Circular CONAU 1-923: Distribution of Results. Modifications.

"2010 - YEAR OF THE BICENTENNIAL OF THE MAY REVOLUTION" COMMUNICATION “A” 5072 06/05/2010 TO FINANCIAL ENTITIES:
Ref.: Circular
CONAU 1 - 923
Distribution of Results. Modifications.

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

“1. Replace the last paragraph of point 2.2. of the rules on “Distribution of Results” with the following:

“Without prejudice to what has been established previously, under no circumstances shall the distribution of results be admitted while:

• the integration of average minimum cash -in pesos, in foreign currency, or in public securities- is less than the requirement corresponding to the last closed position or the projected one considering the effect of the distribution of results, and/or
• the minimum capital integration is less than the requirement recalculated previously,
  increased by 30%, and/or
• it registers financial assistance for illiquidity from the Central Bank of the Republic of Argentina,
  within the framework of article 17 of the Organic Charter of this Institution.”

2. Replace points 1.1.2. and 1.1.4. of the rules on “Distribution of Results” with the following:

“1.1.2. registers financial assistance for illiquidity from the Central Bank of the Republic of Argentina, within the framework of article 17 of the Organic Charter of this Institution,”

“1.1.4. registers deficiencies in minimum capital integration -on an individual or consolidated basis- (without counting for such purposes the effects of the individual franchises granted by the Superintendence of Financial and Exchange Entities) or of average minimum cash -in pesos, in foreign currency, or in public securities.”

3. Replace point 2.1.2. of the rules on “Distribution of Results” with the following:

“2.1.2. the net positive difference resulting between the book values and the market quotation values, in the event that the financial entity registers public debt instruments and/or monetary regulation instruments of the Central Bank not valued at market prices, which have volatility published by the Central Bank.

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When the public debt instrument appears in the list of present values published by the Central Bank, for the purposes of the aforementioned comparison, the respective present value shall be used.
For the case of public securities and monetary regulation instruments of the Central Bank, which do not appear in the volatility or present value lists published by this Institution, said value must be calculated by the financial entities, based on the corresponding discounted cash flow at the internal rate of return of instruments of similar characteristics and “duration” that have volatility published by this Institution or, failing that, using a yield rate that is consistent with the methodology disseminated through the Institution’s website (www.bcra.gov.ar). Likewise, the aforementioned criteria shall apply for the determination of valuation differences in participation certificates and debt titles of financial trusts, in the corresponding proportion, when their underlying consists of the aforementioned instruments not valued at market price.”

4. Repeal points 2.2.2. and 3.1.2.4. of the rules on “Distribution of Results,”
   relating to the application of the “alpha1” coefficient in the calculation of minimum capital requirements.”

We clarify that the recalculation of the minimum capital and minimum cash positions referred to in the last paragraph of point 2.2. of the rules on “Distribution of Results” is solely for the purpose of verifying liquidity and solvency. Likewise, we send you attached the sheets that, in replacement of those previously provided, must replace the sheets in the rules on “Distribution of Results”. Finally, we remind you that on the Institution’s website www.bcra.gov.ar, accessing “regulations” (“ordered texts”), the modifications made with texts highlighted in special characters (strikethrough and bold) can be found.

We greet you very attentively.
CENTRAL BANK OF THE REPUBLIC OF ARGENTINA
Darío C. Stefanelli Alfredo A. Besio
Manager of Emission of Regulations
General Deputy Manager of Regulations

ATTACHMENT

1.1. Previous Conditions.
Financial entities may distribute results provided that the following situations are not verified in the month prior to the presentation of the authorization request to the Superintendence of Financial and Exchange Entities:
1.1.1. they are subject to the provisions of articles 34 “Regularization and Sanitation” and 35 bis “Restructuring of the entity to safeguard credit and bank deposits” of the Financial Entities Law,
1.1.2. they register financial assistance for illiquidity from the Central Bank of the Republic of Argentina,
within the framework of article 17 of the Organic Charter of this Institution,
1.1.3. they present delays or non-compliance in the information regime established by this Institution, or
1.1.4. they register deficiencies in minimum capital integration -on an individual or consolidated basis- (without counting for such purposes the effects of the individual franchises granted by the Superintendence of Financial and Exchange Entities) or of average minimum cash -in pesos, in foreign currency, or in public securities.
Version: 2nd. COMMUNICATION “A” 5072
Validity:
06/05/2010
DISTRIBUTION OF RESULTS
B.C.R.A.
Section 1. General Criterion.

2.1. Determination of Distributable Result.
Entities not included in any of the situations foreseen in point 1.1. may distribute results up to the positive amount resulting from deducting, off-balance sheet, from the balances at the end of the fiscal year to which they correspond, registered in the “Undistributed Results” account (code 450000), the amounts of the legal and statutory reserves -whose constitution is mandatory- and then those corresponding to the concepts -registered on the same date- detailed below:
2.1.1. the balances for the activation of differences resulting from payments made in compliance with judicial measures originating from cases in which the current regulations applicable to “pesified” deposits are challenged, regardless of whether or not new long-term loans are granted, as referred to in the resolution disseminated by Communication “A” 4439.
2.1.2. the net positive difference resulting between the book values and the market quotation values,
in the event that the financial entity registers public debt instruments and/or monetary regulation instruments of the Central Bank not valued at market prices, which have volatility published by the Central Bank.
When the public debt instrument appears in the list of present values published by the Central Bank, for the purposes of the aforementioned comparison, the respective present value shall be used.
For the case of public securities and monetary regulation instruments of the Central Bank, which do not appear in the volatility or present value lists published by this Institution, said value must be calculated by the financial entities, based on the corresponding discounted cash flow at the internal rate of return of instruments of similar characteristics and “duration” that have volatility published by this Institution or, failing that, using a yield rate that is consistent with the methodology disseminated through the Institution’s website (www.bcra.gov.ar). Likewise, the aforementioned criteria shall apply for the determination of valuation differences in participation certificates and debt titles of financial trusts, in the corresponding proportion, when their underlying consists of the aforementioned instruments not valued at market price.
2.1.3. the asset valuation adjustments notified by the Superintendence of Financial and Exchange Entities -accepted or not by the entity- that are pending registration and/or those indicated by the external audit that have not been registered in the accounts.
DISTRIBUTION OF RESULTS
B.C.R.A.
Section 2. General Procedure.
Version: 8th. COMMUNICATION “A” 5072
Validity:
06/05/2010

2.1.4. the individual franchises -for asset valuation- granted by the Superintendence of Financial and Exchange Entities, including adjustments derived from not considering the agreed adaptation plans.
2.1.5. the balances for the activation of the difference existing between the equivalent value in pesos of considering judicial deposits in the original currency of the deposit, and the book value of those deposits constituted in foreign currency that, as of 5.1.02, were subject to the provisions of Law 25.561 and Decree 214/02.
2.1.6. the algebraic sum of the balances of the accounts “Unrealized valuation difference of holdings of available-for-sale national public titles”, “Unrealized valuation difference of holdings of B.C.R.A. Letters available for sale” and “Unrealized valuation difference of holdings of B.C.R.A. Notes available for sale”, when it results in a consolidated net debtor balance.
2.2. Verification of Liquidity and Solvency.
The amount to be distributed according to the proposal presented to the Superintendence of Financial and Exchange Entities, which may not exceed the amount determined in point 2.1., must not compromise the liquidity and solvency of the entity. This requirement shall be considered met when the absence of integration defects in the minimum capital position -both individual and consolidated- at the end of the fiscal year to which the undistributed 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:
2.2.1. those resulting from the deduction from assets of the concepts mentioned in points
2.1.1. to 2.1.4.
2.2.2. from the non-consideration of the franchises granted by the Superintendence of Financial and Exchange Entities that affect the requirements, integrations, or the minimum capital position.
2.2.3. from the deduction of undistributed results of the amounts corresponding to the following concepts:
2.2.3.1. the amount to be distributed and, if applicable, the amount destined to constitute the reserve for the purpose of remunerating instruments representing debt, susceptible of integrating the computable patrimonial responsibility, according to the proposal presented to the Superintendence of Financial and Exchange Entities,
2.2.3.2. 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, as established in the rules on “Minimum Capitals of Financial Entities”, and
DISTRIBUTION OF RESULTS
B.C.R.A.
Section 2. General Procedure.
Version: 4th. COMMUNICATION “A” 5072
Validity:
06/05/2010

2.2.3.3. adjustments made according to points 2.1.1. to 2.1.4.
Without prejudice to what has been established previously, under no circumstances shall the distribution of results be admitted while:

• the integration of average minimum cash -in pesos, in foreign currency, or in public securities- is less than the requirement corresponding to the last closed position or the projected one resulting from considering the effect of the distribution of results, and/or
• the resulting minimum capital integration is less than the requirement recalculated previously, increased by 30%, and/or
• it registers financial assistance for illiquidity from the Central Bank of the Republic of Argentina,
  within the framework of article 17 of the Organic Charter of this Institution.
  2.3. Authorization.
  Express authorization from the Superintendence of Financial and Exchange Entities must be obtained, whose intervention shall have the object of verifying the correct application of the procedure.
  The request must be made, at least, 30 business days in advance of the holding of the shareholders' meeting or equivalent corporate body, which will consider the distribution of results.
  DISTRIBUTION OF RESULTS
  B.C.R.A.
  Section 2. General Procedure.
  Version: 3rd. COMMUNICATION “A” 5072
  Validity:
  06/05/2010

3.1. Conditions for Application. Determination of Distributable Result and Verification of Liquidity and Solvency.
For the purpose of paying the financial services corresponding to issuances of instruments representing debt, as referred to in point 7.2.2. of Section 7. of the rules on “Minimum Capitals of Financial Entities”, the specific procedure detailed below shall be used:
3.1.1. The issuance of such debt instruments must have the prior approval of the shareholders' meeting or equivalent corporate body, which must rule 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, referencing the provisions of the Central Bank applicable in this matter.
When it concerns negotiable bonds, the aforementioned requirement shall also be considered met in the event that the Ordinary General Assembly or equivalent corporate body authorizes a program for the issuance of instruments representing debt in a generic manner, delegating in its Board of Directors the determination of the specific terms and conditions, observing what is provided in article 9° of Law N° 23.576. This, without prejudice to the analyses that, on that aspect and others pertaining to each issuance and placement, correspond to the National Securities Commission in matters of legality control, with adjustment to the regime of public offering of securities, in its capacity as the applying authority of Law N°17.811.
3.1.2. To determine the existence of a sufficient balance to proceed with the payment, the general procedure provided for in points 2.1. and 2.2. regarding the determination of the capacity to distribute results shall be used, with the following exceptions:
3.1.2.1. the amounts corresponding to the concepts foreseen in points 2.1.1. and 2.1.2. shall not be deducted from undistributed results, nor shall they be considered for the recalculation of minimum capital positions -point 2.2.-,
3.1.2.2. the amount corresponding to the concept contemplated in point 2.1.5. shall not be deducted from undistributed results -point 2.1.-, nor shall it be considered as a deduction in the computable patrimonial responsibility (term “Cd” of the expression contained in point 7.1. of Section 7. of the rules on “Minimum Capitals of Financial Entities”) for the recalculation of minimum capital positions -point 2.2.-,
3.1.2.3. the amount corresponding to the concept contemplated in point 2.1.6. shall not be deducted from undistributed results -point 2.1.-, nor shall it be considered in the computable patrimonial responsibility for the recalculation of minimum capital positions -point 2.2.-.
DISTRIBUTION OF RESULTS
B.C.R.A.
Section 3. Specific Procedure.
Version: 5th. COMMUNICATION “A” 5072
Validity:
06/05/2010

ORDERED TEXT ORIGIN OF THE PROVISIONS OBSERVATIONS Sec. Point Para. Com. Annex Chap. Sec. Point Para.
1.1. “A” 4589 1.
1.1.1. “A” 4589 1.1.
1.1.2. “A” 4589 1.2. According to Com. “A” 4591
(point 6.) and 5072.
1.1.3. “A” 4589 1.3.
1.
1.1.4. “A” 4589 1.4. According to Com. “A” 5072.
2.1. “A” 4589 2. According to Com. “A” 4591
(point 6.).
2.1.1. “A” 4589 2.1.
2.1.2. 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 and
5072.
4º “A” 4589 2.2. 3°
2.1.3. “A” 4589 2.3.
2.1.4. “A” 4589 2.4.
2.1.5. “A” 4686 3.
2.1.6. “A” 4702 3.
2.2. “A” 4589 3. According to Com. “A” 4591
(point 8.), 5072 and “B”
9104.
2.2.1. “A” 4589 3.1. According to Com. “A” 4591
(point 8.).
2.2.2. “A” 4589 3.3. iv) According to Com. “A” 4591
(point 8.) and “B” 9104.
2.2.3. “A” 4589 3.3. According to Com. “A” 4591
(point 8.).
2.
2.3. “A” 4589 4.
3.1. “A” 4591 1.
3.1.1. “A” 4591 1. Incorporates the interpretative criterion of Com.
“C” 46841.
3.
3.1.2. “A” 4591 1. According to Com. “A” 4686,
4702, 5072 and “B” 9104.
B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE RULES ON “DISTRIBUTION OF RESULTS”