. This percentage shall be determined in the bylaws of the Fund.
b) Acquire all or some of the deposits prescribed in Article 152, up to the amount set forth in Article 153, in order to subrogate into the legal position of the depositors.
c) Transfer all or some of the liabilities referred to in the preceding point, through trusts or other mechanisms.
d) Sign call options contracts for the liabilities considered in the preceding point.
e) To establish a company of the financial system to acquire all or some portion of the assets and/or liabilities referred to in Point 2 of Article 107 of the banking institutions and the companies able to operate in Module 3 of Article 290, that are subject to the intervention procedure, only in exceptional situations determined by the Superintendency and with the favorable opinion of the Ministry and the Central Bank. This company will have a maximum operation term of (1) year, extendable up to three (3) years through annual extensions approved by the Fund.
f) Carry out any other transaction which may be authorized by the Superintendency and which is compatible with the nature of the Fund
- In the case that a company member of the Fund is dissolved and the process for its liquidation has started, pay for the insured deposits when applicable, up to the limits established in Article 153.
- Pay the agents used in accomplishing the transactions prescribed in this article.
The Fund shall carry out the transactions indicated in this article when the Superintendency so instructs. For the purpose of Items a) and b) of Point 1 and of Item e) of Point 2, the Fund can make new contributions
Article 151-b: (*) EXCEPTIONS
(*) Amended by Law 27331 of Jul 27, 2000
The constitution of the company referred to in Item e), Point 2 of Article 151 will be affected only with the registration of the resolution issued by the Superintendency, authorizing the organization and operation of this company without the need to comply the established in chapters I, II and III of Title I of the First Section of the Law that this Superintendency deem convenient.
All the provisions established in the Law and its regulatory provisions are applicable to the new company, except for the following:
a) The impediment to become a director in accordance with Point 6 of Article 81.
b) The registration of the company shares in the Stock Exchange, in accordance with Article 29.
c) The limitation to appoint managers in accordance with Article 91
d) The requirement to have minimum number of shareholders mentioned in the first paragraph of Article 50, in accordance with Article 4of the Business Corporations Act; and
e) The limits and other prudential dispositions in the opinion of the Superintendency for a maximum term of six (6) months.
Article 152: (*) DEPOSITS BACKED BY THE FUND
(*) Amended by Law 27102 of May 5, 1999
The Fund shall only back the following deposits:
1. Nominal deposits of any type, made by individuals and non-profit organizations;
2. Any interest accrued by the deposits cited in the preceding point as from their effective or last renewal date. Such interest accrues up to the date when the list referred to in Article 154 is received; and
3. Sight deposits of all other legal entities, except for those corresponding to companies of the financial system.
In the case of joint accounts in the same member of the Fund, the amount shall be distributed between the holders of the respective account, with coverage being effective with respect to each of them, in accordance with the limits listed in Article 153 and the restriction resulting from the following paragraph.
The Fund shall not cover any deposits from holders who during a period of two (2) years previous to the declaration of dissolution and liquidation, would have acted as directors of the relevant company or persons belonging to the same economic groups holding a share over 4% of the company, provided they have directly or indirectly participated in its operation. Coverage shall also exclude any deposits corresponding to persons related to the company, its shareholders, directors and officials, as well as deposits of other companies of the Peruvian or foreign financial systems and deposits made by infringing the Law and any instruments which while formally enjoying the status of deposits, are essentially non-deposited credits.
Article 153: (*) MAXIUM COVERAGE AND ITS PUBLICITY
(*) Amended by Law 27008 of December 4, 1998
The maximum amount of coverage shall be S/.62 000,00 per person, including interest, as adjusted in accordance with the provisions of Article 18.
In order to determine the Fund’s coverage for insured persons of a given company undergoing liquidation, the maximum amount in force at the time when payments in their favor commence shall be taken into consideration.
The coverage must be indicated by the members of the Fund in their advertisement of transactions offered to their clients, except for any such advertisement of an uncovered transaction.
Article 154: (*) DISSOLUTION OF A MEMBER OF THE FUND
(*) Amended by Law 27008 of December 4, 1998
If a member of the Fund is dissolved, the Superintendency shall make sure that within a term of sixty (60) days, a list of persons covered is prepared and remitted to the Fund, with an indication of the amount of their rights, breaking down principal and interest amounts. This list must be displayed at least in the headquarters of the relevant company for a period of no less than one hundred and eighty (180) days, together with a notice informing of the dates and places where service will be provided to the insured.
Those who may have been omitted from the list referred to in the preceding paragraph may file a claim with the Superintendency within sixty (6) days from when the notice was first posted. The claim must be certified by a notary.
Article 155: COMPENSATION OF OBLIGATIONS
If the insured had any obligations with the Fund in the process of liquidation, the corresponding compensation shall be carried out and only the remaining balance in his favor shall be paid. This compensation shall also be applied without limitation with respect to any sums deriving from deposits for length of service compensation and any other credit of the debtor, even if intangible and unattachable.
Article 156: INITIATION OF PAYMENTS TO BE MADE BY THE FUND
(*) Amended by Law 27008 of December 4,
Payments to be made by the Fund shall be made within ten (10) business days from the date of receipt of the list referred to in Article 154, and must be made in an uninterrupted manner.
The Superintendency may request from the Fund the resources necessary for paying insured depositors and the Fund shall be obliged to transfer such resources immediately. The Superintendency must account for the use of the transferred funds.
In the event that there are deposits made in the name of minors, a savings account must be opened in their name, in a company of the financial system.
Any depositors not collecting the corresponding coverage within ten (10) years counted as from the date when payment was initiated, shall lose their right over such coverage, and the deposits shall form part of the resources of the Fund, except for those subject to precautionary measures and any deposits made in the name of minors.
Article 157: UNCOVERED PORTION OF DEPOSITS
The uncovered portion of deposits made by insured persons of a Fund member shall become credits to be accounted for the purposes of liquidation, in accordance with the provisions of Article 117.
A company undergoing liquidation shall be obligated to the Fund as from the date when payment of the insurance is initiated, in the total amount of monies in domestic and foreign currency which the Fund covers its clients, in accordance with the list indicated in Article 154, with the corresponding payment being made in accordance with the provisions of Article 117.
Article 158: ORGANIZATION OF THE CREDIT BUREAU AND INFORMATION TO BE CONTAINED
The Superintendency shall be responsible for a comprehensive system to handle a register of financial, credit, commercial and insurance risks, called “Credit Bureau”. This system must have consolidated and classified information with respect to debtors of companies.
Any industry association having the required infrastructure may gain access to the Bureau, once it has subscribed the corresponding contract with the Superintendency.
The Credit Bureau shall contain a record of risks assumed for financial indebtedness within the country, risks related to credit insurance and other insurance risks, within the limits prescribed by the Superintendency.
The system may also keep records of:
- Any collateral pledged in favor of companies of the financial system which do not have a public register organized to this effect, including global and floating collateral for which guaranties the credit bureau will produce the effects and functions of a public register;
- Any trusts established that will entail a transfer of assets, with an indication of the latter, also fulfilling information purposes; and
- Any other type of indebtedness producing additional credit risks for any creditor.
Relevant information shall be made available to companies of the financial system and of the insurance system, the Central Bank, commercial companies and any interested party in general, prior payment of the rate to be established by the Superintendency. This information is to be provided on a systematic, integrated and timely basis.
The Superintendency shall issue the relevant regulations.
Article 159: OBLIGATION TO PROVIDE RELEVANT INFORMATION
Companies of the financial system and of the insurance system must provide on a periodical and timely basis, the information required to update the register referred to in the preceding article. If computer systems are available, the information must be supplied daily.
Before granting credit, all companies of the financial system must require the relevant individual or legal entity to provide the information prescribed by the Superintendency through general regulations. In case of non-compliance, the credit may not be granted.
Article 160: PRIVATE CREDIT BUREAUS
Legal entities may freely get together and provide information to the public with respect to the credit record of debtors of companies of the financial system and of the insurance system and persons writing bad checks.
The Superintendency may totally or partially transfer the credit bureau referred to in Article 158 to the private sector.
Article 161: RESERVES
Companies of the financial system shall be subject to the setting aside of reserves in accordance with the nature of the obligations or of their transactions, as may be determined by the Central Bank.
Article 162: MINIMUM LEGAL RESERVE AND ADDITIONAL RESERVES
The minimum legal reserve shall be no more than 9% of the total obligations subject to reserve.
For reasons of monetary policy, the Central Bank may establish additional or marginal reserves and it is empowered to pay interest for any funds deposited as reserves, at the rate determined by its board of directors.
Article 163: CONSTITUTION AND NON-ATTACHMENT OF LEGAL RESERVES
Legal reserves may only be constituted by:
1. Cash in the account of the corresponding company; and
2. Deposits with the Central Bank.
Foreign currency may not represent legal reserves in domestic currency, or vice-versa.
Amounts comprising the legal reserve required from companies of the financial system are non-attachable. For the purposes of their calculation, such amounts shall be equivalent to the required legal reserve appearing on the last available legal reserve report.
Article 164: RESPONSIBILITIES OF THE CENTRAL BANK
The following are responsibilities of the Central Bank:
1. Determine the minimum legal reserve rate and the rates corresponding to the additional or marginal reserves referred to in Article 162 of the Law.
2. Ensure compliance with the legal reserves and impose any pertinent sanctions, not withstanding the supervisory function of the Superintendency.
3. Set the periods for legal reserves.
4. Determine the obligations which will be subject to legal reserve.
5. Establish the method and basis of calculation to be applied.
6. Prescribe the contents of reports to be submitted with respect thereto.
7. Issue any legal reserve regulations necessary for the implementation of its policies.
Article 165: REVISED REPORTS
The Central Bank may require that a company of the financial system revise any of the periodical reports it may have submitted with respect to its legal reserve situation. Nevertheless, once one (1) year has lapsed since the submission of a report, it shall be deemed to be accurate and final.
Article 166: LEGAL RESERVE DEFICIT
Companies of the financial system incurring in legal reserve deficits shall be sanctioned with a fine in a progressive amount, as determined by the Central Bank.
Any exemption or reduction in the fine for legal reserve deficit approved by the Central Bank in accordance with the provisions of its Organic Law, shall determine the interruption of the progression referred to in the preceding paragraph.
Article 167: RIGHT OF EXECUTION OF THE GUARANTY(revoked by Law 27287)
Any joint and several guaranty with a waiver of the right to excussio of a security, confers the right to execution against its subscriber, in the same terms as prescribed by applicable legislation with respect to guarantors.
Article 168: (*) RENEWAL OF SECURITIES IN THE POSSESSION OF COMPANIES OF THE SYSTEM
(*) Amended by Law 27102 of May 5, 1999 and revoked by Law 27287 of June 17, 2000
Any securities in the possession of a company of the financial system representing obligations in its favor, may be renewed thereby upon expiry or thereafter, provided the debtor has issued its recent consent in advance and the negotiable instruments have not been prescribed. In such case, the calculation of the prescription term shall start on the expiry date of each renewal.
In the case of extension and renewal of warrants with respect to perishables, the express approval of the general warehouses issuing the instrument must be obtained.
Article 169: PRESUMPTION OF GURANTY ENDORSEMENT
Whenever a security or other instrument subject of negotiation by endorsement, except for checks, are in the possession of a company of the financial system, the endorsement issued thereon shall be presumed to have been made as a guaranty, unless otherwise stipulated.
Article 170: PRESUMPTION OF THE EXISTENCE OF COLLATERAL
The mere delivery to a company of the financial system of bonds and other securities not included in this article shall not constitute a pledge over such assets to guarantee any obligations on the part of the party making the delivery, unless otherwise stipulated.
With respect to the pledging of stock, the pertinent provisions of the Business Corporations Act or of the Securities Market Act, as the case may be, shall govern.
Article 171: PRE-EMPTIVE NATURE OF SECURITY
The pre-emptive nature of security, whether or not registered, shall not be affected by the eventual existence of tax obligations of the debtor.
Article 172: (*) GUARANTIES BACK ALL OBLIGATIONS WITH THE COMPANY
Amended by Law N° 27682, amended by Law N° 27851 of October 21, 2002
All assets pledged in mortgages, as collateral or warrant in favor of a company of the financial system, back all existing and future own debts and obligations assumed with the company by the debtor who pledges them as collateral, provided that the contract stipulates so.
When the assets pledged as collateral in favor of a company of the financial system belong to a person different from the debtor, these only back the debts and obligations of the debtor expressly specified by the person pledging the collateral.
The release and extinction of any security pledged in favor of companies of the financial system shall need to be expressly declared by the creditor company. The extinction prescribed in Article 3 of Law 26639 shall not be applicable to any lien instituted in favor of the company.
Article 173: EXTENSION OF CORRESPONDING COMPENSATION
All collateral and mortgages pledged in favor of companies of the financial system shall be extended to the corresponding compensation in case of an occurrence, if the property is insured, and not withstanding any insurance which may have been contracted in favor of the company.
Without the need of a court order, and upon the simple written request of the company of the financial system, insurance companies shall be obliged to provide the corresponding compensation, under liability of duplicate payment in the event that compensation is provided to a third party.
In the case of insurance covering goods backed by warrants, the collection of the relevant compensation shall be done in accordance with the provisions of Law 2763 governing warrants and general warehouses.
Article 174: EXTENSION OF THE AMOUNT TO BE PAID BY THOSE RESPONSIBLE FOR PLEDGED ASSETS
The right enjoyed by companies of the financial system deriving from the pledging of collateral or mortgages in their favor shall be extended to the amounts to be paid by those responsible for the loss, damage or destruction of the assets pledged.
If there was a civil or criminal process underway, regardless of its status, even if sentence is being executed, upon the simple written request from the company, the court shall must order that the amount which may have been determined, be paid directly to the company. The company shall be considered as part of the proceeding and may substitute the plaintiff or civil party, as the case may be.
Article 175: SALE OF PLEDGED ASSETS
Companies of the financial system may request the sale of any assets which may have been pledged as collateral or in mortgage, in the following cases:
1. If the debtor fails to pay one or more installments on the dates established.
2. If the collateral had depreciated or suffered damages to such extent that it may jeopardize the recovery of the credit, as stated by a specialized appraiser registered with the Superintendency.
3. If the debtor or a company of the financial system are charged with respect to the ownership of the assets pledged as collateral.
4. If the debtor sells the assets or pledges the assets offered as collateral to the detriment of the rights corresponding to the company as a creditor.
5. If under any method, the debtor assigns the possession of the assets pledged as collateral without the consent of the creditor company.
Article 176: REGISTER BLOCKING
Companies of the financial system and of the insurance system may use register blocking for the recording of any acts with the public registries, applying as applicable, the provisions of Decree Law 18278 and its amendments and extensions.
Any contracts celebrated between these companies and their clients may be extended by private document signed or authenticated before a notary public, which shall be registered with the corresponding public registry without the need of granting a public deed, except for contracts which may exceed forty (40) Tax Units, in which case a public deed shall be required.
Article 177: NON-APPLICATION TO COMPANIES OF REGULATIONS GOVERNING INSOLVENCY AND EQUITY RESTRUCTURE
Cases of insolvency, and if applicable, of equity restructure of companies governed by the Law shall only be subject to the provisions contained herein.
Any responsibility of the directors and managers of companies of the financial system or of the insurance system declared to be undergoing dissolution or liquidation shall be subject to the provisions of Articles 209, 210, 211 and 213 of the Criminal Code.
Article 178: RELATIONSHIP BETWEEN TERMS AND CURRENCIES OF LENDING AND BORROWING TRANSACTIONS
Companies of the financial system must take care to ensure that there is an adequate relationship, although not necessarily exact, between the terms of their lending and borrowing transactions, as well as between the respective deposits and loans and investments. Such relationship must also apply with respect to exposure in foreign currency.
Article 179: SWORN DECLARATION NATURE OF ALL INFORMATION SUBMITTED TO COMPANIES
All information supplied by a client to a company of the financial system or of the insurance system shall be treated as being supplied under a sworn declaration.
Anyone providing false information or documents concerning his economic or financial situation and directly or indirectly obtaining from a company of the financial system or of the insurance system one or more credit transactions, including financial leasing or rescheduling of credit or refinancing thereof, shall be subject to the sanction prescribed in the first paragraph of Article 247 of the Criminal Code.
Not withstanding the criminal sanction indicated in the preceding paragraph, the company shall be empowered to terminate the relevant contract or call all terms expired and proceed to execute the corresponding guaranties.
Debtors of companies of the financial system may not transfer their assets free of charge, without prior communication in writing to the creditor company. Transfers free of charge or for a price which may appear to be a simulation shall not be valid in accordance with the provisions of Article 219, Point 5) and Article 221, Point 3) of the Civil Code, as may be applicable.
The creditor may exercise the right stipulated in Article 1219, Point 4) of the Civil Code.
Article 180: AUDITING OF COMPANIES
In addition to legal provisions governing audits, the Superintendency shall establish internal and independent auditing requirements and standards to govern cases of companies of the financial system and of the insurance system. Companies must subject independent auditors to comply with such requirements and standards, who must issue their opinion on the subject in their report issued with respect to their financial statements.
Omission or defective compliance on the part of independent auditors with the provisions of the preceding paragraph shall be sanctioned by the Superintendency with their exclusion from the corresponding register.
Article 181: ADVERTISEMENT MADE BY COMPANIES
In any advertisements made by companies of the financial system with respect to the interest offered on deposits, it shall be mandatory to include the annual yield of the deposits. The Superintendency shall sanction any such omissions as well as cases where the information included is inaccurate or leads to error.
Article 182: DORMANT DEPOSITS FOR TEN YEARS
All deposits, securities or other assets of clients which remain in a company of the financial system where no new deposits are added or any portion thereof or corresponding interest is withdrawn and where no claims are submitted during such period, shall become the property of the Fund, together with their corresponding yield.
Article 183: TERM FOR PRESERVATION OF DOCUMENTS
Companies of the financial system shall be obliged to keep their books and records for a period of no less than ten (10) years. If within this term, any legal action is filed against them, the relevant obligation prevails for as long as the process lasts, with respect to any documents which may be related to the subject of controversy.
For the purposes of the provisions of this article, microfilm and similar methods may be used, under application of relevant legislation.
Limits and Prohibitions
Article 184: EFFECTIVE EQUITY
The effective equity of companies may be used to cover credit and market risks and may be constituted as follows:
1. Paid-in capital, legal reserves and premiums for share subscriptions;
2. The portion used in the calculation of subordinate debt and bonds convertible to shares by the sole decision of the issuer, meeting the requirements issued to that effect as general regulations of the Superintendency, up to 50% of the book equity excluding shares which are cumulative and/or redeemable at fixed term, and non-committed profits; and
3. Generic provisions for loans and contingent credits comprising the regular portfolio, weighted by credit risk up to 1% of the said portfolio.
The Superintendency shall issue regulations with respect to the application of the effective equity aimed at covering credit and market risks.
Article 185: CALCULATION OF EFFECTIVE EQUITY
In the determination of the effective equity, accordingly adjusted to inflation, the following procedure shall be followed:
1. Sum of the paid-in capital, legal reserves, additional capital premium and voluntary reserves, if any.
2. Sum of profits in prior fiscal periods and of the current fiscal period, prior declaration, as prescribed in Article 187.
3. Sum of the portion used in the calculation of subordinate debt and bonds convertible to shares by the sole decision of the issuer, if any.
4. Sum of generic provisions for loans and contingent credits comprising the regular portfolio, weighted by credit risk, in the maximum percentage prescribed in Point 3 of the preceding article.
5. Subtraction of the amount of permanent investment in stock and subordinate debt, issued by other companies of the financial system or of the insurance system within the country or abroad.
6. Subtraction of the amount of any investments in stocks, bonds and similar instruments made in companies with which consolidation of financial statements may be in line, including holding companies and the subsidiaries referred to on Articles 34 and 224.
7. Subtraction of any losses in previous fiscal periods and of the current fiscal period, as well as of the deficit in provisions which may be detected and which has not been charged to results.
8. Subtraction of the goodwill resulting from the company reorganization, as well as from the acquisition of investments.(*)
(*) Amended by Law 28184 of February 9, 2004.
Article 186: EFFECTIVE EQUITY FOR USE IN COVERING MARKET RISKS
Prior the favorable opinion of the Central Bank, the Superintendency shall determine the weight factors of market risks, charges to equity and other necessary aspects. It shall also prescribed the weighting mechanism, and if applicable, include the conditions relative to each type of market risk.
Positions of the negotiable portfolio shall determine charges or credits to the effective equity available to cover market risks, in accordance with the relevant risk weight factors and the procedures prepared by the Superintendency.
All positions subject to market risks shall be monitored daily and the corresponding charges and credits to effective equity shall also be done daily.
Article 187: PROFITS INCLUDED IN THE EFFECTIVE EQUITY
In order for cumulative profits and profits of the current period to be included in the effective equity, there must be a resolution approving their capitalization, which may be issued by the board of directors, upon delegation of the shareholders’ meeting.
Charges to results with respect to provisions shall be made at the time when the respective risk is determined and must be immediately deducted from the effective equity.
Article 188: CATEGORIES
In order to calculate the value of the assets of a company weighted by credit risk, their value must be multiplied by the following factors, in consideration to the following categories:
Category I: assets with 0% risk;
Category II: credit assets with 10% risk;
Category III: credit assets with 20% risk;
Category IV: credit assets with 50% risk; and
Category V: credit assets with 100% risk.
Prior opinion with the Central Bank, through general regulations, the Superintendency may change the category, by raising or lowering the asset by one category in the above table, or fix an intermediate level between two categories.
Article 189: 0% RISK ASSETS
The following comprise the 0% risk asset category:
- Cash account available balances, cash and deposits with the Central Bank;
- Credits granted and financial leasing transactions carried out with the Central Government and the Central Bank;
- Credits granted to third parties and financial leasing transactions carried out therewith, guaranteed by instruments issued by the Central Government or the Central Bank, up to their amount, at market value to be revised once per month;
- Credits guaranteed by cash deposited with the creditor company, up to the amount of such deposits. To this effect, the corresponding deposits must be freely available to the depositor and be explicitly encumbered by the guaranty;
- Credits granted to third parties or financial leasing transactions carried out therewith, guaranteed by collateral of financial instruments issued by central governments or central banks of countries which are full members of the Cooperation and Economic Development Organization (CEDO), up to their amount, at market value to be revised once per month, as per publications specialized on the subject; and
- Others which given their nature may be included in this category by the Superintendency.
Article 190: 10% RISK CREDIT ASSETS
The following comprise the 10% risk credit asset category:
- Credits granted to private entities or financial leasing transactions carried out therewith, guaranteed by collateral of financial instruments issued by central governments or central banks of countries mentioned in Article 189, Point 5, included in the list published by the Superintendency, up to their amount, at market value to be revised once per month, as per publications specialized on the subject; and
- Others which given their nature may be included in this category by the Superintendency.
Article 191: 20% RISK CREDIT ASSETS
The following comprise the 20% risk credit asset category:
1. Swap accounts issued by local companies;
2. Funds deposited with companies of the financial system and credits granted thereto, including inter-bank loans, leasing transactions with such companies and credits granted to companies of the insurance system or financial leasing transactions conducted therewith, regardless of their expiry;
3. Credits granted to third parties, or leasing transactions carried out therewith, fully or partly guaranteed by companies of the financial system, top-rated foreign banks, or multilateral credit banks with respect to the portion of the financing covered by guaranty, or which may have guaranties pledged in the form of non-subordinate debt instruments issued by the latter, at market value to be revised once per month;
4. Credits granted to third parties, or leasing transactions carried out therewith having credit insurance policy coverage or bonds issued by duly authorized companies of the insurance system or in any case, by autonomous credit insurance coverage;
5. Deposits made with foreign top-rated banks, credits granted thereto and leasing transactions conducted therewith;
6.Credits granted to third parties, or leasing transactions conducted therewith having credit insurance policy cover, security policies or bonds issued by top-rated foreign insurance companies according to the list to be published by the Superintendency, or which may have non-subordinate debt instruments issued by such companies at market value to be revised once per month; and
7. Any others which in consideration of their nature are classified under this category by the Superintendency.
Article 192: 50% RISK CREDIT ASSETS
The following comprise the 50% risk credit asset category:
1. Assets under leasing transactions in normal fulfillment contracts by the corresponding lessees;
2. Housing mortgage loans granted to individual owners;
3. Deposits in other foreign banks subject to supervision at head office by bodies similar to the Superintendency and credits granted thereto;
4. Credits granted to third parties or leasing transactions carried out therewith, fully or partly guaranteed by the banks referred to in the previous point, in the portion of the financing covered by the guaranty or which may have pledged non-subordinate debt instruments issued by such banks at market value to be revised once per month ;
5. Credits granted to third parties or leasing transactions carried out thereby having credit insurance policy coverage, security policies or bonds issued by other foreign insurance companies subject to supervision at their head offices by agencies similar to the Superintendency, or which may have pledged non-subordinate debt instruments issued by such companies at market value to be revised once per month ; and
6. Any others which in consideration of their nature are classified under this category by the Superintendency.
Article 193: 100% RISK CREDIT ASSETS
The following comprise the 100% risk credit asset category:
1. Deposits in foreign banks not subject to supervision at their head office, and credits granted thereto;
2. Credits appearing on the balance sheet, of any type, except those referred to in Articles 189 to 192;
3. Credits granted to directors of the same company;
4. Payments made by third parties;
5. Fees from bank acceptances issued by foreign banks not subject to supervision;
6. Deferred charges;
7. Fixed assets;
8. Intangible assets;
9. Assets received or foreclosed as payment of obligations, which must be necessarily received according to their realization value subject to valuation standards issued by the Superintendency;
10. Any others which in consideration of their nature are classified under this category by the Superintendency.
Article 194: WEIGHTING OF REPO TRANSACTION RISKS
For the purposes of credit weighting in repo transactions in which the company of the financial system is the buyer of the asset subject to resale, the transactions shall be treated as a guaranteed credit.
When the asset acquired is one of the instruments or securities receiving a lower credit risk weighting factor, such asset shall be recognized as a guaranty, and the risk weighting shall be reduced. Otherwise, credit risk shall be determined according to the identity of the reportee.
The same rule shall apply where the company of the financial system buys over the counter securities from a debtor with a repurchase guaranty by the latter or guaranty by other securities.
Article 195: WEIGHTING FACTORS FOR NON-BALANCE SHEET ITEMS
The weighting factors for non-balance sheet items, shall be as follows:
1. Category 1: 0%
a) Bonds, letters of guaranty and letters of credit issued by the State or companies or institutions having the guaranty;
b) Contingent services and credit lines which commitments may be unilaterally terminated or cancelled by the company at any time;
c) Trusts not comprising the issuing of financial instruments on the part of the trustee; and
d) Any others which in consideration of their nature are classified under this category by the Superintendency.
2. Category 2: 20%
a) Bonds, letters of guaranty and letters of credit having counter guaranties issued by foreign top-rated banks; and
b) Any others which in consideration of their nature are classified under this category by the Superintendency.
3. Category 3: 50%:
a) Bonds, letters of guaranty and letters of credit having counter guaranties issued by foreign top-rated banks subject to supervision at head office, issued by institutions of similar nature of the Superintendency;
b) Contingent guaranties related to non-financial transactions in connection with performance and nonperformance commitments by the bonded party including bonds for public bids and compliance policies;
c) Fiduciary services and/or structured financing generating contingent liability for the issuer
of the instrument;
c) Other contingent obligations, including contingent services and credit lines with maturities in excess of one (1) year; and
d) Any others which in consideration of their nature are classified under this category by the Superintendency.
4. Category 4: 100%:
a) Other guarantees, letters of guaranty and letters of credit even if they have a counter-guarantee issued by foreign banks not subject to supervision at their head offices;
b) Revolving guarantee funds;
c) Contracts for the sale of assets without guaranty of repurchase by the company;
d) Off-stock exchange futures purchase contracts;
e) Futures deposit contracts; and
f) Any others which in consideration of their nature are classified under this category by the Superintendency.
The provisions in the final paragraph of Article 188 shall govern for these categories.
Article 196: WEIGHTING OF ASSETS BY CREDIT RISK
The following rules shall be observed with respect to weighting of assets by credit risk:
1. Subtraction of the amount of permanent investment in shares and subordinate debt instruments, issued by other companies of the financial system or of the insurance system, within the country or abroad.
2. Subtraction of the amount of all investment in shares, bonds and similar instruments in companies with which financial statements must be consolidated, including the holding companies and subsidiaries referred to in Articles 34 and 224.
3. Subtraction of any provision from the account and from the corresponding category;
4. Suspended accounts receivable shall not be considered in the calculation;
5. Amortization of intangible assets and depreciation shall be subtracted from the respective accounts;
6. The valuation of assets in foreign currency shall be made at the exchange rate used on the date of submission to the Superintendency of the report referred to in the following article.
Article 197: FREQUENCY OF REPORTS
The Superintendency shall establish the frequency of the reports to be submitted by companies, to be prepared in accordance with the chart of accounts approved by the Superintendency, showing the following:
1. Effective Equity;
2. Credit assets and contingent credits, their value
and the factor to be applied thereto by groups or categories;
3. Positions subject to market risks on the balance sheet and otherwise and charges made against the effective equity by the corresponding market risks; and
4. Individual and consolidated financial statements of financial and/or mixed conglomerates and/or economic groups with their respective appendices, reports and supplementary information.
Portfolio Concentration and Operational Limits
Article 198: CALCULATION OF OPERATIONAL LIMITS
Limits for company operations are determined based on its effective equity.
Article 199: OVERALL LIMIT
The amount of the contingent assets and credits of a company, weighted by credit risk, in local or foreign currency, including its foreign branches, should not exceed eleven (11) times its effective equity to cover credit risks.
The amount of positions subject to the market risk of a company, weighted for risk, in domestic or foreign currency, may not exceed eleven (11) times its effective equity to cover market risks.
Article 200: OVERALL LIMITS PER OPERATION
For operations carried out under Article 221, companies referred to in Point A of Article 16 shall be subject to the following overall limits, in accordance with the effective equity:
1. For purchases of the invoices referred to in Point 10: 15%.
2. For gold holdings referred to in Point 40: 15%.
3. For transaction referred to in Point 42: 10%.
4. For holdings of shares and bonds listed in the exchange and issued by stock companies domiciled in the country to which reference is made in Point 17, as well as for in certificates of participation in mutual funds and investment funds to which reference is made in Point 19: 20%, with a sub-limit of 15% for each item.
5. For holdings of bonds and other instruments issued by multilateral credit agencies of which the country is a member, contemplated in Point 21: 20%.
6. For investments in real and personal property to which reference is made in Point 28, with the exception of those granted under financial leasing and those subject of foreclosure governed by the provisions of Article 215: 75%.
7. For contingent loans and financial leasing transactions for terms of more than one (1) year, excluding installments, amortization or coverage for shorter
terms: four (4) times the effective equity.
8.Other overall limits determined by the Superintendency on grounds of good judgement after receiving the prior opinion of the Central Bank.
The limit indicated in Point 7 may be surpassed, provided the excess amount is the result of resources deriving from deposits or bonds taken for terms exceeding eighteen months (18) months, taking into consideration only bond coupons exceeding such term.
Article 201: LOANS GRANTED TO COMPANY DIRECTORS AND EMPLOYEES
All loans granted by companies of the financial system to their directors and employees and their spouses and relatives, shall not exceed 7% of their paid-in capital and reserves. No director or employee may receive more than 5% of the indicated overall limit, taking into consideration for the such purposes, their spouses and relatives.
None of the loans to which reference is made in this article may be granted in conditions more favorable than those afforded to the clients of the company, except for mortgages loans for personal housing granted to employees.
Article 202: (*) FINANCING FOR RELATED PERSONS
(*) Amended by Law 27102 of May 5, 1999
Not withstanding the limitations resulting from Articles 206 to 211, the total of all loans, financial leasing transactions, investments and contingencies granted by a company of the financial system to individuals or legal entities directly or indirectly related to its ownership, on a proportion greater than 4%, or who may have a significant influence of its operations, may not exceed any amount equivalent to 30% of the company’s effective equity.
The conditions of such loans may not be more favorable than those granted by the company to its clients, with respect to terms, interest rates and guaranties.
The Superintendency shall determine the criteria governing relationships through general regulations, in accordance with the provisions of the following article.
Article 203: CRITERIA FOR THE SETTING OF INDIVIDUAL LIMITS
In order to determine individual limits, the following shall be taken into account:
- Prevent risk concentration produced when various individuals or legal entities comprise the same financial or mixed conglomerate; and are therefore subject to a common or sole risk.
- When the related counterparts are defined, not only groups producing consolidated accounts shall be taken into consideration, but the criteria established for single or common risk.
- In determining such individual limits, risk concentration on a sole counterpart or on a group of related counterparts shall be considered.
Sole or common risk shall be defined as two or more individuals or legal entities are mutually associated in such manner that:
a) One of them exercises direct or indirect control over the other;
b) Their cumulative credits represent a sole risk to the company of the financial system inasmuch as they are inter-related with the possibility that if one of them experiences financial problems, it is also possible for the other part, or all of them, will have payment problems. This includes relationships based on common ownership, common control or administration, reciprocal guaranties and/or direct business dependence which cannot be replaced at short term;
c) Assumptions based on the fact that credits granted will benefit all others;
d) Assumptions based on the fact that various parties have such relationships which in fact constitute one economic interests unit.
The fact of being the debtor of a company, a company incorporated abroad, among whose partners or shareholders there are other companies or whose shares are bearer shares, will lead to the presumption that it is related for the effects referred to in the previous article.
Sole risk shall not discounted when the indebtedness of such individual or legal entities to one company of the financial system or its subsidiaries is separate.
For the purposes hereof, the definitions regarding economic group, related companies or conglomerates shall be those established as general rules by the Superintendency, taking into account the criteria specified in this article.
Article 204: FINANCING GRANTED TO ANOTHER COMPANY DOMICILED IN THE COUNTRY
Credits granted by a company of the financial system to a different company domiciled in the country and any deposits made therein, added to the warranty bonds, collateral, and other guaranties received from such company, may not exceed 30% of its effective equity.
Companies of the financial system may not receive in guaranty warrants issued by a single general warehouse in excess of 60% of their effective equity. General warehouses in which a company is the majority shareholder are excluded from the provisions of this article.
The individual limits of coverage granted by an independent credit insurance equity to a company of the financial system and the overall limits of such coverage shall be established by the Superintendency.
Article 205: FINANCING OF FOREIGN COMPANIES.
Credits granted by a company of the financial system to a foreign banking or financial institution and the deposits made therein, added to the warranty bonds, collateral, and other guaranties received from such institution, may not exceed the following limits with reference to the effective equity of the company:
1. 5% for institutions not subject to supervision by an agency similar to the Superintendency.
2. 10% for institutions subject to supervision by an agency similar to the Superintendency, and not included in Point 3.
3. 30% for top-rated banks.
4. 50% if the excess in each of the preceding cases is represented by letters of credit, excluding those referred to in the following paragraph.
Letters of credit payable pursuant to the Reciprocal Payment and Credit Agreement – ALADI, are not taken into consideration for purposes of the limit.
Article 206: FINANCING GRANTED TO THE SAME PERSON – 10% LIMIT
Companies of the financial system may not grant to or for the account of a single individual or legal entity, whether directly or indirectly, credit, investment or contingency funds exceeding the equivalent of 10% of their effective equity.
The limit set forth in the previous paragraph includes all types of financing and investment with exception of bonds guaranteeing the signing of contracts in public bids, which shall be subject to a limit of 30%.
Article 207: 15% LIMIT
Under exceptional circumstances, companies of the financial system may exceed the limit to which reference is made in the preceding article, up to the equivalent of 15% of their effective equity, provided that in the respective transaction or operations an amount at least equivalent to the excess of any of such limits is covered by any of the following guarantees at realization value:
2. Collateral with legal or physical delivery, except for any collateral referred to in Articles 208 and 209.
4. Endorsed or assigned bills of lading and consignment notes, only if the transaction involved the financing of imports.
- Trust in guaranty constituted on the property referred to in this article.
The guaranties referred to in Point 4 may shall constitute a separate document, provided that they refer to imported goods and the original documents relating thereto are in the possession of the company.
Article 208: 20% LIMIT
On exception, these companies may exceed the limits to which reference is made in the previous articles, up to the equivalent of 20% of their effective equity, provided that in the respective transaction or transactions an amount at least equivalent to the excess of any of such limits is covered by any of the following guaranties at realization value:
1. First pledge on:
a) Non-subordinate debt instruments issued by any of
the institutions or companies referred to by Articles 189 Point 5, and 191, Points 3 and 4, for the said market value, updated once per month;
b) Securities serving as a basis for the determination of the Selective Index of the Lima Stock Exchange, also at the above-mentioned market value, updated once per month; or
c) Shares or high liquidity bonds quoted on any well-known foreign stock exchange, at their corresponding market value, updated once per month.
In order for such pledges to be eligible, they must appear in the corresponding register.
2. Repo transactions with transfers in favor of the
company of any of the assets specified in this article.
3. Trust in guaranty constituted on the property referred to in this article.
Article 209: 30% LIMIT
Likewise, exceptionally, companies may exceed the limits to which reference is made in the previous articles, up to the equivalent of 30% of their effective equity, provided that an amount at least equivalent to the excess
of any of such limits is formed by financial leasing or by transactions are covered by any of the following guaranties at realization value (*):
(*)Amended by Law 28184 of February 9, 2004.
1. Pledge with physical delivery on the cash deposits referred to in Point 4 of Article 189, for their whole nominal worth;
2. First pledge on instruments representing Central Bank obligations at their market value updated once per
3. Repo transactions with transfers in favor of the company, of the instruments referred to Point 2 of this article.
(*) Paragraph amended by Law 27102 of May 5, 1999
Article 210: FINANCIAL LEASE LIMIT (*)
Amended by Law 28184 of February 9, 2004.
Article 211: FINANCING TO NON-DOMICILED PERSONS
Credits, contingency funds, investments and financial leasing granted by a company to a non-domiciled individual or legal entity, except for the banks and finance companies referred to in Article 205, may not exceed a sum equal to 5% of the effective equity thereof.
The aforesaid limit may be raised up to 10% of the effective equity of the company provided that any of the following guaranties is given for at least an amount equal to the excess over such limit:
b) Shares or bonds issued by a corporation which
shares are listed in a stock exchange and an opinion
concerning their quality and prestige has been issued by a specialized and well-reputed entity in the corresponding country.
By exception, the said 5% and 10% limits may be raised, as appropriate, up to 30% of the effective equity of the company, provided that any of the following guaranties covers at least an amount equivalent to the excess:
1. Cash deposits in the same company, particularly affected; and
2. Warranty bonds, collateral and other obligations owed by a bank in accordance with the Reciprocal Payment and Credit Agreement – ALADI, or granted by a top-rated foreign bank.
Article 212: SUBSTITUTION OF CREDIT COUNTERPART
When a credit is granted under the subsidiary liability of a company of the Peruvian or foreign financial systems or insurance systems, instrumented through solidary bonds or guaranties, or with credit insurance coverage provided by an autonomous credit insurance equity, the counterpart risk corresponds to the guarantor, warrantor or respective autonomous equity, and the individual limit shall be computed according to the guarantor company or warrantor or autonomous equity, applying the provisions of Articles 204 or 205, Points 2 or 3, as the case may be.
In such cases, the individual limit corresponding to the guaranteed or bonded person shall be considered in direct relation to the guaranteeing or bonding company.
Article 213: GUARANTY REGULATIONS
For the purposes of applying. the provisions of Articles 207 to 209, the highest-ranked guaranties may replace those of a lower rank by the corresponding percentages.
Article 214: CREDIT RISK AND MARKET RISK LIMITS
Risk measuring systems for credit portfolios and market risks have a cumulative effect on the effective equity of companies.
The effective equity of companies of the financial system allocated to market risks may not be more than20% of total effective equity. This limit may be changed by the Superintendency after receiving the favorable opinion of the Central Bank.
Article 215: TEMPORARY LIMIT – TREATMENT GIVEN TO PROPERTY RECEIVED AS DEBT PAYMENT
When as the consequence of the payment of a debt previously contracted in good faith, full or part payment is received or awarded in movable or immovable property, this must be disposed of within a period of one (1) year, which may be extended by the Superintendency for one time only and for a maximum term of six (6) months.
Upon expiry of the said period, without the sale or leasing of the property involved having taken place, the company must make a provision for an amount equal to the book value of the unsold property.
Article 216: LIST OF TOP-RATED BANKS
For the purpose of applying the limits referred to in this Title, and all other pertinent provisions hereof, the Central Bank shall prepare a list of top-rated foreign banks not taking into consideration the criteria applied for the investment of the reserves it manages, and taking as a reference the relevant specialist international publications.
Article 217: PROHIBITED TRANSACTIONS AND ACTIVITIES
Not withstanding any others contained herein, companies of the financial system shall be subject to the following prohibitions:
1. Grant credits using their own shares as a guaranty;
2. Grant credits to be directly or indirectly used
for the purchase of the company’s own shares;
3. Grant credits to finance political activities;
4. Grant guaranties or support in any other manner
third-party liabilities, in undetermined amounts or terms;
5. Guarantee loans contracted with third parties, unless any of the said third parties is another company of the financial system, or a foreign bank or finance company;
6. Give in guaranty their fixed assets, unless encumbered, to support financial lease transactions and mortgage bonds issued by real estate capitalization
7. Accept any surety, guaranty collateral pledge furnished by their directors and personnel, in support of loans granted to persons having business limits with said directors or personnel;
8. Purchase shares of companies not forming part of the financial system and which, whether directly or indirectly, are shareholders of the same company, unless they are listed on the stock exchange;
9. Negotiate the deposit certificates referred to in Point 9 of Article 221 hereof with their subsidiaries, and assume commitments giving rise to the obligation to repurchase said certificates;
10. Secure deposits on behalf of financial institutions not authorized to operate within the country;
11. Use information not disclosed to the market concerning individuals or legal entities, whether or not their clients, with the purpose of promoting business for the benefit of third parties, with the provisions of the Securities Market Act being applicable.
Article 218: SANCTION FOR EXCEEDING 11-TIME OPERATIONAL LIMIT
A. CREDIT RISK.
Companies of the financial system which contingent assets and credits weighted by risk exceed the limit of eleven (11) times their effective equity, must deposit any increase in liabilities subject to a legal reserve, as recorded in the monthly reports referred to in Article 165 hereof, into accounts with the Central Bank, in the respective currencies, from the time that the average excess is shown in said reports. This obligation shall be valid even though the bank is not subject to the surveillance system.
Deposits prescribed in this article shall be kept until the excess no longer appears in the reports. As long as the company is not subject to the surveillance system, its interest shall be lower by 50% than that fixed for legal reserve deposits in the respective currencies by the Central Bank.
B. MARKET RISKS.
In the event that market risk transactions carried out by the company of the financial system exceed the level of effective equity assigned to cover such risk, the procedure shall be as follows:
1. Under liability, the General Manager shall on
the day of such excess:
- Suspend any transactions generating complementary market risks for the company;
- Order the immediate and/or gradual reduction of positions causing market risks in order to reduce the portion of effective equity used to cover such risks;
- Convene a board of directors’ meeting to be held within the following three (3) days; and
- Report to the Superintendency due compliance with the foregoing subsections within the immediate following business day.
2. The Superintendency shall immediately order a
permanent inspection of the company;
3.When the board of directors meets, the following shall be resolved either alternatively or complementarily:
- The immediate increase of the limit of effective equity to cover market risk if there is an available supplementary balance which can be allocated but has not been applied to cover credit risks; and/or
- Convening a special general shareholders’ meeting for an increase in capital stock or the issue of eligible subordinate debt. The special general shareholders meeting must be held as soon as possible.
3. A copy of the minutes of the board of directors’ meeting referred to in the previous point, shall be transcribed to the Superintendency on the business day immediately following such meeting. A copy of the minutes of the special shareholders general meeting shall also be transcribed on the first business day after the holding thereof.
The Superintendency shall end the permanent inspection immediately upon the reallocation of available effective equity to cover market risks or, in any case, when the value of subscribed additional shares has been paid into the capital, or the value of subordinate debt has been disbursed by its subscribers.
The ending of the visit shall allow the company to reinitiate the assumption of new market risks.
(*) Paragraph amended by Law 27102 of May 5, 1999
Article 219: SANCTION FOR INFRACTION OF LIMITS
Except for the provisions of the preceding article, an infraction of operational limits prescribed in the Law, shall cause companies to be subject during the first month or fraction of a month, to a fine for the excess, equivalent to 1.5 times the average lending rate for the corresponding currency and market, deducting the average monthly deposit rate for the same term, currency and market.
As from the second month and for as long as the infraction prevails, the fine shall be gradually increased by 50%, month after month.
Article 220: (*) SANCTION FOR PROHIBITED ACTIVITY
Infractions of any of the prohibitions stipulated in Article 217 shall be sanctioned by a fine equivalent to 100% of the transaction’s total amount. The same fine shall apply whenever the period established in Article 201 is exceeded, calculated on the basis of the excess. These sanctions shall be applied, not withstanding any other sanctions which may be prescribed by the Superintendency.
OPERATIONS AND SERVICES
Article 221: OPERATIONS AND SERVICES
Companies may carry out the following operations and services pursuant to the provisions of chapter I, title IV of this second section:
1. Receive on sight deposits
2. Receive term and savings deposits as well as in custody;
3. a) Grant overdrafts or advances in current account;
b) Grant direct credits, with or without collateral;
4. Discount and grant advances over bills of exchange, promissory notes and other debt instruments;
5. Grant mortgage and secured loans; and in relation to them, issue credit instruments, mortgage and pawned securities, both in domestic and foreign currency;
6. Grant securities, guaranties and other collateral, even in favor of other companies of the financial system;
7. Issue, notify, confirm and negotiate letters of credit, whether on sight or term, in agreement with the international practices and, in general channel foreign trade operations;
8. Act jointly with other companies to grant credits and guaranties, under the responsibilities considered in the respective agreement;
9. Acquire and negotiate certificates of deposit issued by companies to grant credits and guaranties under the responsibilities considered in the respective agreement;
10. Carry out factoring operations;
11. Carry out credit operations with domestic companies, as well as make deposits therein;
12. Carry out credit transactions with foreign banks and financial institutions, as well as make deposits in either of them;
13. Purchase, maintain and sell shares of banks or other institutions abroad that operate as financial intermediaries or in the securities market, or are auxiliaries of either, in order for their activities to be at an international level. In the case of the purchase of these shares, in a percentage of over 3 percent (3%) of the receiver’s net worth, prior authorization from the Superintendency is required;
14. Issue and place bonds in domestic or foreign currency, including regular, convertible, financial leasing and subordinate bonds of various types and currencies, and promissory notes, negotiable or nonnegotiable certificates of deposit and other instruments representing liabilities, provided they were issued by them;
15. Accept time bills, originated from commercial transactions;
16. Take or provide coverage for commodities, futures and related financial products;
17. Acquire, keep and sell instruments representing private debt and instruments representing capital for the negotiable portfolio that are subject matter of any centralized mechanism of negotiation in agreement with the pertinent law on the matter;
18. Acquire, keep and sell shares of companies which object is to provide supplementary or auxiliary services to companies and/or their subsidiaries;
19. Acquire, keep and sell, as participants, certificates of participation in mutual trust and investment funds;
20. Buy, keep and sell public debt instruments, both domestic and foreign, as well as bonds from the Central Bank;
21. Buy, keep and sell bonds and other securities issued by multilateral credit agencies of which the country is a member;
22. Buy, keep and sell debt instruments issued by the governments of the countries approved by the Superintendency;
23. Operate in foreign currency;
24. Issue bank certificates in foreign currency and make foreign exchange operations;
25. Serve as a financial agent to place and invest foreign funds in Peru;
26. Execute portfolio purchase and sale contract;
27. Effect structured financing operations and purchase and sell securities, pursuant to the Securities Market Act;
28. Acquire real property, personal property and equipment;
29. Make collections, payments and fund transfers and issue drafts against their own offices or correspondent banks;
30. a) Issue cashier’s checks;
b) Issue payment orders;
31. Issue travelers checks;
32. Accept the powers of attorney as detailed in Article 275;
33. Receive Securities, documents and objects in custody, as well as lease out safe deposit boxes;
34. Issue and manage credit and debit cards;
35. Execute financial leasing operations;
36. Promote foreign trade operations as well as render integral advisory on the matter;
37. Sign temporary first security issues with partial or total guarantees;
38. Provide financial advisory services without this implying the management of money of customers or their investment portfolios;
39. Act as trustees where trusts are involved;
40. Buy, keep and sell gold;
41. Grant pawned credits for jewels or other gold and silver objects;
42. Execute, on their own account, operations involving commodities and related financial products
43. Act as originators in the purchase and sale of securities through the transfer of real or personal property, credit and/or money, having the power to establish companies with special purposes;
44. Any other operations and services, provided they meet the requirements set forth by the Superintendency by means of the norms of general character, with the previous opinion of the Central Bank. To this end, the company shall advise the Superintendency of the characteristics of the new instrument, product or financial service. The Superintendency shall issue its decision to that respect, within thirty (30) days counted as from the date of presentation of the company’s request.
Article 222: EVALUATION OF THE OPERATIONS THAT MAKE UP THE CREDIT PORTFOLIO
Regarding the operations that make up the credit portfolio, the cash flows of the debtor, incomes and capacity to serve its debt, financial situation, net worth, future projects and other relevant factors to determine the capacity to serve and pay its debt, shall be taken into account for purposes of evaluation thereof. The basic criterion is the payment capacity of the debtor. Guaranties are of subsidiary nature.
Article 223: OPERATIONS EXECUTABLE THROUGH SEPARATE DEPARTMENTS
In order to execute each one of the operations set forth in the following groups of operations, the companies must constitute clearly differentiated separate departments:
1. Items 7 and 36 of Article 221;
2. Items 16 and 42 of Article 221;
3. Item 17 of Article 221;
4. Item 35 of Article 221.
5. Items 37 and 38 of Article 221;
6. Item 39 of Article 221.
The operations referred to in this article shall be kept in clearly differentiated accounting registers in agreement with the norms provided for by the Superintendency.
Article 224: OPERATIONS EXECUTABLE THROUGH SUBSIDIARIES
In order for the companies of the financial system to execute the following operations, they must constitute subsidiaries:
1. Establish real property capitalization companies;
2. Operate as general deposit warehouses;
3. Act as stock exchange brokerage companies, subject to the Securities Market Act;
4. Establish and administer mutual fund and investment fund programs, subject to the Securities Market Act;
5. Operate as Custodian, Transportation and cash and Securities Administration Companies, provided they have and authorization therefore issued by the Superintendency and Ministry of Internal Affairs; and
6. Act as trustees in securitization trusts, being subject to the provisions of the Securities Market Act.
A single subsidiary may not develop more than one of the operations or activities set forth in items 1 to 6 above.
They may also constitute subsidiaries execute the other operations indicated in Article 221.
CONTRACTS AND INSTRUMENTS
Article 225: CURRENT ACCOUNT
The current account regulated by this law consists of a contract by virtue of which the company undertakes to comply with the payment orders of its client up to the amount of money that it deposited in it or the credit stipulated, the latter being applicable in the case of companies authorized to grant overdrafts in agreement with Articles 283 and 290.
Article 226: EFFECTS OF THE CURRENT ACCOUNT
There is novation in all credits of one against the other, of any nature and date, if the credit is attributed to a current account; unless the creditor or debtor agree to the express reservation of their rights. All credits or debits within the current account shall be subject to the payment of a fee.
The precautionary measures provided with respect to the current accounts shall only have effect over the resulting balance after the company applies the corresponding charges for past due debts maintained with the titleholder of the account to the date of notification of said measures and provided it is not subject to any encumbrance whatsoever.
The existence of the current account contract shall be evidenced by any means of proof allowed by law, except for testimonial statement.
The delivery of a check book by the client is not consubstantial to the current account. The disposition of available resources in current account may be effected by means of the execution of an autonomous agreement of a check or by means of other agreements.
The companies shall periodically advise their clients of their statements of account, all of which shall be considered accepted if no observations thereto are filed within thirty (30) days following reception thereof.
Article 227: ASSUMPTION OF THE SPOUSE’S CONSENT
In terms of the establishment of current accounts by individuals and in the operations effected with the same, the consent of the spouse of the titleholder of the account is assumed by law.
Article 228: CLOSING OF A CURRENT ACCOUNT
Current accounts are closed by initiative of the company or client. The company may reject the request to close an account submitted by the client in case said account has a debit balance or the client has liabilities pending payment with it.
Unless otherwise agreed to, the company may compensate the balances of the different accounts that the client maintains with it, even in the case of closing a current account.
The companies shall close the current accounts of those that register rejection of checks due to lack of funds, in agreement with the terms set forth by the Superintendency. Said organism shall sanction those not complying with this obligation. The list of current accounts closed for this reason shall be published monthly by the Superintendency in the Official Gazette El Peruano.
The companies shall notify the Superintendency of the closing of current accounts carried out due to lack of funds in order for the latter to provide for the immediate closing of all the other current accounts that the sanctioned party maintains in the rest of the financial system.
The company, may, at any given moment, submit a notification to the client, advising it of the existence of debit balances in its account and requesting payment thereof. After fifteen (15) business days have elapsed from the date of reception of the notification without any observations thereto having been filed, the company is empowered to draw a sight bill for the balance plus interests accrued in said period against the client, duly expressing the reason for which it is issued. The protest for lack of payment of said bill of exchange, wherein the acceptance of the drawee is not required, shall result in an executive action.
Article 229: SAVINGS DEPOSITS
Savings Deposits now have the following characteristics:
1. They may be constituted by individuals or corporations, even those who are illiterate and legally incompetent. The deposits constituted by minors shall be regulated by the provisions of the Code of Children and Adolescents.
2. They appear in the cards or other documents wherein the dates and amounts of deposits and withdrawals as well as the interests deposited are registered for the agreed period.
3. They are not transferable.
4. Withdrawals proceed at the sole requirement of the titleholder, its legal representative or attorney in fact, unless a term or limit of cash has been agreed to in a given period.
Article 230: COVERAGE OR CONTINGENCY FUNDS SYSTEMS
The companies that offer coverage or contingency fund systems in favor of its depositors, titleholders of debit cards, credit cards or other services, are obligated to maintain in their registries the declarations of the clients that use said system, with the names of the beneficiaries of said coverage and their updated addresses.
On being advised of the event subject to indemnification, the corresponding amount is deposited in a savings account opened to the name of and at the disposal of the beneficiaries, in agreement with the procedures set forth by the Superintendency.
Article 231: GLOBAL AND FLOATING COLLATERAL CONTRACT
By means of the global and floating collateral contract, an encumbrance is established over the fungible fixtures subject to the guaranty that allow the maker to dispose of the good in order to substitute it with another good or other goods of equivalent value. The maker of this pledge or representative of the corporation becomes the depositor of the good or goods and is obligated to return other goods of the same kind and amount, or, otherwise, its value in cash. The depositor that does not comply with these obligations shall incur in the crime described in article 190 of the Penal Code.
A global and floating pledge can be constituted over any type of fungible asset in order to guarantee operations subject matter of the credit insurance, of the accepted invoices or other credit operations.
The global and floating collateral must be registered in the special register opened in the Risk Office organized by the Superintendency for this purpose. The creditor has absolute preference over the value of the global and floating collateral, and excludes all other creditors of the maker, whether the latter is subject to a restructuring or bankruptcy proceeding or not.
Article 232: ISSUE OF FINANCIAL INSTRUMENTS
The serial issue of financial instruments to secure savings from the public bust be agreed to by the management organ of the respective company, except in case of convertible and subordinate bonds, the issue of which must be agreed to by the General Shareholders Meeting, this power being able to be assigned to the Board of Directors.
In terms of the issue of such instruments, the favorable opinion of the Superintendency shall be required. Moreover, in cases in which they have the conditions of securities that are issued under public offer, CONASEV shall register them in the Public Register of the Securities Market, after the due presentation of the resolution issued by the Superintendency, and the documentation specified in article 18 of the Securities Market Act.
Instruments issued in series or individually may be placed under their par value.
In terms of the issue of financial instruments, including bonds, the constitution of specific guaranties is not required.
Article 233: BONDS
Non-redeemable subordinate bonds are eligible as part of the effective equity for the whole of its value, and have the following characteristics:
1. They are issued perpetually, the principal not being able to be amortized;
2. They generate periodical profits; and
3. Any sum greater than one hundred percent (100%) of the accountable equity with the exception of the cumulative preferred stock and/or redeemable fixed term stock, if any, and uncommitted profit, is not computable.
Subordinate bonds meeting the following characteristics and requirements are also eligible as part of the effective equity to support credit risk:
a) The minimum original expiration period shall be greater than five (5) years
b) The worth of bonds, or, as applicable, installments thereof, which expire during the immediately subsequent five (5) years shall not be computable as effective equity.
c) Any sum greater than fifty percent (50%) of the accountable equity is not counted with the exception of the cumulative preferred shares and/or redeemable fixed term shares, if any, and uncommitted profit.
Additionally to the characteristics set forth in the preceding paragraphs, subordinate bonds have the following general characteristics;
a) they may not be guaranteed.
b) Payment does not proceed prior to expiration, nor redeemed by draw.
c) The principal and interests of the subordinate bonds are subject, as applicable to their application for absorption of any losses of the company remaining after the accountable net worth has been fully applied to this object. In this case their application shall be carried out by law or by mandate of the Superintendency, which shall provide for the issue of new issue shares in favor of the titleholders of such bonds for the amount of their net capital portion or residual value after covering the accumulated losses.
d) They shall be assessed at their price of placement, which must have been fully paid.
Companies may issue subordinate bonds that may be converted into shares of various types prior to their expiration or on the date of expiration, by decision of the issuing company and/or its titleholders, all of which shall be registered in the corresponding issuance statute.
Article 234: DEBT INSTRUMENTS.
Companies in the financial system may issue financial instruments that are referred to in the Securities Market Act and those authorized by the Superintendency through a regulation of general nature.
Article 235: MORTGAGE INSTRUMENTS.
Companies in the financial system may issue financial instruments pursuant to the norms issued by the Superintendency.
Such instruments will have the following general characteristics:
1. They proceed from a mortgage contract;
2. They must be guaranteed with first mortgage;
3. The mortgages constituted over the real property financed with the issue of mortgage instruments shall be included in a separate register of the company of the financial system and do not guarantee the other obligations of the owner of the real property or maker of the mortgage in favor of the latter;
4. The set of mortgage liens referred to in the preceding paragraph back, by law, the set of mortgage instruments issued by the company of the financial system, without the need of a public deed to grant said liens in favor of such instruments.
5. When a mortgage debtor prepays its debt, the issuing company may place new loans of equal characteristics to the prepaid one, or redeem the financial instruments that back the prepaid debt; and
- In case of intervention due to suspension of the payment of liabilities due to the liquidation of the issuing company, the liabilities supported by the mortgage instruments, as well as the corresponding placements and mortgage collateral shall be transferred to another company of the financial system, after due authorization given by the Superintendency, being excluded from the remaining assets.
- For the effects of the stated in the preceding numeral, the loans granted to the companies of the financial system by the Fondo MIVIVIENDA in order to place mortgage loans, shall receive the same treatment as the mortgage instruments. In this case, only the prior qualification of the Superintendency will be required to be excluded from the estate.(*)
(*)Incorporated by the Law N° 27964 of May 17, 2003
Article 236: MORTGAGE BILLS OF EXCHANGE
The companies of the financial system may issue mortgage bills of exchange in agreement with the norms issued by the Superintendency.
Said instruments shall have the following general characteristics:
1. They come from a mortgage credit.
2. They are issued by a company of the financial system that has the condition of main obligee and is the sole party responsible for payment.
3. They may be issued in domestic or foreign currency.
4. They may be issued for a fixed date. (revoked by Law 27287)
5. They may only be issued for a value that is lower or equal to the amount of the mortgage liabilities assumed with the issuing company.
6. They must be guarantied with a first mortgage, which may not respond for other liabilities in favor of the company, and must be expressly authorized in the deed of incorporation.
7. They may be amortized by the issuing company, directly or by means of purchase, redemption or draw at the par rate.
8. In the case of intervention due to the suspension of payments and obligations or the liquidation of the issuing company, the mortgage bills shall be transferred jointly with the corresponding credits and their respective mortgage collateral to another company of the financial system which the Superintendency has authorized to operate with the mortgage bill system, such assets and liabilities being excluded from the remaining assets.
Article 237: INVOICES APPROVED (revoked by Law 27287)
Invoices approved consist of a credit instrument that represents the goods delivered and unpaid that must be duly subscribed by the debtor as a symbol of conformity in terms of the delivery of the goods therein specified, their value and date of payment of the invoice.
The invoice approved is issued by the creditor and may be endorsed to third parties. It includes the description of the goods, subject matter of the transfer, that are subjected to the global and floating pledge referred to in article 231.
The invoice approved mean the direct execution against the debtor, who becomes the depositary of the goods transferred thereby, which are subject to the above-mentioned pledge. Any return action shall be regulated by the terms of the endorsement.
Article 238: MORTGAGE CERTIFICATES
Mortgage certificates are instruments representing long term mortgage debts, not redeemable in advance, issued by companies authorized by this law and that are backed by the mortgage of the set of real property that are subject to the mortgage regime linked to such certificates.
By nature, they may not be redeemed in advance and are subject matter of secondary market transactions.
Article 239: NEGOTIABLE MORTGAGE CREDIT INSTRUMENTS (revoked by Law 27287)
A negotiable mortgage credit instrument is a bearer security negotiable by endorsement, that have the following formal characteristics:
1. It is issued by the Public Registry in which the real property encumbered with a mortgage is registered.
2. Its issue shall proceed in agreement with the unilateral act executed by the maker, in agreement with article 2010 of the Civil Code.
3. The mortgage lien represented by the title is of first range and exclusively serves as a guaranty of the credit consigned therein, having preference over any credit on account of the maker, irrespective of its origin or nature.
4. This security is issued as an instrument to the order of the owner of the property encumbered; with an indication as to the references contained by the form approved by means of a norm issued by the Superintendency.
5. It may be freely transacted by endorsement; and in the act of the first endorsement the following information must be registered in the same instrument: the sum of the credit which guaranty is encumbered, the expiration date of the credit, payment form, payment terms, interest rates and other conditions of the credit guaranteed, constitution from that point on the negotiable mortgage credit instrument , which further represents the credit consigned therein;
6. Through endorsement the credit consigned in the instrument is also transmitted, as well as the mortgage it represents, the different endorsers of the owner not assuming any responsibility before the last holder, who, notwithstanding, holds all the shares deriving from the credit instrument against the owner and has exclusive preference in terms of the mortgage represented by the instrument to the total amount of the guaranteed credit.
7. Should the instrument be protested due to lack of payment of the credit, under the same terms and conditions that the Securities Act sets forth for the bill of exchange, there is a choice as to whether to provide for the sale of the real property by means of a judicial proceeding of execution of the guaranty as set forth by the Civil Procedures Code; or to sell it directly and to the highest bidder without the intervention of any judicial authority whatsoever, under the conditions set forth by the regulatory norms issued by the Superintendency.
8. The Public Registry shall lift the mortgage credit upon the return of the negotiable mortgage credit instrument, duly canceled by the last endorsee in agreement with the regular endorsement order appearing in the instrument itself; maintaining the encumbrance in force, without its extinction proceeding as per the provisions of article 3 of Law Nº26639.
9. The regulations approved by means of a norm of general nature issued by the Superintendency, shall set forth the other applicable conditions and formalities.
Article 240: AUTOMATIC DEBT READJUSTMENT
The power set forth in article 1235 of the Civil Code may be practiced with respect to the liabilities of companies contracted for a term of at least ninety (90) days. The daily readjustment index is elaborated by the Central Bank subject to the Consumer Price Index for Metropolitan Lima determined by the National Institute of Statistics and Informatics in the preceding month and timely published in the Official Gazette.
In the cases in which the parties abide by the provisions hereof, the contracts, securities, and other documents, shall bear the expression “Constant Acquisitive Value” or the acronym “VAC”, immediately after the corresponding figure.
Article 241: CONCEPT OF TRUST
A trust is a juridical relationship by means of which the trustor transfers property under trust to another person, called the trustee, for the constitution of a trust asset, subject to the possession in trust of the latter, and having the purpose of complying with a specific objective in favor of the trustor or third party referred to as trust beneficiary.
The trust asset is different from the assets of the fiduciary or trustor or trust beneficiary, and, as applicable of the recipient of any remaining assets.
The assets that make up the autonomous trust property do not generate charges on the effective equity corresponding to the trust assets, except in cases where, through a jurisdictional resolution, a liability is assigned due to bad management, and for the amount of the corresponding damages and losses.
The liquid part of the funds which make up the trust is not subject to the requirements of legal reserves.
The Superintendency provides for the general norms as to the different types of trust transactions.
Article 242: COMPANIES AUTHORIZED TO ACT AS TRUSTEES
The companies authorized to act as trustees are COFIDE, the companies of multiple operations referred to in point A of article 16 and the companies of trust services set forth in point b-5 of the above-mentioned article, as well as the companies of item 1 of article 318.
In case of fraud or gross negligence, the Superintendency may order the removal of the trust company and appoint its replacement, should the trustor not do so within the period established.
In order to perform the duties of trustee in the securitization trusts referred to in the Securities Market Act, companies in the financial system must organize securitization companies.
Article 243: VALIDITY OF THE FOUNDING ACT
For the validity of the founding act of any such trust, the trustor must have the power to dispose of the property and rights transferred without prejudice of the requirements set forth by the law for such juridical act.
Article 244: RIGHTS OF FORCED HEIR DAMAGED BY THE TRUST
The forced heirs of the trustor may require the return of the trust assets by the person responsible under gratuitous trust title, to the extent in which their legitimate rights have been violated. The trust company has the power of choosing, among the trust assets, those that would have to be returned.
Notwithstanding, the trustor may entrust any property involving the legitimate rights of any of his or her minor or incompetent heirs, in their own benefit, and while said condition of minor or incompetent heirs subsists.
Prodigality is qualified by the maker of thr trust itself. In this case, the trust shall lasts up to five (5) years after the death of the maker, unless the alleged prodigal evidences before the specialized judge that he/she is capable of administering his/her property.
The trust company, in any case, must attend to the maintenance of the minor or incompetent heir, on account of the income resulting from the trust.
Article 245: ACTION TO ANNUL THE TRUSTEE TRANSFER
The action to annul the trustee transfer effected to swindle the creditors expires after six (6) months of the publication of an ad that notifies said transfer in the Official Gazette during three (3) consecutive days. In any case, this expiration shall take place two (2) months from the date in which the creditor has been personally notified of the constitution of the trust.
Article 246: FORMALITY
The founding of the trust is effected and perfected by a contract entered into by and between the trustor and trust company, formalized by means of a private instrument or public deed.
When the contract involves the trust transfer of property, it must be registered in the Risk Office of the Superintendency, as considered convenient by the trustor.
The unilateral will of the trustor as expressed in his/her will shall also be relevant.
In order to block the trust for third parties, it is required that the transfer to the trust of the goods and rights registered be entered in the corresponding public deed and that the other kind of goods and rights be perfected with tradition, endorsement or other requirement provided for by the law.
In the case of guaranty trusts, registration thereof in the respective register grants the same order of priority applicable based on the date of its registration.
Article 247: TESTAMENTARY TRUST DOES NOT REQUIRE ACCEPTANCE
For the testamentary trust to be valid, the acceptance of the trust company appointed or trust beneficiaries are not required. If such trust company or trustee reject the appointment, it must propose a replacement, and should no other company accept such commission, the trust shall be annulled.
The trusts referred to herein are considered constituted since the Initiation of the Probate Proceedings.
Article 248: VALIDITY OF TRUSTS IN FAVOR OF INDETERMINATE PERSONS
The trust established in favor of indeterminate persons meeting meet certain conditions or requirements, or of the general public, provided the qualities required for enjoyment of the trust benefits or rules to grant them appear in the document of constitution.
Trusts in benefit of the trustor itself are valid.
Article 249: TRUST IN FAVOR OF SEVERAL PERSONS
The trust may be created for the benefit of several persons who must be successively replaced due to the death of the previous person or due to any other even, provided the replacement takes place in favor of persons who exist when the right of the first appointee is confirmed.
Article 250: TRUSTEE INTERVENING IN THE CONTRACT
Should the trust beneficiary be a party to the contract, he/she shall be titleholder of the rights established therein in his/her favor, all of which may not be altered without his/her consent.
In all other cases the trustor and the trust company may agree to the amendments deemed appropriate, including the termination of the trust, except this infringes the rights acquired by third parties.
The trustor may also revoke the trust contract constituted under gratuitous title, except as provided by the first paragraph and, also, if such right had been waived. Should this power be created, he/she shall pay the trust company the penalty agreed to, or, otherwise, that established by the respective specialized judge or arbitration court.
In order to amend or revoke a trust contract, the assignees of the trustor shall, in any case, have the unanimous consent of the trust beneficiaries, or in the case of indeterminate assignees, they shall have the approval from the Superintendent.
Article 251: MAXIMUM TERM
The maximum term of a trust is thirty (30) years, with the following exceptions:
1. Regarding life trusts in benefit of specific trust beneficiaries that are born or conceived at the time of constituting the trust, the term shall be extended to the date of the death of the final trustee.
2. Regarding cultural trusts, which objective is the establishment of museums, libraries, archaeological, historical or artistic research institutes, the term can be indefinite and the trust shall subsist for as long as it is feasible to comply with the purpose for which it was constituted.
3. Regarding philanthropic trusts, which objective is the alleviation of the situation of those that are mentally challenged, orphans, abandoned elderly people, and needy people, the term can also be indefinite and the trust shall subsist for as long as it is feasible to comply with the purpose or which it was constituted.
It the cases in which the trust period must necessarily be extended further than the maximum legal limit in order not to be detrimental to the interests of third parties, the Superintendency may authorize is validity for the term that is strictly necessary for the achievement of its goals.
Article 252: POWERS OF THE TRUSTEE OVER THE GOODS RECEIVED
The trustee has domain over the trust assets, and this gives him / her full powers including those of management, use, disposal and repossession over the property constituting the trust assets, all of which are practiced pursuant to the purposes for which the trust was created, in agreement with the limitations set forth in the constituting instrument.
Depending on the nature of the trust, the trustor and his or her assignees are the titleholders of a personal credit right against the trust assets.
The trust company may only dispose of the entrusted property in agreement with the stipulations contained in the constituting instrument. Any acts of disposal effected that contravene the agreement may be annulled if the acquirer did not act in good faith, except in case the transfer was effected through any stock exchange. The proceeding may be filed by any of the trustees, trustor, and trust company itself.
Article 253: EQUITY IN TRUST.
The trust assets are not liable for the obligations of the trustor or of his / her assignees and, in the case of the obligations of trustees, such liability is only payable through the proceeds or payments at their disposal, as applicable.
In the event that the trust company does not object to the measures affecting the trust assets, the trustor or any trust beneficiaries may do so. Both are empowered to cooperate in the defense, should the trust company have filed an objection.
The trust company may assign to the trust beneficiary or trustor any necessary powers for them to practice protective measures regarding the trust assets, without being released from liability.
Article 254: LIABILITY OF PROPERTY CONSTITUTING TRUST ASSETS
The property constituting trust assets is subject to the payment of obligations and liabilities undertaken by the trust company in the practice of trust domain in terms of the acts it carries out to achieve the purposes for which the trust was created and, in general, in accordance with the constituting instrument.
Except as otherwise provided for, the property constituting the trust assets of the trust company, the trustor, trust beneficiary and recipient of the remainder, are not liable for such payment.
Article 255: LIQUIDATION OF TRUST COMPANY.
In the event of the liquidation of the trust company, those who hold a legitimate interest shall have the right to identify and redeem any existing property and rights which belong to the trust assets, at any stage of the process inasmuch as it does not form part of the remaining assets.
For the value of the property, liquid resources and rights lost or not identifiable of the trust, the trustor shall hold over such remaining assets, for up to the amount of the responsibility of the trust company, a credit supported by a general first order of priority.
Article 256: OBLIGATIONS OF THE TRUST COMPANY.
The following are the obligations of the trust company:
1 To look after and administer the property and rights constituting the trust assets, with the diligence and dedication of an orderly trader and loyal administrator;
2. To defend the trust assets, protecting it from physical damage and judicial actions or extrajudicial acts that could affect or reduce its integrity;
3. To protect with insurance policies the risks run by the trust assets in agreement with the provisions of the constituting instrument;
4. To comply with the duties of the objective of the trust, effecting therefor any acts, contracts, operations, investments or businesses required with the same diligence that the trust company itself applies to its own affairs;
5. To keep an inventory and accounts for each trust, pursuant to law and comply with the substantive and formal tax obligations of the trust assets;
6. To prepare balance sheets and financial statements for each trust, at least every six months, as well as an annual report, and place such documents at the disposal of trustors and trust beneficiaries, without prejudice of their presentation to the Superintendency;
7. Maintain reserve with respect to any operations, acts, contracts, documents and information related to trusts, within the scopes provided for by this Law in terms of the bank secret;
8. Notify trustees of the existence of properties and services available to them, within a term of ten days of availability of such benefit;
9. Return to the trustor or its assignees, at the end of the trust, the remainder of the trust assets, unless, once the objective of the trust transfer has been accomplished, delivery thereof corresponds to the trust beneficiaries or other persons.
10. Transfer to the new trust company, in cases of subrogation, the resources, property and rights of the trust; and
11. Render accounts to the trustors and the Superintendency on termination of the trust or their intervention therein.
Article 257: PROHIBITIONS FOR THE TRUST COMPANY.
The trust company is prohibited from securing, being surety of or guaranteeing in any way whatsoever to the trustor or trust beneficiaries the results of the trust or any operations, acts and contracts entered into with regard to the trust assets.
All agreements to the contrary shall be considered null, the same being the case for any guarantees and undertakings agreed to that contravene the provisions of this article.
Article 258: PROHIBITION OF CARRYING OUT OPERATIONS FOR THE BENEFIT OF CERTAIN PERSONS.
The trust company is prohibited from entering into operations, acts and contracts with the funds and property of trusts, for the benefit of:
1. The company itself.
2. Its directors and workers and, in due case, the members of the committee in charge of the trust.
3. The trust factor or factors.
4. Workers in its trust department and contracted persons for the trust involved.
5. Its external auditors, including professional members of the firm and any professionals participating in the auditing of the company itself.
The prohibitions referred to in this article include the spouses and relatives of the persons indicated and the corporations in which spouses and relatives in conjunction personally hold a participation exceeding fifty percent.
Any operations carried out which contravene the prohibitions set forth above shall be null and void.
Article 259: NON-COMPLIANCE WITH OBLIGATIONS DUE TO FRAUD OR GROSS NEGLIGENCE.
Any trust company that does not comply with its obligations due to fraud or gross negligence, shall return to the trust asset the value of any loss, plus an indemnity for the damage and loss caused, without prejudice of the liabilities applicable in agreement with the law.
Should the original instrument establishing the trust provide for the existence of a committee, board or other governing body, the provisions thereof do not amend the objective of the trust.
Article 260: ISSUE OF BEARER SECURITIES.
The issue of bearer securities backed by a trust asset is subject to the provisions of the Securities Market Act.
Article 261: RIGHTS OF THE TRUST COMPANY.
The following are the rights of the trust company:
1. To charge compensation for its services in accordance with the provisions of the constituting instrument or otherwise, a compensation not exceeding one percent (1%) of the market value of the trust assets; and
2. Take compensation from the resources of the trust for any expenses incurred in with the administration of the trust asset in order to comply with its objective.
Article 262: OBLIGATIONS OF THE TRUSTOR.
It is an obligation of the trustor or its assignees to include in the trust assets, the property and rights set forth in the constituting instrument at the time and place stipulated.
Article 263: TRUSTEES RIGHT TO DEMAND THE BENEFITS GENERATED.
Trust beneficiaries are entitled to demand of the trust company the benefits generated by the trust assets or the capital itself, as stipulated in the original instrument and as appears in the certificate of participation. Such action may be practiced by any of the interested parties, for the part of the benefits corresponding to him / her in the benefits and in agreement with the common interest.
In the case of the first paragraph of Article 259, they may also require the trustor to include in the trust assets the property offered by it.
Article 264: ASSIGNMENT OF RIGHTS.
The trust beneficiaries determined, the trustors and their respective successors may assign their rights to persons who are unfit by law or by the constituting instrument the trust.
Article 265: NULLITY OF TRUST.
The trust is null and void:
1 . If it contravenes the requirement set forth in Article 243.
2. If its objective is illegal or impossible.
3. If the trust company itself is appointed as trust beneficiaries, except in cases of securitization trusts.
4. If all the trust beneficiaries are persons who are legally prohibited from receiving benefits from the trust.
5. If all the goods that should conform it are out of the market.
If the prohibition referred to in point 4 only involves some of the trust beneficiaries, the trust is valid with respect to the others.
Article 266: TRUST OVER GOODS OUTSIDE OF THE MARKET
In the event that one or more of the properties which should comprise the trust are out of the market, the trust is valid and shall subsist with the remaining property.
Article 267: MORE THAN FIVE TRUSTEES.
In the event that the trust beneficiaries should be more than five, they must hold meetings subject to the rules for obligee assemblies established by Articles 236 and 238 of the Business Corporations Act, unless there is a provision to the contrary in the trust instrument.
The objects of the meetings referred to in the preceding paragraph are as follows:
1. Appoint representatives and agents to act as safeguards for the common interest of the trust beneficiaries.
2. Approve amendments to the clauses of the trust, where the consent of the trust beneficiaries is necessary provided that they are not minors or incompetent and are therefore prevented from personally taking part in meetings.
3. Adopt other measures and decisions on behalf of the common interest of their members.
4. In cases of trusts with indeterminate trust beneficiaries, representation shall be assumed by the Superintendency.
Article 268: TRUSTS FOR LONGER TERMS THAN THOSE PROVIDED.
Should the trust be established for a period exceeding that permitted by law, such excess shall be considered null, without prejudice of the provisions of Article 251.
Article 269: TERMINATION OF TRUST.
The trust may terminate due to:
1. Resignation of the trust company, with just cause, accepted by the Superintendency.
2. Liquidation of the trust company.
3. Removal of the trust company.
4. Express resignation of all the trust beneficiaries from the benefits granted to them by the trust.
5. Loss of the property of which it is comprised, or of a substantial part thereof as judged by the trust company.
6. Upon completion of the objective for which it was constituted.
7. Impossibility of the accomplishment of its objective.
8. Resolution agreed between the trustor and beneficiary, with the approval of the trust beneficiaries in the case set forth in the first paragraph of Article 250.
9. Revocation by the trustor, prior to the delivery of the property to the trust company or after compliance with the legal requirements, except as provided for in the first paragraph of Article 250.
10. Expiration of term.
In the cases of points 1, 2 and 3, the causes shall operate if within a period of six (6) months another company to take charge is not found.
Should the revocation referred to in point 9 be partial, the trust shall subsist with regard to the property included in the equity.
Article 270: RETURN OF PROPERTY AT THE END OF THE TRUST.
Should the original agreement not contain any indication of the person to whom the property should be delivered on termination of the trust, it shall be returned to the trustor or its assignees or, in the absence thereof, delivered to the Fund.
Exempted from the provisions set forth in this article are the trusts considered in Article 244, in which the property, in the part where the legitimate rights of some heir have been affected, is delivered to the latter or his / her successors.
Article 271: APPOINTMENT OF A TRUST AGENT.
For every trust it receives, the trust company shall appoint a trust agent, who shall personally assume the conduction thereof and responsibility for any acts, contracts and operations related to such trust. The trust company is severally responsible for any acts which, with respect to the trust, are effected by such agent and the workers of the trustee, except as provided for in the second paragraph of Article 259.
One person may be the agent of several trusts.
The appointment of such agent must be reported to the Superintendency, body that is empowered to direct his removal at any time.
Article 272: POSSIBILITY OF APPOINTING DESIGNATING ADMINISTRATIVE COMMISSIONS.
Should the nature or the number of the operations, acts and contracts concerning the property of a trust or required for the completion of its objective so justify, the trust company shall appoint a trust administrative commission, consisting of at least three (3) but no more than seven (7) members, which shall regulate its operation and powers, always subject to the rules contained in the constituting instrument of the trust.
For the same reasons set forth in the preceding paragraph, the trust company may contract ad-hoc personnel for each trust. Such personnel may only practice their rights with respect to the property of the respective trust and the length of their labor relationship shall be subject to the subsistence of the trust that determined their employment. Such contracts must be in writing.
Article 273: SEPARATE ACCOUNTING FOR EACH TRUST.
The trust property is administered by the trustee.
The trust company must keep separate accounts for trust asset under its control in duly legalized books without prejudice of the corresponding accounts and records appearing in the company’s books, accounts and records that must reconcile with the former.
The trust company has no right of ownership over the property constituting the trust asset, it being responsible for the administration thereof.
Article 274: TRUST AS GUARANTY
Any company granting credit under a trust guaranty with a third trust company shall compensate the unpaid credit with the result obtained from the execution of the trust asset, as provided for in the contract, or with the trust asset itself when made up of money, duly notifying the Superintendency in the latter case.
The conditions of trustee and creditor are mutually exclusive.
COMMISSIONS OF TRUST
Article 275: COMMISSIONS OF TRUST
Companies may accept and execute the commissions of trust set forth below in agreement with point 32 of article 221, without prejudice of the others authorized by the Superintendency:
1. Carry out the functions of depositary and Supervisor of attached goods, unless the deposit includes money.
2. Provisionally administer the businesses and companies that are in the process of economic and financial restructuring in agreement with the law on the matter.
3. Comply with the functions of administration, execution and liquidation of the goods of the companies declared in bankruptcy in agreement with the law on the matter.
4. Be administrators of common goods by agreement of those interested, or through the appointment of a specialized judge in the case of article 772 of the Civil Procedures Code.
5. Act as testamentary or court appointed executor.
6. Keep under custody the goods of minors or incompetent persons in the cases referred to in article 503 of the Civil Code and in all cases in which said Code provides for or authorizes the appointment of special, testamentary or court appointed custodian, for all or part of the goods of minor or incompetent persons.
7. Act as custodians of goods of those judicially declared as missing.
8. Administer the goods bequeathed by means of a will or donated under a condition or up to a specific date, in order to deliver them to the heirs, legatee, or donees when the conditions is complied with or the date reached.
9. Assume the administration of the goods bequeathed by means of a will or by an inter vivos act for public works, welfare or education establishments or other lawful purposes determined by the testator or donor, subject to the will of the provider.
10. Assume the management of the goods left by a will or inter vivos act with the purpose of the trustee solely receiving the income during his/her life or during the term determined by the provider.
11. Act as administrators of goods encumbered with usufruct, when so established in the constituting instrument.
12. Serve as representative of the titleholders of bonds issued by stock companies.
13. Administer portfolios.
14. Enter into agreements of power of attorney, with or without representation, including general or special powers to:
i. Administer goods
ii. Collect credits or documents
iii. Purchase and sell shares, bonds and other personal property.
iv. Receive dividends and interests
v. Represent the titleholders of shares, bonds and securities.
Article 276: RULES ON COMMISSIONS OF TRUST
The following rules regulate the practice of commissions of trust conferred on the companies:
1. The companies are subject to the provisions of commercial law and common law, in the parts not amended by this law.
2. It is not necessary for the companies to grant bonds, nor for their representatives to take oaths in the cases in which other legal provisions require them.
3. The companies may excuse themselves from accepting the commissions as well as waive their right thereto without expression of cause; however, in said case they are in the obligation of adopting the urgent measures imposed by the circumstances, in order not to affect the rights of those conferring the commission.
Article 277: USE OF MONEY ON WHICH COMMISSIONS OF TRUST ARE BASED
The money on which commissions of trust are based, or that result therefrom is invested in agreement with the instructions of the client or with the objective of the commission of trust, in the manner determined in the constituting acts. When no instructions are available, it is applied within a term of fifteen (15) days of having been received, to the acquisition of public debt certificates, obligations of the Central Bank or securities and other investment modalities allowed by the legislation regulating the activities of the Private Pension Fund Administrators.
On lapsing of the above-mentioned term without the investment having been made, and as long as it does not take place, the company shall acknowledge the highest lending interests of the financial system.
Article 278: CUSTODIANS OF PROPERTY BELONGING TO MINORS
In the case of point 6 of article 275, the prohibitions established in articles 538 and 546 of the Civil Code are applicable to the custodian company, its directors and workers. The property of the company are not subject to legal mortgages in order to respond for the administration thereof.
Article 279: ADMINISTRATION OF PROPERTY OF MINORS OR INCOMPETENT PERSONS
The institution of forced heir in favor of a minor or incompetent person can be made under the conditions that, during the minority or incompetence of the heir, the property constituting the legitimate estate be administered by a company, notwithstanding the fact that the minor has a father or mother, or the incompetent person has a guardian appointed by law.
Article 280: ADMINISTRATORS OF ENCUMBERED PROPERTY WITH USUFRUCT
In the case of point 11 of Article 275, the rights and obligations of the company are set forth by the founder, otherwise those corresponding to the bare legal owner.
Article 281: DISSOLUTION OF THE COMPANY EXECUTING THE COMMISSIONS OF TRUST
If a company practicing commissions of trust were to undergo a dissolution and liquidation process or resign from its positions, the Superintendent or specialized judge, as applicable, may appoint a replacement. Preferable, the company appointed should be in the same location.
COMPANIES OF THE FINANCIAL SYSTEM
Article 282: DEFINITIONS:
1. Banking company: a company which main business consists on receiving money from the public as deposit or under any other contractual modality, and on using said money, its own capital, and that obtained from other sources of financing to grant credits under various modalities, or to apply them in operations subject to the market risks;
2. Financial Company: a company that obtains resources from the public and which specialty consists on facilitating the placements of primary securities issues, operating with bearer securities and render advisory of financial nature;
3. Rural Credit and Savings Bank: that which obtains resources from the public and which speciality consists of granting financing preferable to the medium, small and micro enterprises of the rural areas;
4. Municipal Savins and Credit Bank: that which collects resources from the public and which specialty consists of carrying out financing operations, preferably to small and micro enterprises;
(*) 5. Municipal Popular Credit Bank: that which specializes in granting pawned credits to the general public, also having the power to effect asset and liability operations with the respective Provincial and District Councils and with the municipal companies depending on the former, as well as to render banking services to said councils and companies;
6. Company for the development of the small and micro enterprise EDPYME: that which specialty consists of granting financing preferable to the businessmen of small and micro businesses;
7. Financial leasing company, which specialty consists of the acquisition of personal and real property, all of which shall be assigned in use to an individual or corporation in exchange for a periodical rental payment and with the option of purchasing said property at a predetermined value;
8. Factoring company, which specialty consists of the acquisition of approved invoices, securities and, in general, any bearer securities representing a debt;
9. Bond and guaranty company: which specialty consists of granting bonds to guaranty individuals or corporations before other companies of the financial system or foreign companies, in operations related to foreign trade;
10. Trust services company, which specialty consists of acting as trustee in the administration of autonomous trust assets, or in the compliance with trust commissions of any nature;
11. Savings and Credit Cooperatives, authorized to collect resources from the public to which reference is made in article 289 of this law.
Article 283: OPERATIONS EXECUTABLE BY BANKING COMPANIES
The banking companies may execute all the operations set forth in article 221, except for those indicated in points 16 and 42, for which they need the authorization of the Superintendency with the prior opinion of the Central Bank.
Article 284: OPERATIONS EXECUTABLE BY FINANCIAL COMPANIES
The financial companies may execute the operations set forth in points 3b, 6, 15, 23, 28 and 29 of article 221 and all those set forth in module 2 of article 290. For the extension of their operations, they must comply with the requirements established in this article.
Article 285: OPERATIONS EXECUTABLE BY RURAL SAVINGS AND CREDIT BANKS
The rural savings and credit banks, may execute the operations set forth in points 2, 3b), 6, 8, 9, 11, 12, 15, 23, 25, 28, 29 and 39 of article 221 of this law. The other operations set forth in article 221 may also be executed by these companies provided they meet the requirements established in article 290.
Article 286: OPERATIONS EXECUTABLE BY MUNICIPAL SAVINGS AND CREDIT BANKS
The municipal savings and credit banks may execute the operations authorized by their special laws. Additionally they may execute the operations set forth in points 23, 29 and 39 of article 221. In order to access the other operations set forth in article 221, they shall comply with the provisions of article 290.
Article 287: OPERATIONS EXECUTABLE BY THE MUNICIPAL POPULAR CREDIT BANKS
The Municipal Popular Credit Banks may execute the operations referred to in point 5 of article 282 of this law. Moreover, they may execute the operations set forth in points 23, 29 and 39 of article 221. In order to access to the other operations set forth in article 221, they shall comply with the provisions of article 290.
Article 288: OPERATIONS EXECUTABLE BY EDPYMES
The EDPYMES may execute the operations set forth in points 3b), 4, 6, 11, 15, 23, 28, 29 and 39 of article 221 and in subpoint iii of point 14 of article 275 of this law. The other operations set forth in article 221, may also be executed by these companies provided they comply with the requirements contained in article 290.
Article 289: SAVING AND CREDIT COOPERATIVES AUTHORIZED TO OBTAIN RESOURCES FROM THE PUBLIC
The Savings and Credit cooperatives may operate with resources from the public, understood as persons that are not shareholders thereof if they are cooperative stock companies.
They have the following characteristics:
1. The capital stock of these cooperative companies is represented by corporate shares, regulated by this law and by the stock company regime of the Business Corporations Act;
2. They are obligated to maintain the legal reserve referred to in article 67 of this law, without it being necessary for them to maintain any cooperative reserve whatsoever;
3. The administration of these cooperative companies is regulated by the norms of the Business Corporations Act, stock company regime;
4. The cooperatives may execute the operations set forth in points 2, 3b, 4, 6, 11, 15, 23, 28, 29 and 39 of article 221, and subpoint iii of point 14, of article 275 of this law. The other operations set forth in article 221 may also be executed by these companies provided they comply with the requirements contained in article 290.
5. The norms contained in this law are applicable to these companies, which are subject to the direct supervision of the Superintendency.
6. They are not regulated by the General Cooperatives Act, single restated text approved by supreme decree 074-90-TR.
Article 290: MODULAR OPERATIONS SCHEME
If the companies referred to in articles 284 to 289 with to extend the framework of the operations they may execute, they must evidence before the Superintendency that they comply with the requirements of this article for each module of the operations. The authorization of the Superintendency must have the prior opinion of the Central Bank.
The categories, characteristics and operations allowed for the operation modules are those detailed below:
1. MODULE 1
a) Point 2 article 221: Receive term and savings deposits as well as in custody
b) Point 4 of article 221: Discount and grant advances over bills of exchange, promissory notes and other debt instruments;
c) Point 7 of article 221: Issue, notify, confirm and negotiate letters of credit, whether on sight or term, in agreement with the international practices and, in general channel foreign trade operations;
d) Point 10 of article 221: Carry out factoring operations;
e) Point 30 b) of article 221: Issue payment orders
f) Point 32 of article 221: Accept the powers of attorney as detailed in Article 275;
g) Point 34 of article 221: Issue and manage credit and debit cards;
h) Point 36 of article 221: Promote foreign trade operations as well as render integral advisory on the matter;
i) Point 39 of article 221: Act as trustees where trusts are involved;
j) Point 40 of article 221: Buy, keep and sell gold;
k) Point 41 of article 221: Grant pawned credits for jewels or other gold and silver objects;
1. Minimum required capital S/.3,750,000.00
2. Class; “A” or “B” in the last 12 months
3. Internal Controls: Adequate for a new operation
4. Administration: AD-hoc for a new operation
2. MODULE 2
a) Point 1 of article 221: Receive on sight deposits without granting overdrafts and without the possibility of conversion by the Central Bank
b) Point 5 of article 221: Grant mortgage and secured loans; and in relation to them, issue credit instruments, mortgage and pawned securities, both in domestic and foreign currency;
c) Point 8 of article 221: Act jointly with other companies to grant credits and guaranties, under the responsibilities considered in the respective agreement;
d) Point 9 of article 221: Acquire and negotiate certificates of deposit issued by companies to grant credits and guaranties under the responsibilities considered in the respective agreement;
e) Point 11 of article 221: Carry out credit operations with domestic companies, as well as make deposits therein;
f) Point 12 of article 221: Carry out credit transactions with foreign banks and financial institutions, as well as make deposits in either of them;
g) Point 13 of article 221: Purchase, maintain and sell shares of banks or other institutions abroad that operate as financial intermediaries or in the securities market, or are auxiliaries of either, in order for their activities to be at an international level. In the case of the purchase of these shares, in a percentage of over 3 percent (3%) of the receiver’s net worth, prior authorization from the Superintendency is required;
h) Point 14 of article 221: Issue and place bonds in domestic or foreign currency, including regular, convertible, financial leasing and subordinate bonds of various types and currencies, and promissory notes, negotiable or nonnegotiable certificates of deposit and other instruments representing liabilities;
i) Point 17 of article 221: Acquire, keep and sell instruments representing private debt and instruments representing capital for the negotiable portfolio that are subject matter of any centralized mechanism of negotiation in agreement with the pertinent law on the matter;
j) Point 18 of article 221: Acquire, keep and sell shares of companies which object is to provide supplementary or auxiliary services to companies and/or their subsidiaries;
k) Point 19, article 221: Acquire, keep and sell, as participants, certificates of participation in mutual trust and investment funds;
l) Point 20 of article 221: Buy, keep and sell public debt instruments, both domestic and foreign, as well as bonds from the Central Bank;
m) Point 21 of article 221: Buy, keep and sell bonds and other securities issued by multilateral credit agencies of which the country is a member;
n) Point 24 of article 221: Issue bank certificates in foreign currency and make foreign exchange operations;
o) Point 25 of article 221: Serve as a financial agent to place and invest foreign funds in Peru;
p) Point 26 of article 221: Execute portfolio purchase and sale contract;
q) Point 27 of article 221: Effect structured financing operations and purchase and sell securities, pursuant to the Securities Market Act;
r) Point 30 a) of article 221: Issue cashier’s checks;
s) Point 31 of article 221: Issue travelers checks;
t) Point 33 of article 221: Receive Securities, documents and objects in custody, as well as lease out safe deposit boxes;
u) Point 35 of article 221: Execute financial leasing operations;
v) Point 37 of article 221: Sign temporary first security issues with partial or total guarantees of their placement;
w) Point 38 of article 221: Provide financial advisory services without this implying the management of money of customers or their investment portfolios on their account;
x) Point 3 of article 224: Organize Subsidiaries to act as Stock Exchange brokerage companies;
y) Point 4 of article 224: Organize Subsidiaries to establish and administer mutual fund and investment fund programs;
(**)z) Point 6 of article 224: Organize Subsidiaries to act as trustees in securitization trusts.
aa) The other operations authorized for Module 1.
1. Minimum required capital S/.3,750,000.00
2. Class; “A” or “B” in the last 12 months
3. Internal Controls: Adequate for a new operation
4. Administration: AD-hoc for a new operation
3. MODULE 3
a) Article 30: Opening of subsidiaries or foreign agencies
b) Point 3a) of article 221: Grant overdrafts or current account advances and access to Central Bank conversion
c) Point 22 of article 221: Buy, keep and sell debt instruments issued by the governments of the countries approved by the Superintendency;
d) Point 30 a) of article 221: Issue cashier checks on its own account, with access to Central Bank conversion.
e) Point 1 of article 224: Organize subsidiaries to establish real property capitalization companies
f) Point 2 of article 224: Organize subsidiaries to operate as general deposit warehouses;
g) Point 5 of article 224: Organize subsidiaries to operate as Custodian, Transportation and cash and securities administration companies;
h) The other operations authorized by Modules 1 and 2.
1. Minimum required capital S/.14,914,,000.00
2. Class; “A” or “B” in the last 12 months
3. Internal Controls: Adequate for a new operation
4. Administration: AD-hoc for a new operation
The sums indicated as minimum required capital are of a constant value and are readjusted in agreement with article 18.
The companies included in module 3, shall require the special authorization of the Superintendency, with the prior opinion of the Central Bank in order to execute any of the following operations:
a) Point 16 of article 221: Take or provide coverage for commodities, futures and related financial products;
b) Point 42 of article 221: Execute, on their own account, operations involving commodities and related financial products
BRANCHES OF FOREIGN BANKS
Article 291: APPLICATION OF THE PROVISIONS OF THIS LAW TO THE BRANCHES OF FOREIGN BANKS
The provisions of this law are applicable to the branches of foreign banks. They have the same rights and are subject to the same obligations of the domestic companies of similar nature.
They may not file diplomatic claims with respect to the businesses and operations effected in the country, to that end invoking any rights resulting from their nationality.
Article 292: SPECIAL EXEMPTIONS FOR BRANCHES
The branch of a foreign bank is not obligated to have a Board of Directors but it must however have personnel vested with full powers to bind it in all matters concerning the development of its activities.
Said branches are empowered to conduct their businesses following the practices established, provided they do not contravene the Peruvian law and are not considered inappropriate or imprudent by the Superintendency.
Article 293: INVESTMENT BANKS
Investment banks are stock companies, which purpose is to promote investment in general, both in the country and abroad, acting either as direct investors, or as intermediaries between investors and the businessmen that confront capital requirements.
Investment banks shall only operate with negotiable portfolios subject to the various market risks, however not being subject to the limitations of article 200, points 2, 3, 4 and 5, nor those of article 214. They may not receive deposits from the public, nor make placements, nor grant contingent credits, therefore lacking a credit portfolio.
They shall encourage the diversification of market risks.
Article 294: OPERATIONS
Investment banks are empowered to execute the following operations and services:
1. Acquire, maintain and sell shares, bonds and instruments similar to those of the stock companies established in the country or abroad on their own account or on account of third parties.
2. Acquire, maintain and sell, as participants, certificates of participation in mutual funds and investment funds.
3. Execute operations in the futures market, related financial products and commodities.
4. Originate, structure, distribute and subscribe, transitorily, in whole or in part, primary securities issues in the domestic or foreign market for subsequent placement among the public, with the power of granting a full or partial guaranty of the placement to the issuer.
5. Advise and facilitate the placement of funds in the country or abroad, through stock exchange transaction in agreement with the legal provisions in force regarding this matter.
6. Grant the securities referred to in the preceding point as guaranty.
7. Issue and place its own liabilities in the market;
8. Identify eventual partners for their clients interested in the purchase of assets or businesses in progress.
9. Render economic and financial advisory services and assess assets and businesses in progress;
10. Accept and comply with commissions of trust, provided that it is an attempt to promote investment, or the merger and transfer of businesses in progress, restructuring of liabilities as well as those compatible with its nature.
11. Act as a liquidating institution of the companies of the financial and insurance systems.
12. All other operations compatible with its nature authorized by the Superintendency with the prior opinion of the Central Bank.
REAL PROPERTY CAPITALIZATION COMPANIES
Article 295: OPERATIONS ALLOWED:
Real property capitalization companies are those which main activities consist of buying and/or building real property, and, in relation to them, enter into individual real property capitalization contracts with third parties, delivering the corresponding real property unit to the investor as deposit. These contracts include the option right of the investor in terms of the acquisition of the real property unit by means of the payment of its price in cash, at any time. These companies may enter into loan contracts for the pre-financing of the real property and issue mortgage certificates.
The individual capitalization amount is not subject to withdrawal and may only be applied to the payment of the purchase price of the real property unit, or recovered by the investor by means of the assignment of its contractual position.
Real property capitalization companies may only execute operations linked with the individual capitalization programs related to the real property market and may not effect placements.
The Superintendency shall issue the norms regulating the various matters related to these types of companies and their operations, including, among others, the following:
1. The characteristics of the real property capitalization contracts entered into with the investors; of delivery of the real property units in civil deposit; the purchase option contract by means of which the investor purchases the real property, that shall not be subject to the term referred to in article 1423 of the Civil Code; as well as the contracts of assignment of the contractual agreements entered into by such persons.
2. The pre-financing regime and issue of mortgage instruments in domestic and foreign currency.
Article 296: RATING OF THE COMPANIES OF THE INSURANCE SYSTEM
Insurance companies, subject, at least every six months, to a risk rating regime carried out by independent rating companies in order to evaluate the obligations undertaken with their insured parties.
Should there be two different ratings, the lowest one shall prevail.
The Superintendency shall rate the companies of the insurance system in agreement with the previously established technical criteria and judgement of general character, that shall consider, among others, the systems of risk measurement and administration, capital solidity, profitability and financial and management efficiency, as well as liquidity.
Article 297: PUBLICATION OF INFORMATION
The Superintendency publishes, at least quarterly, updated information with the purpose of disseminating the main indicators of the capital and financial and managerial situation of the insurance companies, moreover, it may include its rating. Said information includes statistics regarding the payment and rejection of claims effected by the insurance companies.
INSURANCE AND REINSURANCE COMPANIES
LIMITS AND PROHIBITIONS
CAPITAL AND INSTRUMENTS
Article 298: SOLVENCY EQUITY
Insurance and/or reinsurance companies shall at all times have an effective equity that may not be lower than the solvency equity.
The amount of the solvency equity is established based on the highest figure resulting from the application of the following criteria:
1. The solvency margin set forth in agreement with article 303; and
2. The minimum capital established in article 16.
Article 299: EFFECTIVE EQUITY USED TO COVER INSURANCE AND/OR REINSURANCE RISKS
1. The effective equity of the companies of the insurance system that is used to cover insurance and/or reinsurance operations may be constituted as follows:
a) Paid up capital, facultative and legal reserves and premium for the issue of shares; and
b) The computable portion of the subordinate debt meeting the requirements that the Superintendency establishes for that purpose and based on a general basis, including, as applicable, bonds that may be converted into shares at the exclusive decision of the issuer.
2. The following procedure is followed for the determination of the effective equity eligible to cover insurance and/or reinsurance risks, adjusted by inflation in due time:
a) Sum of the paid-up capital, supplementary capital premium, and the legal and facultative reserves, as applicable;
b) Sum of the profit of preceding fiscal years and of the fiscal year in course, after the declaration referred to in article 187;
c) Subtraction of the amount of all the investment in subordinate bonds and shares of diverse nature made by the insurance companies in insurance companies engaged in other lines; and
d) Subtraction of the losses of the preceding fiscal years and the fiscal year in course.
e) Subtraction of the goodwill resulting from the company reorganization, as well as from the acquisition of investments.
Article 300: EFFECTIVE EQUITY USED TO COVER CREDIT RISKS
When the insurance company grants the bonds referred to in article 304, grants financing to its insured parties for the payment of their insurance premiums, or grants mortgage loans, its shall dedicate a portion of its effective equity, in the part that exceeds its solvency equity, to cover the credit risk, in compliance with the provisions of general nature issued by the Superintendency.
Article 301: PREFERENTIAL SHARES AND SUBORDINATE BONDS
The insurance and/or reinsurance companies shall comply with the provisions of article 60 of this law.
The subordinate bonds issued by the insurance companies shall have the characteristics and limits specified in article 233 of this law, as well as those that are established by the Superintendency by regulations of general nature.
Article 302: LIMITS OF INDEBTEDNESS
1. Limit of indebtedness related to the insurance and/or reinsurance operations.
The insurance and/or reinsurance companies may only take credits, in the country or abroad for a sum not exceeding an amount equivalent to its effective equity.
Should the limit of indebtedness provided by this article be exceeded, it shall advise the Superintendency thereof within two (2) business days following the respective verification and present, within the following fifteen (15) business days a program approved by its Board of Directors wherein it sets forth the measures adopted to eliminate the excess within a term not exceeding three (3) months.
Non-compliance with the provisions of this article shall be sanctioned with a monthly fine equivalent to one and a half (1.5) times the average monthly interest rate for lending operations to thirty (30) in the respective currency and market published by the Superintendency. As from the second month, and throughout the period of the violations, this fine shall be progressively increased in fifty percent (50%) from month to month.
2. Limit of indebtedness related to granting of bonds.
When insurance companies have allocated a portion of their effective equity to cover a credit risk resulting from the granting of bonds, the limit of such operations, based on their contingent credits weighted by credit risks shall be eleven (11) times said capital, in the form specified in the second section of this law.
This limit of indebtedness is independent of that established in point 1 above.
Non-compliance with this limit is subject to the sanctions set forth in article 219.
Article 303: SOLVENCY MARGIN
The solvency margin is determined y the Superintendency based on:
1. The annual amount of the premiums
2. The medium burden of claims of the last three fiscal years.
To such end, the Superintendency chooses the criterion that, on being applied, determines the highest amount between the two.
When the solvency margin exceeds the effective equity, the insurance company must present a capital adaptation program in agreement with the regulations issued by the Superintendency to that end.
Non-compliance with the provisions of this article shall be sanctions with a monthly fine equivalent to that set forth in the last paragraph of point 1 of article 302.
Article 304: OPERATIONS SUBJECT TO CREDIT RISK
The operations referred to in article 318 shall be subject to the following rules:
1. Bonds, credits for the financing of premiums and other credits are subject to the application of the credit risk weighting factors set forth in articles 188 and 195. These operations shall be subject to the provisions and norms regarding limits, financial and/or mixed conglomerates contained in Section Two of this law and shall be kept in duly identified separate accounts with respect to the insurance operations.
2. The subsidiaries organized by the insurance companies for the execution of financial operations are subject to all the provisions of this law.
Article 305: GUARANTY FUND
The companies of the insurance system shall maintain the equivalent to thirty-five percent (35%) of its solvency equity as a Guaranty Fund. This Fund is different and complementary to the portions of capital respectively directed to the following:
1. To constitute the solvency margin of the insurance and/or reinsurance risks.
2. As applicable to bear credit risks.
Article 306: TECHNICAL RESERVE
Insurance and/or reinsurance companies shall monthly constitute the following technical reserves:
1. For claims, including those that took place and were not reported, past due capital and incomes or benefits of the insured parties, pending adjustment or payment.
2. Mathematical, over life or income insurance
3. For risks in course or non-accrued premiums
4. For catastrophes and uncertain casualty risks
Article 307: CLAIM RESERVE
The reserves of casualties, past due capitals and incomes of the insured parties, pending adjustment or payment, are constituted by the amount of the respective liquidation, without including the recoverable part of the reinsurer.
Article 308: MATHEMATICAL RESERVE
The mathematical reserve over personal insurances is constituted over the basis of actuarial calculations, taking into account the total number of insurance policies. The provisions relative to the calculation are passed by the Superintendency.
Article 309: RESERVE FOR RISKS IN COURSE
The reserve for risks in course of premiums not accrued consists of the part of withheld premiums, excluding the annulments used to cover the period of validity not expired in the current fiscal year. They shall be constituted monthly, following the procedures set forth by the Superintendency.
Article 310: RESERVE OF CATASTROPHIC AND UNCERTAIN CASUALTY RISKS
The reserve for catastrophic and uncertain casualty risks is established by order of the Superintendency. Its purpose is to cover the risks of unpredictable frequency and the risk of cataclysms or other similar phenomena, so as to ensure the normal development of the activities of insurance companies.
Article 311: BACKING FOR THE TECHNICAL RESERVE, MINIMUM SOLVENCY EQUITY AND GUARANTY FUND
Insurance and/or reinsurance companies must at all times back the totality of their technical reserves, minimum solvency equity and guaranty fund with the assets indicated below and within the limits set forth:
1. Cash: up to two percent (2%);
2. Deposits and payments of any nature in companies of the financial system in the country and abroad: up to twenty percent (20%);
3. Securities issued by the Central Government or Central Bank: up to thirty percent (30%);
4. Instruments representing the deposit transactions executed by the companies of the financial system, including bonds: up to thirty percent (30%);
5. Bills of exchange, bonds, certificates and other mortgage instruments issued by companies of the financial system: up to thirty percent (30%);
6. Qualified corporate bonds: up to thirty percent (30%);
7. Shares listed in the stock exchange, with the exception of those of other insurance companies that operate in a different line of business, and security investment mutual fund installments: up to thirty percent (30%);
8. Financial instrument issued or guaranteed by other States or Central Banks of foreign countries, by multilateral credit institutions or first class foreign banks duly qualified by risk rating companies of international prestige: up to thirty percent (30%);
9. Urban real property located in the national territory: up to thirty percent (30%);
10. Premiums receivable of disability or survival insurance corresponding to the funds received by the Private Pension Fund Administrators and by the balance of the individual account of affiliates of said pension system, with the sole restriction resulting from their operational limits;
11. Premiums receivable that are not past due, non accrued premiums originated in insurance contracts with a termination clause for lack of payment: up to ten percent (10%) to back the minimum solvency equity without limits with respect to the reserve for risks in course;
12. Loans guaranteed with life insurance policies issued by the company at hand: no limit;
13. Premiums receivable that are not past due of the general assignment insurance companies, by virtue of the reinsurance contracts; without limits in the case of backing technical reserves; and
14. Other investments authorized by the Superintendency: up to thirty percent (30%).
The Superintendency, in agreement with the technical conditions, may change the limits set forth above.
In order to back the technical reserves, the minimum solvency equity and guaranty fund, the assets indicated in points 4, 6 and 7 above, as applicable, must be previously classified.
The assets consisting of bearer securities must be registered in the Public Register of Bearer Securities kept by CONASEV, except for those indicated in points 6, 7 and 8, as applicable, all of which shall be registered in the Register of Securities of their respective countries.
Article 312: DIVERSIFICATION LIMIT PER ASSET ISSUER
Without prejudice of the provisions of the preceding article, points 2, 4, 5, 6, 7 and 8 thereof are regulated by the diversification limit per asset issuer backing the technical reserves, the minimum solvency equity and guaranty fund, for up to ten percent.
Article 313: CLASSIFICATION OF INVESTMENTS
The classification categories established by the Superintendency for the assets set forth in article 311 have the following factors:
Category I or equivalent: 1.0
Category II or equivalent: 0.8
Category III or equivalent: 0.4
Category IV or equivalent: 0.2
Category V or equivalent: 0.0
In no case whatsoever may the investments be effected in assets classifying in categories IV and V or equivalent.
Article 314: LIMIT FOR ASSETS ISSUED BY A FINANCIAL CONGLOMERATE OR ECONOMIC GROUPS
The total investments in the assets comprised by points 2, 4, 5, 6, 7 and 8 of article 311, issued by a single company or by companies that make up a single economic group or financial and/or mixed conglomerate may not exceed twenty percent (20%) of the technical reserves of the minimum solvency equity and the guaranty fund of the insurance company. Said limit is reduced to half when the issuer or issuers belong to the same conglomerate that the insurance and/or reinsurance company forms part of.
Article 315: INVESTMENTS NOT CONSIDERED AS BACKING OF THE TECHNICAL RESERVES, MINIMUM SOLVENCY EQUITY AND GUARANTY FUND
The investments exceeding any of the limits set forth in articles 311 and 312 shall not be considered as backing of the technical reserves, minimum solvency equity and guaranty fund.
Article 316: INVESTMENT DEFICIT
When an insurance and/or reinsurance company presents an investment deficit in the technical reserves, minimum solvency equity and guaranty fund, it shall advise the Superintendency thereof within two (2) business days following the corresponding verification. Moreover, it is obligated to submit, within the following fifteen (15) business days, a program approved by its Board of Director which sets forth the measures adopted for the solution of such deficit within a term not exceeding three (3) months.
The Superintendency is empowered to demand that the deficit be covered within a shorter term.
The investment deficit shall be sanctioned with a monthly fine equivalent to one and a half times the average monthly interest rate for lending operations to thirty (30) in the respective currency and market published by the Superintendency. As from the second month, and throughout the period of the violations, this fine shall be progressively increased in fifty percent (50%) from month to month.
Article 317: ASSETS BACKING RESERVES MAY NOT BE ENCUMBERED OR ATTACHED
The assets backing the technical reserves, minimum solvency equity and the guaranty fund of a company of the insurance system may not be encumbered, nor be subjected to any precautionary measures, act or contract that prevents or limits its free availability.
The property of insurance and/or reinsurance companies representing the investment of their mathematical reserves over life insurance that may be used for compliance with commitments and obligations undertaken with insured parties, trust beneficiaries and reinsurance companies may not be attached either, unless the precautionary measure is adopted to guaranty the compliance with the obligations resulting from the insurance or reinsurance contracts entered into by the company.
Article 318: OPERATIONS
1. OPERATIONS OF INSURANCE AND REINSURANCE COMPANIES
In general, insurance and/or reinsurance companies may carry out all operations, acts and contracts necessary to extend risk coverage or to issue caution policies linked to services to be performed or not, including the operations of assignment or acceptance of reinsurance, as applicable, as well as make investments. They may also grant credits to the insured parties for payment of their insurance premiums.
Moreover, and after the extension of their authorization to operate, they may issue bonds, execute commissions of trust and trusteeships.
2. OPERATIONS OF THE SUBSIDIARIES OF INSURANCE COMPANIES
The companies of the insurance system may organize as subsidiaries:
a) A financial company which shall be regulated by the provisions of sections one and two of this law, and
b) A Health services provider as referred to in Legislative Decree 887.
The various activities and operations comprised by this article shall be subject to the regulations issued by the Superintendency.
Article 319: ASSOCIATION OF INSURANCE COMPANIES
Insurance companies may become associated amongst themselves, by incorporating corporations which sole purpose is that of forming reinsurance systems, having the condition of assignors and reinsurers, over all or part of the insurance lines. To this end, they must request the Superintendency to grant them the corresponding authorizations for organization and operations.
These reinsurance companies are subject to compliance with all the norms set forth by this law.
Article 320: VERIFICATION BY THE SUPERINTENDENCY OF THE AMOUNTS OF RETENTION
The Superintendency shall verify that the retention amounts established by the insurance companies for the various risks that they operate in respond to the technical, economic and financial conditions of each one of them.
Article 321: OTHER AUTHORIZED OPERATIONS
With the consent of the insured party, having due authorization of the Superintendency, and in agreement to the formalities set forth by it, insurance companies may:
1. Assign one or more lines of their current insurance portfolios to other companies of similar nature authorized to issue policies in the same lines.
2. Establish work occupational accidents and disease coverage systems.
Article 322: AUTONOMY OF INSURANCE AND REINSURANCE CONTRACTS
The reinsurance contract does not subordinate the relations resulting from the insurance contract. Consequently the payment of a casualty in agreement with the insurance contract may not be conditioned to the existing relations between the insurance and reinsurance companies.
The Superintendency may establish exceptions to this provision by means of a norm of general nature.
Article 323: REINSURANCE
Insurance companies may freely contract reinsurance in the country or abroad, subject to the regulations issued by the Superintendency.
Moreover, this organism shall establish the minimum catastrophic risk percentage that must be reinsured abroad.
Article 324: REGISTER OF FOREIGN REINSURANCE COMPANIES
The Superintendency keeps a register of foreign reinsurance companies.
In order to be registered in the above-mentioned register, the interested company shall submit an application indicating the date as from which it is authorized to operate, including the following documents:
1. Legalized copy of its current corporate bylaws
2. The last annual report, in which its financial statements appear, duly audited by independent auditors.
3. Copy of the power of attorney granted to a resident in the country that will represent it with full powers.
Moreover, the applying company shall evidence that:
a) It is legally incorporated in its country of origin and is capable of reinsuring risks assigned from abroad.
b) Its equity is of at least US$10,000,000.00 or equivalent in foreign currency.
c) It has no inconvenience in paying, in agreement with the legal provisions of its country of origin, in freely convertible currency, the obligations resulting from the reinsurance contracts subscribed abroad.
Article 325: ACTIVITIES PROHIBITED FOR INSURANCE COMPANIES
The insurance companies are prohibited from:
1. Giving assets applied to the investment to which reference is made in Article 311 as guarantee.
2. Executing operations with shares representing its capital stock
3. Lending money in any form or guaranteeing or warranting the responsibilities of their directors and workers, with the exception of loans for single housing granted pursuant to the provisions of article 201.
4. Paying compensation for claims in excess of what has been agreed.
Article 326: CONDITIONS AND CONTENT OF THE POLICIES
The conditions of the policies and rates respond to the free competition regime of the insurance market, in agreement with the rules contained in this chapter.
The policies must establish the risk coverage conditions.
Moreover, said policies must comply with the following minimum requirements:
1. Their content must adapt to the legal provisions regulating the insurance contract;
2. The general, particular and special conditions of the policy must be drawn in an easily understandable language;
3. The basic coverage and exclusions must appear in bold type;
4. The amount of the premium;
5. As applicable, they shall specify the official registration number of the insurance broker and the commission it shall receive, that is fixed freely by agreement between the insurer and the insurance broker.
Article 327: READJUSTMENT OF INSURED CAPITALS, PREMIUMS AND INDEMNIFICATIONS
Unless agreed to in foreign currency, the insured capitals, premiums and indemnifications may be expressed in the insurance policy in national currency of constant acquisitive value (VAC). The respective redemption values shall be determined by adjusting them in agreement with the index of article 240.
Article 328: INSURANCE CONDITIONS AND RATES REPORTED TO THE SUPERINTENDENCY
The policy models, rates and conditions resulting from the provisions of articles 9, 326 and 327 do not require the prior approval of the Superintendency, however, they must be reported to it before use and application. Said organism is empowered to prohibit the use of policies drawn up with conditions that do not satisfy the provisions of the above-mentioned articles.
Article 329: INSURANCE COVERAGE
In the case of insurance valid for no more than one (1) year, the coverage begins with the acceptance of the insured party’s application by the insurance company and the payment of the premium. In the cases where due to the characteristics of the insurance it must necessarily have a validity exceeding one (1) year, the matter shall be subject to the regulations issued by the Superintendency.
Article 330: CAUSE FOR AUTOMATIC TERMINATION OF THE CONTRACT
In the case of the second paragraph of the preceding article, the total or partial default in payment of the premium may be a cause for automatic termination of the contract, as decided by the company of the insurance system. In this case the insurance shall be covered in the part proportional to the premium paid.
Should the automatic termination not be chosen, the company shall have the right to file a petition for the payment of the premium accrued plus interests, expenses and taxes originated by the issue of the policy through executive channels.
All agreements contravening the provisions hereof shall be null and void.
Article 331: REVOCATION OF THE COMPANY’S AUTHORIZATION
The systematic supply of policies not complying with the principles set forth in articles 9, 326 and 327, the requirement of conditions not provided for by law or by contract for the payment of indemnification and all reiterated practices that have the purpose of unfairly avoiding or delaying the compliance with the obligations originated in the insurance contract, shall result in the revocation of the company’s authorization to operate in the line or lines in which said bad conduct is verified.
Article 332: CLAIMS
The indemnification paid directly to the insured party, beneficiaries and/or endorsees, shall be effected within a term not exceeding thirty (30) days following the acceptance of the claim.
The acceptance of the claim occurs when the insurance company approves or has not rejected the adjustment agreement duly signed by the insured party within a term not exceeding ten (10) days counted as from subscription thereof. In case the insurer does not agree with the adjustment set forth in the agreement, it may require a new adjustment within a term not exceeding thirty (30) days, in order to accept or reject the claim, determine a new amount or propose the application of the arbitration clause.
In cases in which there is no adjustment agreement, the claim shall be considered accepted when the insurer has not issued a statement with respect to the amount claim within a term not exceeding thirty (30) days counted as from the date of delivery of the complete documentation required in the policy for the payment of the claim. Moreover, when the insurance company requires a longer term to make additional investigations or obtain sufficient evidence regarding the origin of the claim or to adequately determine its amount, it may submit a duly justified request therefor, requiring the Superintendency to grant it an additional term. Said term may not exceed ninety (90) days, counted as from the date of delivery of the complete documentation required in the respective policy.
In case of default in payment on part of the insurance company, it shall pay the insured party an annual default interest equal to one point five (1.5) times the average rate for lending operations in Peru, of the currency expressed in the insurance contract during the whole period of delay.
Article 333: EXCEPTIONS REGARDING THE TERMS SET FORTH IN ARTICLE 332.
Not included in the terms referred to in the preceding article are those cases regulated by specific national laws or international agreements, those stipulated as such in the respective policy such as indemnification for casualties exclusively originated by robbery or theft of automobiles, those where an arbitration proceeding has been initiated, and those where a judicial proceeding that the insurance company is not a party to has been initiated.
AUTONOMOUS CREDIT INSURANCE EQUITY
AUTONOMOUS CREDIT INSURANCE EQUITY
Article 334: CONSTITUTION OF AUTONOMOUS CREDIT INSURANCE EQUITY
All insurance companies may constitute autonomous credit insurance equity, which it shall be the administrator of, all of which shall grant coverage and assume the risk against the payment of the self-insurance premium.
Article 335: INSURANCE AND REINSURANCE BROKERS
The name of insurance intermediaries makes reference to insurance and reinsurance brokers.
The Superintendency authorizes and regulates the practice of the activities of intermediaries and keeps a register of them, in which the services of the insurance lines that each one may operate in are specified.
The intermediation of insurance granted by foreign companies shall be subject to the general regulations issued by the Superintendency.
Article 336: REGISTRATION OF INSURANCE INTERMEDIARIES
The Superintendency sets forth the requirements for registration of insurance intermediaries as well as their obligations, rights, guaranties and other conditions that they must subject their activities to, having to comply with at least the following:
1. Maintain their competent capacity to engage in their activities.
2. Not be involved in any cases of incompatibility or impediments.
3. Be up to date in the payment of their contributions to the Superintendency.
Article 337: INSURANCE BROKERS
Insurance brokers are individuals or corporations that, at the request of the insured party, may act as intermediaries in the execution of insurance contracts and advise the insured parties or contracting parties of the insurance in matters that they are competent in.
Article 338: FUNCTIONS AND DUTIES OF INSURANCE BROKERS
The insurance broker has the following functions and duties:
1. Act as intermediary in the contracting of insurance.
2. Advise the insurance company, on behalf of the insured party, of the risk conditions.
3. Advise the insured party or contracting party of the insurance, of the clauses of the contract with details and accuracy.
4. Verify that the policy contains the stipulations and conditions according to which the risk is covered.
5. Notify the insurance company of any changes of the risk that would require a variation on the coverage amount.
Article 339: ACTIVITIES PROHIBITED FOR INSURANCE BROKERS
Insurance brokers are forbidden to subscribe risk coverage on their own behalf or to collect premiums on behalf of the insured party.
Article 340: POWER GRANTED THROUGH THE LETTER OF APPOINTMENT OF THE INSURANCE BROKER
The letter of appointment that the insured party or contracting party issues to an insurance broker, empowers him/her to effect administrative acts of representation but not acts of disposal.
The notifications submitted to the insurance broker have effect in relation to its customer.
Article 341: INSURANCE APPLICATION AND AMENDMENTS MUST BE SIGNED BY THE INSURED PARTY
The insurance application and subsequent amendments proposed by the insurance broker to the insurance company must be signed by the insured party or contracting party, as well as the copy of the policy issued and subsequent amendments. Said documents must be returned to the insurance company.
Article 342: FUNCTIONS OF REINSURANCE BROKERS
The reinsurance broker has the following functions and duties:
1. Act as intermediary in the contracting of insurance.
2. Advise the insurance company in terms of the selection of the reinsurance contracts.
3. Maintain the insurance companies informed in terms of the changes and tendencies of the reinsurance markets that may determine the convenience of amending a program or reinsurance contract.
4. Render advise regarding the presentation, follow-up and collection of claims that the insurance company shall formulate.
Article 343: FUNCTIONS OF THE CASUALTY ADJUSTER
The claim adjuster has the following functions:
1. Estimate the value of the insured property before the occurrence of the casualty in the event that it was covered by the policy.
2. Examine, investigate and determine the known or assumed causes of the casualty
3. Qualify, inform and issue an opinion as to whether the casualty is covered by the conditions of the policy.
4. Establish the amount of the losses or damages covered by the policy.
5. Set forth the amount that must be indemnified in agreement with the conditions of the policy.
6. Establish the salvage value in order to reduce it from the figure of damages, or for its commercialization by the insurance company.
The expert appraisal of the adjuster does not bind the parties and is independent of them.
Article 344: FUNCTIONS OF THE INSURANCE EXPERTS
The functions of the insurance expert are the following:
1. As risk inspector, to examine and qualify a good, a responsibility or an operation, as an action that must take place before the insuring process, with the purpose of the insurance company appreciating the risk that it must cover.
2. As forecaster, to issue an alert regarding the possibility of a damage or loss taking place, recommending the actions to be taken to avoid or reduce one or the other.
3. As damage inspector, to investigate the damages and losses, estimating the amount of one or the other, as well as the value of the objects damaged.
NAME, PURPOSE AND DOMICILE
Article 345: SUPERINTENDENCY OF BANKING AND INSURANCE
The Superintendency of Banking and Insurance is a constitutionally autonomous institution organized under public law, which purpose is to protect the interests of the public in the fields of the financial and insurance systems.
The Superintendency practices within its attributions, the control and supervision of the companies of the Financial System and Insurance System and other individuals and corporations organized in agreement with this law or special laws, exclusively in the corresponding matters.
The Superintendency supervises the compliance with the Organic Law and complementary provisions of the Central Bank, without prejudice of the practice of its autonomy, not including the aspect relative to the purpose and functions contained in articles 83 to 85 of the Political Constitution of Peru.
Article 346: AUTONOMY AND SCOPE OF COMPETENCY OF THE SUPERINTENDENCY
This law determines the framework of the functional, economic and administrative autonomy of the Superintendency of Banking and Insurance; it establishes its location within the structure of the State; defines the scope of its competency; and sets forth the other functions and attributions.
All laws or legal provisions other than this law, may not establish norms that must be obligatorily and imperatively complied with by the Superintendency.
Article 347: PURPOSE OF THE SUPERINTENDENCY
The Superintendency is responsible for the defense of the public interest, guaranteeing the economic and financial soundness of the individuals and corporations under its control; enforcing the legal, regulatory and statutory regulations governing their activities; practicing, to that end, the broadest control over all of their transactions and businesses, filing criminal claims against unauthorized individuals and corporations practicing the activities set forth in this law, and closing their offices, and, as applicable, requesting the dissolution and liquidation of the violator.
Article 348: SEAL USED
The Superintendency uses an official seal with the Coat of Arms of the Republic and the inscription “Republica del Peru – Superintendencia de Banca y Seguros”.
All documents subscribed by the Superintendent that bear the above-described seal, shall be considered authentic.
The Superintendency has its legal domicile in the city of Lima and may establish offices in any other place of the Republic for the better compliance with its objectives.
ATTRIBUTIONS AND FUNCTIONS
Article 349: ATTRIBUTIONS
The Superintendent has the following attributions, in addition to those already established in this law:
1. Authorize the organization and operation of corporations that have the purpose of carrying out any of the operations set forth by this law;
2. Ensure the compliance with the laws, regulations, bylaws and all other provisions that regulates the Financial System and Insurance System, to that end having the broadest and absolute control over all operations, businesses and, in general, in any juridical act that the companies of said systems execute;
3. Fully supervise the companies of the Financial System and Insurance System, those subjected to its supervision in agreement with the special laws and those executing complementary operations;
4. Supervise the individuals or corporations that invest funds in the country;
5. Interrogate, under oath, any person whose testimony may be useful for the clarification of the facts examined during the inspections or investigations, for which purpose it may order that said person be subpoenaed, to that end having the powers authorized by the Civil Procedures Code for this diligence.
6. Interpret, in administrative channels, subject to the provisions of common law and the general principles of law, the scopes of the legal norms that regulate the companies of the Financial system and Insurance System, as well as those rendering complementary services, its decisions being regarded as administrative precedents of obligatory compliance;
7. Approve or amend the regulations that the Superintendency issues;
8. Establish the general norms that regulate contracts and instruments related to the operations set forth in Title III of Section Two of this law and approve the general contracting clauses to which the companies under its competency are subjected, as provided for by the pertinent articles of the Civil Code;
9. Issue the norms necessary for the practice of financial and insurance operations and complementary services of the companies’ activities and for the supervision thereof, as well as for the application of this law.
10. Issue the necessary provisions in order for the companies of the financial system to adequately comply with the agreements subscribed by the Republic having the purpose of combating money laundering;
11. Establish the existence of financial or mixed conglomerates and practice a consolidated supervision with respect to them pursuant to the provisions of article 138.
12. Provide for the individualization of risks for each company, separately;
13. Issue the general norms to specify the elaboration, presentation and publicity of the financial statements, and any other complementary information, ensuring that they reflect the real economic-financial situation of the companies, as well as the norms on consolidation of these financial statements in agreement with the generally accepted accounting principles;
14. Enter into cooperation agreements with other Superintendencies and related entities in other countries with the purpose of a better practice of the consolidated supervision;
15. Enter into agreements with the national supervisory organisms with the purpose of an adequately practicing said supervision;
16. Make coordinations with the Central Bank in all cases set forth in this law;
17. Without prejudice of the provisions of article 269 of the Securities Market Act, the Superintendency may issue guidelines of general nature which the rating of the companies of the financial system and insurance system must abide by; and
18. In general, it is empowered to carry out all the necessary acts to safeguard the interests of the public in agreement with this law.
Article 350: POWER OF INSPECTION
For the development of the power of inspection referred to in the preceding article, the Superintendent may examine, through the means considered necessary, books, accounts, archives, documents, correspondence, and, in general, any other information necessary for compliance with its functions. The company, representative or broker is in the obligations of providing all the facilities required by the personnel in charge of the inspections for compliance with their objective.
The refusal, resistance of non compliance of the obligees, provided they are duly accredited, shall result in the imposition of any of the sanctions set forth in article 361.
Moreover, it may require all the background information deemed necessary to determine the financial situation, resources, administration or management, acts of representatives, degree of security and prudence with which the investments are effected and, in general of any other issue, that must be clarified in the opinion of the Superintendent.
Third parties may also be asked to render testimony and requested to exhibit books and documents, action that shall be carried out within the limits set forth by article 47 of the Code of Commerce.
Article 351: CLOSING OF OFFICES AND DISSOLUTION OF BREACHING COMPANIES
The Superintendent shall order the immediate closing of the offices where unauthorized operations are being executed as per this law, with the intervention of the Public Prosecutor’s Office. Moreover, it shall order the seizure of the documentation found therein wherefore it is empowered to directly request the support of public force. The practice of this power does not generate any responsibility whatsoever for the Superintendent.
Those who fail to comply with the requirement referred to in the preceding paragraph shall incur in the crime of abuse of authority as provided for in the first paragraph of article 378 of the Criminal Code.
Moreover, the Superintendent shall file the corresponding claim with the purpose of bringing criminal suit against the violators, process wherein the Superintendency shall be considered as the aggrieved party. Therefore, it must act as a civil party and offer the necessary proof to clarify the crime.
Article 352: DISSOLUTION OF THE BREACHING COMPANY
Without prejudice of the power that the article 365 of the Business Corporations Act grants to the Executive Branch, the Superintendent has the power to directly file a petition before the Supreme Court for the dissolution of the breaching company referred to in the preceding article.
The Superintendency shall directly appoint the liquidators, the provisions of article 365 of the Business Corporations Act mentioned above not being applicable.
The liquidation process shall be in agreement with the provisions of the Business Corporations Act, the expenses originated with this procedure having to be assumed by the breaching company.
Article 353: DISSEMINATION OF THE INDICATORS OF THE SUPERVISED COMPANIES
The Superintendency must public its annual report by May 31 of each year at latest. Moreover, it must periodically disseminate the information regarding the main indicators of the situation of companies subject to its control, being able to order them to publish any other information that it judges to be necessary for the public.
CONTROL AND SUPERVISION
Article 354: PROVISIONS REGARDING THE ELABORATION AND PRESENTATION OF FINANCIAL STATEMENTS
For the purposes referred to in point 13 of article 349, the Superintendency is authorized to:
1. Request the supervised companies to constitute provisions and reserves for the assets and contingencies that involve credit and market risks, in agreement with the general provisions issued on the matter;
2. Require that investments and other positions subject to market risks be adjusted to their market value in agreement with the methodology established by it;
3. Require that real property and other assets that appear in the books be adjusted to their real market value, in agreement with the methodology established by it.
4. Forbid companies from paying dividends and distributing profit, regardless of the modality used, as long as they do not comply with the requirements set forth in the preceding points; and
5. When, the Superintendency is not supplied with the information with respect to any asset or contingency that would allow for adequate evaluation and qualification thereof, it shall be empowered to order the constitution of the provisions considered necessary with relation to such assets or contingencies.
Article 355: REPORTS ON THE USE OF PROFIT AND THE COMPANIES THAT PRESENT FINANCIAL INSTABILITY OR DEFICIENT ADMINISTRATION.
All companies are obligated to submit to the Superintendency a report explaining the agreements adopted as to the declaration of dividends or other form of application of the profit or disposition of resources. The term within which to submit said report is of ten (10) business days, counted as from the date of adoption of the agreement, a similar term having to elapse in order for the contents thereof to become effective.
The Superintendency may suspend the agreements of use of profit for as long as it does not receive explanations that satisfactorily respond to the observations formulated with regard to said agreements.
In the case of companies that have financial instability or a deficient administration, the Superintendency must provide for the equity evaluation and adjustments deemed pertinent. Moreover, for up to a period of 6 (six) months, renewable for the same term, the Superintendency is empowered to forbid said companies from executing one or more of the following operations:
1. Take additional risks of any and all kinds with any individual or corporate body directly or indirectly related to the property or management of the company, with or without guaranties;
2. Renew for over 180 (one hundred eighty) days, any operation that implies risks;
3. Execute operations that generate new market risks;
4. Purchase, sell or encumber fixtures or real property corresponding to their fixed assets or to their permanent financial investments;
5. Transfer documents from their credit portfolio;
6. Grant credits without collateral; and
7. Grant Powers of Attorney for the execution of the operations set forth in the preceding points.
Similarly, in case a company shows financial instability or a deficient administration, the Superintendency must provide for the equity evaluation and adjustments deemed pertinent.
Article 356: DETERMINATION OF VIOLATIONS
The Superintendent is empowered to provide for the subpoena of one or more representatives of the companies when it considers that there are indications of their instability, or when they have incurred in one of the following infractions:
1. Transgress any legal norm, provision or order that the Superintendency has issued in practice of its attributions.
2. Conduct its businesses or operations in a prohibited or unauthorized way.
3. Reduce the capital stock to figures that are lower than the legal minimum.
4. Exceed the limits set forth by this law in their operations.
5. Have a reserve deficit
6. Keeping books and accounting in such way that its revision does not allow for an accurate appreciation of the true status of the supervised company, or records that doe not offer the due security.
7. Others set forth by this law.
The Superintendency may require all individuals and corporations, even when they are not comprised within the scope of its competence, the presentation of the information considered necessary to determine possible violations of this law. Those not complying with said requirement within the terms established by the Superintendency for each case, shall incur in the crime of contempt and resistance to authority.
Article 357: INSPECTIONS
Without prior notice and at least once a year and when it deems so convenient, the Superintendency shall make general and special inspections, directly or through auditing companies it authorizes, with the purpose of examining the situation of the companies supervised, determining the content and scopes of such inspections.
Article 358: NOTIFICATION TO THE PUBLIC PROSECUTOR’S OFFICE
The Superintendent shall advise the Public Prosecutor’s Office of the criminal offences that have been detected in the course of the inspections practiced on the institutions subject to its control.
Article 359: REPORTS
The examinations to which reference is made in this law shall be used to prepare written reports. The content of these reports shall be made available to the supervised company as determined by the Superintendent, in order for it to adopt the pertinent corrective measures within the term set forth to that effect with the intervention of its highest governing body. Due to their confidential nature, said reports may not be used by the parties as evidence in judicial or arbitration courts.
The Superintendent may provide the Central Bank with copies of the written reports required by it for due compliance with the functions attributed to it by the Constitution and the Law.
Article 360: PROHIBITION OF REVEALING THE RESULTS OF THE REPORT
All employees, delegates, agents or persons rendering services to the Superintendency, Central Bank, auditing companies, and risk rating companies, are prohibited to reveal the information obtained in the performance of their functions to third parties.
Those violating the prohibition set forth in this article shall incur in a major offence and in the crime typified in article 165 of the Criminal Code.
Article 361: SANCTIONS
The Superintendency shall apply the following sanctions in agreement with the seriousness of the transgression committed:
2. Fine applied to the company for an amount of at least ten taxable units but not greater to two hundred taxable units, unless this law specifically provides for a different amount.
3. Fine applied to the director or worker responsible of at least point five taxable units but not greater than one hundred taxable units.
4. Suspension of the director or worker responsible for a term of at least three days but not greater than fifteen, and removal in case of recidivism.
6. Disablement of the director or worker in case they are responsible for the intervention in or liquidation of the institution that they are in charge of.
7. Prohibition from distributing dividends.
9. Suspension or annulment of the authorization for operation
10. Dissolution and liquidation.
The sanctions set forth in points 1, 2, 3, 4, 5, 6 and 7 of the preceding article shall e imposed by the authorized officials. The fine scale shall be established by the Superintendency.
The transgressions subject to sanction are the set forth in the present Law and those that, in a previous and general form, by a rule, typifie
s the Superintendence.
(*) Amended by Law 28184 of February 9, 2004.
Article 362: A CONTENTIOUS ADMINISTRATIVE CLAIM DOES NOT SUSPEND THE EXECUTION OF THE SANCTION
The filing of a contentious administrative claim does not suspend the execution of the sanction.
If the fine were not paid within five days following notification thereof, it shall be subject to enforced collection, being readjusted based on the Wholesale Price Index published monthly by the National Institute of Statistics and Informatics for the whole country, plus the corresponding legal interests.
Article 363: SUPERINTENDENT
The official of higher hierarchical level of the Superintendency is the Superintendent of Banking and Insurance. The superintendent is appointed by the Executive Branch, the Congress of the Republic having to ratify said appointment.
The position of superintendent shall have the constitutional term of the government administration that appoints him/her, being able to be appointed for one or more successive periods. The superintendent shall continue in office until a successor is appointed. The superintendent is prohibited from engaging in any remunerated economic activity, with the exception of teaching.
If due to any reason the office for which the Superintendent is appointed is not completed, his/her replacement shall be appointed within sixty (60) days following discontinuance, the replacement having to be in office throughout the constitutional period that appointed him/her in agreement with the provisions of the preceding paragraphs.
Article 364: REQUIREMENTS TO ACT AS SUPERINTENDENT
The following are the requirements necessary to act as Superintendent:
1. Be a Peruvian citizen.
2. Be over 30 years old.
3. Have specialized studies and experience of at least five years in economic, financial and banking affairs.
4. Have an exemplary conduct and acknowledged trustworthiness and moral standards.
Article 365: IMPEDIMENTS FOR THE APPOINTMENT AS SUPERINTENDENT
The following are impediments for the appointment as superintendent:
1. Have a direct or indirect participation in the capital or equity of any company subject to the supervision of the Superintendency
2. Act as director, advisor, official or employee of the companies subject to the control of the Superintendency.
3. Having been declared bankrupt, even if the respective proceeding was discontinued.
4. Having been condemned for the commission of fraudulent crimes, even when having undergone rehabilitation.
5. Having been disabled by the Superintendency as organizer, shareholder, director or manager of the companies subject to its control.
6. To incur in any of the impediments set forth in this law for acting as organizer, shareholder, director or manager.
7. Having been sanctioned by the Superintendency for acts of bad management in the direction or administration of the companies subject to its control.
8. Having been discharged from a public office or having been dismissed due to serious offence.
Article 366: SERIOUS OFFENCE AND REMOVAL OF THE SUPERINTENDENT
The following are considered serious offences of the Superintendent:
a. Not having adopted the necessary measures to sanction, as applicable, those who execute activities of the companies subject to the control of the Superintendency without having the corresponding authorization therefor.
b. The violation of the prohibitions set forth in article 365.
c. Not applying the sanctions referred to in article 361 when having duly verified information that undoubtedly evidences the transgression committed.
The removal of the Superintendent is effected by the Congress, by its own initiative, or at the request of the Executive Branch in the following cases:
1. When, in the performance of his/her functions he/she incurs in a serious offence that has been duly verified and grounded.
2. When in the absence of the reasons considered in the preceding point, a final arrest warrant is issued against the Superintendent.
Any criminal complaint filed against the Superintendent of Banking and Insurance shall be directly filed before the Attorney General, who shall be the only claimant of the criminal suit against him/her. In case the complaint was declared well founded, the Attorney General shall submit it to the specialized Superior Court in and for Lima, which shall take cognizance of the matter in the first instance. The sentence may be appealed before the Supreme Court of the Republic, which shall act as the revising and final instance.
This procedure is applied to the Deputy Superintendents.
Article 367: POWERS OF THE SUPERINTENDENT
For the administrative management of the Superintendency, the Superintendent is empowered to:
1. Determine and amend the organic structure of the Superintendency.
2. Approve and amend the Regulations of the Organization and Functions of the Superintendency and other provisions required for its normal and efficient operation.
3. Program, formulate, approve, execute, extend, amend and control the annual budget of the Superintendency.
4. Appoint the officials of greater hierarchy and assign the functions considered necessary.
5. Appoint the official that shall substitute him/her when absent or when temporarily prevented from acting as such.
6. Establish the amount from which the managers of the companies subject to the control of the Superintendency, shall advise their Board of Directors of the credits, guaranties and investments and sales effected.
7. Issue provisions that lead to an effective coordination of the activities of the Superintendency with those of the internal or external auditors of the companies subject to its control, as well as the auditing companies and risk rating companies.
8. Appoint, contract, suspend, remove or dismiss personnel of the Superintendency as well as establish their remunerations; and assign its attributions to any of them.
9. Enter into contracts and other acts required for the normal development of the activities of the Superintendency, including those of rendering services for the execution of specific works, unless expressly assigned.
10. Enter into agreements with State organisms or other foreign banking, financial and insurance supervision institutions for training and the exchange of information in the matters of supervision.
11. Any other powers leading to the adequate compliance with the objectives of the Superintendency.
12. All others set forth by this law and the provisions governing other institutions subject to the control of the Superintendency.
Article 368: PROCEDURAL POWERS OF THE SUPERINTENDENT
The procedural powers that the Superintendent confers on any worker of the Superintendency are not subject to the formalities provided for by article 72 of the Civil Procedures Code for purposes of granting them. Thus, for the power to be effective, it shall be sufficient for it to appear in a Resolution that is duly signed and sealed by the Superintendent.
Except as provided to the contrary by the Superintendent, it is assumed that the powers conferred by it contain all the general and special powers to litigate, the principle of literalness contained in the second paragraph of article 75 of the Civil Procedures Code not being applicable for this effect.
Article 369: ADMINISTRATIVE INSTANCES
All administrative resolutions issued by the Superintendency in the practice of its attributions may be subject matter of reconsideration before the official that issued it and appealed before the Superintendent who constitutes the last and second instance, within the terms set forth by the General Law of Administrative Procedures.
This provision is not applicable for the resolutions issued by the Superintendent, according to its knowledge, in the cases of exceptions provided for by this law.
The resolution issued by the Superintendent is the end of the administrative channel.
Article 370: (*) CONTENTIOUS ADMINISTRATIVE ACTION
Revoked by the Law N° 27584 published in December 7, 2001
A contentious administrative action may be filed against the resolution of the Superintendent, within fifteen (15) business days counted as from the date following the notification.
The Superintendent shall refer the claim to the competent courtroom of the Supreme Court within fifteen business days after the claim was filed.
The competent courtroom of the Supreme Court shall issue a resolution within a term of sixty (60) days counted as from the expiration of the term set forth in the preceding paragraph.
ADMINISTRATIVE AND ECONOMIC REGIME
Article 371: LABOR REGIME
The personnel of the Superintendency is comprised by the labor regime of the private activity, wherefore their labor rights are exclusively regulated by that legislation.
The rights and obligations of the personnel shall be established in the Internal Work Regulations approved by the Superintendent. Said norm shall additionally establish the prohibitions for the personnel.
Article 372: NON DISCLOSURE OF INFORMATION
All employees, delegates, agents or persons rendering services to the Superintendency under any title are prohibited to disclose any detail of the reports issued, or give strangers any information regarding any matter, business or situation that was brought to his/her attention during the performance of his/her duties.
Article 373: BUDGET OF THE SUPERINTENDENCY
The budget of the Superintendency shall be approved by the Superintendent of Banking and insurance, who shall be responsible for the administration, execution and control thereof, and be covered by means of advance quarterly contributions on account of the supervised companies.
The General Comptrollership shall be responsible for the control of the execution of the budget of the Superintendency.
Article 374: CONTRIBUTIONS OF THE SUPERVISED COMPANIES
The contributions that must be effected by the supervised companies are established by the Superintendent on a quarterly basis, as follows:
1. In the case of companies of the financial system in proportion to the quarterly average of their assets without exceeding one fifth of one percent, as previously determined by the Superintendency.
2. In the case of insurance and reinsurance companies, in proportion to the premiums retained during the preceding quarter, without exceeding six percent of the amount of said premiums.
3. In the case of life insurance companies, in the proportion indicated in point 1 of this article.
4. In the case of other institutions or persons subject to its control, equitably, in agreement with the stipulations set forth by the Superintendent by means of a general provision, taking into account the volume and nature of their operations and the limitations contained in the special laws.
5. In the case of companies that have operated during part of the preceding quarter, equitably, in agreement with the stipulation set forth by the Superintendent by means of a general provision, based on the capital and reserves of the respective company.
In exceptional cases the Superintendency may increase said contributions when the circumstances so require it. Such funds shall not be included in the General Budget of the Republic.
The contributions are paid within ten (10) days following the publication of the Superintendency Resolution.
In case of default in payment, the amount of the contributions shall accrue the average lending interest rate in domestic currency, published by the Superintendency during the period of default.
If there were a balance resulting from the contributions at the end of the budget year, the Superintendent shall transfer the balance not pledged to a special account, which may be used to cover the expenses corresponding to subsequent years.
SUSPICIOUS FINANCIAL TRANSACTIONS
Article 375: IDENTIFICATION OF CLIENTS AND MAINTENANCE OF REGISTERS
1. The companies of the financial system shall maintain registered accounts. No non-registered accounts or any accounts kept under fictitious or inaccurate names shall be maintained.
2. The companies of the financial system shall register and verify through reliable means, the identity, representation, domicile, legal capacity, occupation and corporate purpose of such persons, whether occasional or regular clients, through document such as identity documents, passports, birth certificates, drivers license, corporate organization agreements and bylaws, or any other documents, whether official or private, when commercial relations are established, especially when opening new accounts, granting pass-books, execution of trust transactions, leasing safe deposit boxes or the execution of cash transactions exceeding a specific amount as provided for by the Superintendency.
3. The companies of the financial system shall adopt reasonable measures to obtain and maintain information regarding the true identity of the persons in whose benefit an account is opened or a transaction carried out, when there are doubts as to the fact that said clients could possibly not be acting in their own benefit, especially in the case of corporations that do not carry out commercial, financial or industrial operations where their headquarters are located.
4. The companies of the financial system shall maintain registries of the information and documentation required in this article during the term of an operation and for at least ten years as from financing of the transaction.
5. The companies of the financial system shall maintain registries of the identities of their clients, archives of commercial correspondence and accounts as determined by the Superintendency, for at least ten years after the account is closed.
6. The companies of the financial system shall additionally maintain registries that allow for the reconstruction of the financial transactions that exceed a specific amount pursuant to the provisions of the Superintendency, for at least ten years after the conclusion of said transaction.
Article 376: AVAILABILITY OF REGISTRIES
1. The companies of the financial system shall comply, within the term specified, with responding to the requests of information submitted by the competent authorities in relation to the information and documentation referred to in the preceding article in order to be used in criminal, civil or administrative proceedings and investigations, as applicable, in connection with to illegal drug trafficking or related crimes.
The companies of the financial system may not disclose to any person, except for a court, competent authority, the Financial Intelligence Unit or other person authorized by the legal provisions, the fact that a piece of information has been required or provided to the court or competent authority.(*)
(*)Paragraph amended by Law N° 27693 of April 11, 2002
2. The competent authorities may share said information with other national or foreign competent authorities, as provided for by law, and in connection with illegal drug trafficking or related crimes.
The competent authorities shall regard the information referred to in this article as classified, unless said information is necessary in criminal, civil or administrative proceedings and investigations, as applicable, in connection to illegal drug trafficking and related crimes.
3. The legal provisions regarding the banking secret, do not constitute an impediment for compliance with this article, when the information is required or shared by the competent authority.
Article 377: CASH TRANSACTION REGISTER AND NOTIFICATION
1. All companies of the financial system must register, in a form designed by the Superintendency, each cash transaction in domestic or foreign currency that exceeds a specific amount in agreement with the provisions issued by it;
2. The forms referred to in the preceding point shall contain at least the following information related to each transaction;
a) The identity, signature or fingerprint of the person physically executing the transaction;
b) The identity and address of the person on whose behalf the transaction is being performed;
c) The identity and address of the beneficiary or receiver of the transaction, as applicable;
d) The identity of the accounts affected by the transaction, if any;
e) The type of transaction being performed, such as deposits, withdrawal of funds, currency exchange, cashing checks, purchases made with cashier’s checks or payment orders or other payments and transfers made by or through the company;
f) The identity of the company in the financial system in which the transaction was made; and
g) The date, time and amount of the transaction.
The characteristics and models of the forms will be determined by the Superintendence.(*)
(*)Paragraph amended by Law N° 28306 of July 6, 2004
3. Such register shall be accurately and fully kept by the company of the financial system on the date in which the transaction is executed and is kept during a term of ten years as from the date thereof.
4. Multiple cash transactions, whether in domestic or foreign currency, which as a whole exceed a specific amount are considered a single transaction, if made by or on behalf of a particular person during a single day or in any other term established by the Superintendency. In such case, the company, its employees, officials and agents should record, as indicated by the Superintendency, any such transactions brought to their attention. The amount shall be determined from time to time by the Superintendency through a general provision.
5. Transactions executed between the companies of the financial system that are subject to supervision of the Superintendency do not need to be registered in the form referred to in this article.
6. Such registers shall be at the disposal of the court or competent authority, as provided for by law, for use in criminal, civil or administrative proceedings and investigations, as applicable, involving illegal drug trafficking and related crimes.
7. When deemed convenient, the Superintendency may establish that thte companies in the financial system submit within the term it specifies, the form referred to in numbers 2 and 3 of this article. The form may be used as a means of proof or official report and is used for the same purposes set forth in point 6 of this article.
8. The companies of the financial system may not disclose to any person whatsoever, other than a court, competent authority or other person authorized by law, the fact that information has been requested or provided to the court or competent authority.
9. When the information is requested by or shared with a court or competent authority, the legal provisions concerning the bank secret or confidentiality does not constitute an impediment for compliance with this article.
Article 378: REPORTING SUSPICIOUS FINANCIAL TRANSACTIONS
1. The Companies of the financial system should pay special attention to any complex, peculiar and significant transaction, whether effected or not, and to all atypical transaction patterns and non-significant but periodic transactions without an economic or evident legal foundation.
2. Whenever it is suspected that any of the transactions described in point 1 of this article may constitute or involve illegal activities, according to their good criteria, companies in the financial system shall report so immediately to the Financial Intelligence Unit of Peru. Such communication is ruled by the Law N° 27693 and will be sent through the compliance officer, who will use his identification code or secret clue, on behalf of the company of the financial system(*)
Paragraph amended by Law N° 27693 of April 11, 2002 and Law N° 28306 of July 6, 2004
3. The Companies of the financial system that inform the Financial Intelligence Unit of Peru about the suspicious financial transactions described in the present Law and in the Law N° 27693, as well as their shareholders, directors, officers, employees, workers or thirds parts with professional links to the obligated subjects, under responsibility, are forbidden to disclose to any person, entity or organism, including their own supervisory bodies, by any mean or form, the fact that any information has been requested and/or proportioned by the Financial Intelligence Unit of Peru, except on a request of the jurisdictional body or competent authority according to the law (*)
Paragraph amended by Law N° 27693 of April 11, 2002 and Law N° 28306 of July 6, 2004
4. The Companies of the financial system and their employees, officials, directors and other legally authorized representatives are exempted from responsibilities of criminal, civil or administrative nature, as applicable, for non-compliance with this article or for the disclosure of information which restriction is established by a contract or is set forth in any legal, regulatory or administrative provision, irrespective of the outcome of such action.
Article 379: RESPONSIBILITIES OF COMPANIES OF THE FINANCIAL SYSTEM
1. The companies of the financial system, their employees, officials, directors or other authorized representatives that, acting in their conditions as such, participate in illegal drug trafficking or related crimes, shall be subject to more severe sanctions.
2. The companies of the financial system are responsible, by law, for the acts of their employees, officials, directors or other authorized representatives that, acting in their condition as such, participate in the commission of the crimes set forth in article 396-B of the Criminal Code. This responsibility may determine, among other measures, the imposition of a fine or the suspension or revocation of the authorization for operation.
3. The employees, officials, directors or other authorized representatives of companies of the financial system that, acting in their condition as such, deliberately fail to comply with the obligations set forth in articles 375 and 378, or that forge or adulterate the records or reports referred to in said articles.
4. Without prejudice of the criminal and civil liabilities that could correspond in relation to illegal drug trafficking and related crimes, the companies of the financial system that do not comply with the obligations referred to in articles 375 to 378 and 380, shall be sanctioned, among other measures, with the imposition of a fine, the temporary prohibition of effecting transactions or the suspension or revocation of the authorization for operation.
Article 380: PROGRAMS THAT THE COMPANIES OF THE FINANCIAL SYSTEM ARE COMPELLED TO COMPLY WITH
1. The companies of the financial system shall adopt, develop and execute programs, norms, procedures and internal controls to prevent and detect the crimes set forth in articles 296-B of the Criminal Code. These programs shall at least include:
a) The establishment of procedures that ensure a high degree of integrity of the personnel and a system to evaluate their personal, labor and capital background;
b) Permanent personnel training programs such as “know your client” and instruction regarding the responsibilities set forth in articles 375 to 378;
c) An independent auditing mechanism to verify compliance with the programs.
2. The companies of the financial system shall moreover appoint officials at managerial levels in charge of controlling compliance with the internal programs and procedures, including maintenance of the adequate registries and report of suspicious transactions. Said officials constitute a ling with the competent authorities.
Article 381: POWERS OF THE SUPERINTENDENCY
1. Pursuant to the law, the Superintendency is empowered to:
a) Grant, refuse to grant, suspend or cancel the authorization for operations of the companies of the financial system;
b) Adopt the necessary measures to avoid and/or prevent incompetent persons from directly or indirectly controlling or participating in the management, administration and operation of the company of the financial system.
c) Examine, control or inspect the companies of the financial system and regulate and supervise the effective compliance with the obligations of registration and reports set forth in the preceding paragraphs.
d) Verify, through regular examinations, that the companies of the financial system have and apply the programs of compulsory compliance;
e) Provide the competent authorities with the information obtained from companies of the financial system in agreement with articles 375 et seq. Including those resulting from the examination of any of them;
f) Issue instructions or recommendations that help companies of the financial system to detect suspicious patterns in the behaviour of their clients. These guidelines are developed taking into account the modern and secure techniques for the management of assets, and should serve as an educational element for the personnel of companies of the financial system.
g) Cooperate with other competent authorities and provide them technical assistance, within the framework of the investigations and processes regarding illegal drug trafficking and related crimes.
2. In agreement with the law, the Superintendency shall closely cooperate with the competent authorities of other States in the investigations, processes and acts referent to illegal drug trafficking and related crimes.
FINAL AND COMPLEMENTARY PROVISIONS
The Central Bank and the Superintendency shall make the pertinent coordinations in order to comply with the purposes commissioned by the Political Constitution of Peru.
The Superintendent shall be present in the Board of Directors of the Central Bank at least once every three months, in order to engage in the necessary exchange of information regarding its functions.
The Superintendency and CONASEV shall make the pertinent coordinations in order to comply with the purposes of supervision as provided for by the corresponding laws.
The Superintendent shall be present in the Board of Directors of CONASEV at least once every three months in order to engage in the necessary exchange of information regarding the financial and capital markets.
The financial leasing companies and general warehouses shall continue being regulated by their own laws, in all matters not expressly repealed by this law.
They shall be under the authority and control of the Superintendency whether they are subsidiaries of the companies of the financial system or not.
In all criminal claims filed against a company of the Financial and Insurance System or its representatives, as well as any other supervised company, the authority that takes cognizance of said claim shall request the technical report of the Superintendency as soon as the corresponding claim comes to its attention, under responsibility.
Municipal Popular Credit Banks and Municipal Savings and Credit Banks shall continue being regulated by the provisions contained in their respective laws, except with regard to the risk weighting factors, minimum capitals, regulatory capital, limit and levels of provisions established by this law as a guaranty for the savings of the public, and the requirement of their conversion into corporations without the need of a plurality of shareholders.
In agreement with the provisions of article 2 of Law N°26483, amendment to the Organic Law of Municipalities, the Municipal Councils shall appoint their representatives for the directive committee of the Corresponding Bank, all of who shall not be governors.
The norms contained in the Business Corporations Act shall be applicable for the election of the Board of Directors, once private third party shareholders have acquired the majority of the shares of the respective fund.
The regulations of articles 167, 168 and 171, are of general application, even should the credit instrument or real or personal guarantee, referred to in said regulations, not have been received by a company of the financial system.
The Superintendency shall promote the constitution of arbitration courts that are integrated by persons of acknowledged moral and professional standards, and that may issue resolutions with respect to any controversies arising between the companies of the financial and insurance systems, and those arising between said companies and their clients.
It is established that the transfers of mortgaged real property in favor of companies, whether by means of judicial auction or direct adjudication, shall not be subject to the provisions of point 1 of article 1708 of the Civil Code, unless the respective leasing agreement was registered prior to the date of constitution of the mortgage guaranty.
The Glossary that appears in an Annex forming an integral part hereof is hereby approved.
Banking companies that are in operation on enforcement hereof may execute all operations referred to in article 221, with the exception of those set forth in point 16 and 42, for which operations they shall require the supplementary authorization from the Superintendency.
All other companies may also execute the operations that they were authorized to engage in by virtue of Legislative Decree N°770 and special laws regulating them. They may extend the framework of their activities provided the Superintendency grants them the corresponding authorization in agreement with the provisions of articles 290 and 318 of this law.
Andean multinational companies engaged in banking activities are governed by Decision 292 of the Commission of the Cartagena Agreement, without prejudice of the compliance with the provisions regulating the activity of companies and other pertinent provisions of this law.
The companies engaged in rendering money and securities transportation services shall require the authorization of the Superintendency and Ministry of Internal Affairs.
The provisions contained in this law are supplementarily applicable to COFIDE as long as they do not alter its condition as a second tier development bank as established in its bylaws.
Moreover, the Banco de la Nacion, in its conditions as corporation under public law, is regulated by its bylaws, however, it is also subject to the provision contained in article 33.
Both institutions are excluded from the Deposit Insurance Fund.
The Superintendency regulates the procedures established in Section five hereof by means of general provisions in order to ensure compliance with its objectives.
It is established that Article 58 of the Organic Law of the Central Bank, solely refers to banking companies and the companies included in module 3 of article 290.
The Small Industry Guaranty Fund – FOGAPI, is subject to the risk weighing factors, effective equity, limits and level of provisions, established by this law, and to the supervision of the Superintendency.
Multinational banks incorporated in agreement with Decree Law N°2195, and that are in operations, and do not choose to adapt to the general provisions contained in this Law, shall be regulated by the following provisions:
1. Only public or private investment or credit financial institutions and insurance and reinsurance companies of acknowledged creditworthiness in their countries of origin may be shareholders of multinational banks.
2. The minimum subscribed capital of multinational banks shall be fifty million US dollars or its equivalent in other freely convertible currencies. The paid-up capital may not be lower than fifty percent of said sum.
3. Multinational banks are organized with the participation of foreign capital and have the purpose of promoting and participating in all types of banking and financial operations, and investment and development of businesses, services and other related activities in the country and abroad.
4. The banks organized as multinational banks shall be considered foreign as well as their investments and credits in the country, when effected with foreign resources.
5. Multinational banks may execute loan operations pertaining to banking or financial companies in the domestic market, provided they allocate a capital of at least the legal minimum required for banking companies, from its capital stock and in cash, maintaining said resources in the country.
6. For the establishment, transfer and closing of branches or agencies of multinational banks within the country, prior authorization of the Superintendency is required, which shall be granted after taking into account the general and local economic and financial conditions, with the prior report of the Central Bank. In the case of branches or agencies abroad, the only requirement is to inform the Superintendency of their existence.
7. The accounting books and registers required by the Peruvian legal provisions must be kept in Spanish by multinational banks, also being able to be kept in a foreign language as provided by their bylaws.
8. Separate accounts shall be maintained to reflect the operations, incomes and expenses originated by their activities abroad and in the country.
9. The operations executed in the local market shall be registered in domestic currency, the operations in foreign currency being able to be kept in the original currency in auxiliary registers.
10. The consolidated financial statements may be elaborated and presented in the currency established by the respective bylaws.
11. In case the multinational bank had its main offices in another country, the provisions of article 292 of this law shall be applicable.
12. When the multinational bank has its main offices in Peru, it shall be regulated, in the following order, by:
a) The regulations contained in this final provision;
b) Other regulations contained in this law;
c) The regulations contained in its bylaws.
13. When the multinational bank has its main offices outside Peru and has a branch in Peru, it shall be regulated, in the following order, by:
a) The regulations contained in its bylaws in what concerns extraterritorial issues not jeopardizing public savings;
b) The regulations contained in this law in what concerns matters not jeopardizing public savings.
14. When the multinational bank has its main offices outside Peru, it shall be regulated, in the following order, by:
a) The regulations contained in its bylaws;
b) The regulations contained in this final provision in what concerns the information that must be submitted to and the authorizations that must be obtained from the Superintendency.
c) In case the multinational bank is not subject to any supervision mechanism equivalent to that set forth by this law in the country where it has its main offices, the Superintendency may assume said supervision.
15. The multinational banks shall provide the Superintendency with all the information and documentation it requests.
The instruments issued for purposes of securitization and financial leasing bonds, by nature are not subject to advance redemption and may be traded in the secondary market.
The provisions contained in articles 53 and 55 of this law are not applicable to the participation of companies of the financial system in COFIDE.
Moreover, exempted from the provisions of articles 53 and 55, is the participation of the companies of the financial system in the institution referred to in Supreme Resolution Nº346-96-PCM, of September 27, 1996, and in savings and credit municipal banks, which are not subject to the provision contained in item 6 of article 20.”
In all cases provided for in this law, where the opinion of the Central Bank is to be issued, its opinion shall be considered favorable to the request formulated, if it does not issue a report within thirty days.
The risk rating companies to which reference is made herein are regulated by the Securities Market Act, as well as by other similar companies incorporated abroad and previously qualified by the Superintendency.
CONASEV, through general provisions, shall establish the criteria for the link between direct and indirect property and between economic groups in the matters regulated by the Securities Market Act.
The ratios to be used for the purposes provided for in article 148 may be changed by the Superintendency with the prior opinion of the Central Bank.
1. Only the savings and credit cooperatives authorized by the Superintendency to receive money from persons other than their associates, as referred to in article 289 of this law, may operate with the resources of the public.
2. The control of the savings and credit cooperatives not authorized to operate with third parties corresponds, in the first instance to its surveillance council and general assembly of associates.
3. The supervision of the cooperatives referred to in point 2 shall be the responsibility of the National Federation of Savings and Credit Cooperatives or other second class federations acknowledged by the Superintendency and those that voluntarily become affiliated.
4. With respect to affiliated cooperatives, the cooperative federations referred to in point 3 above, are empowered to:
a) Provide for any cooperative to adopt, within the term and in agreement with the conditions established, the necessary measures to reestablish an adequate level of solvency, to that end being able to vary their financial structure and reorganize its administration with the amendments required in their directive and managerial organs;
b) Collect from the cooperatives, all the information requested and demand that they present all types of documentation;
c) Effect external auditing to affiliated cooperatives;
d) Constitute a contingency fund for the financial support of the affiliated cooperatives; and
e) Provide all other services required by the member cooperatives of the respective federation.
5. The government organs of such federations referred to in points 3 and 4 above are the General Assembly, Administrative Council and Management.
6. The Superintendency supervises and controls the federations referred to in points 3 and 5 above and regulate the operations of the savings and credit cooperatives that are not authorized to operate with public resources. To that end, it is empowered to:
a) Collect, by means of said federations, information regarding any of said cooperatives;
b) Do inspection visits;
c) Provide for the adoption of the necessary measures to correct the equity or administrative deficiencies detected.
7. Savings and Credit Cooperatives not authorized to obtain resources from the public have the following characteristics:
a) Have a variable capital based on the amount of contributions of the cooperatives;
b) They may only obtain resources from their members;
c) They may only grant credits to their members;
d) They may not be authorized to receive resources from the public.
e) The deposits of its members are not included within the Deposit Insurance Fund system to which this law makes reference;
f) They are regulated by the General Cooperative Act and complementary and amending provisions.
8. Those who have been found to be administratively or criminally responsible for acts of bad management may not be elected or appointed directives and officials, respectively, of the cooperatives and central savings and credit cooperatives referred to in this final provision.
Repeal Legislative Decree Nº770, as well as Decree Laws Nos. 12813, 25987 and 25612, and complementary and amending provisions.
Repeal articles 10, 31, 32, 33, 34 and 35 of Maritime Mortgage Law 2411, as well as the First Complementary Provision of Legislative Decree Nº857. Maritime mortgages shall be regulated by the general norms of the Civil Code on mortgages, and by the norms contained in article 170 of this law, article 6 of the Tax Code enacted by Legislative Decree Nº816, and, as applicable, by the Equity Restructuring Law, enacted by Legislative Decree Nº847.
Repeal points 2, 4 and 7 of article 73 and article 74 of the General Cooperatives Act, comprised by the Single Restated Text approved by Supreme Decree Nº074-90-TR, Decree Law Nº26091, and, in general, all provisions that oppose or contravene the provisions hereof.
The public registry office must register upon simple presentation, the resolutions issued by the Superintendency by virtue of article 99, item 2, article 107, item 1, and article 355. Moreover, for purposes of the provisions of item 3 of article 99, the contradicting provisions of the Securities Market Act are not applicable
The rights and other goods acquired by third parties in good faith during the intervention regime, are not subject matter of claims, nor are they subject matter of legal or administrative objections. The certifications of the transfers issued by the Superintendency are sufficiently valid so as to be registered in the respective public registry office.
The goods of the company during the intervention regime are not susceptible to any precautionary measure whatsoever.
With the purpose of facilitating the transfers provided for in article 107, or the processes provided for in articles 99 and 151, the Superintendency may, temporarily, provide for exemptions from compliance with some of the limitations set forth by this Law and other provisions that are applicable.
This law shall have force and effect as from the date following its publication in the Official Gazette El Peruano, except for the special terms set forth herein.
The companies of the financial and insurance system that are in business when this law is passed, must adapt their operations and bylaws to the provisions contained herein, within a term of six months counted as from enforcement hereof, except as otherwise provided for hereby.
In case that as a result of the application of the provisions regarding consolidated supervision there were excesses of concentration of placements, the companies shall gradually adapt to the limits established in articles 202 to 211 hereof by December 31, 2001, at latest. However, these levels of concentration may not be increased.
The term for adaptation to the limit set forth in article 202, shall expire on December 31, 2003, not being able to exceed an amount equivalent to 75% (seventy-five percent) of the effective equity of the company as at December 31, 2001, and not being able to exceed 50% (fifty percent) of the effective equity of the company as at December 31, 2002. However the existing levels of concentration to the date of enforcement of this law shall not be increased.
Moreover, the companies of the financial system shall adapt to the stipulations of article 133 hereof within the terms determined by the Superintendency by means of general provisions, all of which shall not go beyond June 30, 2000.
The deficit of reserves existing on the date of enforcement hereof, shall be covered within the terms established by the Superintendency.
Subordinate bonds issued prior to enforcement hereof are regulated by the law that was in force when they were issued.
As from December 31, 2000, the Superintendency may authorize, with the prior opinion of the Central Bank, an increase in the computable portion of the perpetual subordinate bond and long term bonds in over thirty percent of the paid up capital and reserves established in Legislative Decree Nº770, and up to the limits set forth in article 233.
Moreover, as from that date, the Superintendency may authorize the companies to issue subordinate bonds that are eligible as effective equity to exclusively support the market risks, with the following characteristics and requirements:
a) An original minimum expiration of two (2) years.
b) They shall be subject to a special conditions according to which the payment of the interest or the principal will not proceed, even on expiration, if as a result of such payments the effective equity of the company computable for market risks falls or is maintained below the required level.
c) With the exception of cumulative and/or redeemable fixed term bonds, if any, and non committed profits, amounts over two hundred fifty percent (250%) of the accounting capital are not computable.
d) The complementary requirements that the Superintendency may establish.
In addition to the characteristics arising in the preceding paragraphs, subordinate bonds have the general characteristics set forth in the last paragraph of article 233.
The assets and contingencies subject to market risks shall continue being subject to the percentage levels of the risk weighing factors set forth by the Banking, Financial and Insurance Institutions Act, approved by Legislative Decree N°770, as long as the corresponding regulations are not issued.
Savings and credit cooperatives that on enforcement hereof wish to receive resources from the public, must adapt to this law. To this end, the amount of the cooperative reserve shall be deposited to the legal reserve account established hereby, the regulations of article 44 of the Cooperatives Act, Single Restated Text approved by Supreme Decree, N°074-90-TR not being applicable.
The cooperative reserve shall be considered as part of the capital stock contributed by the shareholders to the date of transformation, acknowledging in their favor the proportional part over said funds based on the contributions effectively made to the cooperative. Such contributions shall be represented by corporate shares that may be freely transferable to third parties.
The balance of the legal reserve that the insurance companies have constituted in agreement with the provisions of the Business Corporations Act shall be transferred to the legal reserve to which reference is made in article 64 hereof.
The guaranty fund shall be constituted within a term not exceeding three years, that may be extended by the Superintendency when so required by the circumstances.
Except they adapt to the general provisions contained herein, the existing multinational banks shall be subject to the regime specified in final and complementary provision number seventeen.
The liquidating processes in course within the scope of the Liquidation Committee of Legislative Decree N°770, shall be transferred to the Superintendency by June 30, 1997, at latest. To that end, the Superintendency shall issue the corresponding measures in order for said transfer to be effected without affecting the current realization process of their respective assets. Said processes shall be subject matter of commission pursuant to the provisions of article 115.
The Rural Savings And Credit Banks shall register the pledges on their agricultural property in the respective public registries with non-extendable term of one hundred eighty (180) days counted as from the date of publication hereof. Pledges on agricultural property not registered within such term may not be opposed before other companies in the financial system.
Cash transportation, custody and administration companies, as well as fund transfer companies currently in operations shall adapt to the provisions hereof within a term established by the Superintendency. To that end, they shall subject the respective plan to approval of the Superintendency.
When the State considers it timely, it shall transfer its total investments in multinational banks created by virtue of Decree Law N°21915 and transitory provisions thereof.
The companies shall adapt to the global limit referred to in article 199 by December 31, 1999, at latest. To that end, as at June 30, 1997, said global limit shall not exceed eleven point five (11.5) times the effective equity.
The credit risk weighing factors to which reference is made in articles 188 to 193 and 195, shall be enforced on June 30, 1997. Until such date the factors set forth in articles 257 to 263 of Legislative Decree 770 shall applicable.
The procedure provided for in Article 79 for the election of directors is not applicable to Municipal Savings and Credit Banks, which shall be governed by their own laws.
Municipal Savings and Credit Banks and Municipal Popular Credit Banks shall become stock companies within a term not exceeding twelve months counted as from the date of enforcement hereof. The requirement of plurality of shareholders shall not be applicable to said stock companies.
The respective Municipal Councils are authorized, with the prior opinion of FERPMAC, to agree on the participation of individuals or corporations in the stock of the corresponding Municipal Savings and Credit Banks, preferably that of similar local and foreign institutions.
Moreover, the Municipal Councils are authorized to agree on the participation of individuals and corporations in the stock of the corresponding Municipal Popular Credit Banks, preferably that of similar local and foreign institutions.
The obligations issued prior to the enforcement hereof that are guaranteed by the Deposit Insurance Fund, shall continue being guaranteed by it, to the date of their expiration.
The provisions of article 136 are immediately applicable to banking and financial companies as well as to those abiding by modules 1, 2 and 3 referred to in article 290.
Consumption credit companies incorporated during the effectiveness of Legislative Decree N°770, shall have a term of one year to adapt to the terms hereof. Until then, they shall be regulated by the provisions for said type of companies contained in said Legislative Decree.
Until the securities clearance and liquidation institutions referred to in article 56 are created, the information referred to in said article shall be provided to the Superintendency by the institution acting as such.
Companies in the insurance system may grant financing of insurance premiums up to June 30, 2000.(extended until June 30, 2002 by Law 27299)
The accounts receivable resulting from the above-mentioned financing do not form part of the investments of the effective equity, guaranty fund or technical reserves.
If at the time of enforcement of the present
disposition the companies register excesses to the limit established in the Article 209° of the present Law, produced by leasing operations, they shall adequate in a period that shall not exceed December 31, 2006, not being able to exceed an amount equivalent to 70% (seventy percent) of the effective equity of the company as at December 31, 2004, and not being able to exceed 50% (fifty percent) of the effective equity of the company as at December 31, 2005. In case those excesses are detected, the companies shall not increase the existing levels of expositions on leasing operations existing to the date of enforcement of this law.
Amended by Law 28184 of February 9, 2004.
If, as result of the disposed by the item 8 of the Article 185 and the item e) of the Article 299° of the present Law, the companies exceed the limits regarding their effective equity, they shall adequate to the stipulations established in the mentioned articles in a period that shall not go beyond December 31, 2005. However, the companies shall not increase the levels of expositions existing at to the date of enforcement of this
Amended by Law 28184 of February 9, 2004.
ANNEX – GLOSSARY
Majority Shareholders: Those that directly or indirectly have a participation of at least the equivalent to one sixth of the capital stock.
Year: The Gregorian year, according to the rules of article 183 of the Civil Code.
Central Bank: Central Reserve Bank of Peru
Negotiable Portfolio: All positions subject to market risks, within or outside the balance sheet, including instruments representing debts, capital, the positions subject to the risk of exchange and positions in commodities.
CONASEV: National Supervisory Commission of Companies and Securities.
COFIDE: Corporacion Financiera de Desarrollo S.A.
Commodities: Primary or basic merchandize consisting of physical products that may be exchanged in a secondary market, including precious metals, but excluding gold, which is regarded as currency.
Financial Conglomerate: Set of domestic or foreign companies that are engaged in financial, insurance and securities activities, including companies that are shareholders thereof, that are related amongst each other through direct or indirect, property, control, or common administration relations or other means that allow them to have a prevailing and continuous influence over the decisions of the Board of Directors, General Management or other directive organs of the companies that conform it.
Mixed Conglomerate: Set of domestic or foreign companies integrated by, at least, a company that develops financial or insurance operations and others that develop non-financial operations, all of which are related amongs them through direct or indirect, property, control, or common administration relations or other means that allow them to have a prevailing and continuous influence over the decisions of the Board of Directors, General Management or other directive organs of the companies that conform it.
Payment Agreements and Reciprocal Credits: That executed by the Central Banks of the member countries of the Latin American Integration Association (ALADI).
Official Gazette: The Official Gazette “El Peruano” in the capital of the Republic and that in charge of the judicial publications in all other locations of the Republic.
Days: Calendar days, unless specified that they are business days.
Companies: The companies of the financial and insurance systems that are authorized to operate in the country as well as its subsidiaries, with the exclusion of those rendering complementary services.
Reinsurance Company: That which grants coverage to one or more insurance companies or autonomous insurance equities for the risks assumed, in cases in which there are important capitals or when it is convenient for the latter due to their operational limits.
Insurance Company: Company which objective is to make contracts under which it binds itself, under certain limits and in exchange for a premium, to indemnify a specific damage, or to satisfy a capital, income or other payments agreed in the case of occurrence of a specific incident or uncertain future.
Fund: Deposit Insurance Fund
Financial Intermediation: The normal activity consisting in the collection of funds, under any modality, and placement in form of credits or investments.
Solvency margin: The marginal support that insurance companies must have to face the possible situations of technically unexpected future casualties, determined based on the parameters set forth by the Superintendency.
Month: The calendar, according to the rules of article 183 of the Civil Code.
Ministry: The Ministry of Economy and Finance.
Minister: The Minister of Economy and Finance.
Financial Operations: Those authorized for companies in agreement with the provisions of Section Two of this law, whether loan or deposit, service or investment operations.
Relatives: Those having up to the second degree of consanguinity and first degree in affinity.
Accountable Equity: The resources of the company, constituted by the difference between the assets and liabilities. It comprises the investments of shareholders or associates, additional capital (coming form donations and issue premiums) as well as from reserves, the capital being negotiated, accumulated results and net results of the fiscal year, net losses, if any. It does not include the subscribed capital as long as it has not been incorporated into capital.
Effective equity: It is the off-books amount which results from adding or subtracting the value of the different items that this law refers to from the accountable equity.
Life Insurance Lines: Those which have as main coverage the risk that may affect the insured party during his life. This field also comprises the additional benefits that, based on personal health or accidents are included in the regular life insurance policies, insurance contracts which basis is a pension plan related to age or retirement of persons and those resulting form social security regimes. It does not include the insurances which main coverage are risks caused by accidents and diseases that do not cover the life of the insured party.
General Insurance Lines: All lines not included in the life insurance lines.
Representative: The representative, in the country, of a banking, financial and reinsurance company not domiciled in the country.
Resolution Issued Based on Conscience: That which does not require an expression of cause or consideration and cannot be challenged. By nature it does not attribute any responsibility by means of its issue, which is effected in practice of the power and responsibility of safeguarding the publics savings, conferred on the Superintendency by article 87 of the Political Constitution.
Credit Risk: The risk that the debtor or counterpart of a financial contract does not comply with the contract conditions.
Market Risk: The risk of having losses in positions on and off the balance sheet deriving from changes in the market prices. It includes risks pertaining to the instruments related to interest rates, exchange risk, quotation of stocks, commodities and so on.
Financial System: The set of companies that are duly authorized to operate in the financial intermediation. It includes the subsidiaries which organization must be authorized by the Superintendency.
Insurance System: insurance and reinsurance companies that are duly authorized to operate in the country, and are differentiated from those operating in general risks and engaged in life insurance, as well as their subsidiaries, intermediaries and insurance auxiliaries.
Superintendency: The Superintendency of Banking and Insurance.
Superintendent: The Superintendent of Banking and Insurance.
Workers: The managers, including the general manager, officials and other employees of a company in a position of dependency.
To be served to the President of the Republic for promulgation.
Lima, December 6, 1996.
VICTOR JOY WAY ROJAS
President of the Congress of the Republic
CARLOS TORRES Y TORRES LARA
First Vice-president of the Congress of the Republic
TO THE CONSTITUTIONAL PRESIDENT OF THE REPUBLIC
This law is to be published and complied with.
Given at the House of Government, in Lima, this 6th day of December, 1996
ALBERTO FUJIMORI FUJIMORI
Constitutional President of the Republic
ALBERTO PANDOLFI ARBULU
President of the Council of Ministers
JORGE CAMET DICKMANN
Minister of Economy and Finance.
Tax Accountant & Business Law
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