Circular LISOL 1-295 OPASI 2-235 OPRAC 1-483: New Regime of Charges for Minimum Capital Deficiencies and Other Regulatory Non-Compliance

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
________________________________________________________________________________ COMUNICACION " A " 3100 | 10/04/00 ________________________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL - 1 – 295
OPASI - 2 – 235
OPRAC - 1 - 483
New regime of charges for minimum capital deficiencies and non-compliance with other regulations

We address you to inform you that this Institution has adopted, on the matters referred to, the following resolution:

1. Approve, with effect from 1.4.00, the rules on "Non-compliance with minimum capital and technical ratios. Charges" which appear in the Annex to this communication.

2. Repeal, with effect from 1.4.00, sections ii) and iii) of point 1.4.2.3. of Section 1. of the rules on "Minimum capital of financial entities", related to the consequences for the presentation of regularization and sanitation plans (limitation on access to advances and rediscounts from the Central Bank and exclusion to operate directly with this Institution in foreign exchange and open market operations).

3. Repeal, with effect from 1.4.00, point 3.7. of Section 3. of the rules on "Minimum capital of financial entities", related to the application of charges for incorrect application of risk weightings and risk indicators.

4. Replace, with effect from 1.4.00, point 3.1.3. of Section 3. of the rules on "Minimum liquidity requirements", with the following:

"3.1.3. Charges not paid in due time and form will be subject, during the period of non-compliance, to an interest equivalent to the rate resulting from adding 5 percentage points to the rate applicable to the deficiency, as provided in point 3.1.1."

5. Repeal, with effect from 1.4.00, point 3.1.4. of Section 3. of the rules on "Minimum liquidity requirements".

6. Replace, with effect from 1.4.00, points 1.6.3.1. and 1.6.3.3. of Section 1. of the rules on "Placement of debt securities and obtaining lines of credit from abroad", with the following:

"1.6.3.1. Excesses over the limit on holding own securities established in point 1.6.2., measured by the monthly average of daily balances, will be subject to a charge equivalent to 18% nominal annual."

"1.6.3.3. Charges not paid in due time and form will be subject to an interest equivalent to 23% effective annual during the period of non-compliance."

7. Establish, with effect from 1.4.00, that the interest on charges for excesses over the limits on credit risk fragmentation and credit assistance to related clients (Communication "A" 2140) that are not paid in due time and form, will be equivalent to 23% effective annual.

8. Incorporate, with effect from 1.4.00, in Section 6. of the rules on "Credit Graduation", the following point:

"Deferral of charge collection.
The presentation of a regularization and sanitation plan under the terms of article 34 of the Financial Entities Law will determine the deferral of the collection of charges for excesses over the maximum limits established in point 3.1. of Section 3. that originated in financing granted up to the date of its presentation or request by the Superintendence of Financial Entities and Foreign Exchange. Charges will be collected from the month in which the plan is deemed fulfilled, provided that the excesses that originated them persist. During the validity of the regularization and sanitation plan, entities will accrue charges monthly, accounting for them in the account 'Non-deductible organization and development expenses for the determination of computable equity responsibility.'"

9. Replace, with effect from 1.4.00, the third paragraph of point 12.3. of the "Regulation of the bank current account" with the following:

"Amounts not paid in due time and form will be subject to interest equivalent to 23% effective annual during the period of non-compliance."

10. Repeal from 1.4.00 the resolution made known by Communication "A" 2019 and complementary ones.

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Juan Carlos Isi Alfredo A. Besio
Deputy Manager Manager of Norms for
Regulatory Regime Financial Entities

Annex: 7 pages

B.C.R.A. NON-COMPLIANCE WITH MINIMUM CAPITAL AND TECHNICAL RATIOS. CHARGES
Annex to
Com. "A" 3100

• Index -
  Section 1. Criteria applicable regarding minimum capital deficiencies and excesses in the ratio for immobilized assets and other concepts.
  1.1. Non-compliance reported by entities.
  1.2. Non-compliance detected by the Superintendence of Financial Entities and Foreign Exchange.
  1.3. Daily capital deficiency.
  Section 2. Criteria applicable regarding excesses over the limits on credit risk fragmentation, financing to related clients and credit graduation.
  2.1. Non-compliance reported by entities.
  2.2. Non-compliance detected by the Superintendence of Financial Entities and Foreign Exchange.
  Section 3. Charges. Treatment and rate.
  3.1. Suspension.
  3.2. Withdrawal of collection.
  3.3. Determination.
  3.4. Late payment.

Section 1. Criteria applicable regarding minimum capital deficiencies and excesses in the ratio for immobilized assets and other concepts.
1.1. Non-compliance reported by entities.
1.1.1. Application of charges.
1.1.1.1. Charges will not be applicable to the extent that the entity complies with any of the following conditions:
i) Be included in the requirement or ratio no later than the second month following that in which the non-compliance was registered. ii) Have presented a regularization and sanitation plan within the 30 calendar days following the last day of the month to which the non-compliance corresponds, while it is not rejected by the Superintendence of Financial Entities and Foreign Exchange.
1.1.1.2. In the case of not meeting these conditions, the charge calculated on the amount of capital integration defects or excesses in the ratio registered from the position of the month in which the non-compliance should have been regularized or in which the regularization and sanitation plan is rejected, as provided in points 1.1.1.1.i) and 1.1.1.1.ii), respectively, will be debited ex officio.
This charge will be debited from the entity's current account opened at the Central Bank of the Republic of Argentina as long as the non-compliance persists or until the month prior to that in which a regularization and sanitation plan is presented, whether requested or not. In these situations, when it is appropriate to apply charges, the rate established in point 3.3.1.1. i) of Section 3 will be used.
1.2. Non-compliance detected by the Superintendence of Financial Entities and Foreign Exchange.
1.2.1. Defense.
The entity will have 30 calendar days counted from the notification of the determination made by the Superintendence of Financial Entities and Foreign Exchange to formulate its defense, on which it must rule within the 30 calendar days following the presentation.
1.2.2. Application of charges.
1.2.2.1. When the entity does not present its defense within the period indicated in point 1.2.1., the non-compliance will be considered final, applying the procedure established in point 1.1.1. in the case that non-compliance persists. The periods will be calculated from the day on which the non-compliance became final as provided previously.

1.2.2.2. If the defense formulated is dismissed -totally or partially- by the Superintendence of Financial Entities and Foreign Exchange, the entity will adjust to the procedure established in point 1.1.1., in the case that non-compliance persists. The periods will be calculated from the month in which the notification of the adopted decision is made.
In these situations, when it is appropriate to apply charges, the rate established in point 3.3.1.2. i) of Section 3 will be used.
1.3. Daily capital deficiency.
1.3.1. Immediate inclusion.
In the event of a daily integration defect regarding the capital requirement for market risk, originated in the calculation of the requirement by the sum of the risk values of the assets included ("VaRp"), the financial entity must replenish capital and/or reduce its financial asset positions until it meets the established requirement, for which it will have a period of ten business days, counted from the first deficiency.
1.3.2. Persistent deficiency.
1.3.2.1. From the eleventh business day, deficiencies will be subject to a charge that must be paid by the entity through the procedure that is established, calculated on the greatest deficiency registered in the month.
For the determination and settlement of the charge for the daily integration deficiency of the capital requirement originated in the calculation of market risk values (greatest daily deficiency and number of days with deficiency), the increase of the defect on the eventual deficiency calculated on the last day of the previous month with respect to the capital requirement will be taken into account.
1.3.2.2. The charge referred to in point 1.3.2.1. will not be applicable if a regularization and sanitation plan is presented within the 5 subsequent business days, provided it is approved by the Superintendence of Financial Entities and Foreign Exchange within the 10 business days following.
In the event that the plan is not approved or its non-compliance is incurred, the charge provided in point 3.3.1.1. i) of Section 3 will be applied.
1.3.2.3. When it concerns deficiencies determined by the Superintendence of Financial Entities and Foreign Exchange and to the extent that the deficiency is persistent according to the last available information, the terms referred to in point 1.2.1. for the presentation of the defense and that that Superintendence rules on it will be 5 and 10 business days, respectively, while for the regularization of the non-compliance the entity will observe the period of 10 business days, counted from the date on which the integration defect becomes final.
Once that term has expired without the non-compliance having been regularized, what is established in point 1.3.2.2. will be observed, with the exception that in the case where the application of charges corresponds, the rate established in point 3.3.1.2.i) will be used.

Section 2. Criteria applicable regarding excesses over the limits on credit risk fragmentation, financing to related clients and credit graduation.
2.1. Non-compliance reported by entities.
They will determine the payment of charges in accordance with the information regime rules in force in the matter.
For the determination and payment of charges, the rate established in point 3.3.1.1. ii) of Section 3 will be used.
2.2. Non-compliance detected by the Superintendence of Financial Entities and Foreign Exchange.
2.2.1. Defense.
The entity will have 30 calendar days counted from the notification of the determination made by the Superintendence of Financial Entities and Foreign Exchange to formulate its defense, on which it must rule within the 30 calendar days following the presentation.
2.2.2. Application of charges.
2.2.2.1. When the entity does not present its defense within the period indicated in point 2.2.1., the determination will be considered final on the day of expiration of the period to formulate the defense.
2.2.2.2. If the defense formulated is dismissed -totally or partially- by the Superintendence of Financial Entities and Foreign Exchange the non-compliance will be considered final on the date of notification of the adopted decision.
2.2.2.3. The charges, calculated at the rate established in point 3.3.1.2. ii) of Section 3., will be paid by the entity together with the interest on charges not paid in due time and form, considering for this effect the date on which the non-compliance was configured and that of the effective payment, within the 20 calendar days counted from when they have become final, as provided in the previous points.

Section 3. Charges. Treatment and rate.
3.1. Suspension.
The suspension of the financial entity according to what is provided in article 49 of the Organic Charter of the Central Bank of the Republic of Argentina will determine the non-application of charges during the term of validity of that situation.
3.2. Withdrawal of collection.
In the event that any of the restructuring mechanisms provided for in points I -subsections c) and d)- and III of article 35 bis of the Financial Entities Law applies or the authorization to operate of the entity is revoked, the Central Bank of the Republic of Argentina will forgive the charges that accrue from 6.4.00.
3.3. Determination.
3.3.1. Applicable rates.
3.3.1.1. For non-compliance reported by entities regarding the:
i) regulations included in Section 1.: 14% nominal annual. ii) regulations included in Section 2.: 18% nominal annual.
3.3.1.2. For non-compliance detected by the Superintendence of Financial Entities and Foreign Exchange regarding the:
i) regulations included in Section 1.: 20% nominal annual. ii) regulations included in Section 2.: 24% nominal annual.
3.3.2. Calculation
It will be calculated applying the corresponding rate, as provided in the previous point, on the amount of the non-compliance, for which the following expression will be used:
c = n *
TNA/365 where c: charge, as a percentage, with two decimals. n: number of days of the month to which the non-compliance corresponds.
TNA: nominal annual rate applicable to the non-compliance, as a percentage.

For the rounding of the magnitude "c", values will be incremented by one unit when the third digit of the fractions is equal to or greater than 5, discarding these latter if they result inferior.
3.4. Late payment.
In the cases where the collection of interest on charges not paid in due time and form is provided, a rate of 23% effective annual will be applied, using the following expression:
i = [(1 + TEA) n/365 - 1] *
100 where i : interest rate corresponding to the delinquency period, as a percentage, with two decimals.
TEA: effective annual rate during the delinquency period, as a unit. n : number of calendar days between the due date fixed for the effective realization and the day prior to the presentation of the relevant debit note for the current account opened at the Central Bank of the Republic of Argentina. For the rounding of the magnitude "i", values will be incremented by one unit when the third digit of the fractions is equal to or greater than 5, discarding these latter if they result inferior.