Circular LISOL 1-148: Modifications to Minimum Liquidity Requirements

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMUNICACION "A" 2490 15/11/96 __________________________________________________________________

TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 148.
Modifications to the rules on minimum liquidity requirements

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

1. Increase, starting from 1.2.97, 1.8.97, and 1.2.98, by one percentage point respectively, the minimum liquidity requirements on deposits and other obligations for financial intermediation, except for those with a term exceeding 365 days.

2. Incorporate, starting from 1.12.96, into Section 3 of the consolidated text disseminated by Communication "A" 2422 the following point:

   "3.1.10. Time deposit certificates issued by foreign banks that have, at a minimum, a rating granted by one of the rating agencies, as detailed below:

   Agency	Required Rating
   Moody's Investors Service	Aa (long-term)
   Standard & Poor's Corporation	AA (long-term)
   International Bank Credit Analysis	AA (long-term)

   Entities must be holders of the right to exercise a put option to a foreign bank that meets the aforementioned requirement, at any time during the validity of the deposit.

   The computation of this integration will be admitted at the exercise value of the option, from the day of agreement.

   The certificates and the corresponding put option contracts of the entity must be kept in custody at Deutsche Bank, New York, or at the custodians designated by it, observing in pertinent matters what is provided in this matter in point 3.1.5."

3. Substitute, starting from 1.12.96, point 3.2 of Section 3 of the consolidated text disseminated by Communication "A" 2422 with the following:

   "3.2. The integration in the admitted concepts will only be computable up to the following maximum limits, measured with respect to the minimum requirement of each period:

   Concept	Maximum Computable -in %-
   a) Points 3.1.1. and 3.1.4. (together)	100
   b) Points 3.1.2., 3.1.3., 3.1.5. and 3.1.7. to 3.1.10. (together)	60
   c) Point 3.1.5. (within the preceding margin)	10
   d) Point 3.1.7. (within the 60% margin)	5

   For these purposes, the amount of the concept referred to in point 3.1.6. may be computed in its entirety, without any limitation."

4. Increase, starting from 1.7.97 and 1.1.98, by ten percentage points respectively, the maximum limit of paragraph b) of point 3.2 of Section 3 of the consolidated text disseminated by Communication "A" 2422 (text according to point 3 of this resolution).

5. Establish that, starting from 1.1.97, on no day of the computation period of the integration of the minimum liquidity requirements, the sum of the balances of the admitted concepts, registered at the close of each day, may be less than 60% of the total requirement.

The daily integration requirement will be calculated based on the requirement determined for the month immediately preceding the one in question.

6. Provide that, starting from 1.12.96, the monthly position of the minimum liquidity requirements and its integration will be calculated on the basis of daily average balances of the items included, registered in each calendar month.

7. Establish that, starting from 1.12.96, the repetition of non-compliance with the minimum liquidity requirements -in average positions- for two consecutive times or for four alternating times within a year, will determine the obligation to present a regularization plan, within the 20 calendar days following the close of the period in which any of those circumstances is registered.

8. Substitute what is provided in the fourth paragraph of Section 6 of the consolidated text disseminated by Communication "A" 2422 with the following:

   "The mechanisms or modalities that, in the judgment of the Superintendence of Financial and Exchange Entities, make it presumable the existence of undue conditions on the availability of liquidity, will determine the obligation for the financial entity to provide explanations on the matter within the term of 5 business days, counted from the notification of the requirement."

We clarify that, as a consequence of the change in the calculation methodology of the positions (point 6 of the resolution transcribed above), the computation period 16.11/15.12.96 is rendered void.

Finally, the sheets that are to be replaced -with effect from 1.12.96- in the consolidated text of the rules on minimum liquidity requirements are attached.

We greet you very respectfully.

BANCO CENTRAL DE LA REPUBLICA ARGENTINA

Juan Carlos Isi
Submanager of Rules for Financial Entities

Alfredo A. Besio
Manager of Rules for Financial Entities

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ANEXO

I B.C.R.A. I	TEXTO ORDENADO DE LAS NORMAS SOBRE REQUISITOS MINIMOS DE LIQUIDEZ	Anexo a la Com. "A" 2490
Index
Section 1. Concepts included.
Section 2. Computation.
Section 3. Integration.
Section 4. Minimum requirements.
Section 5. Non-compliance.
Section 6. Responsible parties and sanctions.
Section 7. Accounting registration.
Section 8. Model of notification of the put option contract.
Section 9. Model of loan contract with mortgage guarantee.
Section 10. Other provisions.

Version: 2a.	Communication "A"	Validity	Page 1	2490	1.12.96

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I I	REQUISITOS MINIMOS DE LIQUIDEZ	I B.C.R.A. I---------------------------------------------------I Section 2. Computation. I
When the financial entity concludes agreements or put option contracts that ensure the total or partial refinancing of term obligations, for the purpose of establishing the residual term until the maturity of the obligations, the term resulting from using those facilities, for the part of the liability included in the agreement, will be considered. This criterion is applicable in cases where the agreement is carried out with Backstop Fund S.A. (created by the National Government within the framework of the Program for the Development of the Capital Market agreed with the World Bank) or when the counterparty is a foreign bank that has at least an "A" rating or higher granted by one of the international risk rating agencies according to the list contained in point 2.2 of Section 2 of the consolidated text on Asset Qualification for Investments with Pension and Retirement Funds (Communication "A" 2484).
Computation periods will coincide with calendar months.
Averages are obtained by dividing the sum of daily balances by the total number of days of each calendar month.
Days on which no movement is registered must repeat the balance corresponding to the immediately preceding business day.

Version: 2a.	Communication "A"	Validity	Page 2	2490	1.12.96

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I I	REQUISITOS MINIMOS DE LIQUIDEZ	I B.C.R.A. I---------------------------------------------------I Section 3. Integration. I
It must be provided that the orders to sell quota-shares are accepted on the day the instruction is formulated and that their settlement -with crediting to the entity of the pertinent amount- is effected within five business days following the date of the sell order.
The computation will be effected taking into account the value of the quota-share determined for each day of the month based on the daily quotation of the securities that make up the fund.
The computation of this integration will be admitted provided that the certificates representing the quota-shares are kept in custody at Deutsche Bank, New York.
3.1.10. Time deposit certificates issued by foreign banks that have, at a minimum, a rating granted by one of the rating agencies, as detailed below:

Agency	Required Rating
Moody's Investors Service	Aa (long-term)
Standard & Poor's Corporation	AA (long-term)
International Bank Credit Analysis	AA (long-term)

Entities must be holders of the right to exercise a put option to a foreign bank that meets the aforementioned requirement, at any time during the validity of the deposit.

The computation of this integration will be admitted at the exercise value of the option, from the day of agreement.

The certificates and the corresponding put option contracts of the entity must be kept in custody at Deutsche Bank, New York, or at the custodians designated by it, observing in pertinent matters what is provided in this matter in point 3.1.5.

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I I	REQUISITOS MINIMOS DE LIQUIDEZ	I B.C.R.A. I---------------------------------------------------I Section 3. Integration. I
3.2. The integration in the admitted concepts will only be computable up to the following maximum limits, measured with respect to the minimum requirement of each period:

Concept	Maximum Computable -in %-
a) Points 3.1.1. and 3.1.4. (together)	100
b) Points 3.1.2., 3.1.3., 3.1.5. and 3.1.7. to 3.1.10. (together)	60
c) Point 3.1.5. (within the preceding margin)	10
d) Point 3.1.7. (within the 60% margin)	5

For these purposes, the amount of the concept referred to in point 3.1.6. may be computed in its entirety, without any limitation.

Version: 1a.	Communication "A"	Validity	Page 6	2490	1.12.96

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I I	REQUISITOS MINIMOS DE LIQUIDEZ	I B.C.R.A. I---------------------------------------------------I Section 5. Non-compliance. I
The deficiency in the integration of the minimum liquidity requirements -including the deficiency of the minimum daily balance- will be subject to a charge equivalent to 30% nominal annual, calculated according to the following expression:

c = D * 30 / 36500

where c : amount of the charge
D : deficiency subject to charge, expressed in numerals

When deficiencies in the monthly position and in the daily requirement are verified concurrently in the same computation period, the charge will be determined by the greater of the two.

Likewise, the following provisions will be applicable:

• charges may be reduced in exceptional cases, when mitigating circumstances exist and weighing the causes that originated the non-compliance.
• unpaid charges are subject to an interest equivalent to 40% effective annual during the period of non-compliance.
• the Central Bank may debit ex officio, totally or partially when in its judgment so justified, the charges applicable to such non-compliance along with the corresponding interests.
• in case of not having the procedure norms for their settlement and effectiveness, the charges will be paid subject to adjustment within the 12 calendar days following the close of the period to which they correspond.

The repetition of non-compliance -in average positions- for two consecutive times or for four alternating times within a year, will determine the obligation to present a regularization plan, within the 20 calendar days following the close of the period in which any of those circumstances is registered.

Version: 2a.	Communication "A"	Validity	Page 1	2490	1.12.96

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I I	REQUISITOS MINIMOS DE LIQUIDEZ	I B.C.R.A. I---------------------------------------------------I Section 5. Non-compliance. I
This will constitute an impediment for the expansion of the entity (opening of branches or representation offices abroad), transformation or participation in other financial entities.

Furthermore, starting from the first day of the month following the month of the non-compliance that determines the obligation to present the aforementioned plan, the amount of deposits, in pesos, in foreign currency, and in securities, may not exceed the level that in average monthly daily balances it had reached during the period in which said non-compliance is verified.

The lifting of that restriction will be subject to the resolution that is adopted regarding the plan presented.

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I I	REQUISITOS MINIMOS DE LIQUIDEZ	I B.C.R.A. I---------------------------------------------------I Section 6. Responsible parties and sanctions. I
The financial entity will inform the Superintendence of Financial and Exchange Entities, the names of the responsible parties for the management of the liquidity policy -which involves the adoption of safeguards for the compliance with the integration of the minimum liquidity requirements- (officials and/or manager of the area), of the General Manager and of the member of the board of directors or advisor or highest authority in the country in the case of foreign entities to whom the function must be reported. Likewise, when changes occur in that list, the information must be updated within the 10 calendar days of the occurrence of that modification.

The aforementioned officials will be fully responsible for verifying that the declared integration corresponds strictly to the definition of the concepts admitted for such effect, that is, that they are not subject, directly or indirectly, to conditions that distort the objective pursued with said requirements (availability of funds in time and form adequate to meet the return of liabilities), due to the existence of counter-documents, formalized or informal commitments or committed operations that nullify the liquidity of the instruments admitted as integration.

Likewise, the designated officials will be responsible for changes in the resource collection policy that imply an arbitrage aimed at evading the minimum liquidity requirements such as the extension of the term of the operations associated with the early cancellation of the obligations.

The mechanisms or modalities that, in the judgment of the Superintendence of Financial and Exchange Entities, make it presumable the existence of undue conditions on the availability of liquidity, will determine the obligation for the financial entity to provide explanations on the matter within the term of 5 business days, counted from the notification of the requirement.

The aforementioned Superintendence will issue a ruling within the 30 business days following the receipt of the defenses.

Version: 2a.	Communication "A"	Validity	Page 1	2490	1.12.96