Circular LISOL 1-220: Minimum Liquidity Requirements, Transfer of Integration Deficiencies, and Non-Compliance

"1998 - Year of the Municipalities"
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMMUNICATION "A" 2833 24/12/98 __________________________________________________________________ To FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 220.
Minimum liquidity requirements. Transfers of integration deficiencies. Non- compliance

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

"1. Establish that, from 1.1.99, the integration of the minimum liquidity requirements of the positions based on the monthly average of daily balances of the included obligations cannot be less than 90% of the requirement resulting from the following expression:
EMLA(n)= EML(n)+ ENI(n-1) where :
EMLA(n): Adjusted minimum liquidity requirement corresponding to month (n) EML(n): Minimum liquidity requirement according to current regulations corresponding to month (n) ENI(n-1): Requirement not integrated in month (n-1) The admitted transfer of the unmet requirement from each month to the next position can be carried out for a maximum of six months, counted from the first month (inclusive) in which one opts for its use as provided previously or from the first immediate subsequent position after which the transferred defects are compensated.

2. Provide that, from 1.1.99, the deficiencies in the integration of the minimum liquidity requirements, except for the amount regarding which one opts for the application of what is provided in point 1 of this resolution, and the deficiencies in daily integration, will be subject to a charge equivalent to a rate of 4% nominal annual, with no other effect except what is provided in the following paragraph.
   In the case where the total of the integration defects in the average positions exceed 20% of said adjusted minimum liquidity requirement, the repetition of non-compliance for two consecutive months or four alternating months within a year will determine the obligation to present a regularization and sanitation plan, within the 20 calendar days following the closure of the period in which any of those circumstances is recorded. Such obligation will constitute an impediment for:

• transformation of financial entities.
• installation of subsidiaries in the country and abroad.
• increases in participation in financial entities of the country and abroad.
• installation of representation offices abroad.
  Likewise, from the first day of the month following the month of the non-compliance that determines the obligation to present the plan, the amount of deposits in pesos, in foreign currency, and in securities, cannot exceed the level that was reached in the monthly average of daily balances during the period in which such non-compliance occurs. The lifting of that restriction will be subject to the resolution adopted regarding the presented plan."

Given the validity of the measure referred to in point 1 of the resolution transcribed above for the calculation of the adjusted minimum liquidity requirement corresponding to the January position, the deficiency registered in December 1998 will be taken into account to the extent that the admitted transfer has been used as provided in point 1 of the resolution made known by Communication "A" 2817. Finally, we clarify that, for the purposes of calculating the minimum daily integration from 1.2.99, the adjustment that would have been applied in the month immediately preceding the one in question, as provided in point 1 of this resolution, should not be taken into account.

We greet you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Juan Carlos Isi Alfredo A. Besio
Submanager of Standards Manager of Standards for Financial Entities for Financial Entities