Circular A 598: Regulations on US Dollar-Indexed Adjustable Deposits and Export Pre-financing Loans

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 598 28/02/85
TO FINANCIAL ENTITIES:
Ref.: Circulars ACTIVE OPERATIONS - OPRAC

• 1 - 52; MONETARY REGULATIONS - REMON - 1 - 193; PASSIVE OPERATIONS -
  OPASI - 1 - 52. Applicable rules for deposits adjustable with a United States dollar clause and for loans for pre-financing of promoted exports

We address you to inform you that, in accordance with the objective of continuing to transfer to financial entities the placement of captured financial resources, this Institution resolved to establish the rules on deposits and credits adjustable with a United States dollar clause, contained in Annexes I to IV, which will be in effect from 4.3.85.

At the appropriate time, we will send you the complementary procedural rules applicable to the present regime.

We salute you very attentively.

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
Alfredo A. Besio
Deputy Manager for Standards for
Financial Entities
Horacio A. Alonso
General Deputy Manager

ANNEXES

B.C.R.A. FIXED-TERM, NOMINATIVE, NON-TRANSFERABLE DEPOSITS ADJUSTABLE WITH UNITED STATES DOLLAR CLAUSE
Annex I to
Comm. “A” 598

1. They shall be established in favor of:
   1.1. Natural persons and private legal entities.
   1.2. Religious entities.
   1.3. Associations, foundations, and entities whose object is social assistance, public health, charity, benevolence, education and instruction, scientific, literary, artistic, union, and physical or intellectual cultural activities.
   1.4. Insurance companies, regardless of their legal nature.

2. Each deposit must remain for a period of no less than 180 days.

3. The value of each deposit shall be updated by applying during the validity of the contract the variation experienced by the closing selling rate for clients of the United States dollar registered at the Banco de la Nación Argentina for the transfer of financial services abroad. The correction factor shall arise from the application of the following expression:

fc = (Type of exchange rate on the day of the deposit / Type of exchange rate on the 2nd day prior to the maturity date of the deposit) ^ (2/n)

where n = term of the operation in days.

When either of the two days prior to the maturity date of the deposits is a non-business day for exchange purposes, the quotation of the currency on the second immediate preceding business day for exchange prior to the maturity of the deposit shall be taken.

When the deposit is made on a day declared a non-business day for exchange, the quotation of the currency in effect at the close of operations of the immediate following business day shall be used.

In both cases, the denominator of the exponent of that formula shall be “n - j”, where “j” is equivalent to the difference between the term of the deposit and the number of days comprising the comparison.

4. On the adjusted capital, the interest rate freely agreed upon shall be applied.

5. The effective annual interest rate must be expressed in the corresponding document, and interest must be paid at the maturity of the contract.

6. The certificates representing these deposits shall be issued with the inscription “Certificate of fixed-term, nominative, non-transferable deposit adjustable with United States dollar clause”.

7. When not provided for in these requirements, the provisions governing Circular PASSIVE OPERATIONS - OPASI - 1, Chapter I, Deposits, points 3.1.1. to 3.1.12. inclusive and 3.2.2. and 3.2.3. shall apply.

B.C.R.A. RULES FOR THE APPLICATION OF RESOURCES
Annex II to
Comm. “A” 598

1. The lending capacity resulting from the financial resources provided in this resolution may be applied to the following destinations:
   1.1. Pre-financing operations of promoted exports, under the conditions established in point 2.
   1.2. Interfinancial loans with a United States dollar adjustment clause, in the terms and with the interest rate freely agreed upon by the parties. The borrowing entities must allocate these funds to the granting of credits provided for in point 1.1.
   1.3. B.C.R.A. Certificates adjustable by dollar clause: the total investments under this concept may not exceed the percentage periodically established by the Central Bank of the Republic Argentina on the average of fixed-term, nominative, non-transferable deposits adjustable with United States dollar clause, capitals, and accrued adjustments, referred to in Annex I.

2. The conditions under which credits must be granted are those made known through Circular OPRAC - 1 (Communication “A” 49) with the following modifications:

“2.1.8. Adjustment Clause.
Debt balances shall be updated in accordance with the variations experienced by the index referred to in point 3. of Annex I to Communication “A” 598.

2.1.10. Resources.
To cover the operations included in the preceding rules, banks may apply:
2.1.10.1. The lending capacity of fixed-term, nominative, non-transferable deposits adjustable with United States dollar clause.
2.1.10.2. Interfinancial obligations adjustable with United States dollar clause.
2.1.10.3. Special support from the Central Bank of the Republic Argentina:
When financing needs exceed the resources mentioned in the previous points, the Central Bank will grant a fund advance under the conditions established in Circular OPRAC - 1.
This additional support is conditioned on the total of pre-financing operations attended with Central Bank resources - except those indicated in point 2.1.10.4.- not exceeding 50% of the Computable Patrimonial Responsibility of the requesting entity determined in the last Formula 3926 presented to this Institution. In cases where excesses in the aforementioned limit occur, entities must allocate the increase in lending capacity, first of all, to cancel such excesses.

2.1.10.4. When the nature, amount, and term of disbursement of the loans justify exceptional treatment, the Central Bank of the Republic Argentina will consider presentations from authorized banks requesting fund advances intended to pre-finance promoted exports under the conditions of Circular OPRAC - 1.

2.1.11. Remuneration to banks.
For the intervention of entities in this regime, the Central Bank recognizes the following commissions:
2.1.11.1. Operations attended with Central Bank resources: 2.5% annual.
2.1.11.2. Other operations: 5.5% annual.
These percentages shall be payable per calendar quarter expired on the adjusted amount of the loans. For their settlement, numerals expressed in dollars are used based on daily balances computing a year of 365 days and converting to Argentine pesos according to the quotation - exchange rates, as applicable - of the last business day of each quarter.

2.1.13. Delays in export.
If at the expiration of the maximum term admitted for pre-financing, the export is not carried out totally or partially, the entities may, under their exclusive responsibility and after determining that the motives invoked by the beneficiaries justify it, grant an extension of up to 60 days. For said period, banks must charge an interest rate of 10% annual on the adjusted amount of the loan, of which the Central Bank will receive 90%. Both settlements will be effected at the expiration of the extension or at the moment of early cancellation.”

B.C.R.A. RULES ON LENDING CAPACITY OF THE SYSTEM ADJUSTABLE WITH DOLLAR CLAUSE
Annex III to
Comm. “A” 598

1. Fixed-term, nominative, non-transferable deposits adjustable with United States dollar clause constituted from 4.3.85 will not observe a minimum cash requirement and will be subject to the rules mentioned in Annex I.

2. The difference between adjustable financing operations with United States dollar clause and the lending capacity defined in points 2.1.10.1. and 2.1.10.2. of Chapter I of Circular OPRAC - 1 shall be governed by the following rules:

2.1. Investment excesses will be subject to a charge equivalent to 0.55 times the maximum rediscount rate in effect for the month in question.
2.2. Deficiencies in application will generate an increase in minimum cash requirement equivalent.
The adjustments of unused deposits and interfinancial obligations adjustable with dollar clause will be at the expense of the entity.
The determination of such differences will be verified based on the monthly average of daily balances of pending capitals and accrued adjustments for settlement of the following items adjustable by United States dollar clause:

• Assets: Credits - except those attended with Central Bank resources - and Central Bank certificates.
• Liabilities: Deposits constituted from 4.3.85 and interfinancial obligations.

B.C.R.A. TRANSITORY REGIME APPLICABLE TO
OPERATIONS IN EFFECT ON 1.3.85
Annex IV to
Comm. “A” 598

1. Funds provided before 4.3.85 will be maintained until the maturities of the respective operations, under the conditions established in point 2.1. of Chapter I of Circular OPRAC - 1.

2. Operations with a beginning of execution, that is, those in which one or more installments of the loan have already been credited to the beneficiary, will continue to be governed, in all their aspects, by the rules that applied to their concertation. Consequently, to attend such operations, banks may continue obtaining funds from the Central Bank until their total coverage.
   In relation to the operations cited in the previous paragraph, entities must inform the Foreign Exchange and Changes Management by 15.3.85 the committed funds that remain to be disbursed, indicating the total amount and the dates planned for such disbursements.