Circular A 4254: Extension of Transitional Provisions for Debtor Classification, Credit Graduation, and Immobilized Assets

"2004 - Year of the Antarctic Argentina"
BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 4254 02/12/2004
TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 433
"Debtor Classification", "Credit Graduation" and "Relationship for Immobilized Assets and Other Concepts". Extension of transitional provisions. ______ We address you to inform you that this Institution adopted the following resolution:

"1. Substitute the first paragraph of point 11.9. of Section 11. of the regulations on "Debtor Classification" with the following:

"11.9. Debtors from the commercial portfolio who during the period 30.6.02 to 31.12.05 have formalized or formalize payment agreements resulting from judicial or extrajudicial homologated conciliations or private arrangements negotiated jointly with creditor financial entities, or private arrangements with the financial entity, may be reclassified in normal status provided they have the prior approval of the members of the Board of Directors or Administration Council - by simple majority or, when dealing with related clients, by two-thirds of the total number of members - or equivalent authority of the lending entity, and this must be recorded in the client's file."

2. Substitute the first paragraph of point 11.11. of Section 11. of the regulations on "Debtor Classification" with the following:

"11.11. Debt refinancings agreed or to be agreed upon in the period 30.6.02 to 31.12.05, corresponding to debtors from the commercial portfolio - with the exception of those contemplated in points 11.9. and 11.10. above - in which capital write-downs are made, the minimum provision for risk of uncollectibility to be established shall be equivalent to the amount resulting from deducting from the provisions required on the debt before its refinancing - calculated in accordance with general regulations - the amount corresponding to the write-down made. The resulting provisioning percentage on the refinanced amount will determine the classification level to be assigned to the debtor based on the ranges of the table contained in point 2.1.1. of Section 2. of the regulations on "Minimum provisions for risk of uncollectibility."

3. Substitute the first paragraph of point 9.2. of Section 9. of the regulations on "Credit Graduation" with the following:

"9.2. Maximum assistance limits.
Credit assistance involving new fund disbursements granted until 31.12.05 may exceed 300% of the client's computable net worth, provided there is prior approval from the Board of Directors or Administration Council or equivalent authority of the lending entity in accordance with the criterion established in point 3.1.2.2. of Section 3. of the regulations on "Credit Graduation"."

4. Extend until 31.12.05 the validity of what is provided in point 1. of the resolution disseminated by Communication "A" 3954.

5. Substitute points 7.3. and 7.4. of Section 7. of the regulations on "Relationship for Immobilized Assets and Other Concepts" with the following:

" 7.3. Assets in defense or payment of credits.
Until 30.6.05, assets taken in defense or payment of credits incorporated into the entity's assets until 31.3.03 will not be computed."

"7.4. Defaults.
Until 31.12.05, for calculating the limitations established in point 2.3. of Section 2. of the regulations on "Defaults of minimum capital and technical ratios. Applicable criteria.", the amount of the excess recorded by this relationship, without exceeding that verified on 31.12.03, minus assets taken in defense or payment of credits as established in the preceding point, will not be computed."

We send you attached the sheets that, in replacement of those previously provided, should be incorporated into the ordered texts of the regulations on "Credit Graduation", "Relationship for Immobilized Assets and Other Concepts" and "Debtor Classification". We salute you very attentively. BANCO CENTRAL DE LA REPÚBLICA ARGENTINA Alfredo A. Besio José Rutman Issuance Manager Norms Manager Principal Manager Norms Manager

ANEXO

CREDIT GRADUATION
B.C.R.A.
Section 9. Transitional Provisions.
Version: 2nd COMMUNICATION "A" 4254
Validity:
02/12/2004
9.2. Maximum assistance limits.
Credit assistance involving new fund disbursements granted until 31.12.05 may exceed 300% of the client's computable net worth, provided there is prior approval from the Board of Directors or Administration Council or equivalent authority of the lending entity in accordance with the criterion established in point 3.1.2.2. of Section 3. of the regulations on "Credit Graduation". The assistance granted to each client under the conditions established above may not exceed 2.5% of the computable net worth of the entity corresponding to the last day of the second month prior to the granting of the financing. The total of credits granted under the conditions established above may not exceed 15% of the computable net worth of the financial entity on the last day of the second month prior to the granting of the financing.

CREDIT GRADUATION
ORDERED TEXT SOURCE OF NORM
Section Point Paragraph Com. Annex Point Paragraph
Observations
5.1.1. except
"A" 467 unique 6.1. 1st
5.1.1.1.i) 2nd "B" 1460 2nd
5.1.1.2. "A" 490 unique 9.
5.1.2. "A" 467 unique 6.1. 1st
5.2.1.1. "A" 467 unique 6.1. last
"A" 2373 2.
5.2.1.2. "A" 490 unique 8.
5.2.2. "A" 467 unique 6.1. last
5.2.3. "A" 3002 Incorporates interpretative criterion.
5.
5.2.4. "B" 5902 7.
6.1. "A" 3002 6.1.1. 2nd
6.2. 1st "A" 3161 1. and 2. According to Com. "A" 3171 and 4093 (penultimate paragraph).
6.2. 2nd "A" 2019 6. According to Com. "A" 3161 and 3171.
6.3.1. "A" 3161 1. According to Com. "A" 4093 (penultimate
paragraph).
6.3.2. "A" 3161 1. According to Com. "A" 3171 (pt. 2.) and
4093 (penultimate paragraph).
6.3.3. "A" 3161 1. According to Com. "A" 4093 (penultimate
paragraph).
6.4. "A" 3161 1. According to Com. "A" 4093 (penultimate
paragraph).
6.4.1. "A" 3161 1. According to Com. "A" 4093 (penultimate
paragraph).
6.4.2. "A" 3161 1. According to Com. "A" 4093 (penultimate
paragraph).
6.4.3. "A" 3161 1. According to Com. "A" 3171 (pt. 3.) and
4093 (penultimate paragraph).
6.5. "A" 2019 5. last
6.5.1. "A" 2019 5. last
6.5.2. "A" 3161 1. According to Com. "A" 3171 (pt. 4.) and
4093 (penultimate paragraph).
6.6. "A" 3161 1.
6.
6.7. "A" 3183 1. According to Com. "A" 4093 (pt. 5). Includes interpretative criterion.
7.1. "A" 2227 unique 5.1. According to Com. "A" 2649.
and 5.2.1. last
7.2.1. "A" 2227 unique 5.1.4. According to Com. "A" 2649.
"A" 2227 unique 5.2.2.
7.
7.2.2. "B" 5902 5. Includes interpretative clarification.
8.1. "A" 467 unique 1. last According to Com. "A" 2373.
8. 8.2. "A" 467 3rd
8.3. "A" 490 unique 17.
9.1. "A" 3918
According to Com. "A" 4055 and 4093 (pe9. last paragraph).
9.2. "A" 4060 1. and 2. According to Com. "A" 4254

RELATIONSHIP FOR IMMobilized ASSETS
B.C.R.A. AND OTHER CONCEPTS
Section 7. Transitional Provisions.
Version: 6th COMMUNICATION "A" 4254
Validity:
02/12/2004
7.1. Shares or participations received in payment of credits.
The total of shares or participations in the capital of companies received in payment of credits up to the limit of 20% of the social capital, without exceeding 20% of the votes, regarding companies that do not provide complementary services, in accordance with the conditions established in Section 9. of the regulations on "Credit Graduation", shall not exceed 40% of the computable net worth of the financial entity for the month in question, during the maximum periods established for the liquidation of holdings, in points 9.1.1. and 9.1.2. of the cited Section 9. This without prejudice to its computation as established in point 1.1. of Section 1. for the purpose of determining compliance with the maximum limit referred to in point 4.1. of Section 4. If excesses over the maximum limit of 40% referred to in the preceding paragraph are verified, the financial entity will be subject to the provisions established in Section 5. Once the periods for the liquidation of holdings have elapsed, excesses over the percentage of holding admitted to which point 3.2. of Section 3. of the regulations on "Credit Graduation" refers, shall be deducted from the computable net worth.

7.2. Differences resulting from compliance with judicial measures.
Until 31.12.05, the activated amount of differences resulting from compliance with judicial measures originating in cases where the current regulations applicable to deposits and other obligations by financial intermediation in the financial system, originally agreed in foreign currency within the framework of what is provided by Law 25.561, Decree 214/02 and complementary provisions, will not be computed for the purpose of determining compliance with the maximum limit contemplated in Section 4.

7.3. Assets in defense or payment of credits.
Until 30.6.05, assets taken in defense or payment of credits incorporated into the entity's assets until 31.3.03 will not be computed.

7.4. Defaults.
Until 31.12.05, for calculating the limitations established in point 2.3. of Section 2. of the regulations on "Defaults of minimum capital and technical ratios. Applicable criteria.", the amount of the excess recorded by this relationship, without exceeding that verified on 31.12.03, minus assets taken in defense or payment of credits as established in the preceding point, will not be computed.

RELATIONSHIP FOR IMMobilized ASSETS
AND OTHER CONCEPTS
6.1. "A" 2227 unique 5.2.1. last According to Com. "A" 2649.
6. 6.2. "A" 2227 unique 5.1.8. According to Com. "A" 2736.
"A" 2227 unique 5.2.2.
7.1. "A" 3918 6. According to Com."A" 4093
(pt. 2.).
7.2. "A" 3954 1. According to Com. "A" 4020,
Com. "A" 4124 and "A"
4254
7.3. "A" 4093 7. According to Com. "A" 4254
7.
7.4. "A" 4093 8. According to Com. "A" 4254

DEBTOR CLASSIFICATION
B.C.R.A.
Section 11. Transitional Provisions.
Version: 4th COMMUNICATION "A" 4254
Validity:
02/12/2004
11.6. Debtors corresponding to the commercial portfolio and of commercial nature up to $
200,000 that receive the treatment of credits for consumption or housing, whose debts have been refinanced from 30.6.02, may be reclassified in higher levels in the terms established in point 11.5., insofar as the requirements there established are verified.

11.7. Debtors who maintain payment agreements resulting from judicial or extrajudicial homologated conciliations due or private arrangements negotiated jointly with creditor financial entities may be reclassified in higher levels taking into account the cancellation of the amount involved in the cited agreement based on the amortization percentages established in subsection i) of points 11.5.3.1. and 11.5.3.2.
The circumstance that, subsequent to the recategorization as indicated in the preceding paragraph, delays are verified will determine the application of what is established in point 11.5.2.2. In terms of provisioning, what is established in points 11.5.6.2. and
11.5.6.3. shall be observed.

11.8. Provisions for risk of uncollectibility established in accordance with what is established in
point 2.2.2.1. of Section 2. of the regulations on "Minimum provisions for risk of uncollectibility" corresponding to debts refinanced between 1.4.03 and until 31.12.03 within the framework of what is established in point 6.5.2.2. of Section 6., shall be derecognized with a counterpart in the specific account of the item "Provisions" referred to in point 11.3.

11.9. Debtors from the commercial portfolio who during the period 30.6.02 to 31.12.05 have formalized or formalize payment agreements resulting from judicial or extrajudicial
homologated conciliations or private arrangements negotiated jointly with financial entities creditors, or private arrangements with the financial entity, may be reclassified in normal status provided they have the prior approval of the members of the Board of Directors or Administration Council - by simple majority or, when dealing with related clients, by two-thirds of the total number of members - or equivalent authority of the lending entity, and this must be recorded in the client's file. For the purpose of the debtor's recategorization in normal status, their payment capacity measured through future cash flows based on the agreement conditions (whether it contemplates write-downs and/or grace periods for capital payment), the company's prospects, and the economic activity sector or business branch to which it belongs, and other conditions provided for this category, shall be taken into account. Subsequently, the debtor's evaluation will be carried out in accordance with the general regulations in force regarding classification. Clients recategorized who maintain debts for amounts exceeding $ 5,000,000 in the entire financial system, must be reported to the Superintendence of Financial and Currency Entities specifying the parameters considered for assigning such classification (projected cash flows, company perspective, etc.).

DEBTOR CLASSIFICATION
B.C.R.A.
Section 11. Transitional Provisions.
Version: 3rd COMMUNICATION "A" 4254
Validity:
02/12/2004
Financial entities may derecognize provisions for risk of uncollectibility established timely regarding financings to debtors recategorized in normal status, taking into account for this purpose the category in which the debtor would have corresponded to be reclassified if the capital cancellation percentages established in the general regulation had been observed as a guideline. In cases of refinancings that contemplate capital write-downs, provisions may be derecognized, at the time of recategorization, by the amount equivalent to the write-down made.

11.10. What is provided in point 11.9. will not apply to debtors who have been
refinanced in accordance with the regime established in point 11.5.

11.11. Debt refinancings agreed or to be agreed upon in the period 30.6.02 to
31.12.05, corresponding to debtors from the commercial portfolio - with the exception of those contemplated in points 11.9. and 11.10. above - in which capital write-downs are made, the minimum provision for risk of uncollectibility to be established shall be equivalent to the amount resulting from deducting from the provisions required on the debt before its refinancing - calculated in accordance with general regulations - the amount corresponding to the write-down made. The resulting provisioning percentage on the refinanced amount will determine the classification level to be assigned to the debtor based on the ranges of the table contained in point 2.1.1. of Section 2. of the regulations on "Minimum provisions for risk of uncollectibility". In cases where, by application of the methodology established above, it results that the provisioning percentage corresponds to the first range of the table contained in the cited point 2.1.1., the debtor may be recategorized in "normal status" provided they have the prior approval of the members of the Board of Directors or Administration Council

• by simple majority or, when dealing with related clients, by two-thirds of the total number
  of members - or equivalent authority of the lending entity - and this must be recorded in the client's file - and the provisions contained in the second and third paragraphs of point 11.9. are also observed. In subsequent months, the regulations established with general character from the assigned category will apply.

DEBTOR CLASSIFICATION
ORDERED TEXT SOURCE OF NORM Observations
Section Point Paragraph Com. Annex Point Paragraph
6.5.6.1. last "A" 2440 2. last
6.5.6.2. "A" 2287 2. Modified by Com. "A" 2890 (pt. 3.)
except b), 2nd clause
"A" 2287 2.3. Modified by Com. "A" 2497 (pt. 1.) b), last clause "A" 2287 2.5. Modified by Com. "A" 2497 (pt. 1.)
6.5.6.3. "A" 2573 1.
6.
6.6. last
"A" 2216
"A" 4060
I I.c.
10.
Modified. by Com. "A" 2932 (pt. 6.) and "A" 3339
7.1. 1st "A" 2216 I II. 1st
7.1 2nd "A" 3142
7.1. last "A" 3142
7.2.1. 1st "A" 2216 I II.1.
7.2.1. last Incorporates criterion not given to
known generally prior
7.2.2. "A" 2216 I II.2.
7.2.3. "A" 2216 I II.3.
7.2.4. "A" 2216 I II.4. Includes interpretative clarification
7.2.5. "A" 2216 I II.5. Includes interpretative clarification
7.2.6. "A" 2216 I II.6. According to Com. "A" 2440
7.
7.3. "A" 2216 I II. 1st and
2nd
Modified by Com. "A" 2932 (pt. 6.) and
"A" 3339
8. 8.1. "A" 2216 I 5. Mod. by Com. "A" 2562
9.1. "A" 2227 unique 5.2.1. last
According to Com. "A" 2649
9.2. "A" 2227 unique 5.1.5. According to Com. "A" 2649
9.
"A" 2227 unique 5.2.2.
10.1. "A" 2389 2.
10.2.1. "A" 2703 3. According to Com. "A" 3145 (pt. 1.)
10.2.2. "A" 2703 4.
10.
10.3. "A" 3141 4.
11.1. "A" 3918
11.2. "A" 3918
11.3. "A" 3918 According to Com. "A" 3955
11.4. "A" 3918 According to Com. "A" 3955
11.5. "A" 3918
11.5.2.2 "A" 3918 According to Com."A" 4060 (pt. 3.)
11.5.3. penultimate and
last
"A" 3918 According to Com. "A" 3955
11.6. "A" 3918
11.7. "A" 3918
11.8. "A"3955
11.9. "A" 4060 4. According to Com. "A" 4254
11.10. "A" 4060 4.
11.
11.11. "A" 4060 5. Includes interpretative clarification (Com."B"
8114). According to Com. "A" 4254