Circular A 3498: Minimum Cash Reserves. Unification of Regimes. Derogation of Debt Issuance and Placement Requirement

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
__________________________________________________________________ COMUNICACIÓN " A " 3498 I 01/03/02 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 374
OPASI 2 – 294
RUNOR 1 - 527
Cash Reserves. Unification of
Regimes. Derogation of the Require- ment for Issuance and Placement of Debt

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

"1. Approve, with effect from 1.3.02, the regulations on "Minimum Cash" attached to this communication.
2. Establish that, for the period November 2001/February 2002, the requirement and integration of the minimum cash and minimum liquidity requirements shall be observed based on the average resulting from dividing the sum of the daily balances of the included concepts recorded during that period by the total number of days in the quarter.
3. Provide that, for the purposes of applying the provisions regarding the transfer of requirements referred to in point 1.5 of Section 1 of the regulations on "Minimum Cash" (text according to point 1 of this communication), the global position of the quarter November 2001/February 2002 resulting from considering jointly the positions of minimum cash and minimum liquidity requirements shall be admitted.
4. State that, for March 2002, the requirement for daily minimum integration referred to in the first and second paragraphs of point 2.4 of the regulations on "Minimum Cash" (text according to point 1 of this communication), shall be determined taking into account, regarding the included concepts, the monthly average of the daily balances of February 2002.
5. Repeal, with effect from 1.3.02, the regulations on "Minimum Liquidity Requirements".
6. Render ineffective the regulations on "Mandatory Issuance and Placement of Debt"."

We clarify that any deficiencies recorded in the daily minimum integration from the 1st to the 3rd of the current month will not be considered as non-compliance.

Finally, we inform you that you will be promptly provided with complementary guidelines to determine the final position of the period November 2001/February 2002 regarding minimum cash and minimum liquidity requirements, including the treatment of amounts contributed to the Banking Liquidity Fund.

We salute you very attentively.

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Alfredo A. Besio José Rutman
Manager of Emission Principal Manager of
Norms Norms and Authorizations

ANNEX

B.C.R.A. ORDERED TEXT OF THE REGULATIONS ON
MINIMUM CASH
-Index
Section 1. Requirement.
1.1. Included Obligations.
1.2. Application Base.
1.3. Minimum Cash.
1.4. Specific Increases in Requirement due to Liability Concentration.
1.5. Transfers.
1.6. Requirement due to Deposit Increase.
1.7. Deductible Concept.
1.8. Defect in Application of Foreign Currency Resources.
Section 2. Integration.
2.1. Admitted Concepts.
2.2. Calculation.
2.3. Maximum Calculation Limit.
2.4. Daily Minimum Integration.
Section 3. Non-compliance.
3.1. Charge.
3.2. Framing Programs.
3.3. Regularization and Sanitation Plans.
Section 4. Base for Observance of Regulations.
4.1. Individual Base.
Section 5. Responsible Parties and Sanctions.
5.1. Responsible for Liquidity Policy.
Version: 5a. Communication “A” 3498 Validity:
01.03.02

1.1. Included Obligations.
1.1.1. Included Concepts.
1.1.1.1. Deposits and other obligations for financial intermediation on demand and at term (in pesos, foreign currency, and public and private securities).
The following obligations are not included, those that do not participate in the concept of financial intermediation, among them the following:
i) Price balances for the purchase of movable and immovable goods intended for own use. ii) Obligations related to the entity's own functioning, such as:
a) Profits or surpluses pending distribution -including cash dividends, returns, fees, and other participations pending payment or crediting- until the moment of making them available to the holders. b) Sums received from third parties and made available by the entity to professionals or managers, to cover the payment of ancillary services, such as title studies, background checks, powers of attorney, or appraisals. c) Social charges, taxes, and withholdings for staff, pending payment. d) Expenses, salaries, dismissal indemnities, fees, pending payment. iii) Collections on account of matured loans or for the sale of movable and immovable goods, while not applied to reduce the corresponding asset items.
1.1.1.2. Unused balances of formalized current account advances that do not contain clauses enabling the entity to unilaterally and discretionarily cancel the possibility of using such margins.
1.1.2. Exclusions.
1.1.2.1. Obligations with the Central Bank of the Argentine Republic.
1.1.2.2. Obligations with local financial entities.
Version: 2a. Communication “A” 3498 Validity:
01.03.02

1.1.2.3. Obligations with foreign banks -including parent and controlling entities of local entities and their branches- for lines destined for financing foreign trade operations.
1.1.2.4. Obligations for cash purchases to be settled and forward sales.
1.1.2.5. Cash sales to be settled and forward sales, linked or not to active repos.
1.1.3. Calculation.
The included obligations shall be calculated based on the balances of capital effectively transacted, including, if applicable, quotation differences (positive or negative). Accrued, matured, or to-mature interests and premiums on included obligations are excluded, provided they have not been credited to the account or made available to third parties, and the amount accrued from the application of the "Reference Stabilization Coefficient".
1.2. Application Base.
The minimum cash requirement shall be applied to the monthly average of daily balances of included obligations, recorded at the close of each day during each calendar month. Averages are obtained by dividing the sum of daily balances by the total number of days in each month. Days on which no movement is recorded shall repeat the balance of the immediate preceding business day. The requirement shall be observed separately for each currency in which the obligations are denominated. At the option of the entities, the requirement on on-demand obligations for foreign transfers and transfers pending payment and foreign correspondent operations in foreign currencies other than the euro or the US dollar may be imputed to the requirement in the latter currency. This alternative may be applied provided that the requirement in currencies other than the US dollar or the euro does not exceed the equivalent of US$ 100,000 or 1% of the minimum cash requirement of all foreign currencies, whichever is greater. Version: 6a. Communication “A” 3498 Validity:
01.03.02

1.3. Minimum Cash.
The minimum cash amounts resulting from applying the following rates shall be integrated:
Concept Rate in %
1.3.1. Current account deposits. 40
1.3.2. Savings account deposits. 40
1.3.3. Pupilar usuras, special accounts for closed circles, special accounts for cash deposits, "Unemployment Fund for Construction Industry Workers", "Payment of Remuneration", special current accounts for legal entities, and pension savings account. 40
1.3.4. Other on-demand deposits and obligations, pension benefits credited by ANSES pending cashing, and immobilized balances corresponding to obligations included in these regulations. 40
1.3.5. Unused balances of formalized current account advances. 40
1.3.6. On-demand placements -regardless of the form of imposition- which, at a minimum, must constitute the equity of common investment funds (as provided in the regulations of the National Securities Commission). 100
1.3.7. Deposits in current accounts of non-banking financial entities, calculable for the integration of their minimum cash. 100
1.3.8. Time deposits, obligations for "acceptances" -including liabilities for sale or assignment of credits to subjects other than financial entities-, passive repos, passive stock market repos, constant-term investments, with option for early cancellation or renewal for a fixed term and with variable remuneration, obligations with the Financial Assistance Funds for Financial Entities and Insurance and for Provincial Development, and other time obligations, with the exception of reprogrammed deposits included in points 1.3.9. and 1.3.10. 40
Version: 6a. Communication “A” 3498 Validity:
01.03.02

1.3.9. Deposits included in the "Deposit Reprogramming Regime" regarding installments whose maturity operates until the eleventh month following the calculation period, except those included in point 1.3.13. 40
1.3.10. Deposits included in the "Deposit Reprogramming Regime" regarding installments whose maturity operates from the twelfth month following the calculation period, except those included in point 1.3.13. 0
1.3.11. Obligations for foreign financial lines, including obligations with correspondents. 0
1.3.12. Negotiable obligations. 0
1.3.13. Reprogrammed deposits ceded by other financial entities, maintained under reprogramming conditions, due to the operation provided in point 5. of the "Deposit Reprogramming Regime". 100
1.4. Specific Increases in Requirement due to Liability Concentration.
When excessive concentration of liabilities (in holders and/or terms) is verified, implying significant risk regarding the individual liquidity of the financial entity and/or having a significant negative effect on systemic liquidity, additional minimum cash requirements may be set on the included liabilities of the financial entity and/or complementary measures deemed pertinent. This situation is considered to exist when, among others, any of the following factors are present:

• A high percentage of liabilities is concentrated in the same holder or holders.
• In term obligations, the term is short.
• The mentioned liabilities represent a significant percentage regarding the integration of minimum cash and/or the total of private sector deposits in the entity.
  1.5. Transfers.
  1.5.1. Admitted Margin.
  The integration of minimum cash from the monthly average position of daily balances of included obligations shall not be less than 90% of the requirement resulting from the following expression:
  EEMA (n) = EEF (n) + ENI (n-1)
  Version: 5a. Communication “A” 3498 Validity:
  01.03.02

Where
EEMA (n): adjusted minimum cash requirement corresponding to month "n".
EEF (n): minimum cash requirement according to current regulations corresponding to month "n".
ENI (n-1): requirement not integrated in month "n-1".
1.5.2. Utilization Period.
The admitted transfer of the requirement not integrated in each month to the next position may be carried out for a maximum of six months, counted from the first month -inclusive- in which the option to use it is chosen according to the preceding provisions or from the first immediate position following that in which the transferred defects are compensated or a charge is paid on them.
1.6. Requirement due to Deposit Increase.
A minimum cash requirement of 75% shall be observed on the monthly average (considering only positive balances) of the daily increase recorded in deposits (on demand and at term, including all obligations subject to minimum cash requirement, except obligations with foreign banks -including parent and controlling entities of local entities and their branches- for lines not destined for financing foreign trade operations, negotiable obligations, and usable balances of current account advances), from 1.3.02, with respect to the balance verified on 30.11.01 (in this case, including computable obligations, according to the preceding criterion, subject to minimum liquidity requirements). Additionally, a minimum cash requirement of 25% shall be observed on the monthly average (considering only positive balances) of the daily increase recorded in deposits (on demand and at term, including all obligations subject to minimum cash requirement, except obligations with foreign banks -including parent and controlling entities of local entities and their branches- for lines not destined for financing foreign trade operations, negotiable obligations, and usable balances of current account advances), from 1.3.02, with respect to the balance verified on 4.1.02 (in this case, including computable obligations, according to the preceding criterion, subject to minimum liquidity requirements). In determining such requirements, the following deposits shall not be considered for any purpose:

• official,

• time deposits constituted in cash from 3.12.01,
  Version: 2a. Communication “A” 3498 Validity:
  01.03.02

• in special accounts for cash deposits,

• corresponding to foreign diplomatic or consular representations, international organizations, special missions, and commissions or bilateral or multilateral organs established by treaties in which the Argentine Republic is a party, and to foreign officials of those entities, accredited before the Ministry of Foreign Affairs, International Trade and Worship, provided that the accounts are related to the performance of their functions, and

• reprogrammed balances that are ceded by other financial entities, maintained as a deposit in the receiving entity under reprogramming conditions, due to the operation provided in point 5. of the "Deposit Reprogramming Regime".
  For the purpose of determining computable growth, obligations included in foreign currency and the respective comparison base shall be converted to pesos at a rate of one peso with forty cents for each US dollar ($ 1.40 = US$ 1) or its equivalent.
  1.7. Deductible Concept.
  Amounts contributed to the Banking Liquidity Fund.
  1.8. Defect in Application of Foreign Currency Resources.
  The defect in application of resources corresponding to foreign currency deposits determined in a month shall be calculated by an equivalent amount in the calculation of the minimum cash requirement for that same period. Version: 1a. Communication “A” 3498 Validity:
  01.03.02

MINIMUM CASH B.C.R.A. Section 2. Integration.
2.1. Admitted Concepts.
Integration shall be carried out in the same currency corresponding to the requirement, except when the option referred to in the last paragraph of point 1.2 of Section 1 is used, in which case integration in US dollars is admitted for the requirement on on-demand obligations for foreign transfers and transfers pending payment and foreign correspondent operations in foreign currencies other than the euro or the US dollar.
2.1.1. Cash.
Includes banknotes and coins maintained in the entity's offices and in custody at other financial entities.
2.1.2. Current accounts of financial entities opened at the Central Bank in pesos.
The balance recorded at the close of each business day in these accounts shall accrue interest for the period until the first business day following, at the rate set daily and transmitted through the Foreign Exchange and Open Market Operations Desk. The corresponding settlement shall be made available to entities at the opening of operations of the next business day via the STAF communications system; the accrued amounts shall be automatically credited to the corresponding current accounts. Special current accounts opened for crediting pension benefits are not calculable.
2.1.3. Minimum Cash accounts of financial entities opened at the Central Bank in US dollars or other foreign currencies.
The balance recorded at the close of each business day in these accounts shall accrue interest for the period until the first business day following, at the rate set daily and transmitted through the Foreign Exchange and Open Market Operations Desk. The corresponding settlement shall be made available to entities at the opening of operations of the next business day via the STAF communications system; the accrued amounts shall be automatically credited to the corresponding current accounts.
2.1.4. Special guarantee accounts in favor of electronic clearing chambers and for covering the settlement of credit card operations and ATMs.
Version: 3a. Communication "A" 3498 Validity:
01.03.02

MINIMUM CASH B.C.R.A. Section 2. Integration.
These shall be considered, even when balances are affected as guarantee for electronic clearing and settlement chambers and deposited in their name, on behalf of the respective entity, in special accounts in pesos at the Central Bank of the Argentine Republic. The balance recorded at the close of each business day in these accounts shall accrue interest for the period until the first business day following, at the rate set daily and transmitted through the Foreign Exchange and Open Market Operations Desk. The corresponding settlement shall be made available to entities at the opening of operations of the next business day via the STAF communications system; the accrued amounts shall be automatically credited to the corresponding special accounts.
2.1.5. Current accounts of non-banking financial entities.
Opened at commercial banks for the integration of the minimum cash requirement.
2.1.6. Cash in transit and in cash transport companies.
Includes banknotes and coins in transit within the country from or to another financial entity or between offices of the same entity or in possession of transport companies located in the country.
2.1.7. Special guarantee accounts for check cancellation operations, at the Central Bank.
These shall be considered, even when balances are affected as guarantee for check cancellation operations.
2.2. Calculation.
The compliance with the integration of minimum cash shall be measured based on the monthly average of daily balances of concepts admitted for this purpose, recorded during the same month to which the minimum cash corresponds, dividing the sum of said balances by the total number of days in the period. Days on which no movement is recorded shall repeat the balance of the immediate preceding business day. In the case of current accounts opened at commercial banks by non-banking entities, the balances reflected in account summaries shall be taken into account. Version: 4a. Communication “A” 3498 Validity:
01.03.02

MINIMUM CASH B.C.R.A. Section 2. Integration.
2.3. Maximum Calculation Limit.
For the purpose of determining the integration of the requirement in foreign currencies, up to 50% of the cash (banknotes and coins, in entity offices, in custody at other financial entities, in transit, and in cash transport companies) shall be admitted for calculation.
2.4. Daily Minimum Integration.
On no day of the month shall the sum of the balances of the concepts admitted as integration, recorded at the close of each day, be less than 60% of the total minimum cash requirement, excluding the requirement for deposit increase, determined for the immediate previous month, recalculated based on the requirements and concepts valid in the month to which the reserves correspond, without considering the effects of the application of what is provided in point 1.5.1 of Section 1. This daily requirement shall be 70% when a deficiency in integration in the previous calculation period was recorded in monthly average exceeding the admitted transfer margin. To the amount obtained as applicable, the requirements for deposit increase referred to in point 1.6 of Section 1 shall be added, which must be integrated exclusively in the current account in pesos opened at the Central Bank of the Argentine Republic, on the third business day following the calculation. Version: 7a. Communication “A” 3498 Validity:
01.03.02

MINIMUM CASH B.C.R.A. Section 3. Non-compliance.
3.1. Charge.
3.1.1. Deficiencies in the integration of minimum cash and daily minimum integration shall be subject to charges resulting from the application of the rates established by the Central Bank of the Argentine Republic, in each case, for the period in question, with no other effect except what is provided in point 3.2. only regarding the monthly minimum cash position. Differential rates may be set according to the type of currency.
When deficiencies in the average position and daily minimum integration are verified concurrently in the same month, the greater resulting charge shall be paid. For this purpose, to determine deficiencies in the average position, the following shall be considered:
i) those for which the option for transfer is not used. ii) those that are not susceptible to be transferred to the next month by exceeding the admitted margin.
3.1.2. Charges may be reduced in exceptional cases, when mitigating circumstances are present and weighing the causes that originated the non-compliance.
3.1.3. Charges not paid in time and form shall be subject, during the period of non-compliance, to an interest equivalent to the rate resulting from adding 50% to the rate applicable to the deficiency, as provided in point 3.1.1.
3.1.4. The charge shall be calculated with the following expression:
c = D *
TNA / 36500
Where c : amount of the charge.
D: deficiency subject to charge, expressed in numerals.
TNA: nominal annual rate applicable to the non-compliance, as a percentage.
To determine the interest on charges not paid in time and form, the following expression shall be applied:
i = [(1 + TEA) n/365 - 1] *
100
Version: 4a. Communication “A” 3498 Validity:
01.03.02

MINIMUM CASH B.C.R.A. Section 3. Non-compliance.

where i : interest rate corresponding to the default period, as a percentage, with two decimal places.
TEA: effective annual rate during the default period, as a unit. n : number of calendar days between the maturity date set for the effectuation and the day before the presentation of the relevant debit note for the relevant current account opened at the Central Bank of the Argentine Republic. For the purposes of rounding the magnitudes of “c” and “i”, the values will be incremented by one unit when the third digit of the fractions is equal to or greater than 5, discarding these latter if they are less.
3.2. Compliance programs.
Determining situations.
3.2.1. Integration defects, including for these purposes the margin transferred to the next
month, in the average position that exceeds 20% of the adjusted requirements, for two consecutive months or four alternating months within a year.
3.2.2. Integration defects, regardless of their magnitude, computed in the manner
mentioned in point 3.2.1., regarding which the entity pays charges, that are registered for three consecutive months or four alternating months within a year. This is provided that the determining situation provided for in point 3.2.1. is not configured. The submission of the compliance program must be made within 20 calendar days following the close of the period in which any of the situations previously mentioned is registered.
3.3. Regularization and sanitation plans.
The requirement to submit a regularization and sanitation plan, by determining that liquidity is affected by the defects registered, will have the following consequences. Version: 2nd Communication “A” 3498 Validity:
01.03.02

MINIMUM CASH B.C.R.A. Section 3. Non-compliance.
3.3.1. Institutional aspects.
It shall constitute an impediment for:
i) Transformation of financial entities. ii) Installation of subsidiaries in the country and abroad. iii) Increases in participation in financial entities in the country and abroad. iv) Installation of representation offices abroad.
3.3.2. Limitation on deposit growth.
From the first day of the month following the month of the request to submit the plan, the amount of deposits in pesos, in foreign currency and in securities, cannot exceed the level reached on the last day of the previous period. The lifting of that restriction will be subject to the resolution adopted regarding the submitted plan. Version: 2nd Communication “A” 3498 Validity:
01.03.02

MINIMUM CASH B.C.R.A. Section 4. Basis for observing the rules.
4.1. Individual basis.
Financial entities (comprising exclusively their subsidiaries in the country) will observe the rules on minimum cash on an individual basis.
Version: 1st Communication “A” 3274 Validity:
01.06.01

MINIMUM CASH B.C.R.A. Section 5. Responsible parties and sanctions.
5.1. Responsible for liquidity policy.
The financial entity will report to the Superintendence of Financial and Exchange Entities the names of the persons responsible for the management of the liquidity policy -which comprises the adoption of precautions for the compliance with the integration of the minimum cash and the monitoring of the liquidity position- (officials and/or manager of the area), of the General Manager and of the director or counselor or highest authority in the country in the case of foreign entities, to whom the function must be reported. When changes occur in that list, the information must be updated within 10 calendar days of the modification occurring. Version: 2nd Communication “A” 3498 Validity:
01.03.02

B.C.R.A. ORIGIN OF THE PROVISIONS INCLUDED IN THE ORGANIZED TEXT OF THE RULES ON MINIMUM CASH ORGANIZED TEXT ORIGIN OF THE RULE OBSERVATIONS Sec. Point Para. Com. Annex Sec. Point Para.
1.1. “A” 3274 II 1. 1.1.
1.1.1. “A” 3274 II 1. 1.1.1. According to Com. “A” 3498
1.1.2. “A” 3274 II 1. 1.1.2.
1.1.3. “A” 3274 II 1. 1.1.3. According to Com. “A” 3498
1.2. “A” 3274 II 1. 1.2. According to Com. “A” 3304 and
“A” 3498.
1.3. “A” 3274 II 1. 1.3.
1.3.1. “A” 3274 II 1. 1.3.1. According to Com. “A” 3338,
“A” 3417 and “A” 3498.
1.3.2. “A” 3274 II 1. 1.3.2. According to Com. “A” 3338,
“A” 3417 and “A” 3498.
1.3.3. “A” 3274 II 1. 1.3.3. According to Com. “A” 3338,
“A” 3399, “A” 3417 and “A”
3498.
1.3.4. “A” 3274 II 1. 1.3.4. According to Com. “A” 3338,
“A” 3417 and “A” 3498.
1.3.5. “A” 3274 II 1. 1.3.5. According to Com. “A” 3338,
“A” 3417 and “A” 3498.
1.3.6. “A” 3274 II 1. 1.3.6. According to Com. “A” 3365 and
“A” 3498.
1.3.7. “A” 3274 II 1. 1.3.7.
1.3.8. “A” 3498 unique 1. 1.3.8.
1.3.9. “A” 3498 unique 1. 1.3.9.
1.3.10. “A” 3498 unique 1. 1.3.10.
1.3.11. “A” 3498 unique 1. 1.3.11.
1.3.12. “A” 3498 unique 1. 1.3.12.
1.3.13. “A” 3498 unique 1. 1.3.13.
1.4. “A” 3274 II 1. 1.5. According to Com. “A” 3498
1.5. “A” 3274 II 1. 1.6.
1.5.1. “A” 3274 II 1. 1.6.1.
1.5.2. “A” 3274 II 1. 1.6.2. According to Com. “A” 3304.
1.6. “A” 3470 1. According to Com. “A” 3498
1.7. “A” 3498 unique 1. 1.7.
1.
1.8. “A” 3498 unique 1. 1.8.
2.1. “A” 3274 II 2. 2.1. According to Com. “A” 3498
2.1.1. “A” 3274 II 2. 2.1.1. According to Com. "A" 3304.
2.1.2. “A” 3274 II 2. 2.1.2. According to Com. “A” 3304 and
“A” 3498.
2.1.3. “A” 3498 unique 2. 2.1.3.
2.1.4. “A” 3274 II 2. 2.1.3. According to Com. “A” 3498
2.1.5. “A” 3274 II 2. 2.1.4.
2.1.6. “A” 3311
2.1.7. “A” 3498 unique 2. 2.1.7.
2.2. “A” 3274 II 2. 2.2. According to Com. “A” 3498
2.
2.3. “A” 3274 II 2. 2.3. According to Com. “A” 3311,
3338 and “A” 3498.

MINIMUM CASH
ORGANIZED TEXT ORIGIN OF THE RULE OBSERVATIONS Sec. Point Para. Com. Annex Sec. Point Para.
2.4. “A” 3365 2. According to Com. “A” 3387,
3470 and “A” 3498.
3.1. “A” 3274 II 3. 3.1.
3.1.1. “A” 3274 II 3. 3.1.1. According to Com. “A” 3326,
3365 and “A” 3498.
3.1.2. “A” 3274 II 3. 3.1.2.
3.1.3. “A” 3274 II 3. 3.1.3. According to Com. “A” 3326.
3.1.4. “A” 3274 II 3. 3.1.4.
3.2. “A” 3274 II 3. 3.2.
3.2.1. “A” 3274 II 3. 3.2.2.1.
3.2.2. “A” 3274 II 3. 3.2.2.2.
3.3. “A” 3274 II 3. 3.3. According to Com. “A” 3498
3.3.1. “A” 3274 II 3. 3.3.1.
3.
3.3.2. “A” 3274 II 3. 3.3.2.
4. 4.1. “A” 3274 II 4. 4.1.
5. 5.1. “A” 3274 II 5. 5.1. According to Com. “A” 3498