BANCO CENTRAL DE THE REPUBLICA ARGENTINA

COMMUNICATION "A" 3229 I 02/12/01

TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 – 327
Minimum liquidity requirements. Specific increases due to liability concentration

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

“Establish that when an excessive concentration of liabilities (in holders and/or terms) is verified that implies a significant risk regarding the individual liquidity of a financial entity and/or has an impact on systemic liquidity, additional minimum liquidity requirements may be set on such liabilities of said financial entity and/or those complementary measures deemed pertinent. To this end, it will be considered that this situation occurs when, among others, the existence of any of the following factors is verified:

• A high percentage of liabilities is concentrated in the same holder or holders.
• That they have a reduced residual term.
• That they represent a significant percentage with respect to their integration of minimum liquidity requirements and/or their total private deposits.”

We send you attached the foundations of the measure adopted.
We greet you very attentively.

BANCO CENTRAL DE THE REPUBLICA ARGENTINA
Claudio Alejandro Gatti José Rutman
Submanager of Emission Manager Principal of Norms of Norms

ANNEX: 1 page

B.C.R.A.
FOUNDATIONS OF THE RESOLUTION ON
SPECIFIC INCREASES IN MINIMUM LIQUIDITY REQUIREMENTS BY CONCENTRATION OF LIABILITIES
Annex
to the
Com. "A" 3229

The minimum liquidity requirements were designed with the aim of improving the individual liquidity policy of financial entities and the financial system.
To these effects, liquidity requirements were extended to almost all liabilities by financial intermediation, the applicable rates were unified considering only their residual term, and alternatives for the constitution of their integration were expanded. When setting these rates, the usual behavior of each one of the liabilities was taken into account, and on that basis, the corresponding coefficients were established. In particular, factors linked to the diversification of the willingness to renew them, their residual term and historical volatility were considered. This regime was complemented with a contingent program of swaps with banks abroad that expands systemic liquidity without affecting the credit of the financial system. In this context, it is convenient to advance in this global policy taking into account new elements that were not considered opportune. In particular, the concentration in certain liabilities in financial entities and its implications in the financial system must be contemplated. Significant concentrations of liabilities in few holders and/or reduced terms entail a liquidity risk, both individual and systemic, which may not be completely covered with the current structure of the minimum liquidity requirements, since the decision on their renewal is concentrated in few decision units. From there, until a definition of a general nature is adopted, it is advisable to apply specific increases in the minimum liquidity requirements and other complementary measures when such liability concentrations are detected. In that sense, such measures must arise from particular evaluations carried out by the technical areas and must weigh, among others, factors such as maturity dates of the liabilities, their type and concentration by holders.