Circular Active Operations - OPRAC 1 - 33. Credit Policy. Supplementary Rules

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 467 30/03/84
TO FINANCIAL ENTITIES:
Ref.: Circular ACTIVE OPERATIONS - OPRAC-1-
33. Credit Policy. Supplementary Rules.

We address you with reference to the rules issued by this Central Bank with the aim of guiding the action performed by the financial system in the administration of Credit (Circular OPRAC - 1 - 30).

We bring to your knowledge that this Institution has resolved to establish the provisions attached as an annex for the purpose of complementing the indications formulated in that regulation.

On the other hand, we remind you that the analyses carried out in connection with these rules must be incorporated into the minimum elements that constitute the debtor's file, in accordance with the current provisions in this matter (point 3.1. of Chapter I of Circular OPRAC - 1).

We salute you very attentively.

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
Ernesto V. Feldman Daniel E. de Pablo
Manager of Financing Submanager General and Studies of the Financial System

ANNEX

B.C.R.A. CREDIT POLICY. SUPPLEMENTARY RULES Annex to Comm. "A" 467

1. Applicable relationships for the graduation of Credit
   The credit support, in national or foreign currency, that each financial entity grants may not exceed 50% of the computable net worth of the clients, established in accordance with the rules contained in point 6.1., whether natural or legal persons, groups or economic sets, a maximum relationship which in the case of related borrowers will be 25%.

Within these maximum assistance limits, entities must weigh the payment capacity of Credit applicants and analyze the risk emerging from each allocation to require the constitution of Guarantees they deem adequate. Likewise, a relationship that does not exceed in all concepts 100% of the client's net worth will be considered as a reasonable allocation in the entire financial system.

2. Operations included.
   The relationships indicated in the preceding point are applicable to financing operations -both those granted directly and those incorporated into assets as a consequence of portfolio purchases from other entities- mentioned in point 2. of Chapter II of Circular LISOL-1, their renewals, repetitions, extensions, and forbearances.

3. Operations not included
   The following operations are not covered by the regulations referred to in point 1.:
   3.1. Credit assistance destined for the execution of investment projects.
   3.2. Mortgage Credits for own and permanent housing for end users, which have been granted observing a sufficient margin of Guarantee against an adequate valuation of the encumbered assets and weighing the payment capacity from the regular income of the borrowers, so that the initial allocation does not exceed 30% of the income of the holder and the cohabiting family group.

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3.3. Personal and family loans granted based on the payment possibilities of services by users derived from their regular income, when those installments do not exceed, at the time of the agreements, the degree of attribution indicated in the previous point.

4. Excluded operations.
   The following financings may be assigned exceeding the relationships indicated in point 1.:
   4.1. Those mentioned in point 3. of Chapter II of circular LISOL-1, with the exclusions expressly indicated in its item 3.7.
   4.2. Credits of a seasonal nature, provided that, added to the assistance granted for other concepts, they do not exceed on average annually the cited proportions and are destined to meet extraordinary needs of a cyclical nature, whose duration is not greater than one year.
   4.3. The discount of documents issued by the National State and its dependent agencies presented by their suppliers and contractors.
   4.4. Loans to construction companies linked to the financing of public works.

5. Method of computing allocations to each client.
   To these ends, the criteria explained in point 4. of Chapter II of Circular LISOL-1 must be applied.

6. Computable net worth of clients.
   6.1. Entities will take into consideration the capital, reserves, and accumulated results in values adjusted at the close of the last accounting period -according to statements with external auditor's opinion, in accordance with generally accepted audit standards, and certification of the corresponding Professional Council in the case of joint-stock companies and, for the rest of legal and natural persons, with certification of a public accountant- or the net equity that arises from the asset declarations when accounting books are not kept in accordance with the legal provisions governing the matter. The corresponding amounts will be updated to the second month prior to the date of presentation of each Credit application, using as correction factors the coefficients established for the determination of the accounting revaluation prescribed by Law No. 19.742.

In addition, they must verify that the assets considered to determine the aforementioned responsibility are linked to the activities for which assistance is required. In a similar manner, when it comes to groups or economic sets, only the equity of the company or companies managing the credit contest must be computed, in the manner indicated.

B.C.R.A. CREDIT POLICY. SUPPLEMENTARY RULES Annex to Comm. "A" 467

6.2. Financial support subject to the maximum interest rate regime established by the Central Bank may not be granted to natural or legal person applicants who maintain placements of a temporary nature or other type of allocation of financial surpluses outside the usual business operation for amounts that represent more than 10% of the total assets.

Investments of the aforementioned character are considered to be foreign currency in cash, time deposits greater than 30 days - adjustable or not - and in foreign currency located in the country and abroad, External Bonds of the Argentine Republic and other titles and shares with quotation in securities markets of the country or abroad, Credits in foreign currency, Financial Credits to other companies, placements in the acceptances market and any other financial asset that does not fit the condition of being directly linked to the specific activity of the client, excluding deposits that must be made for reasons of imports and others with restricted availability due to the norms applicable in each case and the permanent participations in the capital of other companies.

The determination of the maximum relationship indicated above will be carried out based on the accounting balances of the corresponding included assets for the month immediately preceding the month of the Credit application.

7. Distribution of credit portfolios.
   Complementarily to the precautions to be observed in accordance with the instructions contained in point 5. of Chapter II of Circular LISOL-1, entities must maintain an adequate distribution of their Credit portfolios, so that significant concentrations do not occur in certain sectors of economic activity.

8. Adjustment of existing operations.
   Credit operations included that are found to be exceeded in relation to the new regulations on credit graduation, must be framed according to the particular situation of each case, for which entities must consider the pre-existing assistance commitments and the possibilities of gradual reduction of obligations by users, with flexibility of criteria that enables their gradual framing.

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In all cases, the granting of new credit support to users who are found to be exceeded must be done restrictively and with special observance of the provisions established in point 6.2. Adjustment programs to the present norms of the indebtedness situation may not exceed 1.1.87 for the general clientele and 1.9.85 for natural and legal persons linked.

9. Applicable treatment to credit operations not framed in these norms.
   The financial support that entities grant from 1.4.84, without observing the provisions of point 6.2., may not be affected to any loan line of the Central Bank nor to the Credit capacity of deposits at regulated rate or adjustable by combined price index and will be considered as an excess for the purposes of the provisions on placement of own funds.

In the Credit applications they formulate, clients must authorize the lending entities, the Central Bank or whoever this Institution designates, to verify the correctness of the information supplied.

If the checks carried out determine the lack of partial or total truthfulness of the declarations made, the Credits must be considered as if they were of matured term and their cost conditions will be modified, by applying from the origin an Adjustment Clause based on the evolution of the wholesale price index - general level - (INDEC), with an interest rate of 15% effective annual on updated capitals. To this end, loan contracts must include provisions that enable this adjustment.

Entities will transfer entirely to the Central Bank the amounts that result due, affected to lines adjudicated by this Institution, and the sums that arise from the mentioned recalculation.