2024-07-18 | A 8067Added
The Central Bank of Argentina amends the minimum capital requirements for financial entities by replacing Section 2 on minimum capital for credit risk, effective January 1, 2025. The regulation introduces a transitional schedule for Group 2 entities in categories B and C to convert certain discretionary commitments into credit equivalents using Credit Conversion Factors (CCF) at 0% from January to June 2025 and 5% from July to December 2025. It also establishes a new risk-weighted asset formula incorporating a capital factor (k) based on supervisory ratings, defines specific exclusions and due diligence requirements for Group 1 entities, and details risk weighting criteria for exposures to financial institutions, companies, and other counterparties.
BCRA published 10 documents in the last 30 days — get each new one by email the day it lands.
"AÑO DE LA DEFENSA DE LA VIDA, LA LIBERTAD Y LA PROPIEDAD" COMUNICACIÓN “A” 8067 18/07/2024 TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1-1067:
Minimum Capital of Financial Entities.
Minimum Capital for Credit Risk. Adjustments.
___________________________________________________________________________ We address you to inform you that this Institution has adopted the resolution that, in its pertinent part, establishes:
“1. Replace, with effect from 01/01/25, the “Section 2. Minimum Capital for Credit Risk” of the regulations on “Minimum Capital of Financial Entities” with the provisions contained in the Annex to this communication.
2. Provide that from 01/01/25 until 31/12/25, financial entities classified in group 2 according to the Annex to this communication that on 01/01/25 belong to groups “B” and “C” – based on what is established in Section 4. of the regulations on “Authorities of Financial Entities” – must convert “commitments that can be cancelled at the discretion and unilaterally by the financial entity, or that are automatically cancelled in the event of deterioration of the debtor’s solvency” into credit equivalents by applying the Credit Conversion Factors (CCF) according to the following schedule:
”
Likewise, we inform you that we will subsequently send you the sheets that, in replacement of those previously provided, will need to be incorporated into the aforementioned regulations.
We greet you sincerely.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Enrique C. Martin
Manager of Emission of Regulations
Dario C. Stefanelli
Principal Manager of Emission and
Regulatory Applications
ANNEX
CCF Period
01/01/25 to 30/06/25 0 %
01/07/25 to 31/12/25 5 %
Section 2. Minimum Capital for Credit Risk.
For the purposes of applying the provisions of this section, financial entities will be classified into:
i) Group 1: entities qualified by the BCRA as of systemic importance at the local level (D-SIB) and branches or subsidiaries of banks from abroad qualified as of global systemic importance (G-SIB). ii) Group 2: financial entities not included in item i). In cases where no specific provisions are established for each of the aforementioned groups of financial entities, the same treatment must be applied to both groups. Financial entities that present changes in their qualification – in accordance with what is provided in the preceding items – will have a period of 6 months to apply the specific provisions corresponding to the new group to which they belong.
2.1. Requirement.
It will be determined by applying the following expression:
CRC = (k x 0,08 x APRC) + INC
where:
CRC: capital requirement for credit risk. k: factor linked to the rating assigned to the entity according to the evaluation carried out by the SEFyC, taking into account the following scale:
Assigned Rating Value of “k”
1 1
2 1,03
3 1,08
4 1,13
5 1,19
To this effect, the last rating reported for the calculation of the requirement that corresponds to integrate into the third month following that in which the notification takes place will be considered. Until it is communicated, the value of “k” will be equal to 1,03.
APRC: risk-weighted credit assets, determined by summing the values obtained after applying the following expression:
(A x p) + (PFB x CCF x p) + no DvP + (DVP + RCD + INC(significant investments in companies)) x 12,5
B.C.R.A. MINIMUM CAPITAL OF FINANCIAL ENTITIES
Annex to
Comm. “A”
where:
A: computable assets/exposures.
PFB: computable items not recorded in the balance sheet (“off-balance sheet items”).
CCF: credit conversion factor. p: risk weight, as a decimal. no DvP: operations without delivery versus payment. Amount determined by summing the values obtained after applying to the operations included the corresponding risk weight (p) in accordance with what is established in point 4.1. DvP: failed delivery versus payment operations (for the purposes of these regulations, they include failed payment versus payment – PvP – operations). Amount determined by summing the values obtained after multiplying the current positive exposure by the applicable capital requirement established in point 4.1. RCD: requirement for counterparty credit risk in over-the-counter (“OTC”) derivative operations, determined in accordance with what is established in point 4.2. INC(significant investments in companies): increase for excesses over the following limits:
– participation in the capital of each company: 15 %; – total participations in the capital of companies: 60 %.
The established maximum limits will be applied to the computable equity responsibility (RPC) of the financial entity on the last day prior to the one that corresponds.
INC: increase for the following excesses:
– in the relationship of immobilized assets and other concepts (Section 4. of the respective ordering), excluding those computed for the determination of INC (significant investments in companies); – to the limits established in the regulations on “Financing to the non-financial public sector”, excluding those computed for the determination of INC (significant investments in companies); – to the limits established in the regulations on “Large exposures to credit risk” – according to what is provided in item ii), point 2.1. of the regulations on “Minimum Capital Defaults and Technical Relations. Applicable Criteria.” – excluding those computed for the determination of INC (significant investments in companies); – to the credit grading limits (Section 3. of the respective ordering); and – to the limit on derivatives on raw materials or basic products – “commodities” – provided for in point 1.2. of the regulations on “Spot Operations to be Settled and Forward, Repos, Pledges, Other Derivatives and with Common Investment Funds”.
In this matter, the provisions contained in Section 2. of the regulations on “Minimum Capital Defaults and Technical Relations. Applicable Criteria” will apply, unless what is provided in Section 3. of those regulations is applicable.
The credit exposure resulting from the use of the expanded credit lines referred to in points 6.1.1.2. and 6.1.2.1. – item d) – of the regulations on “Financing to the non-financial public sector” (considering, if applicable, what is established in Section 9. of the cited regulations) with respect to the financial assistance granted and/or the holdings of debt instruments of financial trusts or fiduciary funds referred to in point 5.1. of the regulations on “Financing to the non-financial public sector” and point 3.2.4. of the cited ordering, computed in accordance with the following schedule, which will operate from the moment the works or equipment have begun to be used economically and generate income for the trust or fiduciary fund through tariffs, fees, rates or other similar concepts, will also be computed in this expression.
Computation as “INC” of the use of the expanded quota – as a % of said use – From the 25th First month 50 Seventh month 100 Thirteenth month
The non-financial public sector cited in these regulations is that defined in Section 1. of the regulations on “Financing to the non-financial public sector”.
2.2. Exclusions.
2.2.1. Guarantees granted in favor of the Central Bank of the Argentine Republic (BCRA) and for direct obligations.
2.2.2. Concepts that must be deducted for the purposes of calculating the RPC.
2.2.3. Financing and guarantees, sureties and other liabilities granted by local branches and subsidiaries of foreign financial entities, on behalf and order of their head office or their branches in other countries or of the controlling entity, provided that the following requirements are observed:
2.2.3.1. The regulations of the country where the head office or controlling entity is located, the latter defined according to the provisions in force in that jurisdiction, must cover supervision on a consolidated basis of the local branches or subsidiaries.
2.2.3.2. The entity must comply with what is provided in point 3.1. of the regulations on “Credit Evaluations”, requiring in this effect an international risk rating included in the “investment grade” category.
2.2.3.3. In the case of financing, these must be attended to by the local branches or subsidiaries only with funds coming from lines assigned to them by the aforementioned foreign intermediaries.
If the assistance is granted in a currency different from that of the foreign resources, the local entity cannot assume the exchange rate risk.
2.2.3.4. In the case of guarantees granted locally, there must be counter-guarantees extended by the head office or its branches in other countries or by the foreign controlling entity, whose enforcement operates in an unrestricted manner upon simple request of the local branch or subsidiary and in an immediate manner to its eventual execution by the beneficiary.
2.3. Computation of included concepts.
2.3.1. Individual and consolidated monthly basis.
The included concepts will be computed based on the balances on the last day of each month (capital, interest, premiums, updates – by the Reference Stabilization Coefficient “CER” – and quotation differences, as applicable, net of provisions for uncollectible risk – including, if applicable, provisions accounted for in the liability – and devaluation and of accumulated depreciation and amortization attributable to them and other regularization accounts, without deducting 100 % of the amount of the provision for uncollectible risk corresponding to the portfolio of debtors classified “in normal situation” – points 6.5.1. and 7.2.1. of the regulations on “Classification of Debtors” – and to the financing that are covered with preferred guarantees “A”).
2.3.2. Consolidated quarterly basis.
The balances at the end of the quarter will be considered, applying in other aspects the corresponding provisions established.
2.4. Due diligence requirements.
Financial entities of group 1 must carry out a due diligence process – at the time of granting the credit and with a minimum annual frequency – in order to have an adequate understanding of the risk profile and characteristics of their counterparties. The degree of sophistication of the due diligence evaluations must be proportional to the size and economic importance of the financial entities and to the nature and complexity of their operations. As a result of that evaluation, financial entities must demonstrate to the SEFyC that the assigned risk weights are adequate to the risk profiles of their counterparties. To this effect, financial entities of group 1 must:
i) adopt adequate and reasonable measures in order to evaluate the financial and operational performance of each counterparty through credit analysis; ii) have access to information about their counterparties on a regular basis to complete their analysis; iii) carry out analyses of exposures to counterparties that belong to consolidated groups – whenever possible – at the individual level. At the time of evaluating the counterparty’s individual payment capacity, financial entities must take into account the backing of the economic group, as well as the possibility that the counterparty is harmed by problems generated in the economic group; iv) have effective internal policies, processes, systems and controls; and v) be able to demonstrate to the SEFyC that their due diligence analyses are adequate and consistent with other models and evaluations that must be carried out by the entities – such as the processes for estimating provisions for uncollectible risk and for evaluating their economic capital – as well as with the criteria contemplated in the complementary regulations – among others, Sections 1. and 2. of the regulations on “Guidelines for Risk Management in Financial Entities” –.
This requirement will not apply in the case of exposures to governments and central banks provided for in point 2.12.2.
2.5. Criteria for the determination of risk-weighted assets.
2.5.1. The risk weights established in point 2.12. will be applied – according to the group to which the financial entity belongs, in accordance with what is provided in this section –.
If as a result of the due diligence process – in accordance with what is established in point 2.4. – higher risk weights than those established in point 2.12. arise, financial entities of group 1 must apply the greater of both.
2.5.2. The risk weights will be applied per operation. If it is understood that an exposure could be subject to different specific risk weights, the greater of them will be applied.
2.5.3. Financial entities of group 1 must assign to exposures denominated in a currency different from that of the income of their counterparties – in the cases of retail exposures without credit risk coverage from Section 5. and exposures with mortgage guarantee on residential real estate – a risk weight of 150 % or the one resulting from multiplying by 1.5 the risk weight that would correspond to them according to these provisions, the greater of both.
2.5.4. For the purposes of determining the risk weight to be applied to the exposures referred to in points 2.12.2.4., 2.12.2.5., 2.12.2.6., and 2.12.2.8., the rating granted by an entity that is an External Credit Assessment Institution (“ECAI”) admitted by the BCRA, in accordance with what is established in Section 10., must be used.
The credit ratings contemplated in said points correspond to the methodology used by Standard & Poor’s and are only used by way of example.
No exposure with unrated debtors may receive a risk weight lower than the one applied to the country of incorporation, except that it be the exposures referred to in points 2.12.2.2. and 2.12.2.3.
2.5.5. The term “exposure” covers all financing granted by the entity – in its different modalities, such as loans, holdings of securities, sureties, guarantees and other contingent liabilities – including those coming from operations carried out in the securities, currencies and derivatives markets.
In the case of exposures to financial entities, exposures to companies, retail exposures, exposures with mortgage guarantee, exposures in default situation and exposures to instruments, the specific provisions of points 2.6., 2.7., 2.8., 2.9., 2.10. and 2.11., respectively, must be taken into account. In order to determine the amount of financing included in the exposure to the non-financial public sector, with respect to national public bonds that have normal and habitual quotation for significant amounts in country markets that are applied to passive repo operations in pesos and that are funded with deposits of those public bonds, the net position criterion for bonds provided for in the regulations on “Financing to the non-financial public sector” will be observed. Exposures will include debt balances and contingent commitments multiplied by the corresponding credit conversion factor (CCF).
2.5.6. The treatment granted to the exposure to the non-financial public sector will not apply in operations with counterparties to which the BCRA has granted them the treatment provided for non-financial private sector persons. In these cases, they must be considered as exposures to non-financial private sector companies.
2.5.7. In the case that at least one of the counterparty’s operations with the financial entity is in a situation of default, the entire exposure of the financial entity to the counterparty will be subject to the treatment provided for in point 2.10.
2.5.8. Exposures denominated in foreign currency but whose service collection is made in pesos – “dollar linked” – will be computed as those denominated in national currency. Exposures to the non-financial public sector of national public bonds in pesos with dual currency yield must be considered as species issued in pesos.
2.5.9. A Central Counterparty (“CCP”) entity is understood to be the clearing house that intervenes between the parties to a financial contract negotiated in one or more markets, acting as buyer for every seller and as seller for every buyer, thereby guaranteeing the future execution of the contracts in question. The CCP becomes the counterparty in the negotiations of market participants through novation, or through an open bidding system or by using another scheme with legal force. For the purposes of determining the treatment to be dispensed to the exposure to a CCP, what is provided for in point 4.3.3. or 4.3.4., as applicable, will apply.
2.5.10. Credits incorporated by portfolio purchases will have the same treatment as credits originated by the entity itself, provided that the corresponding conditions are verified.
2.5.11. For the purposes of recognizing the coverage of credit risk, what is provided for in Section 5. will be taken into account.
2.6. Exposures to financial entities.
2.6.1. Included exposures.
It includes exposures to financial entities of the country and abroad (the latter, subject to prudential regulation and supervision comparable to the minimums established in international standards or to compliance with the minimum capital requirement when it comes to banks that are not internationally active according to the regulation of their jurisdiction). Exposures provided for in point 2.11. are excluded. Short-term exposures include those denominated in pesos whose source of funds is in that currency and whose original contractual term is up to 3 months, and exposures linked to foreign trade whose original contractual term is up to 6 months.
2.6.2. Financial entities of group 1 will use the Standardised Credit Risk Assessment Approach (“SCRA”) for the assignment of risk weights. To this end, counterparties must fall into one of the following degrees:
2.6.2.1. Degree “A”.
The borrowing financial entity:
i) evidences an adequate capacity to comply – in time and form – with its financial commitments during the estimated life of the exposures, regardless of the economic conjuncture and business conditions; and ii) observes the minimum regulatory requirements subject to disclosure – including the countercyclical and capital conservation buffers – or equivalents – in the case of foreign financial entities –. Exposures must be assigned to degrees “B” or “C”, if:
a) it is verified that the borrowing entity does not observe the minimum regulatory requirements subject to disclosure provided for in item ii), or does not facilitate the information required to the lending financial entity; and/or b) the financial entity determines – as part of the due diligence process provided for in point 2.4. – that the counterparty does not meet the requirements provided for degree “A”.
2.6.2.2. Degree “B”.
The borrowing financial entity:
i) evidences substantial credit risk and its payment capacity is subordinated to a favorable economic conjuncture or business conditions or with a stable perspective; and ii) observes the minimum regulatory requirements subject to disclosure – without considering the countercyclical and capital conservation buffers – or equivalents – in the case of foreign financial entities –. Exposures must be assigned to degree “C” when it is verified that the borrowing financial entity does not meet the minimum regulatory requirements subject to disclosure provided for in item ii) or when it does not facilitate the information required to the lending financial entity.
2.6.2.3. Degree “C”.
Degree “C” must be assigned to exposures to the borrowing financial entity that is in any of the following situations:
i) evidences material default risk and it is probable that it will not be able to comply with its financial obligations in an unfavorable economic conjuncture or financial or business conditions; ii) does not meet the minimum regulatory requirements subject to disclosure indicated for degree “B” or does not facilitate the information required to the lending financial entity; iii) the external auditor issues a “qualified opinion”, “adverse opinion” or “disclaimer of opinion” regarding its capacity to continue as a going concern, either in the financial statements or in any other audited report in the last 12 months; iv) the lending financial entity evaluates – as part of the due diligence process provided for in point 2.4. – that its counterparty fits the characteristics of degree “C”, even if the situations described in items i) to iii) are not verified.
Minimum regulatory requirements subject to disclosure are understood to be those established in the corresponding regulation – regardless of the group to which the borrowing financial entity belongs according to the regulations on “Authorities of Financial Entities” – without including the regulations on liquidity.
2.6.3. Financial entities of group 2 must assign to exposures to their counterparties the risk weights provided for in point 2.12.
2.7. Exposures to companies.
2.7.1. Included exposures.
i) Companies and other legal persons of the country and abroad – such as exchange entities, insurers, stock exchanges, and companies of the country to which the treatment of the non-financial private sector is granted based on what is established in Section 1. of the regulations on “Financing to the non-financial public sector” –. ii) Other entities with similar characteristics that do not meet the criteria to be admitted in other categories. Exposures to instruments provided for in point 2.11. are not included.
2.7.2. For the purpose of assigning the risk weights provided for in point 2.12., financial entities must consider the following definitions:
2.7.2.1. Companies with "investment grade".
Companies with investment grade are those with sufficient capacity to meet their financial commitments promptly even in the face of adverse changes in the economic climate and business conditions.
To this end, the complexity of the company's business model, its performance relative to its industry and similar companies, and the risks in its operating environment must be taken into account. The company with investment grade (or its controlling entity) must have issued securities quoted on recognized stock exchanges or securities markets.
2.7.2.2. Specialized financing for large infrastructure projects. Pre-operational stage.
Specialized financing for large infrastructure projects is that in which the lending financial entity does not consider the debtor's general income, but rather the income generated by a single project as the source of repayment and backing for the credit. Projects related to the real estate activity are not included.
Specialized financing for large infrastructure projects must legally or in its economic reality have one of the following characteristics:
i) It is granted to an entity –such as a special purpose entity ("SPE")– created solely for the purpose of financing or managing the project.
ii) The borrowing entity does not have other significant assets or activities, and therefore lacks means for the repayment of the financing other than the income derived from the project that is the subject of that financing.
iii) The contractual terms of the financing granted give the lending financial entity a high degree of control over the income and/or assets associated with the project.
A project is in the pre-operational stage if:
a) the entity created to manage it does not yet have a sufficient positive cash flow to cover contractual obligations; and
b) long-term debt is not decreasing.
2.7.2.3. Micro, small and medium-sized enterprises (MSMEs) that do not meet the criteria for regulatory retail exposures provided for in point 2.8.3.
2.8. Retail Exposures.
2.8.1. Exposures Included.
i) Natural persons.
ii) Micro, small and medium-sized enterprises (MSMEs), in accordance with the rules on "Determination of the status of micro, small and medium-sized enterprise", that meet the criteria for regulatory retail exposures provided for in point 2.8.3.
The remaining exposures to MSMEs will receive the treatment applicable to corporate exposures provided for in point 2.7.
Exposures with mortgage guarantee on residential housing, equity participations in MSMEs, and holdings of debt instruments issued by these companies are excluded.
2.8.2. Classification.
i) Regulatory retail exposures –those that must meet the criteria provided for in point 2.8.3.–.
Financial entities may classify regulatory retail exposures as:
a) Transactional. This includes facilities for the use of credit cards –or similar– that would have been fully cancelled on each due date during the last 12 months. It includes overdraft agreements, insofar as that facility has not been used in the last 12 months.
b) Non-transactional.
The exercise of this option must be communicated to the SEFyC with 30 days' prior notice. In the event that financial entities do not exercise this option, all regulatory retail exposures must be considered "non-transactional".
ii) Non-regulatory retail exposures.
2.8.3. Regulatory Retail Exposures. Criteria.
2.8.3.1. Product.
Exposures must be structured as revolving financings, pledge loans, personal loans, financial leases and/or be financings to MSMEs. Revolving financings are understood to be those financings in which borrowers are authorized to make withdrawals and cancellations within the limits agreed upon in a credit line, and which include credit cards and current account overdrafts.
2.8.3.2. Concentration.
The portfolio must be diversified. To this effect, the total exposure with each individual counterparty (single beneficiary or set of connected and associated counterparties to a single beneficiary, in accordance with what is provided for in point 1.2.1 of the rules on "Large exposures to credit risk") must not exceed 0.2% of the total regulatory retail exposures of the entity, without considering exposures in default as provided for in point 2.10.
For the purpose of calculating the limit defined in the preceding paragraph, the aforementioned percentage will be applied to the balance of regulatory retail exposures at the end of the month prior to the month to which the balances used to determine the requirement refer. Individual counterparties whose exposure balance at the end of the month referred to in the second term exceeds that limit cannot be included within regulatory retail exposures.
The total exposure will be the gross amount –without considering credit risk coverages from Section 5.– of retail exposures with the counterparty.
Off-balance sheet items will be calculated after applying the applicable credit conversion factor (CCF).
2.8.3.3. Limit.
The maximum exposure to the same individual counterparty must not exceed, at the time of the agreement, the following amounts:
i) Natural persons –consumer portfolio–: the amount equivalent to 75 (seventy-five) times the Minimum, Vital and Mobile Salary established by the National Council of Employment, Productivity and Minimum, Vital and Mobile Salary for monthly workers who work the full legal working day, in effect at the close of the month prior to the month in question.
ii) MSMEs (including financings to natural persons for the development of their professional activity): the amount equivalent in pesos of € 1,000,000 (in line with international standards) at the selling exchange rate of the Banco de la Nación Argentina at the close of business on the last business day of the month prior to the one in question.
2.8.3.4. In the case of retail exposures to natural persons, the total of the maturities for the installments of all the financial entity's financings that have periodic amortization –without considering the installments of credits from other entities– must not exceed, at the time of the agreements, thirty percent (30%) of the debtor's and/or, if applicable, the co-debtors' income.
Consequently, the margins agreed upon for current account overdrafts and the purchase limits for credit cards –in both cases, both the used and the available limit–, as well as pre-agreed personal loans –insofar as they have not yet been formalized or disbursed to the client–, will not form part of the numerator of the installment/income ratio as they do not have periodic amortization. Installments that the client has for financed purchases within the framework of the credit card system must be considered within the concept of "installments".
For the purpose of considering retail exposures in regulatory retail exposures through portfolio purchases, it must be possible to have the necessary information to verify compliance with the criteria and limits detailed above.
2.9. Exposures with Mortgage Guarantee.
2.9.1. Treatment.
Financial entities in group 1 will classify exposures with mortgage guarantee as regulatory –those that must meet the requirements provided for in point 2.9.2.– and non-regulatory.
Exposures with mortgage guarantee from financial entities in group 2 will receive the treatment provided for regulatory exposures with mortgage guarantee.
To this effect, the risk weights provided for in points 2.12.8.1. and 2.12.8.2. will apply, provided that the requirement of point 2.9.2.1. is observed.
2.9.2. Regulatory Exposures with Mortgage Guarantee. Requirements.
2.9.2.1. The mortgage guarantee must be first priority, or of any priority level provided that the entity is the creditor in all priority levels.
2.9.2.2. The exposure must be guaranteed by a completed real estate property. This requirement will not apply to rural real estate or to financings to natural persons that are guaranteed by a real estate property under construction or by land intended for that purpose; in the latter case, provided that:
i) it is a construction of up to four units for housing –one of which will be the sole, family and permanent occupation residence of the borrower–; or
ii) any of the entities covered by the rules on "Financing of the non-financial public sector" has legal authority and capacity to ensure the completion of the construction of the real estate property.
2.9.2.3. The ratio between the debt balance and the value of the real estate property ("loan to value", LTV) must be calculated prudently and with adjustment to the following requirements:
i) The outstanding debt balance must be calculated without deducting provisions for uncollectible risk or credit risk coverages provided for in Section 5.
ii) The value of the real estate property must correspond to that at the time of granting, except that:
a) Adjustments are made for objective reasons.
b) The BCRA establishes that a generalized reduction in value must be made. If increases are subsequently authorized, the adjusted value of the real estate property may not exceed the value considered at the time of granting the credit, duly updated.
c) An idiosyncratic and extraordinary event occurs resulting in a permanent reduction in the value of the real estate property.
d) Permanent improvements are made to the real estate property that undoubtedly increase its value.
iii) The value of the real estate property is the result of an appraisal that meets the following criteria:
a) it adjusts to a conservative valuation;
b) it is carried out independently from those participating in the credit granting processes;
c) it is not based on the expectation that the price of the real estate property will increase;
d) it does not exceed the market price;
e) it is not higher than the acquisition price –in cases where the mortgage-backed loan finances the purchase of the mortgaged real estate property–, taking into account what is provided for in item ii), subsection a); and
f) it does not depend on the financial situation of the borrower.
2.9.2.4. Any rights over the real estate property must be legally enforceable, and the documentation and legal process for execution must allow the financial entity to recover the value of the real estate property within a reasonable time.
2.9.2.5. All information requested –both in the origination of the loan and during its monitoring– must be duly documented; in particular, that referring to the borrower's ability to repay their debt and to the appraisal of the real estate property.
2.9.2.6. The repayment of the financings must not depend significantly on the cash flow generated by the real estate property that is the subject of the mortgage guarantee.
2.9.2.7. Loans must not be destined to special purpose entities ("SPE") to finance the acquisition of land intended for development and construction projects or to develop and construct residential and commercial real estate.
2.9.2.8. Financial entities must establish policies for the granting of mortgage-backed loans that allow for an adequate assessment of the borrower's ability to repay, including metrics and limits (such as the debt service coverage ratio), in accordance with what is provided for in the rules on "Guidelines for risk management in financial entities".
2.10. Exposures in Default.
This includes all exposures to a debtor with respect to whom any of the following situations is verified:
i) The debtor has a credit in arrears for more than 90 days. A current account overdraft is considered in arrears from the moment the debtor exceeds the authorized limit or is notified of a new limit that is lower than their debtor balance.
ii) The debtor has any significant obligation with respect to which the accrual of interest has been suspended, or the interest is fully provided for.
iii) An obligation has been written off or a specific provision has been established against a significant deterioration in the credit quality of the debtor subsequent to the granting of the credit.
iv) A credit has been sold with a significant loss due to its credit situation.
v) A restructuring of a credit obligation has been agreed that may result in a reduction of the debt as a consequence of haircuts, deferrals of capital or interest payments, or a decrease in applicable commissions.
vi) The bankruptcy of the debtor or another similar measure has been requested that causes the deferral or prevents the recovery of the credit by the entity.
vii) The debtor has requested their preventive bankruptcy or bankruptcy or another similar measure that causes the deferral or prevents the recovery of the credit by the entity.
viii) The financial entity considers it unlikely that it can recover the total claims of the debtor without resorting to the execution of guarantees or other measures in defense of its credit.
2.11. Exposures to Instruments.
2.11.1. Financial entities in group 1 must classify exposures to instruments as:
i) Subordinated debt issued by companies and/or financial entities.
ii) Shares –defined in accordance with the criteria established in point 2.11.3.–.
iii) Other equity instruments issued by companies and/or financial entities.
2.11.2. Financial entities in group 2 must classify exposures to instruments as:
i) Subordinated debt issued by companies and/or financial entities.
ii) Equity participations issued by companies and/or financial entities.
2.11.3. Criteria for considering an exposure to an instrument as a share.
For the purpose of determining whether an exposure should be treated as a share, financial entities in group 1 must take into account the economic reality of the instrument.
The following are included:
2.11.3.1. Direct and indirect participations in the equity and profits of financial entities and companies, with or without voting rights. Indirect participations include, among others, the holding of derivative instruments linked to shares and to shares, quotas or interest parts in commercial companies whose main activity is investment in shares.
2.11.3.2. Instruments, insofar as they meet the following conditions:
i) They cannot be amortized. The results of the investment can only be realized through the sale of the instrument or the rights over the investment or through the liquidation of the issuer.
ii) They do not represent any obligation for the issuer.
iii) They represent a residual right over the assets or profits of the issuer.
2.11.3.3. Instruments that have the same structure as those admitted as Common Equity Tier 1 (CET1) capital of financial entities.
2.11.3.4. Any instrument that incorporates an obligation for the issuer and has any of the following characteristics:
i) The issuer can indefinitely defer payment of the obligation.
ii) The contract establishes or grants the issuer the option to cancel the obligation by issuing:
a) a fixed amount of its shares; and/or
b) a variable amount of its shares and –keeping other factors constant– any change in the value of the obligation is attributable and proportional to the change in the market value of a fixed number of the issuer's shares multiplied by a predetermined factor.
iii) The holder has the option to demand payment of the obligation with shares.
2.11.3.5. Debt securities and other securities, derivatives and structured vehicles intended to replicate the economic reality of a share.
This includes obligations whose return is linked to shares, and shares accounted for as a loan that originate from a debt-for-equity swap carried out in a debt restructuring process. The minimum capital requirement determined for these latter instruments cannot be less than that which would have corresponded had they remained in the credit portfolio.
For the purpose of compliance with these provisions, the SEFyC may reclassify debt positions as share positions if it observes that the conditions and requirements ensuring the adequate treatment of holdings are not met.
Investments in structured shares with the object of replicating the economic reality of credit exposures or securitizations will not be considered shares.
2.12. Risk Weight Table.
Concept Weight
–in %–
2.12.1. Cash and Balances.
2.12.1.1. Cash in hand, in transit (when the financial entity assumes responsibility and risk of transport) and in ATMs. 0
2.12.1.2. Current and special accounts at the BCRA and payment orders charged to the BCRA. 0
2.12.1.3. Minted or bar gold of "good delivery", as defined in the rules on "Foreign Exchange and Changes", in the entity or in another financial entity –as long as it is individualized under "on an allocated basis" clauses– and provided that the assets are backed by liabilities denominated in these species. 0
2.12.1.4. Cash items that are in the process of being collected (checks and drafts for collection), cash in valuables transport companies and cash in custody at financial entities. 20
2.12.2. Exposure to Governments and Central Banks.
2.12.2.1. To the BCRA in pesos, when its source of funds is in that currency. 0
2.12.2.2. To the National Government and to provincial and municipal governments and of the Autonomous City of Buenos Aires in pesos, when its source of funds is in that currency. 0
2.12.2.3. To the non-financial public sector for financings granted to beneficiaries of social security or to public employees –in both cases with discount code–, insofar as such operations are denominated in pesos, the source of funds is in that currency and the installments of all the entity's financings that have a periodic amortization system do not exceed, at the time of the agreements, thirty percent (30%) of the debtor's and/or, if applicable, the co-debtors' income. 0
2.12.2.4. To the non-financial public sector and the BCRA. Other.
Rating
AAA to
AA-
A+ to
A
BBB+ to
BBB
BB+ to
B
Below
B
Unrated
Risk Weight 0 % 20 % 50 % 100 % 150 % 100 %
2.12.2.5. To other sovereign states (or their central banks).
Rating
AAA to
AA+ to
A
BBB+ to
BBB
BB+ to
B
Below B
Unrated
Risk Weight 0 % 20 % 50 % 100 % 150 % 100 %
2.12.2.6. To non-financial public sector entities of other sovereign states, in accordance with the credit rating assigned to the corresponding sovereign.
Rating
AAA to
AA+ to
A
BBB+ to
BBB
BB+ to
B
Below B
Unrated
Risk Weight 20 % 50 % 100 % 100 % 150 % 100 %
2.12.2.7. To the Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Stability Mechanism and the European Financial Stability Facility. 0
2.12.2.8. To the provincial, municipal and/or Autonomous City of Buenos Aires non-financial public sector for the acquisition of public titles issued in pesos by the central administration, when they do not have any of the guarantees established in point 4.1.1 of the rules on "Financing of the non-financial public sector", in accordance with the credit rating assigned to the corresponding jurisdiction.
Rating
AAA to
AA+ to
A
BBB+ to
BBB
BB+ to
B
Below B
Unrated
Risk Weight 20 % 50 % 100 % 150 % 200 % 200 %
2.12.3. Exposure to Multilateral Development Banks (MDBs).
2.12.3.1. Exposure to entities that in the opinion of the Basel Committee on Banking Supervision satisfactorily meet the admissibility criteria contemplated in international standards. 0
2.12.3.2. Other. 50
2.12.4. Exposure to Financial Entities.
2.12.4.1. Exposure to financial entities by financial entities in group 1 (SCRA).
Credit Risk Assessment of Counterparty Grade "A" Grade "B" Grade "C" General Weight 40 % 75 % 150 % Weight for short-term exposures 20 % 50 % 150 %
The risk weight of exposures to financial entities cannot be lower than the weight applicable to the jurisdiction in which the counterparty is established when:
i) the exposure is not denominated in the local currency of the counterparty's jurisdiction of establishment; or
ii) the debt is contracted by a branch or subsidiary of the counterparty abroad, and is not denominated in the local currency of the jurisdiction in which it operates.
The treatment provided for in subsections i) and ii) excludes self-liquidating contingent lines for the financing of foreign trade with an original contractual term of up to one year.
2.12.4.2. Exposure to financial entities by financial entities in group 2.
i) Short-term exposures. 20
ii) Other. 100
2.12.5. Exposures to Companies.
2.12.5.1. Companies with "investment grade". 65
2.12.5.2. MSMEs that do not meet the criteria provided for in point 2.8.3. 85
2.12.5.3. Specialized financing for large infrastructure projects. Pre-operational stage. 130
2.12.5.4. Other. 100
2.12.6. Retail Exposures.
2.12.6.1. Transactional regulatory retail exposures. 45
2.12.6.2. Non-transactional regulatory retail exposures. 75
2.12.6.3. Non-regulatory retail exposures. 100
2.12.7. Exposures guaranteed by reciprocal guarantee societies or public guarantee funds registered in the records authorized by the BCRA. 50
2.12.8. Exposures with mortgage collateral.
2.12.8.1. Regulatory exposures with mortgage collateral on residential real estate.
i) Regarding the credit support that does not exceed 55% of the value of the property. 20 ii) On the amount that exceeds 55% of the value of the property, the risk weight of the counterparty will be applied.
2.12.8.2. Regulatory exposures with mortgage collateral on commercial real estate.
i) Up to the amount equivalent to 55% of the value of the property, the 60% risk weight or the counterparty's risk weight, whichever is lower, will be applied. ii) For the amount that exceeds 55% of the value of the property, the counterparty's risk weight will be applied.
2.12.8.3. Non-regulatory exposures with mortgage collateral. 150
The counterparty risk weight referred to in points 2.12.8.1. and 2.12.8.2. will be the one that would be assigned to an exposure without mortgage collateral. To this end, a risk weight of 75% will be applied for exposures to natural persons, 85% for exposures to SMEs, and the risk weights provided for in point 2.12. for the rest of the exposures.
2.12.9. Exposures in default.
2.12.9.1. Regulatory exposures with mortgage collateral on residential real estate. 100
2.12.9.2. Exposures or tranches not covered by credit risk coverages of Section 5. not contemplated in point 2.12.9.1.
i) With specific provisions less than 20% of the outstanding balance. 150 ii) With specific provisions equal to or greater than 20% and less than 50% of the outstanding balance. 100 iii) With specific provisions equal to or greater than 50% of the outstanding balance. 50
2.12.9.3. Part of the exposures that have credit risk coverages. The provisions of Section 5. must be taken into account.
2.12.10. Exposures to instruments (non-deductible part of CET1 as provided in Section 8.).
2.12.10.1. Exposures to instruments by financial entities of group 1.
i) Subordinated debt and equity instruments that do not meet the characteristics to be considered as shares. 150 ii) Shares (defined according to point 2.11.3.). 250
2.12.10.2. Exposures to instruments by financial entities of group 2.
i) Subordinated debt. 150 ii) Equity participations. 250
2.12.11. Securitization positions. The provisions of point 3.1. must be taken into account.
2.12.12. Non-failed cash operations to be settled. 0
2.12.13. Failed DvP and non-DvP operations. The provisions of point 4.1. must be taken into account.
2.12.14. Exposures to central counterparty entities (CCP). The provisions of point 4.3. must be taken into account –with the exception of cases contemplated in point 4.1.–.
2.12.15. Derivative operations not included in point 2.12.14. The provisions of point 4.2. must be taken into account.
2.12.16. Exposures to natural and legal persons arising from installment purchases made until 11/25/21, via credit cards for travel abroad and other tourist services abroad (such as accommodation, car rental, etc.), whether made directly with the service provider or through a travel and/or tourism agency and/or web platforms. 1250
2.12.17. Other assets and/or off-balance sheet items. 100
2.13. Off-balance sheet items. Credit Conversion Factors (CCF).
Off-balance sheet items –including commitments for financing and correspondent lines to entities abroad, guarantees granted, sureties granted on deferred payment checks, documentary credits and acceptances, documents rediscounted in other financial entities, and other credit agreements– will be converted into credit equivalents using the following credit conversion factors (CCF), after which the risk weights established in point 2.12. will be applied, taking into account, where applicable, the provisions established in Section 5.:
| Concept | CCF -in %- |
|---|---|
| i) Direct credit substitutes, such as general debt guarantees –including “stand-by” letters of credit used as financial guarantees– and acceptances and endorsements with liability. | 100 |
| ii) Contingent items related to the client's commercial operations –such as those derived from guarantees of compliance with commercial obligations–. | 50 |
| iii) Short-term commercial letters of credit –that is, with a residual term of up to one year– self-liquidating that cover the movement of goods –such as documentary credits secured by the underlying documentation–. Both the issuing bank and the confirmer will be subject to the CCF provided for in this subsection and the corresponding risk weight based on the counterparty. | 20 |
| iv) Asset sales with repurchase agreement –even in swap operations– or with liability for the transferor, and in general, operations of a similar nature, in which the entity retains the credit risk of the asset (they will be weighted according to the asset and not based on the counterparty). This treatment excludes titles delivered as collateral for derivative operations provided for in point 4.2. | 100 |
| v) Commitments to acquire assets not recorded in the balance sheet (they will be weighted according to the asset and not based on the counterparty). | 100 |
| vi) Short-term securities issuance lines (“Note issuance facility”, NIF) and revolving securities underwriting lines (“Revolving underwriting facility”, RUF), regardless of the term of the underlying facility. | 50 |
| vii) Committed credit lines, regardless of the maturity of the underlying facility. | 40 |
| viii) Commitments that can be cancelled at the discretion and unilaterally by the financial entity, or that are automatically cancelled in case of deterioration of the debtor's solvency. | 10 |
Off-balance sheet items referring to commitments will be subject to the lowest CCF that is applicable.
Note from RegAlert. AI assistants can read this document in full, and search 70,000+ more, through the RegAlert MCP connector (https://mcp.regalert.today/mcp). Free with an account. How to connect ChatGPT, Claude or Cursor.
Source: Banco Central de la Republica Argentina — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
More like this from BCRA
BCRA published 10 documents in the last 30 days. We email you each new one the day it's published.