Circular A 4242: Modifications to Regulations on Guarantees

"2004 - Year of Antarctica Argentina"
BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 4242 22/11/2004
TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 432
Regulations on "Guarantees". Modifications.

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

"- Replace, with effect for new credit operations, points 1.1., 1.1.1, 1.1.3., 1.1.4., 1.1.6., 1.1.12., 1.2.6. and the first paragraph of point 1.1.10.3. of Section 1. and points 3.1.5.,
3.1.16. and 3.1.17. of Section 3. of the regulations on "Guarantees" with the following:

"1.1. Preferred "A"
These are constituted by the assignment or pledge of rights regarding titles or documents of any nature that, reliably instrumented, ensure that the entity can dispose of the funds as cancellation of the obligation incurred by the client, without the need to previously request payment from the debtor since the effectiveness depends on solvent third parties or on the existence of markets in which they can be settled directly the mentioned titles or documents, or the effects they represent, whether their maturity coincides or is later than the maturity of the loan or the periodic payments committed or that the proceeds are applied to the cancellation of the debt or transferred directly to the entity for that purpose, provided that credit operations do not exceed, measured in residual form, the term of 6 months except in cases where a different term is established. The following are included in this category, with the character of a taxative enumeration:

"1.1.1. Guarantees constituted in cash, in pesos, or in the following foreign currencies: US dollars, Swiss francs, British pounds, yen, and euros, taking into account permanently their quotation value. When the guarantee is constituted in the currency of the credit operation, the computable term must not exceed the term of one year."

"1.1.3. Pledges of fixed-term deposit certificates issued by the financial entity itself, constituted in the currencies referred to in point 1.1.1. When the deposit certificate is issued in the currency of the credit operation, the computable term must not exceed the term of one year."

"1.1.4. Automatic reimbursement in export operations, charged to the Central Bank of the Argentine Republic, in accordance with the respective regimes of bilateral or multilateral agreements, regardless of the term of the operation."

"1.1.6. Guarantees and letters of credit issued by foreign banks with international risk rating "A" or higher, which are not the parent or controlling house and its subsidiaries and branches, or controlled or branches of the local entity or that maintain other forms of linkage, to the extent that they are unrestricted and that the accreditation of funds is carried out immediately upon simple request of the beneficiary entity. It will be required that the rating has been granted by any of the rating agencies admitted by the regulations on "Evaluation of financial entities". When the foreign bank has an international risk rating of "AA" or higher, the computable term of the credit operation must not exceed the term of one year."

"1.1.12. Guarantees constituted by the assignment of rights over the collection of tariffs and fees in public works concessions, provided that it does not exceed 50% of the projected income. The computable term of the credit operation cannot exceed the term of one year."

"1.1.10.3. The set of operations carried out with different clients must constitute a portfolio whose nominal value is up to 15% of the computable equity responsibility of the entity of the month prior to the one corresponding. It may exceed that limit with adjustment to the following guidelines:"

"1.2.6. Preferred "A", in operations with a residual term greater than 6 months or to the term that is specifically established. The operations referred to in point 1.1.10. that exceed the term of 6 months are not included."

"3.1.5. National public securities (point 1.1.5.): 85% of their quotation value."

"3.1.16. From reciprocal guarantee societies or provincial funds constituted with the same object as those societies (points 1.1.15. and 1.2.3.): 100%."

"3.1.17. Credit titles (point 1.1.14.): 100% of the nominal value of the documents."

We send you attached the sheets that, in replacement of those previously provided, correspond to incorporate into the ordered text of the regulations on "Guarantees". We greet you very attentively. BANCO CENTRAL DE LA REPÚBLICA ARGENTINA Ana M. Lemmi Alfredo A. Besio Deputy Manager of Issuance of Standards Manager of Issuance of Standards

ANNEX

-3-

GUARANTEES
B.C.R.A.
Section 1. Classes.
Version: 4th COMMUNICATION "A" 4242
Validity:
22/11/2004
1.1. Preferred "A".
These are constituted by the assignment or pledge of rights regarding titles or documents of any nature that, reliably instrumented, ensure that the entity can dispose of the funds as cancellation of the obligation incurred by the client, without the need to previously request payment from the debtor since the effectiveness depends on solvent third parties or on the existence of markets in which they can be settled directly the mentioned titles or documents, or the effects they represent, whether their maturity coincides or is later than the maturity of the loan or the periodic payments committed or that the proceeds are applied to the cancellation of the debt or transferred directly to the entity for that purpose, provided that credit operations do not exceed, measured in residual form, the term of 6 months except in cases where a different term is established. The following are included in this category, with the character of a taxative enumeration:
1.1.1. Guarantees constituted in cash, in pesos, or in the following foreign currencies: US dollars, Swiss francs, British pounds, yen, and
euros, taking into account permanently their quotation value.
When the guarantee is constituted in the currency of the credit operation, the computable term must not exceed the term of one year.
1.1.2. Guarantees constituted in gold, taking into account permanently its
quotation value.
1.1.3. Pledges of fixed-term deposit certificates issued by the financial entity itself
constituted in the currencies referred to in point 1.1.1.
When the deposit certificate is issued in the currency of the credit operation, the computable term must not exceed the term of one year.
1.1.4. Automatic reimbursement in export operations, charged to the Central Bank of the Argentine Republic, in accordance with the respective regimes of bilateral or multilateral agreements, regardless of the term of the operation.
1.1.5. Guarantees or pledges of national public securities, taking into account permanently their market value which must respond to a normal and habitual quotation, in the country or abroad, of wide dissemination and easy access to public knowledge.
1.1.6. Guarantees and letters of credit issued by foreign banks with international risk rating "A" or higher, which are not the parent or controlling house and
its subsidiaries and branches, or controlled or branches of the local entity, or that maintain other forms of linkage, to the extent that they are unrestricted and that the accreditation of funds is carried out immediately upon simple request of the beneficiary entity.

GUARANTEES
B.C.R.A.
Section 1. Classes.
Version: 5th COMMUNICATION "A" 4242
Validity:
22/11/2004
It will be required that the rating has been granted by any of the rating agencies admitted by the regulations on "Evaluation of financial entities". When the foreign bank has an international risk rating of "AA" or higher, the computable term of the credit operation must not exceed the term of one year.
1.1.7. "Warrants" on fungible goods that have normal and
habitual quotation in local or international markets, of wide dissemination and easy access to public knowledge.
1.1.8. Guarantees constituted by the assignment of collection rights of invoices to consumers for services already provided, issued by service provider companies
(public service companies supplying electricity, gas, telephone, water, etc.), provided that it is a set of invoices that represents a quantity no less than 1,000 clients.
1.1.9. Guarantees constituted by the assignment of collection rights regarding credit card coupons.
1.1.10. Credit titles (post-dated checks, promissory notes, bills of exchange and credit invoices) discounted with recourse to the assignor, to the extent that the following conditions are observed:
1.1.10.1. In the set of operations carried out with each assignor
it must be verified with respect to any of the subjects legally obligated for payment other than the assignor:
a) That at least 85%, measured in relation to the nominal value of the documents, are classified in "normal situation" (category 1) according to the last information available in the "Central of debtors of the financial system". b) That, at most, 15%, measured in relation to the value nominal of the documents, are classified in category 2 or are persons not informed in said central. c) That, at most, 20% of the nominal value of the documents corresponds to the same subject obligated for payment. This limitation will not be applicable when it comes to documents up to $ 5,000. These requirements must be observed considering the value nominal of the documents still pending maturity and the new documents that are discounted, when carrying out each discount operation.

GUARANTEES
B.C.R.A.
Section 1. Classes.
Version: 5th COMMUNICATION "A" 4242
Validity:
22/11/2004
1.1.10.3. The set of operations carried out with different clients must constitute a
portfolio whose nominal value is up to 15% of the computable equity responsibility of the entity of the month prior to the one corresponding. It may exceed that limit with adjustment to the following guidelines:
a) Maximum limit of the total nominal value of documents corresponding to the same subject obligated for payment: 2.5% with respect to the computable equity responsibility of the entity of the month prior to the one corresponding. b) Maximum limit of the total nominal value of the documents corresponding to subjects obligated for payment that, individually considered, are equivalent to 1.5% or more of the computable responsibility of the entity of the month prior to the one corresponding: 25% of this portfolio measured in average monthly daily balances of the month prior to the one corresponding. c) Maximum limit of the nominal value of the documents corresponding to the same subject obligated for payment: 5% of this portfolio measured in average monthly daily balances of the month prior to the one corresponding. d) Global limit of the portfolio in nominal value: 100% of the computable equity responsibility of the entity of the month prior to the one corresponding. When the subjects obligated for payment are clients of the financial entity, the amount of assistance granted in accordance with this modality will be imputed to their credit margins, not being counted for the purposes of the limits established previously. Within each period, the limits must be observed in daily form.
1.1.10.4. In the portfolio discounted by a certain client, the amount not
cancelled by the client of the unpaid documents and of the checks whose registration has been rejected, cannot exceed the equivalent to 100% of the existing margin of coverage. In case of exceeding that value, the assignor cannot access new credit title discount operations within this modality, except to the extent necessary to replenish the amount of those unpaid documents. Once the total cancellation of the client's portfolio, the entity may grant him financings with adjustment to this regime.

GUARANTEES
B.C.R.A.
Section 1. Classes.
Version: 7th COMMUNICATION "A" 4242
Validity:
22/11/2004
In all cases where in this point "subject/s obligated/s for payment" is mentioned, it is referring to any of the signatory persons of the documents that hold that condition in their character as drawer, endorser, acceptor or guarantor.
1.1.11. Direct guarantees issued by central governments, agencies or departments of central governments of countries members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have international risk rating "AA" or higher granted by any of the rating agencies admitted by the regulations on "Evaluation of financial entities".
1.1.12. Guarantees constituted by the assignment of rights over the collection of
tariffs and fees in public works concessions, provided that it does not exceed the 50% of the projected income. The computable term of the credit operation cannot exceed the term of one year.
1.1.13. Guarantees or pledges of securities (shares or bonds) privately
issued by national or foreign companies, taking into account permanently their market value, which must respond to a normal and habitual quotation in local or international markets, of wide dissemination and easy access to public knowledge. Local issuing companies must maintain valid debt papers that have local risk rating "A" or higher, granted by any of the rating agencies admitted by the regulations on "Evaluation of financial entities". Foreign titles must correspond to companies whose debt papers have international risk rating "A" or higher granted by any of those rating agencies.
1.1.14. Credit titles (post-dated checks, promissory notes, bills of exchange and credit invoices), discounted with recourse to the assignor, in which
any of the subjects legally obligated for payment, holding that condition in their character as drawer, endorser, acceptor or guarantor, meets at least one of the following conditions:
1.1.14.1. Register a level of indebtedness with the system equal to or greater than $ 2,000,000, according to the last information available in the
"Central of debtors of the financial system" and being informed by at least two financial entities in which the indebtedness -in each of them- is at least $ 1,000,000.

GUARANTEES
B.C.R.A.
Section 1. Classes.
Version: 4th COMMUNICATION "A" 4242
Validity:
22/11/2004
The following are included in this category, with the character of a taxative enumeration:
1.2.1. First-degree mortgage on real estate, and regardless of its degree of priority as long as the entity is the creditor in all degrees.
1.2.2. Fixed pledge with first-degree registration or with displacement towards the entity
on motor vehicles and agricultural, road and industrial machinery (in the extent that they are registered in the pertinent national registry of motor vehicle property and have a market that allows obtaining a reference value).
1.2.3. Guarantees or guarantees granted by reciprocal guarantee societies registered
in the Registry enabled at the Central Bank of the Argentine Republic or by provincial funds constituted with the same object as those societies, admitted by this Institution, regardless of the term of the operation, to the extent that the requirement mentioned in point 1.1.15. is not met.
1.2.4. Goods in financial leasing that had been agreed in accordance with the provisions of Law 25.248 on real estate and on motor vehicles and agricultural, road and industrial machinery (in the extent that they are registered in the
pertinent national registry of motor vehicle property and have a market that allows obtaining a reference value).
1.2.5. Export credit insurance, to the extent that the terms of effectiveness of accidents due to commercial risk exceed 90 days without exceeding
180 days counted continuously from the maturity of the credits, regardless of the term of the operation, and the other safeguards provided in point 1.1.16. are observed.
1.2.6. Preferred "A", in operations with a residual term greater than 6 months or to the term
that is specifically established.
The operations referred to in point
1.1.10. that exceed the term of 6 months are not included.
1.3. Remaining guarantees.
The guarantees not explicitly included in the preceding points, such as the mortgage in a degree other than first and the pledge or pledge of shares or documents commercial and the encumbrances constituted abroad with adjustment to legislations different from the local -except the cases expressly provided for-, are considered non-preferred.

GUARANTEES
B.C.R.A.
Section 3. Computation.
Version: 6th COMMUNICATION "A" 4242
Validity:
22/11/2004 iii) For coverage of an operation in a foreign currency other than:
80% of the quotation value, calculated on the imposed capital.
3.1.4. Reimbursement of export operations (point 1.1.4.): 100%.
3.1.5. National public securities (point 1.1.5.): 85% of their quotation value.
3.1.6. Guarantees and letters of credit from foreign banks (point 1.1.6): 100%.
3.1.7. "Warrants" (point 1.1.7.): 80% of the market value of the goods.
3.1.8. Invoices to consumers for services already provided, issued by
service provider companies (point 1.1.8.): 80% of the nominal value of the documents.
3.1.9. Credit card coupons (point 1.1.9.):
3.1.9.1. Issued by financial entities: 90% of the nominal value of the documents.
3.1.9.2. Issued by companies that are not financial entities that meet the conditions required to be a subject of credit: 80% of the
nominal value of the documents.
3.1.9.3. Issued by the remaining non-financial companies: 50% of the value
nominal of the documents.
3.1.10. Credit titles (point 1.1.10.).
3.1.10.1. Documents corresponding to subjects obligated for payment classified in category 1 and in cases where the assignors are found
classified in categories 1 or 2, in the "Central of debtors of the financial system": 90%.
3.1.10.2. Documents corresponding to subjects obligated for payment classified in category 2 or that have not been classified and in cases
where the assignors are found classified in categories 1 or 2, in the "Central of debtors of the financial system": 80%.
3.1.10.3. Documents corresponding to subjects obligated for payment classified in category 1 and in cases where the assignors are found
classified in categories 3, 4, 5 or that have not been classified, in the "Central of debtors of the financial system": 80%.

GUARANTEES
B.C.R.A.
Section 3. Computation.
Version: 7th COMMUNICATION "A" 4242
Validity:
22/11/2004
3.1.10.4. Documents corresponding to subjects obligated for payment classified in category 2 or that have not been classified and in cases where the assignors are found classified in categories
3, 4, 5 or that have not been classified, in the "Central of debtors of the financial system": 70%.
3.1.11. Direct guarantees from foreign governments (point 1.1.11.): 100%.
3.1.12. Assignment of rights over the collection of tariffs and fees in concessions of
public works (point 1.1.12.): 80%.
3.1.13. Private securities (point 1.1.13.): 70% of their quotation value.
3.1.14. First-degree mortgage on real estate, and regardless of its degree of priority as long as the entity is the creditor in all degrees (point 1.2.1.):
3.1.14.1. On real estate for own housing that are the object of the encumbrance: 75% of the appraisal value of the property.
3.1.14.2. On real estate for uses other than own housing: 50% of the
appraisal value of the property.
3.1.15. Fixed pledge with first-degree registration or with displacement towards the entity
(point 1.2.2.):.
3.1.15.1. Motor vehicles and agricultural machinery: 75% of the value
market.
3.1.15.2. Road and industrial machinery: 60% of the market value.
3.1.16. From reciprocal guarantee societies or provincial funds constituted with
same object as those societies (points 1.1.15. and 1.2.3.): 100%.
3.1.17. Credit titles (point 1.1.14.): 100% of the nominal value of the documents.
3.1.18. Goods in financial leasing (point 1.2.4.):
3.1.18.1. Real estate for housing of the lessee: 75% of the appraisal value
of the property.
3.1.18.2. Other real estate: 50% of the appraisal value of the property.
3.1.18.3. Motor vehicles and agricultural machinery: 75% of the appraisal value of the property.

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE REGULATIONS ON "GUARANTEES" ORDERED TEXT ORIGIN NORM
Section
Point Paragraph Com. Annex Point Paragraph Observations
1.1. "A" 2932 Unique 1.1. According to Com. "A" 4242
1.1.1. "A" 2216 I 1. 3rd, a) According to Com. "A" 2443, "A"
2932, "A" 3918 and "A" 4242.
1.1.2. "A" 2216 I 1. 3rd, a) According to Com. "A" 2443, "A"
2932 and "A" 3918.
1.1.3. "A" 2216 I 1. 3rd, b) According to Com. "A" 2932, "A"
3918 and "A" 4242.
1.1.4. "A" 2216 I 1. 3rd, c) According to Com. "A" 2932 and "A"
4242.
1.1.5. "A" 2216 I 1. 3rd, d) According to Com. "A" 2932.
1.1.6. "A" 2216 I 1. 3rd, e) According to Com. "A" 2932, "A"
3918 and "A" 4242.
1.1.7. "A" 2216 I 1. 3rd, g) According to Com. "A" 2932.
1.1.8. "A" 2216 I 1. 3rd, h) According to Com. "A" 2932.
1.1.9. "A" 2216 I 1. 3rd, i) According to Com. "A" 2932.
1.1.10. "A" 2932 unique 1.1.11. According to Com. "A" 3104 and "A"
4242.
1.1.11. "A" 2932 unique 1.1.12. According to Com. "A" 4141.
1.1.12. "A" 2932 unique 1.1.13. According to Com "A" 4242
1.1.13.
1.1.13. 2nd
"A" 2932 unique 1.1.14.
According to Com. "A" 3918.
1.1.14. "A" 3114 1.
1.1.14.1. 1st "A" 3114 According to Com. "A" 3918 and "A"
4055.
1.1.14.2. "A" 3114 1. According to Com. "A" 3918 and "A"
4055.
1.1.15. "A" 3141 According to Com. "A" 3307 and "A"
3918.
1.1.16. "A" 3314
1.1.17. "A" 3918 5.
1.2. "A" 2932 unique 1.2. According to Com. "A" 3104.
1.2.1. "A" 2419 1. 1st According to Com. "A" 2563 (points

1. and 2.), "A" 2932 and "A" 3314.
   1.2.2. "A" 2448 Debtor status statement (point 6.1.2.2.2.), Com.
   "A" 2932 and "A" 3918.
   "A" 2448 Debtor status statement (point 6.1.2.2.2.), Com.
   "A" 2932 and "A" 3918.
   1.2.3.
   "A" 2410 7. According to Com. "A" 3141.
   1.2.4. "A" 3259 1. According to Com. "A" 3314.
   1.2.5. "A" 3314
   1.2.6. "A" 2932 unique 1.2.4. According to Com. "A" 4242
   1.
   1.3. "A" 7 Specifications of the items of "other guarantees received", modified by Com. "A"
   2932.

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE RULES ON "GUARANTEES" GUARANTEES CONSOLIDATED TEXT RULE OF ORIGIN
Section Point Paragraph
Com. Annex Point Paragraph Observations
2.1. 1st "A" 2448 Status of debtors (point 6.1.2.2.2.).
2.1. 2nd "A" 2932 single 2.1. 2nd
2.
2.2. "A" 2216 I 1. 4th
3.1. "A" 2932 single 3.1.
3.1.1. "A" 2932 single 3.1.1. According to Com "A" 3918.
3.1.2. "A" 2932 single 3.1.2.
3.1.3. "A" 2932 single 3.1.3. According to Com "A" 3918.
3.1.4. "A" 2932 single 3.1.4.
3.1.5. "A" 2932 single 3.1.5. According to Com "A" 3918 and "A"
4242.
3.1.6. "A" 2932 single 3.1.6. According to Com "A" 3918.
3.1.7. "A" 2216 I 1. 3rd, g) According to Com. "A" 2932.
3.1.8. "A" 2216 I 1. 3rd, h) According to Com. "A" 2932.
3.1.9. "A" 2216 I 1. 3rd, i) According to Com. "A" 2932.
3.1.10. "A" 2932 single 3.1.11. According to Com. "A" 3104.
3.1.11. "A" 2932 single 3.1.12. According to Com "A" 3918.
3.1.12. "A" 2932 single 3.1.13.
3.1.13. "A" 2932 single 3.1.14.
3.1.14. "A" 2419 1. 1st, ii) According to Com. "A" 2932, "A"
3314 and "A" 3918.
3.1.15. "A" 2932 single 3.1.18. According to Com "A" 3918.
3.1.16. "A" 2932 single 3.1.19. According to Com. "A" 3141, "A"
3918 and "A" 4242.
3.1.17. "A" 3114 2. According to Com. "A" 4242
3.1.18. "A" 3259 2. According to Com. "A" 3314.
3.1.18.1. "A" 3259 2 According to Com. "A" 3314 and "A"
3918.
3.1.18.2. "A" 3259 2 According to Com. "A" 3314 and "A"
3918.
3.1.19. "A" 3314
3.1.20. "A" 3918. 5th
3.
3.2. "A" 2216 II 5th According to Com "A" 3918.