Monetary Integration Act

Original Language Title: LEY DE INTEGRACIÓN MONETARIA

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LEGISLATIVE ASSEMBLY-REPUBLIC OF EL SALVADOR

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DECREE No. 201.-

THE LEGISLATIVE ASSEMBLY OF THE REPUBLIC OF EL SALVADOR,

WHEREAS:

I.-That in accordance with the Constitution of the Republic, it is the duty of the State to orient the monetary policy in order to promote the orderly development of the national economy;

II.-That the ordinal 13th of Art. 131 of the Constitution of the Republic, establishes that it is up to this Legislative Assembly to resolve on the admission and circulation of foreign currency;

III. In fact, it becomes necessary to introduce regulations that facilitate trade and finance with the rest of the world, in an efficient manner;

IV. preserving the economic stability that leads to optimal and transparent conditions to facilitate the investment, and to guarantee the direct access to international markets, it becomes necessary to authorize the circulation of foreign currencies that enjoy international liquidity;

V.-That for such purpose it is indispensable to dictate the norms basic by which the form and conditions that must prevail in the financial transactions of our country will be regulated;

BY TANTO,

in use of its constitutional powers and on the initiative of the President of the Republic, Minister of Finance and Deputies Julio Antonio Gamero Quintanilla, Carmen Elena Calderon de Escalon, Walter Rene Araujo Morales, Carlos Antonio Borja Letona, Renato Antonio Perez, Roberto Jose D' Aubuison Munguía, Mauricio Lopez Parker, Rodrigo Avila Avilés, Rene Mario Figueroa, Norman Noel Quijano Gonzalez, Guillermo Antonio Gallegos Navarrete, Juan Duch Martínez, Juan Miguel Bolanos Torres, Joaquin Edilberto Iraheta, Martin Francisco Antonio Zaldivar Vides, José Mauricio Quinteros Cubias, Osmin López Escalante, Nelson Funes, Hector Nazario Salaverria Mathies, Roberto Villatoro, Jesús Grande, Douglas Alejandro Alas García, Willian Rizziery Pichinte, Louis Agustin Calderon Cáceres, Hermes Alcides Flores Molina, Donato Eugenio Vaquerano Rivas, Carlos Armando Reyes Ramos, Rafael Hernan Contreras Rodriguez, Julio Eduardo Moreno Niños, Alejandro Dagoberto Marroquín, Roman Ernesto Guerra, Jose Rafael Machuca Zelaya, Jose Antonio Almendariz Rivas, Elizardo Gonzalez Lovo, Ruben Orellana, Noel Orlando Gonzalez, Mario Antonio Ponce, Carlos Walter Guzman, Isidro Antonio Caballero, Jose Francisco Merino Lopez, Ciro Cruz Zepeda Peña, and Gerardo Antonio Suvillaga,

DECRETA the following:

MONETARY INTEGRATION ACT

LEGISLATIVE ASSEMBLY-REPUBLIC OF EL SALVADOR

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CHAPTER I GENERAL PROVISIONS

Art. 1. The exchange rate between the colon and the dollar of the United States of America will be fixed and unalterable from the validity of this Law, at the rate of eight colons seventy-five cents per dollar of the United States of America. In this law, that currency is denominated dollar.

Art. 2.-The contracting of monetary obligations expressed in any other currency of legal circulation abroad is permitted. Such obligations must be paid in the contracted currency, even if their payment is to be made by the court.

Art. 3.-The dollar will have unrestricted legal tender with unlimited release for payment of obligations in money in the national territory.

Art. 4.-After the current law, the Central Reserve Bank of El Salvador, at the request of the banks of the system, will exchange the colones in circulation for dollars.

Art. 5.-The colon notes and their fractional coins issued before the current law will continue to be legally unrestricted, but the institutions of the banking system will have to exchange them for dollars.

Central Reserve Bank of El Salvador will provide the dollars to the banks of the system, through the respective exchange.

The exchange between dollars and colones in cash, whatever the Bank does Central Reserve of El Salvador to the banks of the system or these to the users of the same, not will generate no commission or charge.

The breach of the above will be sanctioned by the Superintendence of the Financial System with a fine equivalent to a hundred times the commission or charge charged. The aforementioned Superintendence will apply, for the imposition of the fine, the procedure laid down in Articles 47 and following of its Organic Law.

Art. 6.-Banks, non-bank financial intermediaries and other legal entities that capture public resources may acquire assets and liabilities denominated in other currencies only when the following requirements are met:

a) institutions maintain a reasonable calce between assets and liabilities in a specific currency, in accordance with the laws that govern them; and

b) That debtors in a given currency check income denominated in that currency currency, sufficient to meet their obligations or to be able to demonstrate coverage

To the Superintendence of the Financial System, it will be up to the Superintendency of the Financial System to monitor compliance with these provisions, in accordance with the privileges conferred on it by its organic law.

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Art. 7.-Salaries, salaries and fees may be called and paid in colones or dollars.

All the obligations in money expressed in colons, existing before the current law, may be paid in dollars to the type of change established in Art. 1 of this law.

Also, checks and other securities issued in Salvadoran colons prior to the law of this law may be accepted and paid in dollars, the exchange rate set in this law.

Art. 8. Public institutions, authorized by the Ministry of Finance in accordance with the State Financial Administration Law, may issue and contract obligations in other currencies, provided that they cover the currency risk.

Art. 9.-All financial transactions, such as bank deposits, loans, pensions, securities issued and any other securities made through the financial system, as well as the accounting records of the financial system, are express in dollars. Financial System transactions or transactions that have been performed or agreed upon prior to the validity of this law shall be expressed in dollars at the exchange rate established in this law.

savings, securities, current accounts and any other bank documents, insurance policies, securities securities which are placed and traded on a stock exchange, shares, negotiable bonds or bonds and other securities may be held request the respective issuing entity to replace the documents in which the rights are established derivatives thereof, for others with the values expressed in dollars at the exchange rate established in Art. 1 of this law and that will be required to perform the replenishment. If the replacement is not effected, the respective value expressed in colones is estimated to be expressed in dollars, at the exchange rate established in this law, for all the effects resulting from the value entered in the document.

Art. 10.-The prices of goods and services can be expressed both in colones and dollars, at the exchange rate established in this law.

Art. 11.-All the obligations of the Central Bank of El Salvador will be assumed by the State through the Ministry of Finance, who will be able to compensate them for existing obligations in their favor.

CHAPTER II TRANSITIONAL PROVISIONS

Art. 12.-Banks, insurance companies and securities issuing entities securities which are placed and traded on a stock exchange within forty-five days of the validity of this law shall be required to notify the respective securities exchange. Superintendence, the changes that to comply with it, have made in the financial operations or of any other nature that had been established or agreed in colones prior to that validity.

Art. 13.-The extension of the term of the loans granted by the institutions of the financial system, in colones, before the validity of this law, will take effect with the single written communication made by the bank to the user, without need to grant new documents. The time limits for mortgages and garments shall be understood to be extended in the same manner as the communication. In

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both cases, the debtor will have a period of thirty days to express to the bank its inconformity on the modification referred to in this article. Silence shall be understood as acceptance of the extension of the period.

Art. 14. During the first three months of this Law, the institutions of the financial system will gradually adjust the interest rates of the credits contracted in colones, prior to the validity of this Law, in relation to the decrease in your financial costs and interest rates for new dollar credits.

Art. 15.-During the first six months of this Law, the prices of goods and services must be expressed in both currencies, for which the Consumer Protection Directorate will establish the corresponding provisions.

CHAPTER III REFORMS, REPEAL AND VALIDITY

Art. 16.-Replace Art. 49 of the Organic Law of the Central Reserve Bank of El Salvador, by the following:

" Art. 49.-The Bank may:

(a) Issue securities, register them on a stock exchange, place them and acquire them on the secondary market, as well as exchange these securities for other securities issued or guaranteed by the Central Bank, the conditions that the Bank establishes; and

b) Ceder documents from its portfolio of loans and investments to banks and other institutions of the financial system and acquire from these entities, documents from its loan and investment portfolio, in the conditions to be determined by the Council. '

Art. 17.-Replace Art. 51 of the Organic Law of the Central Reserve Bank of El Salvador, by the following:

" Art. 51.-The Central Reserve Bank of El Salvador may grant financing to the Deposit Insurance Institute for the purposes set forth in Art. 179 of the Law of Banks.

The Bank will not be able to grant loans, guarantees, guarantees and guarantees. guarantees of no kind to banks, non-bank financial intermediaries and official credit institutions. "

Art. 18.-Replace Art. 62 of the Organic Law of the Central Reserve Bank of El Salvador, by the following:

" Art. 62.-The Bank may issue bonds or other securities, entered in a stock exchange, expressed in dollars of the United States of America. "

Art. 19.-Add to the "Law of Sanitation and Strengthening of Commercial Banks and Associations of Savings and Loan", the following article:

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" Art. 2-A.-In the case of contributions granted in portfolios of credits and other assets to the Fund for Sanitation and Financial Strengthening, the same shall be reintegrated to the Central Bank of the Reserve of El Salvador to the extent that these assets are For this purpose, the Fund is authorized to reintegrate the value of such contributions in dollars from the United States of America and to reduce its assets in the corresponding amount, at the request of the Central Bank, as well as for the repayment of the the other contributions received from the Central Reserve Bank of El Salvador, the Fund is authorized to transfer to the referred institution to its requirement, the property on any asset class, with the consequent decrease of its patrimony. "

Art. 20.-Title II, Chapter VI of the Banking Law, is replaced by the following:

CHAPTER VI LIQUIDITY REQUIREMENTS

LIQUIDITY RESERVE

Art. 44.-The Superintendence of the Financial System shall establish a reserve of liquidity which, in proportion to its deposits and obligations, shall be maintained by the banks.

The negotiable obligations entered into a stock exchange, backed by mortgage credit guarantees issued by banks within five years or more, shall not be subject to the liquidity reserve provided for in this Article, provided that the resources collected through these instruments are allocated to financing medium-and long-term investments, as well as housing acquisition.

CONSTITUTION OF LIQUIDITY RESERVE

Art. 45.-The liquidity reserve of each bank may be constituted in the form of deposits of money in dollars of the United States of America, at the sight, in the Central Bank or in securities issued by it in the same currency, which shall be to remain free from all taxes. This reserve may also be invested abroad, in deposits with first-line banks or securities issued with high liquidity and low risk, all in accordance with the technical standards issued by the Superintendence of the System Financial.

The liquidity reserve shall be general for the different types of obligations.

Without prejudice to the foregoing, differentiated liquidity reserves may be established, taking into account the nature of the obligations or deposits. In any case, the average liquidity reserve of the deposits must not be greater than twenty-five percent of the deposits.

REMUNERATION OF THE LIQUIDITY RESERVE

Art. 46.-The reserve of liquidity that is constituted in deposits with the view or titles of the Central Bank shall be remunerated. The Central Reserve Bank of El Salvador will charge a commission for the administration of this reserve.

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CALCULATION AND USE OF THE LIQUIDITY RESERVE

Art. 47.-The Superintendency shall determine the frequency with which the liquidity reserve shall be calculated and shall indicate the period within which a bank may compensate the amount of liquidity deficiencies that it has in certain days, with the excess I will find you on other days of the same period. It will also dictate the technical standards necessary for the application of the provisions on the liquidity reserve that this law deals with.

Each bank may use its reserves for its liquidity needs, in accordance with what is has in this chapter and the technical standards that for this effect the Superintendence will issue.

For the elaboration of the technical norms referred to above, the Superintendence will have to observe the following:

a) Of the total of the reserve of (i) a total of 25% will be allocated to the first tranche and will be constituted by (a) the payment of the interest rate at the end of the period of the financial year; This tranche shall be automatic access for the bank;

b) The second tranche shall correspond to 25% of the liquidity reserve and shall be made up of interest-bearing deposits at the Central Bank or the foreign bank. in question, or securities issued for this purpose by the Central Bank. This tranche will be automatic access for the bank. The Central Reserve Bank of El Salvador shall charge a charge proportional to the amount withdrawn from this tranche; and

c) The third tranche shall constitute fifty percent of the liquidity reserve and shall be constituted in securities that for that effect, issue the Central Bank or as determined by the Superintendence; the use of this tranche may only be carried out with the prior authorization of the Superintendent of the Financial System.

When the use of the liquidity reserve thus the Central Bank may carry out operations of reporting securities with securities that constitute the liquidity reserve.

Art. 48.-For the calculation of the reserve of liquidity that corresponds to a bank, the set consisting of its head office and the branches and agencies established in the Republic shall be considered.

RESERVE OF LIQUIDITY TO OTHER ENTITIES

Art. 49.-The Superintendency may provide liquidity reserve requirements to other legally established entities, which within the rotation of their businesses usually receive public money through any passive operation.

The Bank Central shall report to the Superintendency on a daily basis the liquidity situation of the banks during the period in which the banks are the depositary of the aforementioned liquidity reserves.

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REGULARIZATION PLAN

Art. 49-A.-When a bank uses part of the third tranche of the liquidity reserve to meet the needs of this nature, the Superintendence will require a regularization plan, according to Art. 79 of this same law.

must be approved by the Superintendence and the bank in question will be subject to the special supervision regime referred to in this law.

REPORTING OPERATIONS

Art. 49-B.-In order to protect bank liquidity, the Central Bank may carry out transactions with securities issued in U.S. dollars by the State, by the Central Bank itself or by the Institute of Deposit guarantee, with the funds to be deposited by the State for this purpose.

The operations referred to in the preceding paragraph shall be carried out by the Central Bank in coordination with the Superintendency, only in the following cases:

a) To prevent general financial system illiquidity situations;

b) To reset the liquidity in case of a crisis caused by a strong market contraction; and

c) In cases of force majeure.

The Central Bank shall issue the respective technical standards for the application of this article.

REQUIREMENT OF LIQUID ACTIVE

Art. 49-C.-Without prejudice to the liquidity reserve established in Art. 44 of this Law, the Superintendency shall establish as a prudential measure, a liquidity requirement to all banks of the system, consisting of a certain percentage of assets liquids, which is related to its liabilities. Liquid assets constituting the liquidity reserve shall be included in this percentage. The Superintendence will fix the percentage referred to in this article and will dictate the technical standards to comply with this requirement.

FINES AND PENALTIES FOR DEFICIENCIES IN LIQUIDITY REQUIREMENTS

Art. 50.-Banks that incur deficiencies of the liquidity reserve at the end of the period of computation established by the Superintendence, will be punished for this over the missing amount, according to the procedures established in their law

Also, non-compliance with the requirement for liquid assets referred to in Article 49-C of this Law shall be sanctioned by the Superintendence in accordance with the procedures laid down in its organic law. "

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Art. 21.-Replace Art. 436 of the Trade Code with the following:

" Art. 436.-Records must be carried in Spanish. The accounts will settle in Colones or in Dollars of the United States of America. All accounts must be kept in the country, even those of the agencies, subsidiaries, subsidiaries or branches of foreign companies. The violation shall be sanctioned by the office which exercises the supervision of the State in accordance with its Law. Any authority which is aware of the infringement is obliged to give immediate notice to the office referred to above. '

Art. 22.-Replace Art. 170 of the Law of Banks, by the following:

" Art. 170.-The total of the funds of the Deposit Guarantee Institute, with the exception of the funds to cover its operating expenses, must be deposited for its administration in the Central Reserve Bank of El Salvador and may only be used for the purposes for which the Institute was created. Such funds will be inembargable.

Funds for their operation may be maintained as deposits in the view of member banks. "

Art. 23.-Defeat the following legal provisions:

a) The Arts. 29,30,35,42,43,45,46,448,5,60.61 and 63 of the Organic Law of the Central Bank of El Salvador; and

b) The Arts. 57,58,171,172 and 247 of the Law of Banks.

TRANSIENT

Art. 24. During the first two years of the present law, the reserve of liquidity referred to in Article 44 of the Law of Banks shall be constituted in the form of deposits of money in dollars of the United States of America, the view, in the Central Bank or in securities issued by it in the same currency. At the end of that period, they shall have the said reservation in accordance with Article 45 of the Law of Banks. "

Art. 25. -This Decree will enter into force on the first day of January of the year two thousand one, after publication in the Official Journal.

GIVEN IN THE BLUE HALL OF THE LEGISLATIVE PALACE: San Salvador, at the thirty days of the month of November of the year two thousand.

CIRO CRUZ ZEPEDA PEÑA, PRESIDENT.

WALTER RENE ARAUJO MORALES, JULIO ANTONIO GAMERO QUINTANILLA, VICE-PRESIDENT. VICE PRESIDENT.

CARMEN ELENA CALDERÓN DE ESCALA, JOSÉ RAFAEL MACHUCA ZELAYA, SECRETARY. SECRETARY.

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ALFONSO ARISTIDES ALVARENGA, WILLIAM RIZZIERY PICHINTE, SECRETARY. SECRETARY.

RUBEN ORELLANA, AGUSTIN DÍAZ SARAVIA, SECRETARY. SECRETARY.

CASA PRESIDENTIAL: San Salvador, at the eleven days of the month of December of the year two thousand.

PUBLISH, FRANCISCO GUILLERMO FLORES PÉREZ,

President of the Republic.

José Luis Trigueros, Minister of Finance.

D. O. No. 241 Took No 349 Date: December 22, 2000.

CGC/adar 3-july-2008