Accounting Valuation of National Public Debt Instruments. Refinancing of Guaranteed Loans Issued by the National Government (Decree 1387/01 and Complementary) — BCRA — AR

"2009 - Year of Homage to Raúl SCALABRINI ORTIZ" COMMUNICATION “A” 4898 22/01/2009 TO FINANCIAL ENTITIES:
Ref.: Circular
CONAU 1 - 876
LISOL 1 - 496
OPRAC 1 - 621
Accounting Valuation of National Public Debt Instruments. Refinancing of Guaranteed Loans Issued by the National Government (Decree 1387/01 and Complementary).

We address you to inform you that this Institution has adopted the following resolution, the pertinent part of which is transcribed below:

“1. Establish that the “Argentine Nation Bond in pesos BADLAR private + 275 bps. Mat. 2014” and/or the “Argentine Nation Promissory Note in pesos BADLAR private + 275 bps. Mat. 2014” subscribed by financial entities through swap, dation in payment, or exchange for Guaranteed Loans issued by the National Government (Global 08 Fixed Rate - Caja de Valores S.A. code 31A1-, Global 08 Variable Rate - Caja de Valores S.A. code 31A2-, Bonte 06 Fixed Rate - Caja de Valores S.A. code 14A1- and BP E+580 Mega Fixed Rate - Caja de Valores S.A. code 08A1-, within the framework of Decree No. 1387/01) -including those delivered as collateral for advances granted by the Central Bank of the Argentine Republic for the subscription of the bonds provided for in articles 10, 11 and 12 of Decree 905/02, ratified by article 71 of Law 25.827-, shall be recorded at the net book value of the proportional part of the regularizing account of the Guaranteed Loans applied to that operation on the day prior to the effective date of said subscription.

Subsequent to that date, financial entities must definitively opt to account for their holdings -total or partial- under one of the following valuation criteria, before filing the “Monthly Accounting Information Regime, Balance Sheet” with the Superintendence of Financial and Exchange Entities for the month in which the swap is carried out:

1.1. The higher value resulting from the comparison between the present value that this Institution will disseminate monthly and the net book value of its regularizing account shall be used.

The entity must charge to a regularizing account 50% of the accrual of its internal rate of return. When that net book value is equal to or lower than the present value disseminated by the Central Bank, the entity shall remove the respective regularizing account up to the amount corresponding to the difference between the present value and the net book value of the regularizing account. In the event that the title is expressly included in the list of volatilities published monthly by this Institution, the quotation value will replace the present value.

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It will be admitted that these holdings be applied to repo operations without affecting their book value provided that the counterparty is one of the following:

other financial entities in the country.
a foreign bank that has an international rating of “A” or higher granted by one of the international rating agencies admitted according to the regulations on “Evaluation of Financial Entities”.
Central Bank of the Argentine Republic.

1.2. These holdings (including the promissory note) shall be charged to the “Investment Accounts” regime, applying the valuation criterion provided for monetary regulation instruments of the Central Bank contemplated in point 3.1.2. of those regulations.

Provide, from February 2009, the modification of the valuation criterion for all those instruments covered by point 1. of the updated text of the “Regime for the Valuation of Guaranteed Loans Issued by the National Government and other debt instruments of the non-financial public sector” (annex to Communication “A” 4455) whose present values are disseminated by this Institution. To this effect, the higher value resulting from the comparison between the respective present value and the book value (net of the regularizing account -of the previous month- and of the financial services charged in that period) shall be used.

When the net book value of the regularizing account thus determined is equal to or lower than said present value, the entity shall remove the corresponding regularizing account up to the amount corresponding to the difference between the present value and said net book value.

To this end, the present values that this Institution will disseminate will arise from the yield curve of securities corresponding to the same type of instrument, with normal and usual quotation and similar “duration”, according to the methodology that will be disseminated through the website of this Institution (www.bcra.gov.ar).

On the other hand, in the case of the BOGAR 2018 -covered by point 1. of the updated text of the “Regime for the Valuation of Guaranteed Loans Issued by the National Government and other debt instruments of the non-financial public sector” (annex to Communication “A” 4455)-, that comparison will be made considering the corresponding book value decreased as provided in the first paragraph of this point and the usual quotation value in the markets.

The Guaranteed Loans and the BOGAR 2018 delivered as collateral for advances granted by the Central Bank of the Argentine Republic for the subscription of the bonds provided for in articles 10, 11 and 12 of Decree 905/02, ratified by article 71 of Law 25.827, held in portfolio and to the extent that the entity has opted for the valuation criterion admitted for the purposes of constituting the guarantees (third paragraph of point 1. of the updated text of the “Regime for the Valuation of Guaranteed Loans Issued by the National Government and other debt instruments of the non-financial public sector” -annex to Communication “A” 4455-), will continue to apply that valuation criterion.

Establish that, from February 2009, public debt instruments not contemplated in point 2. of this resolution, subject to the “Regime for the Valuation of Guaranteed Loans Issued by the National Government and other debt instruments of the non-financial public sector” (annex to Communication “A” 4455) and valid as of 31.3.03, shall be recorded at the net book value as of 31.1.09 (net book value of the respective asset regularizing account) and the financial services charged after that date shall be deducted.

The interest accrued monthly and, if applicable, the adjustment for the application of the “CER”, shall be accounted for with a counterpart in an asset regularizing account.

Establish that the “Argentine Nation Bond in pesos BADLAR private + 275 bps. Mat. 2014” and the “Argentine Nation Promissory Note in pesos BADLAR private + 275 bps. Mat. 2014” subscribed by financial entities through swap, dation in payment, or exchange for Guaranteed Loans issued by the National Government, will have the following regulatory treatment:

4.1. they are included in the provisions of paragraph b) of point 8. of Communication “A” 3911 (text according to point 2. of the resolution disseminated by Communication “A” 4676), regarding excesses admitted to the limits of financing to the non-financial public sector, and

4.2. they will not require the prior authorization of the Central Bank provided for in Section 4. of the regulations on “Financing to the non-financial public sector”.

Incorporate as the penultimate paragraph of item c) of point 8. of Communication “A” 3911 (text according to point 2. of the resolution disseminated by Communication “A” 4676), the following:

“The term referred to in the first part of the preceding paragraph will also be extended by 180 days, reaching 360 days prior to the date of subscription of the “Argentine Nation Bond in pesos BADLAR private + 275 bps. Mat. 2014” and/or the “Argentine Nation Promissory Note in pesos BADLAR private + 275 bps. Mat. 2014” for Guaranteed Loans issued by the National Government (Global 08 Fixed Rate - Caja de Valores S.A. code 31A1-, Global 08 Variable Rate - Caja de Valores S.A. code 31A2-, Bonte 06 Fixed Rate - Caja de Valores S.A. code 14A1- and BP E+580 Mega Fixed Rate - Caja de Valores S.A. code 08A1-). In such case, the new operations of financing to the non-financial public sector by effect of this provision that may be granted, within the 180 days following the date of subscription of said title (bond and/or promissory note), may not exceed the amount of the capital amortization services whose maturity would have occurred during the 360 days following that same date had said Guaranteed Loans been kept in the entity's own portfolio or the amount of the amortizations collected and not reinvested corresponding to all the public debt instruments included during the additional 180 days resulting from the application of said extension, whichever is lower.”

Establish that in the case of sale of the debt instruments contemplated in points 1., 2. and 3. of this resolution, the balance of the regularizing account shall be cancelled proportionally with a counterpart in results.

The collection of income and amortization services will not imply the removal of the respective regularizing account.

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Substitute point 2.1.2. of Section 2. of the regulations on “Distribution of Results” with the following:

“2.1.2. the positive difference resulting between the book value and the market quotation value, in the case that the financial entity records public debt instruments and/or monetary regulation instruments of the Central Bank not valued at market prices.

For the case of Guaranteed Loans, the BOGAR 2020, the “Argentine Nation Bond in pesos BADLAR private + 275 bps. Mat. 2014” and the “Argentine Nation Promissory Note in pesos BADLAR private + 275 bps. Mat. 2014”, subscribed by financial entities through swap, dation in payment, or exchange for Guaranteed Loans issued by the National Government (Global 08 Fixed Rate - Caja de Valores S.A. code 31A1-, Global 08 Variable Rate - Caja de Valores S.A. code 31A2-, Bonte 06 Fixed Rate - Caja de Valores S.A. code 14A1- and BP E+580 Mega Fixed Rate - Caja de Valores S.A. code 08A1-), for the purposes of comparison with their net book value, the present value published monthly by this Institution shall be used.

For monetary regulation instruments of the Central Bank and public debt instruments that do not have volatility published by the Central Bank, said value must be calculated by financial entities based on the corresponding cash flow discounted at the internal rate of return of instruments of similar characteristics and “duration” that have volatility published by this Institution or, in default, using a yield rate that is consistent with the methodology that will be disseminated through the website of this Institution (www.bcra.gov.ar).

Likewise, the criteria indicated above will apply for the determination of valuation differences in participation certificates and debt titles of financial trusts, in the proportion that corresponds, when their underlying is constituted by the aforementioned instruments not valued at market price.”

Repeal, from February 2009, the resolution disseminated by Communication “A” 4704, the annex to Communication “B” 8911 and point 2. of the updated text of the “Regime for the Valuation of Guaranteed Loans Issued by the National Government and other debt instruments of the non-financial public sector” (annex to Communication “A” 4455).
Establish that the valuation criteria contemplated in the preceding points will cover the mentioned debt instruments that are underlying in participation certificates and debt titles of financial trusts.
Admit, within the framework of what is provided in Decree No. 905/02, article 15, and complementary regulations, that financial entities replace the Guaranteed Loans issued by the National Government according to Decree No. 1387/01 (Global 08 Fixed Rate - Caja de Valores S.A. code 31A1-, Global 08 Variable Rate - Caja de Valores S.A. code 31A2-, Bonte 06 Fixed Rate - Caja de Valores S.A. code 14A1- and BP E+580 Mega Fixed Rate - Caja de Valores S.A. code 08A1-), duly affected as collateral for advances granted by the Central Bank of the Argentine Republic for the acquisition of “Boden depositantes” (Decree 905/02, art. 14), with the instrument (bond and/or promissory note) referred to in point 1. of this resolution.

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In the same way, the substitution cited in the preceding paragraph will be admitted for the following lines: i) Global Program of Credit to Micro, Small and Medium Enterprises (Communication “A” 4620 and complementary) and ii) Credit Program for the Development of Production and Employment in the Province of San Juan (Communication “A” 4769 and complementary), subject to the approval of the respective Executive Agencies.

The new instrument to be received in replacement of the respective Guaranteed Loans, as collateral for the mentioned credit lines, must maintain at the date of swap a value equivalent to the cited original instruments, without prejudice to the value of the titles granted as collateral duly, with the purpose of complying with the corresponding regulatory coverage in relation to the existing debt.

As long as all the procedures inherent to the issuance and assignment as collateral of the resulting Bond are fulfilled, financial entities must assume -for the mentioned credit lines- the irrevocable commitment to assign said asset under identical conditions as the Guaranteed Loans subject to the swap.”

Finally, we send you the sheets that, in replacement of those duly provided, correspond to incorporate in the ordered text of the regulations on “Distribution of Results”.

We salute you very attentively.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Darío C. Stefanelli Juan C. Isi
Manager of Issuance of Regulations
Principal Manager of Issuance and
Regulatory Queries

ANNEX

2.1. Determination of distributable result.
Entities not included in some of the situations provided for in point 1.1. may distribute results up to the positive amount resulting from deducting, off-balance sheet, from the balances at the close of the annual fiscal year to which they correspond, registered in the “Undistributed Results” account (code 450000), the amounts of the legal and statutory reserves -whose constitution is mandatory- and then those corresponding to the concepts -registered on the same date- detailed below:

2.1.1. the balances in concept of activation of differences resulting from payments made in compliance with judicial measures originating in cases in which the current regulations applicable to “pesified” deposits are challenged, regardless of whether or not the granting of new long-term loans is registered, as referred to in the resolution disseminated by Communication “A” 4439.

2.1.2. the positive difference resulting between the book value and the market quotation value, in the case that the financial entity records public debt instruments and/or monetary regulation instruments of the Central Bank not valued at market prices.

2.1.3. the asset valuation adjustments notified by the Superintendence of Financial and Exchange Entities -accepted or not by the entity- that are pending registration and/or those indicated by the external audit that have not been registered accountingly.

DISTRIBUTION OF RESULTS B.C.R.A.
Section 2. General procedure.
Version: 6th COMMUNICATION “A” 4898
Validity:
22/01/2009

2.1.4. the individual franchises -of asset valuation- granted by the Superintendence of Financial and Exchange Entities, including adjustments derived from not considering the agreed adaptation plans.

2.1.5. the balances in concept of activation of the difference existing between the equivalent value in pesos of considering judicial deposits in the original currency of the imposition, and the book value of those deposits constituted in foreign currency that, as of 5.1.02, were covered by what is provided in Law 25.561 and Decree 214/02.

2.1.6. the algebraic sum of the balances of the accounts “Unrealized valuation difference of holdings of national public titles available for sale”, “Unrealized valuation difference of holdings of Letters issued by the B.C.R.A. available for sale” and “Unrealized valuation difference of holdings of Notes issued by the B.C.R.A. available for sale”, when a consolidated net debtor balance results.

2.2. Verification of liquidity and solvency.
The amount to be distributed according to the proposal presented to the Superintendence of Financial and Exchange Entities, which may not exceed the determined in point 2.1., must not compromise the liquidity and solvency of the entity. This requirement will be considered fulfilled when the non-existence of integration defects in the minimum capital position -both individual and consolidated- at the close of the fiscal year to which the undistributed results considered correspond or in the last closed position, according to information available on the date of said presentation, of both the one that presents the least excess of integration with respect to the requirement, recalculating them, computing additionally -for this sole purpose- the following effects based on the corresponding data to each of those dates:

2.2.1. those resulting from the deduction from the asset of the concepts mentioned in points 2.1.1. to 2.1.4.

2.2.2. of the application of the “alpha1” coefficient with a value equal to one on the asset, purged according to the previous subsection, to recalculate the corresponding requirement.

2.2.3. of the non-consideration of the franchises granted by the Superintendence of Financial and Exchange Entities that affect the requirements, integrations or the minimum capital position.

2.2.4. of the deduction of undistributed results of the amounts corresponding to the following concepts:

2.2.4.1. the amount to be distributed and, if applicable, that which is destined to constitute the reserve for the purposes of rewarding instruments representative of debt, susceptible of integrating the computable patrimonial responsibility, according to the proposal presented to the Superintendence of Financial and Exchange Entities,

DISTRIBUTION OF RESULTS B.C.R.A.
Section 2. General procedure.
Version: 3rd COMMUNICATION “A” 4898
Validity:
22/01/2009

2.2.4.2. balances in favor by application of the tax on minimum presumptive profit -net of provisions for devaluation risk- that have not been deducted from basic net equity, according to what is established in the regulations on “Minimum capitals of financial entities”, and

2.2.4.3. adjustments made according to points 2.1.1. to 2.1.4.

Without prejudice to what is established above, in no case will the distribution of results be admitted while the entity presents deficiencies in minimum cash on average -in pesos or in foreign currency- corresponding to the last closed position, and/or registers financial assistance for illiquidity from the Central Bank of the Argentine Republic, with the exception of the assistance received with adjustment to the regime of Decree 739/03 and its regulations (Communication “A” 3941 and complementary), within the framework of article 17 of the Organic Charter of this Institution, and of the operation provided for through Communication “A” 4268 and complementary.

2.3. Authorization.
Express authorization from the Superintendence of Financial and Exchange Entities must be obtained, whose intervention will have the object of verifying the correct application of the procedure.
The request must be made, at least, 30 business days in advance of the holding of the shareholders' assembly or equivalent corporate body, which will consider the distribution of results.

DISTRIBUTION OF RESULTS B.C.R.A.
Section 2. General procedure.
Version: 2nd COMMUNICATION “A” 4898
Validity:
22/01/2009

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE REGULATIONS ON “DISTRIBUTION OF RESULTS”

ORDERED TEXT ORIGINATING NORM OBSERVATIONS
Sec. Point Para. Com. Annex Chap. Sec. Point Para.
1.1. “A” 4589 1.
1.1.1. “A” 4589 1.1.
1.1.2. “A” 4589 1.2. According to Com. “A” 4591
(point 6.).
1.1.3. “A” 4589 1.3.
1.
1.1.4. “A” 4589 1.4.
2.1. “A” 4589 2. According to Com. “A” 4591
(point 6.).
2.1.1. “A” 4589 2.1.
2.1.2. 1° “A” 4589 2.2. 1° According to Com. “A” 4698 and
4898 and “B” 9186.
2° “A” 4589 2.2. 2° According to Com. “A” 4591 (point 7.), 4664 and 4898.
3° “A” 4898
4º “A” 4589 2.2. 3°
2.1.3. “A” 4589 2.3.
2.1.4. “A” 4589 2.4.
2.1.5. “A” 4686 3.
2.1.6. “A” 4702 3.
2.2. “A” 4589 3. According to Com. “A” 4591
(point 8.) and “B” 9104.
2.2.1. “A” 4589 3.1. According to Com. “A” 4591
(point 8.).
2.2.2. “A” 4589 3.2. According to Com. “A” 4591
(point 8.) and “B” 9104.
2.2.3. “A” 4589 3.3. iv) According to Com. “A” 4591
(point 8.) and “B” 9104.
2.2.4. “A” 4589 3.3. According to Com. “A” 4591
(point 8.).
2.
2.3. “A” 4589 4.
3.1. “A” 4591 1.
3.1.1. “A” 4591 1. Incorporates the interpretative criterion of the Com.
“C” 46841.
3.
3.1.2. “A” 4591 1. According to Com. “A” 4686 and
4702 and “B” 9104.

Lineage: No known changes