Agreement-JD-003-20-12-2023

PURPOSE: The purpose of these Regulations is to establish the concepts and calculation processes related to compliance with the Institutional Capital Adequacy Index (IACI), with respect to assets weighted by risk and other risks to which Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives are exposed.

SCOPE: The provisions of these Regulations are applicable to Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives, supervised by the Superintendency of Savings and Loan Cooperatives.

BASIS FOR CALCULATING OWN RESOURCES: The basis for calculating own resources shall consist of primary capital and supplementary capital, in accordance with what is established in Article 6 of these Regulations.

INSTITUTIONAL CAPITAL ADEQUACY INDEX: The Institutional Capital Adequacy Index, hereinafter IACI, is the quotient resulting from dividing the volume of own resources, "Primary Capital, minus contributions, plus Supplementary Capital", in the form defined in Article 6 "Components of Own Resources and Their Exclusions" of these Regulations, by the sum of assets weighted by risk and other risks to which Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives are exposed, calculated in accordance with the guidelines established in Article 7 "Asset Weightings" of these Regulations.

MINIMUM REQUIRED LEVEL: Savings and Loan Cooperatives with open membership shall comply at all times with a minimum IACI of ten percent (10%); likewise, Federations of Savings and Loan Cooperatives shall comply with eight percent (8%) and Savings and Loan Cooperatives with closed membership with five percent (5%).

COMPONENTS OF OWN RESOURCES AND THEIR EXCLUSIONS: For purposes of establishing the IACI, own resources shall be classified according to their permanence in Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives, under the groups of Primary Capital (CP) and Supplementary Capital (CC). The components that shall be accepted by the National Supervisory Council of Cooperatives (CONSUCOOP), in the integration of both segments, are as follows: PRIMARY CAPITAL: Shall be accepted without limitation as to amount and shall be comprised of the Legal Reserve. SUPPLEMENTARY CAPITAL: Shall be accepted without limitation and shall be comprised as follows: Sum of: a) Reserves from revaluations. b) Reserves for contingencies. c) Donations. d) Other capital reserves. e) Accumulated results. f) Surpluses or losses for the period. Plus: a) Excess of reserves for investments, credits and doubtful interest. Minus: a) Inadequacies of valuation reserves for investments, loans and interest based on the specific regulations that govern such matter, determined by the Superintendency or by the Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives themselves; whichever sum is greater. RISK-WEIGHTED ASSETS

ASSET WEIGHTINGS: Assets shall be weighted according to their degree of risk, with a percentage scale of 0%, 10%, 20%, 50%, 100% and 150%, applicable to the net balances after depreciation and amortization shown at the end of each day for the different items or account headings of the balance sheet. The weighting of assets according to their risk is as follows:

• a)

  ASSETS WEIGHTED AT 0% RISK 1) Cash, National Currency and Foreign Currency; 2) Deposits in the Central Bank of Honduras; 3) Official Securities, National Currency and Foreign Currency; 4) Automatic Loans, National Currency and Foreign Currency; 5) Investments in Various Securities, National Currency and Foreign Currency.

• b)

  ASSETS WEIGHTED AT 10% RISK 1) Deposits in Banks within the Country, National Currency and Foreign Currency; 2) Investments in Special Funds, National Currency and Foreign Currency;

• c)

  ASSETS WEIGHTED AT 20% RISK 1) Loans, Discounts and Negotiations with Savings and Loan Cooperatives, in National Currency and Foreign Currency; 2) Shares and Participations in National Currency and Foreign Currency.

• d)

  ASSETS WEIGHTED AT 50% RISK 1) Mortgage Loans, Discounts and Negotiations, in National Currency and Foreign Currency; 2) Loans, Discounts and Negotiations with Mortgage Rediscounted Funds, in National Currency.

• e)

  ASSETS WEIGHTED AT 100% RISK In this category, all other assets not included in the previous categories must be included. Notwithstanding the foregoing, the following are indicated: Plus: 1) Credits to be Used, in National Currency and Foreign Currency. Minus: 1) Valuation Provisions.

• f)

  ASSETS WEIGHTED AT 150% RISK 1) Foreign currency loans granted to Legal Entities engaged in activities that do not generate foreign exchange. 2) Foreign currency loans granted to Natural Persons for consumption purposes including international use of credit cards

CAPITAL INSUFFICIENCY: If as a result of the application of this Regulation, Cooperatives present an IACI lower than the legally established minimum, they shall have a term of up to thirty (30) business days to present a regularization plan to the Superintendency of Savings and Loan Cooperatives, which must contain measures to remedy the insufficiency, in accordance with what is established in Article 63 of the Cooperatives Law of Honduras, in connection with Articles 49 and 50 of the Regulation of said Law, or other additional measures that contribute to improving their Equity Solvency. ACCOUNTING INSTRUCTIONS AND ANNEX

ANNEX AND ACCOUNTING ACCOUNTS: Cooperatives, for the calculation of the IACI, shall use the formats to detail the accounts previously described, which shall be the Annex and shall form an integral part of this Regulation.

FREQUENCY OF INFORMATION SUBMISSION: Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives shall establish monthly their Institutional Capital Adequacy Index (IACI) and shall send CONSUCOOP the calculations corresponding to the month-end closing date, within the first ten (10) days of the following month, using the annex of this Agreement.

REVIEW OF THESE REGULATIONS: These regulations shall be subject to review, analysis and/or amendments or modifications thereto, with the understanding that they may be subject to review according to the market, economic, and social conditions, among others, in which savings and loan cooperatives and federations operate.

UNFORESEEN CASES: Cases not provided for in these regulations shall be resolved and verified by the Superintendency of Savings and Loan Cooperatives. SECOND: To reform the content of Chapter III, Table, of indicator 3.1, of the Manual of Risk Limits and Financial and Management Indicators for Savings and Loan Cooperatives, approved by Agreement No. S.E. 001/03-09-2015 and its amendments by Agreement No. J.D. 001-21-04-2020, dated April 21, 2020, which shall be as follows:

FREQUENCY OF INFORMATION SUBMISSION: Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives shall establish monthly their Institutional Capital Adequacy Index (IACI) and shall send CONSUCOOP the calculations corresponding to the month-end closing date, within the first ten (10) days of the following month, using the annex of this agreement. FINAL PROVISIONS

REVIEW OF THESE REGULATIONS: These regulations shall be subject to review, analysis and/or amendments or modifications thereto, with the understanding that they may be subject to review according to the market, economic, and social conditions, among others, in which savings and loan cooperatives and federations operate.

UNFORESEEN CASES: Cases not provided for in these regulations shall be resolved and verified by the Superintendency of Savings and Loan Cooperatives. SECOND: To reform the content of Chapter III, Table, of indicator 3.1, of the Manual of Risk Limits and Financial and Management Indicators for Savings and Loan Cooperatives, approved by Agreement No. S.E. 001/03-09-2015 and its amendments by Agreement No. J.D. 001-21-04-2020, dated April 21, 2020, which shall be as follows: 3.1 Institutional Capital Adequacy Index (IACI) In the detailed Table below: Indicator Purpose Formula Parameter Justification 3.1 Institutional Capital Adequacy Index (IACI) Institutional Capital Adequacy Index: It is the quotient that results from dividing the volume of Own Resources of Institutional Capital, comprised of Equity Reserves, by the sum of Net Assets Weighted by their Risk Percentage, in accordance with what is provided in this regulation, issued regarding the Institutional Capital Adequacy Index (IACI). Institutional Capital / sum of Assets Weighted by Risk Equal to or greater than 10% for Savings and Loan Cooperatives with Open Affiliation Equal to or greater than 8% for Federations of Savings and Loan Cooperatives Equal to or greater than 5% for Savings and Loan Cooperatives with Closed Affiliation. To measure the level of adequacy of Institutional Capital, according to the levels of risks weighted by the different types of assets, in order to absorb losses and maintain the solvency of Savings and Loan Cooperatives and Federations of Savings and Loan Cooperatives. THIRD: To reform the content of Chapter IV, Bases for the Calculation of Institutional Capital Adequacy Index (IACI), Section 3.1, of the Manual of Risk Limits and Financial and Management Indicators for Savings and Loan Cooperatives, approved by Agreement No. S.E. 001/03-09-2015 and its Amendments by Agreement No. J.D. 001-30-06-2020, dated June 30, 2020, which shall be as follows: BASES FOR THE CALCULATION OF INSTITUTIONAL CAPITAL ADEQUACY INDEX (IACI) 3. SOLVENCY 3.1 Institutional Capital Adequacy Index (IACI) Institutional capital / Total of Assets Weighted by Risk Numerator: Institutional Capital: Total of Own Resources (Primary Capital plus Supplementary Capital), determined in accordance with the criteria and guidelines detailed in the FIRST Resolutive of these regulations. 1. Primary Capital National Currency: 301103 Legal Reserve Plus 2. Supplementary Capital National Currency: 302101 Reserves from revaluations 302102 Reserves for contingencies 302105 Donations 302107 Other capital reserves 302108 Accumulated results 302109 Surpluses (Losses) for the period (50% of the Surplus or 100% of Losses). Denominator: Total of Assets Weighted by Risk, Calculated in accordance with the criteria and guidelines detailed in the FIRST Resolutive of this regulation 3. Subtotal of Assets Weighted at 0% Risk (See Calculation Annex) 4. Subtotal of Assets Weighted at 10% Risk (See Calculation Annex) 5. Subtotal of Assets Weighted at 20% Risk (See Calculation Annex) 6. Subtotal of Assets Weighted at 50% Risk (See Calculation Annex) 7. Subtotal of Assets Weighted at 100% Risk (See Calculation Annex) 8. Subtotal of Assets Weighted at 150% Risk (See Calculation Annex). FOURTH: To reform in Chapter V, Ranges for Determining the Rating of Risk Limits and Financial Indicators of the Manual of Risk Limits and Financial and Management Indicators for Savings and Loan Cooperatives, approved by Agreement No. 001/03-09-2015 and its Amendments by Agreement No. J.D. 001-30-06-2020, dated June 30, 2020, which shall be as follows: RANGES FOR DETERMINING THE RATING OF RISK LIMITS. FINANCIAL INDICATORS BY CATEGORY. Quantitative ranges have been defined that shall be used to determine at what level of the categories (A, B, C, D and E), the result of the indicator determined in each savings and loan cooperative corresponds, which must be consolidated with the rating obtained in the management evaluation and thus determine the overall rating of the institution. The quantitative ranges defined for indicator 3.1 are as follows: 3. Subtotal of Assets Weighted at 0% Risk (See Calculation Annex) 4. Subtotal of Assets Weighted at 10% Risk (See Calculation Annex) 5. Subtotal of Assets Weighted at 20% Risk (See Calculation Annex) 6. Subtotal of Assets Weighted at 50% Risk (See Calculation Annex) 7. Subtotal of Assets Weighted at 100% Risk (See Calculation Annex) 8. Subtotal of Assets Weighted at 150% Risk (See Calculation Annex) FOURTH: To reform in Chapter V, Ranges for Determining the Rating of Risk Limits and Financial Indicators of the Manual of Risk Limits and Financial and Management Indicators for Savings and Loan Cooperatives, approved by Agreement No. 001/03-09-2015 and its Amendments by Agreement No. J.D. 001-30-06-2020, dated June 30, 2020, which shall be as follows: RANGES FOR DETERMINING THE RATING OF RISK LIMITS. FINANCIAL INDICATORS BY CATEGORY. Quantitative ranges have been defined that shall be used to determine at what level of the categories (A, B, C, D and E), the result of the indicator determined in each savings and loan cooperative corresponds, which must be consolidated with the rating obtained in the management evaluation and thus determine the overall rating of the institution. The quantitative ranges defined for indicator 3.1 are as follows: Score Indicator Parameter A B C D E Risk Limits 3 SOLVENCY 3.1 Institutional Capital Adequacy Index (IACI) Minimum of 10% (Open Affiliation Cooperative) 10.0% or more 8.0%-9.99% 6.0% - 7.99% 4.0%-5.99% Less than 3.99% Minimum of 5% (Closed Affiliation Cooperative) 5% or more 4.0% - 4.99% 3.0% - 3.99% 1.0%-2.99% Less than 1% Minimum of 8% (Federation of CAC) 8% or more 6.0% - 7.99% 4.0% - 5.99% 2.0% - 3.99% Less than 2% FIFTH: To repeal what is provided in the First Resolutive of Agreement No. J.D. 001-30-06-2021, issued by the Board of Directors of the National Supervisory Council of Cooperatives (CONSUCOOP), concerning the amendment to the Solvency indicator 3.3 of the Adjusted Institutional Capital Index of the Manual of Risk Limits and Financial and Management Indicators for Savings and Loan Cooperatives, approved by Agreement No. S.E. 001/03-09-2015 of CONSUCOOP. SIXTH: All provisions remain in effect for the Solvency indicator 3.3 Equity Solvency Index of Agreement No. S.E. 001/03-09-2015, indicated in the fifth resolutive above. SEVENTH: Inquiries regarding the terms of this agreement shall be addressed by the Superintendency of Savings and Loan Cooperatives, with inquiries to be sent to the email address seguimiento@consucoop.hn; likewise, matters not provided for in this Regulation shall be resolved by the Superintendency, based on the general legislation of the Republic, as well as the norms and international practices issued on the matter. EIGHTH: This Agreement is effective immediately and must be published in the Official Gazette La Gaceta and subsequently for general knowledge on the CONSUCOOP website which, in compliance with the Public Information Transparency Law, this Council maintains. NINTH: Once published in the Official Gazette La Gaceta, communicate this Agreement to the Honduran Confederation of Cooperatives (CHC), the Federation of Savings and Loan Cooperatives of Honduras, Limited (FACACH), the Honduran Federation of Savings and Loan Cooperatives, Limited (FEHCACREL), and to the Savings and Loan Cooperatives supervised by the Superintendency of Savings and Loan Cooperatives, for the corresponding legal purposes, delegating said action to the General Secretariat. TENTH: Communicate this Agreement to the Superintendency of Savings and Loan Cooperatives, so that in the on-site and off-site supervision processes, it verifies compliance with the provisions contained in these regulations. BE PUBLISHED AND COMMUNICATED.