Circular LISOL 1-142: Minimum Capital of Financial Entities and Computable Equity Responsibility

BANCO CENTRAL DE THE REPUBLIC OF ARGENTINA
__________________________________________________________________ COMMUNICATION "A" 2453 24/07/96 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 142.
Minimum capital of financial entities and computable equity responsibility.

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

"1. It is ordered that non-compliance with requirements for the application of risk weightings and indicators that determine a lower integration of minimum capital than required will be subject to a charge calculated at a nominal annual rate of 30%, without prejudice to the validity of the other provisions contained in point 3.2. of Chapter V of Circular LISOL - 1 (text according to Communication "A" 2019) and in point 3. of the resolution disseminated by Communication "A" 2136.

2. Eliminate factor "D" usable for the determination of the computable equity responsibility of the expression contained in point 2. of Communication "A" 2136 (text according to Communication "A" 2279).

3. Substitute the risk value weighting table for non-fixed assets referred to in Communication "A" 2136 with that contained in the Annex forming part of this resolution.

4. It is ordered that what is established in the preceding points will apply to determine the minimum capital required starting from 31.8.96."

We inform you that, in accordance with point 4. of the preceding resolution, the new weightings will apply with respect to the monthly average of daily balances of the included items registered from July 1996.

Finally, we clarify that holdings of public securities from central bank reverse repos are weighted at 0%.

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

ANEXO

Annex to
Com. "A" 2453
RISK VALUE WEIGHTING TABLE
FOR NON-FIXED ASSETS

Concept | Weighting

• in % -

1. Availability
   1.1. B.C.R.A. - current common and special accounts and at sight; B.N.A. (New York branch) for placements at sight under the regime of Communication "A" 1820; account "Liquidity Requirements - Com. "A" 2350" open at Deutsche Bank (New York) and payment orders charged to the Central Bank | 0
   1.2. current accounts, correspondent accounts, or at sight accounts at the head office or controlling bank of the local financial entity or in its branches in other countries and in its subsidiaries, provided they are subject to a consolidated supervision regime | 0
   1.3. cash in vault (in pesos, US dollars, German marks, French francs, Swiss francs, yen, and British pounds) and in automated teller machines | 0
   1.4. gold and other precious metals as long as they meet the conditions established in Communication "A" 2290 | 0
   1.5. other current accounts, correspondent accounts, and other at sight accounts in banks in the country, and in banks abroad included in the highest quality categories for investment ("investment grade"), according to rating granted by some international agency included in the list of point 6. of Communication "A" 2269 | 20
   1.6. others | 100

2. Public Securities
   2.1. national | 0
   2.2. provincial and municipal | 100
   2.3. issued by government companies referred to in:
   2.3.1. paragraph 2.1. | 50
   2.3.2. paragraph 2.2. | 100
   2.4. foreign
   2.4.1. bonds of central governments of countries members of the Organization for Economic Cooperation and Development (O.E.C.D.) that have an "A" or higher rating granted by some international agency included in the list of point 6. of Communication "A" 2269 | 0
   2.4.2. others | 100

3. Loans
   3.1. to the non-financial private sector
   3.1.1. with preferred guarantees
   3.1.1.1. cash (in pesos, US dollars, German marks, French francs, Swiss francs, yen, and British pounds) and gold | 0
   3.1.1.2. sureties of certificates of fixed-term deposits issued by the creditor entity itself
   a) in pesos or US dollars | 0 b) in the remaining currencies referred to in point 3.1.1.1. or in national public securities, in both cases with a 10% margin | 0
   3.1.1.3. guarantee of the National Government (only with respect to operations valid as of 30.6.93) | 0
   3.1.1.4. automatic repayments of export letters corresponding to reciprocal credit agreements for multilateral and bilateral foreign trade | 0
   3.1.1.5. provincial guarantee funds, provided these have the special allocation of resources from the federal tax sharing | 0
   3.1.1.6. national public securities, with a 10% margin | 0
   3.1.1.7. mortgage
   a) in any degree of privilege on real estate for own housing that is subject to the encumbrance, when it concerns loans for their acquisition, construction, or improvement or cancellation of pre-existing loans agreed with that purpose, provided that mortgages in a degree of privilege other than first back complementary assistance and that the total credit support they have with guarantees in a different degree of privilege does not exceed 75% of the appraisal value of such goods | 50 b) linked to real estate referred to in point 3.1.1.7. a), on the amount exceeding 75% of the appraisal value of such goods | 100 c) in first degree on real estate for own housing that is subject to the encumbrance, when it concerns loans for acquisition and improvement (only with respect to financings granted until 13.3.96) | 50 d) in first degree on real estate, except the financings included in paragraphs a), b), and c) of point 3.1.1.7. | 75
   3.1.1.8. pledge
   a) fixed with registration in first degree or with displacement to the entity on new motor vehicles (for private use) | 50 b) fixed with registration in first degree or with displacement to the entity on other goods | 75 c) floating with registration, to the extent that it is instrumented on automobiles that have manufacturing certificates that are retained until the cancellation of the assistance granted | 50
   3.1.1.9. "warrant" | 50
   3.1.1.10. documentary credits used, except deferred payment ones, whose shipping documentation has not yet been delivered to the client | 50
   3.1.1.11. with guarantees granted by reciprocal guarantee societies (Law 24.467), registered in the registry enabled at the B.C.R.A. | 50
   3.1.2. without preferred guarantees | 100
   3.2. to the non-financial public sector
   3.2.1. National Government (except companies) | 0
   3.2.2. to companies by the National Government | 50
   3.2.3. Provinces and Municipality of the City of Buenos Aires, with guarantee of the federal tax sharing and that have the pertinent intervention of the Ministry of Economy and Public Works and Services of the Nation | 0
   3.2.4. others | 100
   3.3. to the financial sector
   3.3.1. official banks of provinces and of the Municipality of the City of Buenos Aires, with guarantee of the federal tax sharing | 0
   3.3.2. with guarantee of banks abroad
   3.3.2.1. head office or controlling bank of the local financial entity or of its branches in other countries and of its subsidiaries, provided they are subject to a consolidated supervision regime | 0
   3.3.2.2. other banks abroad that have the "investment grade" rating, granted by some international agency included in the list of point 6. of Communication "A" 2269 | 20
   3.3.3. others | 100

4. Other credits by financial intermediation
   4.1. for operations with the Central Bank | 0
   4.2. debentures and other debt securities purchased
   4.2.1. own issuances | 0
   4.2.2. others | 100
   4.3. financial leasing rentals accrued to collect
   4.3.1. linked to goods included in points 5.1. and 5.2. | 50
   4.3.2. linked to other goods | 75
   4.4. forward purchases of national and foreign currency public securities, linked or not to reverse repos, and their corresponding premiums to accrue
   4.4.1. with a coverage margin of 20% or more in the traded asset or in fixed-term deposit certificates in the intervening entity itself | 0
   4.4.2. with counterparties that have the "investment grade" rating granted by some of the international risk rating agencies, according to the list contained in point 6. of Communication "A" 2269 | 0
   4.4.3. others | 20
   4.5. debtors from forward sales of national and foreign currency public securities, linked or not to active repos
   4.5.1. with a coverage margin of 20% or more in the traded asset or in fixed-term deposit certificates in the intervening entity itself | 0
   4.5.2. with counterparties that have the "investment grade" rating granted by some of the international risk rating agencies, according to the list contained in point 6. of Communication "A" 2269 | 0
   4.5.3. others | 20
   4.6. spot purchases to be settled of securities and foreign currency, and their corresponding premiums to accrue | 0
   4.7. debtors from spot sales to be settled of foreign currency and securities | 0
   4.8. forward purchases of private securities and others, except national public securities, linked or not to reverse repos, and their corresponding premiums to accrue
   4.8.1. with counterparties that have the "investment grade" rating granted by some of the international risk rating agencies, according to the list contained in point 6. of Communication "A" 2269 | 0
   4.8.2. others | 50
   4.9. debtors from forward sales of private securities and others, except national public securities, linked or not to active repos
   4.9.1. with counterparties that have the "investment grade" rating granted by some of the international risk rating agencies, according to the list contained in point 6. of Communication "A" 2269 | 0
   4.9.2. others | 50
   4.10. matured spot and forward operations of national, private, and other public securities and foreign currency, linked or not to repos, in which the financial entity has already effected its provision and the receipt of the agreed counterparty is pending, regardless of the accounting registration modality used | 100
   4.11. other forward purchases, their corresponding premiums to accrue, and debtors from other forward sales
   4.11.1. with counterparties that have the "investment grade" rating granted by some of the international risk rating agencies, according to the list contained in point 6. of Communication "A" 2269 | 0
   4.11.2. others | 50
   4.12. sureties and stock market repos
   4.12.1. on national public securities
   4.12.1.1. with a coverage margin of 20% or more in the traded asset | 0
   4.12.1.2. with other coverage margins | 20
   4.12.2. with counterparties that have the "investment grade" rating granted by some of the international risk rating agencies, according to the list contained in point 6. of Communication "A" 2269 | 0
   4.12.3. others | 50
   4.13. others | 100

5. Goods in financial leasing
   5.1. real estate for tenant housing | 50
   5.2. new motor vehicles (for private use) | 50
   5.3. other goods | 75

6. Other non-fixed assets
   6.1. participations in the capital of companies in the country and abroad | 100
   6.2. shares of common investment funds whose assets are constituted by:
   6.2.1. national public securities | 0
   6.2.2. bonds issued by central governments referred to in paragraph 2.4.1. | 0
   6.2.3. bonds issued by central governments referred to in paragraph 2.4.1. | 20
   6.2.4. others | 100
   6.3. others, except those deductible for the determination of computable equity responsibility | 100

7. Guarantees, sureties, and other eventual liabilities (*)
   7.1. documentary credits for deferred payment whose shipping documentation has not yet been delivered to the client | 50
   7.2. for fulfillment of contractual obligations and/or maintenance of offers | 50
   7.3. to the non-financial public sector
   7.3.1. National Government (except companies) | 0
   7.3.2. Provinces and Municipality of the City of Buenos Aires, with guarantee of the federal tax sharing and that have the pertinent intervention of the Ministry of Economy and Public Works and Services of the Nation | 0
   7.3.3. others | 100
   7.4. rights arising from purchase and sale option contracts
   7.4.1. on national public securities
   7.4.1.1. with a coverage margin of 20% or more in the traded asset | 0
   7.4.1.2. with other coverage margins | 20
   7.4.2. with counterparties that have the "investment grade" rating granted by some of the international risk rating agencies, according to the list contained in point 6. of Communication "A" 2269 | 0
   7.4.3. others | 50
   7.5. others | 100

In the case that these operations have counter-guarantees, in place of the weighting values established in points 7.1., 7.2., 7.3., 7.4., and 7.5., those mentioned in point 3. will be used when, according to the guarantee offered, they are lower than those.

(*) These concepts (codes 711009, 711033, 715009 and 715033 -insofar as they correspond to operations accounted for in accounts 721003, 721033, 725001 and 725033-, 711010, 711034, 711035, 711038, 711045, 715003, 715007, 715010, 715034, 715035, 715038 and 715045), will be computed in accordance with what is established in the last paragraph of the definitions relating to the concept "Vrani".