Circular CONAU 1 - 1171: Distribution of Results. Update

"2016 - Year of the Bicentennial of the Declaration of National Independence" COMMUNICATION "A" 6013 12/07/2016 TO FINANCIAL ENTITIES:
Ref.: Circular
CONAU 1 - 1171
Distribution of Results. Update
.

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We address you to deliver to you attached the sheets that, in replacement of those previously provided, must be incorporated into the norms referenced, for the purpose of their update in accordance with what is provided by the resolution made known through Communication "A" 5985. Finally, it is recalled that on the website of this Institution www.bcra.gob.ar, by accessing "Legal and Regulatory Framework - Ordered Texts - Normative Orders", the modifications made with texts highlighted in special characters (strikethrough and bold) will be found. We salute you attentively. CENTRAL BANK OF THE ARGENTINE REPUBLIC Darío C. Stefanelli Agustín Torcassi Chief Manager of Issuance and Regulatory Applications Deputy General Manager of Rules

ANNEX

Financial entities may distribute results provided that none of the following situations are verified in the month prior to the submission of the authorization request to the Superintendence of Financial and Exchange Entities:
1.1. They are covered by the provisions of articles 34 "Regularization and Sanitation" and 35 bis "Restructuring of the entity to protect credit and bank deposits" of the Financial Entities Law.
1.2. They register financial assistance for illiquidity from the Central Bank of the Argentine Republic, within the framework of article 17 of the Organic Charter of this Institution.
1.3. They present delays or non-compliance with the information regime established by this Institution.
1.4. They register deficiencies in the integration of minimum capital - individually or consolidated - (without computing for such purposes the effects of the individual franchises granted by the Superintendence of Financial and Exchange Entities) or of minimum cash - on average - in pesos, foreign currency, or public securities.
1.5. They register fine sanctions - greater than 25% (twenty-five percent) of the last computable net worth reported -, or of disqualification, suspension, prohibition, or revocation imposed in the last five (5) years by the Central Bank of the Argentine Republic, the Financial Information Unit (UIF), the National Securities Commission (CNV) and/or the National Insurance Superintendence (SSN) that are weighted as significant, except when corrective measures have been implemented to the satisfaction of the Superintendence of Financial and Exchange Entities, after prior consultation, if applicable, to the body that imposed the sanction that is subject to weighting, if applicable, to the body that imposed the sanction that is subject to weighting.
Information and/or sanctions communicated by entities or authorities abroad with equivalent powers will also be taken into consideration.
For the weighting of the significance of sanctions, the type, reason, and amount of the sanction applied, the degree of participation in the facts, the possible alteration of the economic order and/or the existence of damages caused to third parties, the benefit generated for the sanctioned party, its operational volume, its net worth, and the position or function exercised by the natural persons involved will be considered. The payment of dividends - unless they are ordinary share dividends -, the purchase of own shares, the payments on other level 1 capital instruments - determined in accordance with point 8.1 of the norms on "Minimum Capital of Financial Entities" - and/or the payment of economic incentives (bonuses) to personnel - in this case, subject to the public order labor regulations (legal, conventional, and contractual) governing the relationships of financial entities with their personnel - will be subject to the restriction detailed in this regulation.

DISTRIBUTION OF RESULTS
B.C.R.A.
Section 1. General Criterion.
Version: 6th COMMUNICATION "A" 6013
Validity:
10/06/2016

The amount to be distributed according to the proposal presented to the Superintendence of Financial and Exchange Entities, which may not exceed that determined in Section 2., must not compromise the liquidity and solvency of the entity. This requirement will be considered met when the non-existence of integration defects in the minimum capital position - both individual and consolidated - of the closing of the fiscal year to which the unassigned results considered correspond or in the last closed position, according to information available on the date of said presentation, of both the one presenting the smaller excess of integration with respect to the requirement, recalculating them, computing additionally - for this sole purpose - the following effects based on the corresponding data for each of those dates:
3.1. Those resulting from the deduction from assets of the concepts mentioned in points 2.1 to 2.4.
3.2. The non-consideration of franchises granted by the Superintendence of Financial and Exchange Entities that affect the requirements, integrations, or the minimum capital position.
3.3. The deduction of unassigned results from the amounts corresponding to the following concepts:
3.3.1. the amount to be distributed and, if applicable, that destined to constitute the reserve for the purpose of remunerating instruments representing debt, susceptible of integrating the computable net worth, according to the proposal presented to the Superintendence of Financial and Exchange Entities;
3.3.2. balances in favor due to the application of the minimum presumptive income tax - net of provisions for devaluation risk - that have not been deducted from basic net equity, in accordance with what is established in the norms on "Minimum Capital of Financial Entities"; and
3.3.3. adjustments made according to points 2.1 to 2.4.
3.4. The non-consideration of the limit provided in point 7.2 of the norms on "Minimum Capital of Financial Entities".
Without prejudice to what is established above, the distribution of results will only be admitted to the extent that none of the following conditions are verified:

• the integration of minimum cash on average - in pesos, in foreign currency, or in public securities - is less than the requirement corresponding to the last closed position or to the projected considering the effect of the distribution of results; and/or
• the entity has not complied with the additional capital margins applicable to them as provided in Section 4.
  In the case of financial entities that are branches of foreign entities, the Superintendence of Financial and Exchange Entities will also take into account the liquidity and solvency situation of their parent houses and of the markets in which they operate.

DISTRIBUTION OF RESULTS
B.C.R.A.
Section 3. Verification of Liquidity and Solvency.
Version: 11th COMMUNICATION "A" 6013
Validity:
10/06/2016

Express authorization from the Superintendence of Financial and Exchange Entities must be obtained, whose intervention will have the object of verifying the correct application of the procedure.

DISTRIBUTION OF RESULTS
B.C.R.A.
Section 5. Authorization.
Version: 2nd COMMUNICATION "A" 6013
Validity:
10/06/2016

For the purposes of determining the distributable result and the verification of liquidity and solvency, for the payment of financial services corresponding to issuances of instruments representing debt, referred to in point 8.2.2 of the norms on "Minimum Capital of Financial Entities", the specific procedure detailed below will be used:
6.1. The issuance of such debt instruments must have the prior approval of the shareholders' assembly or equivalent corporate body, which must issue its decision on the issuance and its conditions. In these issuance conditions and in the offers made, the requirements that condition, according to this regime, the payment of financial services must be explicit, referring to the provisions of the Central Bank applicable in this matter.
When dealing with negotiable bonds, the cited requirement will also be considered met in the case that the Ordinary General Assembly or equivalent corporate body authorizes a program for the generic issuance of instruments representing debt, delegating in its Board of Directors the determination of specific terms and conditions, observing what is provided in article 9 of Law 23.576. This, without prejudice to the analyses that, on this aspect and others pertaining to each issuance and placement, correspond to the National Securities Commission in matters of legality control, adjusted to the regime of public offering of securities, in its capacity as the applying authority of Law 26.831.
6.2. To determine the existence of a sufficient balance to proceed with payment, the general procedure provided in Sections 2., 3., and 4. relative to the determination of the capacity to distribute results will be used, with the following exception: amounts corresponding to the concepts provided in points 2.1 and 2.2 will not be deducted from unassigned results, nor will they be considered for the recalculation of minimum capital positions - Section 3.-
The Superintendence of Financial and Exchange Entities, without prejudice to the authorization previously granted for the issuance, will verify annually, based on the corresponding distribution proposal formulated, the correct application of the procedure for the calculation of unassigned results purged according to these provisions and of the solvency and liquidity levels required for this case and the constitution of the corresponding reserve for the attention of financial services. Consequently, issuances of debt instruments that do not satisfy the applicable requirements in the matter or at the option of the entity, will be subject to the general procedure provided in Section 3.

DISTRIBUTION OF RESULTS
B.C.R.A.
Section 6. Specific Procedure.
Version: 2nd COMMUNICATION "A" 6013
Validity:
10/06/2016

7.1. From 1.1.13, for the purposes of computing the minimum capital position for the verifications provided in these norms, the capital requirement for credit risk by securitizations must be computed on all operations outstanding on the date of computation.
7.2. The countercyclical capital buffer that financial entities must apply to their exposures in Argentina, in accordance with what is established in point 4.2., is established, from 1.4.16, at 0%.

DISTRIBUTION OF RESULTS
B.C.R.A.
Section 7. Transitional Provisions.
Version: 2nd COMMUNICATION "A" 6013
Validity:
10/06/2016

ORDERED TEXT ORIGIN NORM
Sec. Point Para. Com. Annex Ch. Sec. Point Para.
OBSERVATIONS
"A" 4589 1. According to Com. "A" 5827.
1.1. "A" 4589 1.1.
1.2. "A" 4589 1.2. According to Com. "A" 4591
(point 6.) and 5072.
1.3. "A" 4589 1.3.
1.4. "A" 4589 1.4. According to Com. "A" 5072.
1.
1.5. "A" 5485 According to Com. "A" 5785,
5827 and 5985.
"A" 4589 2. According to Com. "A" 4591
(point 6.), 5273 and 5827.
2.1. "A" 4589 2.1. According to Com. "A" 5827.
1° "A" 4589 2.2. 1° According to Com. "A" 4698, 4898, 4976, 5072 and "B" 9186.
2° "A" 4589 2.2. 2° According to Com. "A" 4591 (point 7.), 4664, 4898 and 4976.
3° "A" 4898 According to Com. "A" 4976,
5072 and 5180.
2.2.
4° "A" 4589 2.2. 3°
2.3. "A" 4589 2.3.
2.
2.4. "A" 4589 2.4.
"A" 4589 3. According to Com. "A" 4591
(point 8.), 5072, 5273,
5827, 5985 and "B" 9104.
3.1. "A" 4589 3.1. According to Com. "A" 4591
(point 8.).
3.2. "A" 4589 3.3. iv) According to Com. "A" 4591
(point 8.) and "B" 9104.
3.3. "A" 4589 3.3. According to Com. "A" 4591
(point 8.).
3.
3.4. "A" 5737 4.
4. "A" 5827
5. "A" 4589 4. According to Com. "A" 5827 and
5985.
"A" 4591 1. According to Com. "A" 5282 and
5827.
6.1. "A" 4591 1. Incorporates the interpretative criterion of Com. "C"
46841. According to Com. "A"
5393.
6.
6.2. "A" 4591 1. According to Com. "A" 4686,
4702, 5072, 5180, 5282,
5369, 5580, 5827, 6013 and
"B" 9104.
7. "A" 5272 9. According to Com. "A" 5282,
5369, 5707, 5827, 5938 and
5985 and 6013.
B.C.R.A.
ORIGIN OF THE PROVISIONS CONTAINED IN THE NORMS ON "DISTRIBUTION OF RESULTS"