Circular LISOL 1-213: Minimum Liquidity Requirements. Transfer of Deficiencies to December 1998 Position. Integration with Stand-By Letters of Credit

1998 - Year of the Municipalities
CENTRAL BANK OF THE ARGENTINE REPUBLIC
__________________________________________________________________ COMMUNICATION "A" 2817 10/12/98 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 213.
Minimum liquidity requirements.
Transfer of deficiencies from the December 1998 position.
Integration with "stand-by" letters of credit

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

"1. It is ordered that the deficiencies recorded in the average position of the minimum liquidity requirements corresponding to December 1998 may be transferred to the position whose closure will operate on 31.1.99.

2. Substitute, with effect from 1.12.98, point 2.1.3. of Section 2. of the rules on minimum liquidity requirements, with the following:

"2.1.3. "Stand-by" letters of credit issued in United States dollars for a minimum validity period of 180 days at all times, opened by foreign banks with at least an international rating of "A" or higher granted by one of the rating agencies admitted by the rules on evaluation of financial entities.

The utilization of the fund margin agreed upon by said letters of credit must be unrestricted, that is, it cannot be subject to any condition of any kind, and the resources must be available immediately upon simple request of the local entity without prior notice.

It will be admitted that as collateral for the letters of credit opened under the aforementioned conditions and for this purpose of integration of liquidity requirements, the affected financial entity may allocate mortgage or pledge loans or other documents representing its active portfolio, up to 125% of the amount of the letters of credit.

The computation of this integration may be carried out provided that the contract adheres to the model of "stand-by" letter of credit included in point 6.3. of Section 6. and that the original version of the document representing the letter/s of credit corresponding to the entity, along with the relevant payment instrument, is kept in custody at Deutsche Bank, New York. Furthermore, the entity must maintain the integration with this concept for the minimum validity period of the letter of credit.

The amount of these letters of credit must reach, as a minimum, 1.2 times the sum computed as integration.

In the event that the entity decides to discontinue the computation of this concept, the de-allocation will take effect provided that notice of that decision is given to the custodian and once the minimum validity period of the letter of credit has elapsed (180 days from the date of notification).

Any act affecting the disposition of the letter of credit, except as provided in this point, will determine the obligation to recalculate -deducting the respective amount- the positions in which this concept has been used to integrate the minimum liquidity requirements.

On the other hand, it will be necessary to deduct the amount of credit lines committed to other local or foreign financial entities regardless of their nature and the amount of existing liabilities with foreign banks subject to cancellation clauses upon simple request, within a period of 30 days."

3. Fix, with effect from 1.12.98, at 20% the maximum limit for the computation of "stand-by" letters of credit for the purposes of integrating the minimum liquidity requirements referred to in point 2.3.ii) of Section 2. of the respective rules."

We salute you very respectfully.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Juan Carlos Isi Alfredo A. Besio
Deputy Manager of Standards Deputy Manager of Standards for for Financial Entities Financial Entities