Circular RUNOR 1-203 and OPASI 2-159: Composition of Liabilities from Financial Intermediation

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMUNICACION " A " 2494 25/11/96 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
RUNOR 1 - 203.
OPASI 2 - 159.
Composition of Liabilities from
Financial Intermediation

We address you to inform you that this Institution adopted the following resolution:

"- Establish that financial entities must issue and place debt, subject to the conditions set forth below:

1. Minimum Amount.
   The equivalent to 2% of their deposits in national and foreign currency and securities registered on the last day of the second month prior to that in which the issuance is carried out.

2. Frequency.
   The debt must be issued and placed annually.
   The first issuance and placement must be carried out before December 31, 1997.
   Subsequent issuances and placements must be carried out with an advance or deferral not greater than one month with respect to the date on which one year has elapsed since the previous mandatory issuance.

3. Issuance.
   It will be carried out under the conditions freely agreed upon, except that:
   3.1. the duration shall not be less than 2 years, calculated in accordance with what is provided in point 1.2.1.3. of the resolution disseminated through Communication "A" 2266.
   3.2. they cannot be redeemed early, unless 2 years have elapsed since the issuance or, alternatively, if express authorization is obtained from the Superintendence of Financial and Exchange Entities based on prevailing market conditions.

4. Instruments.
   For the placement of the debt issued under this regime, one may opt indistinctly for any of the following instruments:
   4.1. negotiable bonds or other debt securities whose public offering has been authorized by the competent regulatory body in the matter and are negotiable in markets in the country or in those functioning in countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have issued titles that have an AAA rating or equivalent granted by one of the international risk assessment companies referred to in point 2.2. of Section 2. of the Standards on asset qualification for investments with Pension and Retirement Funds (Communication "A" 2484, T.O.).
   4.2. fixed-term deposit certificates whose holder is a foreign bank that has a rating of at least A or equivalent granted by one of the aforementioned international risk assessment companies.
   4.3. loans from foreign banks that have the required rating according to the previous section.
   4.4. loans from local financial entities that have met the requirements of this norm through the placement of negotiable bonds or other debt securities in markets in the country or abroad, as provided in section 4.1.
   Loans from entities excluded from this regime will also be admitted, as provided in point 6.
   Foreign banks and local financial entities that place their resources in any of the instruments referred to in sections 4.2 to 4.4 must issue a sworn declaration stating that they do not register liabilities (deposits, other obligations from financial intermediation, etc.) with the issuing entity that imply neutralizing, directly or indirectly, the obligation established by this regime. The declarations must be sent directly by the signatories to the Superintendence of Financial and Exchange Entities.

5. Non-compliance and Sanctions.
   5.1. Total or partial placement defects -whatever their origin- that occur on the maturity date for the annual mandatory issuance and placement will determine:

5.1.1. the automatic increase of one percentage point of the minimum liquidity requirements, except for obligations with terms greater than 365 days, which will take effect in the calculation period of the month following that in which the non-compliance occurs.
This increase will remain until the position of the month in which the Superintendence of Financial and Exchange Entities determines that the entity has regularized its situation regarding the placement of mandatory debt.

5.1.2. the increase in the minimum capital requirement, for which the result of the expression referred to in point 1.1. of Communication "A" 2136 will be multiplied by 1.05. This will be taken into account for the determination of the minimum capital requirement whose integration becomes due on the last day of the month following that in which the non-compliance occurs.

5.2. To the extent that the placement defect persists for more than three consecutive months, the entity must present a regularization and stabilization plan in accordance with Article 34 of the Financial Entities Law.

5.3. For the purposes of applying the provisions of Article 41 of the Financial Entities Law, any maneuver or action that, in the judgment of the Superintendence of Financial and Exchange Entities, implies, directly or indirectly, circumventing compliance with these provisions will be considered a serious offense.
It will be presumed that such intention exists when the existence of assets (cash, securities, loans, other credits from financial intermediation, etc., with respect to holders who, in turn, are holders of debt placed by the entity, either directly or indirectly) is verified. The verification of these circumstances will determine an automatic additional increase of three percentage points in the minimum liquidity requirements. In addition, the increase in the minimum capital requirement referred to in section 5.1.2 will apply, with the caveat that in these cases the coefficient to be used will be 1.10.

6. Exclusions.
   The following are excluded from the provisions of this regime:

6.1. local branches of foreign banks that:
6.1.1. have an "investment grade" rating granted by one of the international risk assessment companies admitted according to point 2.2. of Section 2. of the Standards on asset qualification for investments with Pension and Retirement Funds (Communication "A" 2484, T.O.) and
6.1.2. are subject to supervision on a consolidated basis.

6.2. local subsidiaries of foreign banks to the extent that the following conditions are met with respect to the controlling entity:
6.2.1. they meet the conditions of section 6.1 and
6.2.2. they have explicitly guaranteed the obligations of the subsidiary.

7. Other Provisions.
   In aspects not provided for, the norms established with a general character according to the instrument and the conditions that are established to comply with what is provided in this regime will apply, where pertinent."

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Juan Carlos Isi Alfredo A. Besio
Submanager of Standards for Submanager of Standards for Financial Entities Financial Entities