The Peruvian supervisor for banking, insurance and pension funds (SBS) has set out to clarify the requirements for the debarment, recruitment, appointment and severance procedures for directors on the Peruvian savings banks or Cajas Municipales de Ahorro y Crédito (known as “CMAC”). It has drawn up a new regulation for the election of Directors to the CMAC boards.

The new regulation establishes that the CMAC board of directors will comprise up to seven members representing: (i) the majority of the Municipal Council^*: 2 representatives, (ii) the minority of the Municipal Council^**: 1 representative, (iii) COFIDE or Banco de la Nación: 1 representative, (iv) the Chamber of Commerce: 1 representative, (v) the Clergy: 1 representative; and, (vi) small traders and producers working within the region served by the CMAC^***: 1 representative.

The election or re-election of the CMAC Directors will be a two-step process: (i) Designation; and, (ii) Appointment.

Designation

This first stage in the election or re-election process starts when the authorised body in the institution designating its representative simultaneously submits an official communication, with signatures certified by a notary public, to the CMAC Management and a copy to the supervisor (the SBS), with the name of the person it wishes to represent it on the CMAC board. The same body in the institution designating its representative will also copy this communication to the Internal Audit Unit of the CMAC, appending documentation to prove the technical and moral suitability of the person designated and, where appropriate, a notarised copy of the resolution to designate this person, including the notice of meeting and the quorum, so that the Internal Audit Unit can issue the official verification report on the documentation to the CMAC Management.

The regulation establishes that the authorised bodies of the institution designating its representative are responsible for verifying that the potential director complies with the requirements of such position and that the potential director is not subject to any impediment that may make him or her ineligible, as explained below.

Appointment

This second stage in the election or re-election process comprises the formalisation of the designation of the CMAC director through the following steps:

1. Verification of the documentation by the Internal Audit Unit of the CMAC: The CMAC's Internal Audit Unit has a maximum of fifteen days after receiving the documentation accrediting the technical suitability of the person designate to draw up and submit a report to the CMAC Management regarding: (i) whether the proposed director complies with the necessary requirements; and, (ii) whether the proposed directors is affected by the impediments described below.
2. Appointment of the director by the Municipal Council: When the Internal Audit Unit report is in favour of appointment, the CMAC Management has a maximum of 15 days to submit an official communication to the Municipal Council, which then has 15 days to formalise the appointment of the director designated.
3. Presumption of formalisation of the director's appointment: Should the Municipal Council fail to formalise the appointment within the 15-day deadline, the appointment of the director will be presumed to have been formalised.

Impediments

The above notwithstanding, candidates for a seat on a CMAC board must comply with the requirements of technical and moral suitability for the performance of such a position in an adequate manner, and must not be subject to the impediments listed in article 81 of the General Law 26702 of the Financial System and the Insurance System and Organic Law of the Banking, Insurance and Pension Fund Supervisor. The following are also impediments to eligibility for such a position:

1. The candidate may not have negative background references regarding his/her management skills or have been fined for any administrative or criminal infraction or have been involved in other acts suggesting lack of honesty or unsuitable conduct that could jeopardise public confidence or any other actions that may suggest lack or moral suitability
2. Demonstrate technical suitability, by accrediting:

• A school-leaving certificate or professional qualification in economics, finance, accounting, engineering, law or administration. The candidate must also have at least three years' experience in positions of senior management or directorships over the previous eight years in companies with annual sales of over 850 tax units (UIT)
• The candidate must also have at least three years' experience in positions of senior management or directorships over the previous eight years in companies in or related to the financial industry.

 Term of office

The regulation establishes that the director's term of office will be a year when representing the Municipal Council (Majority or Minority list) and two years for other directors. The directors may be re-elected. Should a seat become vacant, the person replacing the previous director must come from the same institution and occupy the position for the remainder of the term left to serve. The incoming director may be re-elected at the end of that term.

An important aspect of the new regulation is that the duration of the CMAC directors' terms of office is now independent of any changes in the authorities or legal representatives that may take place in the designating entities or in the Municipal Council.

Vacancies

Seats on the CMAC board will only be vacated by death, resignation, revocation by the designating entity or removal due to impediments that may have existed before appointment or arisen subsequent to appointment.

*Majority of the Council: group of counsellors on the election list of the Mayor.

**Minority of the Council: group of counsellors not on the election list of the Mayor.

*** Representative of small traders and producers: appointed by the most representative association within the region served by the CMAC, duly ratified.