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05/06/2024

Through Resolution No. 15 Minute No. 24 dated May 30, 2024, the Board of Directors of the Central Bank of Paraguay ("BCP") issued the Regulation of Loan Portfolio Sale Operations of Supervised Entities (the "Regulation"). This Regulation is applicable to financial institutions supervised by the BCP, subject to Law No. 861/96 "General Law on Banks, Financial and Other Credit Institutions" and its amendments, as well as to other entities that are supervised by the BCP in accordance with special laws.

The loan portfolio is the set of loans, of any nature, current and/or mature. The loan portfolio sale includes the transfer of all rights, accessories, privileges, as well as the enforcement of the title, if any.

The sale may be financed or paid in full. In the case of payment in full sales, the maximum settlement period will be up to 72 hours, counted from the assignment or accounting movement of the portfolio and up to the effective collection of the sale.

Supervised entities must include the sale of a loan portfolio in their policies and include it in their business plan and annual budget, analyze each sales contract and ensure that, if the sale is made to a natural or legal person operating in the financial market, it is registered in the registry of the Superintendency of Banks ("SIB"). In addition, they must ensure that the portfolio to be sold meets the requirements of the credit risk classification rules. The Regulation prohibits supervised entities to establish portfolio return clauses in their agreements between the parties for periods exceeding 45 days after the sale transaction is formalized, and to provide all the information required by the SIB.

In addition, the minimum content of loan portfolio sales contracts is foreseen in the Regulation. The obligation to keep informed to the Information Center those debtors assigned for at least 3 years after the sale of the credit must be included. These contracts must be available to the SIB.

In cases where the sale is made with a related party of the supervised entity, the transaction must be carried out only as payment in full and the communication to the SIB must be submitted within 10 business days from the execution of the contract, including all the information required in the Regulation. Likewise, in cases where the sale is made with a non-related party of the supervised entity, the communication of the transaction must be made within 10 business days from the date of execution the contract, regardless of whether it is a payment in full or credit sale.

The supervised entity must inform the assigned debtor or co-debtors about the sale made within 10 working days from the date of signing the contract and, in no case, may it carry out any collection management on its own behalf or on behalf of third parties, assuming the character of manager or agent.

In addition, supervised entities must apply the rules for the prevention of Money Laundering, Financing of Terrorism and Proliferation of Weapons ("AML/FT/FP") related to the proper administration, management and mitigation of AML/FT/FP risk.

In the event of non-compliance with the provisions set out in the Regulation, supervised entities shall be subject to the penalties provided therein.

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