Circular LISOL 1 - 138. CONAU 1 - 195. Classification and Provisioning of Debtors Who Are Also in Default with Former Entities

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMMUNICATION "A" 2440 28/05/96 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 138.
CONAU 1 - 195.
Classification and provisioning of debtors who are also in default with former entities

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

"1. Incorporate into Sections I. Commercial Portfolio and II. Consumer Portfolio of Annex I to Communication "A" 2216, as points d.6. and 6. respectively, the following:

"d.6. Unrecoverable by technical disposition.
Financing to clients who are themselves debtors in irregular status (considering as such those with delays exceeding 180 days) will be included, according to the list that, for this purpose and based on the information that administrators of credit portfolios must supply, the Central Bank will prepare and provide from:
i) entities liquidated by this Institution, ii) residual entities of public financial entities privatized or in the process of privatization or dissolution, and iii) financial entities whose authorization to operate has been revoked by this Institution and are in a state of judicial liquidation or bankruptcy.

Likewise, it will be necessary to classify in this category the assets that meet the conditions established in point 2. of the resolution disseminated by Communication "A" 2287."

"6. Unrecoverable by technical disposition.
It comprises the amount of financing to clients who meet the conditions provided under this same title in point d.6. of Section I. Commercial Portfolio."

2. Establish that the inclusion in the new categories established pursuant to the preceding point of debtors in default with former financial entities will determine the obligation to provision 100% of the financing,
   including renewals, extensions, forbearances -express or tacit-, etc., that are granted from the day following the inclusion of the debtor in the list disseminated by the Central Bank, regardless of whether they have preferred or self-liquidating guarantees.

The obligation to classify the debtor in the new categories is exempted when the financing is intended to cancel the loans that led to their inclusion in the list of debtors in default, provided that the funds are credited directly to the accounts of the former creditor entities."

We clarify that the inclusion in the new categories of debtors in default with former entities liquidated by the Central Bank (regime of Communication "A" 1944) must be carried out starting next June, for which purpose the list of the aforementioned borrowers referred to in Communication "A" 2429 applies.

Therefore, from that month, what was provided in the penultimate and last paragraphs of points d.5. and 5. of Sections I and II of Annex I to Communication "A" 2216, respectively, is no longer in effect, without prejudice to which the obligation to provision remains in force, in accordance with currently in force provisions, for the capital and interest that accrue from that month corresponding to the debt that those borrowers register and that is not originated in the situation provided in point 2. of the preceding resolution.

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Alfredo A. Besio Miguel A. Kiguel
Manager of Standards for General Manager
Financial Entities Area of Economics and Finance