Capital Markets and Financial Newsletter – January 2023

SMV Regulations

 The Superintendency of the Securities Market (“SMV”) provides that it will apply only an indicative audit with respect to the obligations contained in Article 5 and the second paragraph of Article 10 of Resolution SMV No. 019-2021-SMV/01 during the fiscal year 2023. Through Resolution SMV No. 002-2023-SMV/01, published in the Official Gazette El Peruano on January 28, 2023, the SMV established that during the fiscal year 2023, it will only apply an indicative supervision with respect to the obligations contained in Article 5 of Resolution SMV No. 019-2021-SMV/01 (referring to the obligation of issuers with programs and/or securities registered in the Public Registry of the Securities Market, (referring to the obligation of issuers with programs and/or securities registered in the Public Registry of the Securities Market to submit a resume of their directors with the minimum content established in the regulation, when appointing said directors, and to update said resume when there are changes in the information included therein) and in the second paragraph of Article 10 of the same resolution (which establishes the obligation of said issuers to submit said resume with respect to the directors they had appointed prior to the effectiveness of the aforementioned Article 5).

In this sense, it has been provided that the SMV will not initiate administrative sanctioning proceedings with respect to any non-compliance with the aforementioned obligations during the year 2023.

New Comprehensive Risk Management Regulation is approved. By means of Resolution SMV No. 001-2023-SMV/01, published in the Official Gazette El Peruano on January 19, 2023, the SMV approved a new Comprehensive Risk Management Regulation, replacing the previous regulation approved by Resolution SMV No. 037-2015-SMV/01.

Among the main changes introduced by the new regulation, the following may be mentioned:

• Its provisions are not applicable to risk rating companies, which are governed by their own rules.
• Obliged entities must approve guidelines of conduct in accordance with the types of risks to which they are exposed. In addition to ensuring the proper functioning of integral risk management, such guidelines must promote a risk culture and take corrective and improvement measures in the event of non-compliance.
• A reference list of types of risks that must be taken into account for the purposes of the obligations imposed by the regulation is included.
• The minimum content of the Integral Risk Management Manual to be approved by the entities is modified, stipulating that said manual must be reviewed at least annually.
• The obligation to design, program and coordinate a training plan for the dissemination of the risk culture is established.
• It is provided that the comprehensive risk management of the entities must include documented information on the aspects required by the regulations and all other information considered relevant for such management.
• The responsibilities of the board of directors of the entities in the integral risk management are expanded, in aspects such as (i) the definition of roles and reporting lines; (ii) the follow-up of reports, reports or similar documents submitted to the Board of Directors as a result of the evaluations made; or (iii) the approval of significant changes for the implementation of the integral risk management.
• The characteristics of the Integral Risk Management Committee are established, in case the Board of Directors decides to create it, including the possibility for the SMV to require its creation.
• The characteristics of the Risk Management Unit are modified and its functions are regulated, including the SMV’s power to require its formation.
• It is provided that in case the entity decides that the integral risk management is to be carried out by another body or officer, this must be approved by the board of directors of the entity, after preparing a report supporting its convenience.
• New rules are established to be followed in case of outsourcing risk management functions.
• The role of the internal audit for risk management is modified, and the duty to report to the board of directors of the obliged entity is included.

SBS Standards

The Regulation for Market Risk Management and the Accounting Manual for Financial System Companies are amended. Through Resolution SBS No. 00066-2023, published in the Official Gazette El Peruano on January 13, 2023, the Superintendence of Banking, Insurance and Private Pension Fund Administrators (“SBS”) approved the amendment of Article 34 of the above mentioned regulation, in order to standardize the conditions for the management of foreign exchange risk exposure by multiple transaction companies, specialized companies and State Banking (Banco de la Nación, COFIDE, AGROBANCO and Fondo MiVivienda). This amendment establishes that the limit to the global overbought position in foreign currency must be established according to the volume of the effective equity of the entity, and the aforementioned manual is also modified to adapt it to the aforementioned change.

The Model Risk Management Regulation is approved and the Internal Audit Regulation is modified. Through SBS Resolution No. 00053-2023, published in the Official Gazette El Peruano on January 11, 2023, the SBS approved the Model Risk Regulation (“Regulation”), applicable to companies that use models for risk management and are included in paragraphs A, C and D of Article 16 of the Law, C and D of Article 16 of the General Law of the Financial System and the Insurance System and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702, Banco de la Nación, Banco Agropecuario, COFIDE and Fondo MIVIVIENDA S. A.

The models to which the regulation applies are those used in the management of credit, market, liquidity, operational, and money laundering and terrorist financing risks, defined in Article 23 of the Corporate Governance and Comprehensive Risk Management Regulation, approved by SBS Resolution No. 272 -2017.

Among the main provisions of the Regulation, it establishes the obligation to:

1. Have a permanently updated inventory of models that includes at least the information in the format indicated in Annex A “Inventory of Models” of the Regulation.
2. Submit annually Annex A “Inventory of Models” with the available information updated at the close of the first semester of the current year, within 31 calendar days after the close of the first semester of the year.
3. Take actions when weaknesses are identified as a result of model validation or monitoring and establish temporary mitigation measures for model use if actions cannot be implemented immediately.
4. That the risk unit prepares an annual risk report, with the minimum content provided for in the standard.
5. Have officers specialized in model risk management, according to the nature, size and complexity of its operations and services. The SBS may require companies to create specialized units for model risk management.
6. Approve manuals related to model risk management, with the minimum content provided for in the standard.
7. Approve models through its risk committee, as well as periodically validate them.
8. Prepare at least annual model monitoring reports.

The aforementioned resolution also modifies the Internal Audit Regulation, approved by SBS Resolution No. 11699-2008, to adapt it to the provisions of the Regulation.

The “Regulation for the Authorization of Companies and Representatives of the Financial and Insurance Systems”, approved by SBS Resolution No. 211-2021, is amended. Through Resolution SBS N° 04035- 2022, published in the Official Gazette El Peruano on January 3, 2023, the amendment was approved in order to make the type of guarantee that can be offered to the SBS at the time of submitting an application for authorization of an organization more flexible, to specify the content of the feasibility report that must be submitted to the SBS, and to allow the operating authorization certificate obtained from the SBS to be exhibited by digital means. The TUPA of the SBS is modified in the same sense.