Circular LISOL 1 - 72. Minimum Capital of Financial Entities

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMUNICACION " A " 2135 19/08/93 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 71.
Minimum Capital of Financial Entities

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

"- To substitute and/or incorporate into the provisions on the requirement and integration of minimum capital of financial entities, made known through Communication "A" 2118, the aspects indicated in each case:

1. In point 1.1., last two paragraphs:
   "Financings that, at origin, were weighted with values lower than 100%, will be subject to that weighter from the moment the debtor is classified in the 'Debtor Status Report' with risk of insolvency or in any of the following lower quality categories. To this effect, assets -whether immobilized or not- will be calculated based on the monthly averages of daily balances of the month prior to that corresponding to the determination of the requirement (capital, interest, premiums and exchange differences, as applicable, net of provisions for risk of uncollectibility and devaluation and of the accumulated amortizations attributable to them, without deducting provisions for risk of uncollectibility on the normal portfolio, with delay or as referred to in point 1.1. of Communication "A" 2016)."

2. In point 3.:
   "PNc: Supplementary net equity, not exceeding 100% of PNb".
   "D: 50% of the positive amount of the restatement of non-monetary assets, except if they are concepts included in Cd, -net of the amortizations attributable to them-, generated from the balances as of July 1993, to the extent that the assets are maintained in equity." "'Supplementary net equity' comprises the positive or negative result of the algebraic sum of the following concepts:" "- 50% of the positive results and the entirety of the losses, registered each month, calculated cumulatively, from the last quarterly or annual balance sheet that has an audit report or opinion (positive or negative)." "- 100% of the losses not considered in the financial statements, corresponding to the quantification of the facts and circumstances reported by the auditor, as provided in point 2. of Annex IV to the minimum standards on external audits (negative)." "For the purpose of computing the 100% of the results registered up to the last quarterly or annual balance, the respective financial statement with the auditor's report must be submitted prior to the date by which the presentation of the monthly balance is mandatory."

3. In point 6:
   "6. Establish that, for July, August and September 1993, entities may opt to determine the requirement and compliance of the integration of minimum capital taking into account the provisions disseminated by Communication "A" 1858 and its complementary ones. Therefore, in the event that this option is fully exercised, they must observe the rules of this resolution starting from October 1993, calculating the requirement based on the monthly averages of the computable assets registered in September. The chosen option and the subsequent months it comprises -since alternating periods are not admitted- must be reported by note addressed to Supervision of Financial Entities."

4. In the weighting table of Annex I:
   4.1. In point 1. Liquidity:
   "1.1. B.C.R.A - common and special checking accounts and demand deposits in US dollars; B.N.A. - Clearing houses of the interior; B.N.A. (New York branch) for demand placements under the regime of Communication "A" 1820 (1st paragraph of Communication "A" 2120); other computable accounts for the integration of minimum cash in foreign currency; other special deposits at the Central Bank and payment orders charged to it; checking, correspondent or demand accounts at the headquarters of the local financial entity or at its branches in other countries 0"

4.2. In point 2. Public securities
"2.1. national, according to the weighted average remaining life term of each security"

4.3. In point 3. Loans:
"3.1.2. collateral of time deposit certificates (in national or foreign currency) issued by the creditor entity itself 0" "3.1.5. national public securities. according to the weighted average remaining life term of each security" "3.1.6.1. on real estate for owner-occupied housing that is subject to the lien, when it concerns loans for their acquisition and improvement 50
3.1.6.2. on real estate, except for financings included in point 3.1.6.1. 75"
"3.3. to the financial sector
3.3.1. up to 45 days term 15
3.3.2. more than 45 days term 30"
"3.7. to the headquarters of the local financial entity or to its branches in other countries 0"

4.4. In point 4. Other credits by financial intermediation:
"4.2.2. collateral of time deposit certificates (in national or foreign currency) issued by the creditor entity itself 0" "4.2.4. national public securities, according to the weighted average remaining life term of each security" "4.5. with the financial sector
4.5.1. up to 45 days term 15
4.5.2. more than 45 days term 30"

"4.10. cash purchases for settlement of national public securities, private and others and of foreign currency, and their corresponding premiums to accrue 0" "4.11. debtors from cash sales for settlement of national public securities, private and others and of foreign currency 0" "4.14. with the headquarters of the local financial entity or its branches in other countries 0" "4.15. overdue cash purchases for settlement and forward transactions of national public securities, private and others and of foreign currency, linked or not with repos, in which the financial entity has already effected its provision and is pending receipt of the agreed counterparty, regardless of the accounting registration modality used 100"

4.5. In point 7. Guarantees, sureties and other eventual liabilities:
"(*) These concepts (codes 711033, 715003, 715003 - insofar as they correspond to operations accounted for in accounts 721033, 725003 and 725033-, 711045 and 715045) will be computed in accordance with what is established in the last paragraph of point 1.1. of the resolution."

5. In the risk indicators table (Annex II):
   " The nominal annual interest rates will be considered, both for operations in foreign currency and in pesos."

We remind you of the validity of the provisions contained in point 1.5. of Chapter II of Circular OPRAC -1 regarding the prohibition of charging commissions or other additional charges to the interest agreed upon in credit operations. Without prejudice to the application of the pertinent legal norms, the charging or accrual of concepts that do not constitute a service effectively rendered or a genuine reimbursement of expenses or the subscription and integration of shares in the case of entities of a cooperative nature, when they are associated -directly or indirectly- with the financing granted, is considered by this Institution as a component of the financial cost of the operation and, as such, added to the rate in order to determine the bracket of the risk indicator table to which it can be attributed.

Separately, we send you the ordered text of the provisions on the requirement and integration of minimum capital, in replacement of those disseminated through Communication "A" 2118.

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