Circular LISOL 1-335. Guarantees. Financial Leasing of Real Estate and Motor Vehicles

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
COMUNICACIÓN " A " 3259 I 23/04/01
TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 335
Guarantees. Goods in financial leasing of real estate and motor vehicles

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

“1. Include in Section 1. of the regulations on “Guarantees” the following point:
“1.2.4. Goods in financial leasing of real estate and motor vehicles, which had been agreed upon in accordance with the provisions of Law 25.248.”

2. Incorporate as point 3.1.21. in Section 3. of the regulations on “Guarantees” the following:
   “3.1.21. Goods in financial leasing (point 1.2.4.):
   3.1.21.1. Real estate for the tenant’s residence.
   Financing granted, according to the result of the comparison between the values of the index of “Evolution of the price per square meter in sales operations (national average)” which, monthly, is elaborated by Banco Hipotecario S.A. and whose series is published by the B.C.R.A., corresponding to the third month prior to that in which the financing is granted and to the base month -October 1997= 100-, in accordance with the following scale:

• Up to 1.50: 75% of the appraised value of the property.
• More than 1.50 and up to 2: 55% of the appraised value of the property.
• More than 2: 40% of the appraised value of the property.
  3.1.21.2. Other real estate: 55% of the appraised value of the property.
  3.1.21.3. Motor vehicles: 75% of the appraised value of the property.”

Furthermore, we send you attached the justifications for the measure adopted and the pages that, in replacement of those previously provided, should be incorporated into the ordered text of the reference.

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Alfredo A. Besio Alejandro Henke
Manager of Sub-manager General of
Emission of Regulations and Information Regulation

ANNEX: 6 pages

B.C.R.A.
JUSTIFICATIONS FOR THE RESOLUTION ON
GUARANTEES. GOODS IN FINANCIAL LEASING
OF REAL ESTATE AND MOTOR VEHICLES
Annex
to
Com. "A" 3259

1. Law 25.248 has granted the specific legal framework to the “leasing” contract, defining it as that in which the grantor agrees to transfer to the grantee the possession of a certain and determined good for its use and enjoyment, against the payment of a fee and grants an option to purchase at a price (article 1° of the cited legal device).
   For the purposes of its enforceability against third parties, the contract must be registered in the registry that corresponds according to the nature of the thing that constitutes its object. Likewise, article 16 of the law establishes that the transfer of ownership occurs by the exercise of the purchase option, the payment of the exercise price of the option as determined in the contract and the fulfillment of the pertinent legal safeguards according to the nature of the thing in question.
   Article 17 of the cited legal device establishes that the objective liability arising from art. 1113 of the Civil Code falls exclusively on the grantee or custodian of the things given in “leasing”, which has constituted an important step to facilitate the use of this financial modality.

2. In that legal context, among the characteristics of the “leasing” contract stands out, in particular, the fact that the entity maintains ownership until the cancellation of the operation by the payment of the total price. This circumstance, in the event of defaults by the grantee, makes it possible to claim the return of the delivered good, without prejudice to the other actions, since the grantor has not released himself from his rights over the thing, in addition to the enforceability against third parties that would derive from the registration of the contract.
   This enables the dispensing of the treatment of preferred guarantee “B” to the goods given in “leasing”, which among other aspects, will have a favorable impact on the level of provisions required on these operations, in case of risk of uncollectability. In this sense, it is estimated that the fact prevails that, in the event of default by the debtor, the owner or grantor of the good can recover it in a practically automatic manner, with the speed that can be given to said procedure, given that the good given in “leasing” has remained in the assets of the grantor and that, at the same time, the grantee loses all rights regarding the purchase, having to impute as rental expense the total amounts paid until the rupture of the contract. In addition, the measure will give impetus to “leasing” as an alternative route for economic agents who cannot access goods, in general, of significant cost through other traditional financing modalities. However, taking into account the need to require appraisals for prudential reasons, only part of that operation will be considered guaranteed by that route. This is due to the special characteristics of the operation, in which 100% of the value of the good is financed under the figure of the contract of rental with option to purchase and that, except at the time of concluding the operation, during its validity, the residual value of the registered good (cost value minus accumulated amortizations calculated according to the conditions agreed in the contract and specific accounting provisions) does not necessarily coincide with its market value.

The lack of an adequate appraisal margin, in the event of default by the debtor and unless other guarantee safeguards are adopted, would lead to losses in the event that the recovery value of the good does not reach to cover the registered credit, so it is established, as the maximum ratio, that only a proportion of the value of the goods given in “leasing” can be counted as preferred guarantee. Likewise, it should be clarified that this measure will be limited, in a first stage, to real estate and motor vehicles. Separately, the normative treatment that “leasing” on motorized agricultural machinery might deserve is being analyzed, insofar as these goods are registrable and have a transparent market.

3. In another order, it is recalled that, in the regulations on “Minimum capital of financial entities”, a similar treatment has been applied to “leasing” operations as is dispensed to pledge or mortgage loans.

GUARANTEES B.C.R.A. Section 1. Classes. patrimonial computable entity of the month prior to the that corresponds. This limit will not be observed in case that the entity has a credit file of said obligor, so the operations will be computed within the margins of assistance that the applicable regulations provide in the matter.
1.1.18. Guarantees or sureties granted by reciprocal guarantee societies registered in the Registry enabled at the Central Bank of the Argentine Republic
or by provincial funds constituted with the same object as those societies, admitted by this Institution, regardless of the term of the operation, if they effective the credits not canceled within 30 days correlated to their maturity and to the extent that the interest rates of the respective operations do not exceed those fixed for the first tramo of the Risk Indicator Table applicable to the remaining financings (point 5.2. of Section 5. of the regulations on “Minimum capital of financial entities”).
1.2. Preferred “B”.
They are constituted by real rights on goods or commitments of third parties that, faithfully instrumented, ensure that the entity can dispose of the funds in concept of cancellation of the obligation contracted by the client, fulfilling previously the procedures established for the execution of the guarantees, and by the guarantees defined in point 1.1. with the exception of those included in the point 1.1.11., insofar as the residual term of the operations exceeds the term of 6 months. They are included in this category, with the character of taxative enumeration, the following:
1.2.1. Mortgage in first degree of privilege on real estate.
1.2.2. Fixed pledge with registration in first degree.
1.2.3. Guarantees or sureties granted by reciprocal guarantee societies registered
in the Registry enabled at the Central Bank of the Argentine Republic or by provincial funds constituted with the same object as those societies, admitted by this Institution, regardless of the term of the operation, in the extent that the remaining requirements mentioned in the point 1.1.18. are not met.
1.2.4. Goods in financial leasing of real estate and motor vehicles, that
had been agreed upon in accordance with the provisions of Law 25.248.
1.2.5. Preferred “A”, in operations of residual term superior to 6 months, with
exception of those included in point 1.1.11.
Version: 3a. Communication “A” 3259 Validity:
23.04.01

GUARANTEES B.C.R.A. Section 3. Computation.
3.1.17.1. Up to 1.50: 75% of the appraised value of the property.
3.1.17.2. More than 1.50 and up to 2: 55% of the appraised value of the property.
3.1.17.3. More than 2: 40% of the appraised value of the property.
3.1.18. Fixed pledge with registration in first degree (point 1.2.2.): 75% of the appraised value of the property.
3.1.19. From reciprocal guarantee societies or provincial funds constituted with
the same object as those societies (points 1.1.18. and 1.2.3.): 90%.
3.1.20. Credit titles (point 1.1.17.): 85% of the nominal value of the documents.
3.1.21. Goods in financial leasing (point 1.2.4.):
3.1.21.1. Real estate for the tenant’s residence.
Financing granted, according to the result of the comparison between the values of the index of “Evolution of the price per square meter in sales operations (national average)” which, monthly, is elaborated by Banco Hipotecario S.A. and whose series is published by the B.C.R.A., corresponding to the third month prior to that in which the financing is granted and to the base month -October 1997= 100-, in accordance with the following scale:

• Up to 1.50: 75% of the appraised value of the property.
• More than 1.50 and up to 2: 55% of the appraised value of the property.
• More than 2: 40% of the appraised value of the property.
  3.1.21.2. Other real estate: 55% of the appraised value of the property.
  3.1.21.3. Motor vehicles: 75% of the appraised value of the property.
  3.2. Partial coverage with preferred guarantees.
  When the existing preferred guarantees do not cover the total assistance to the client, the part not reached with that coverage will have the treatment established for deeds without preferred guarantees. Version: 4a. Communication “A” 3259 Validity:
  23.04.01

B.C.R.A. ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE REGULATIONS ON GUARANTEES ORDERED TEXT ORIGIN RULE
Section Point Paragraph Com. Annex Point Paragraph Observations
1. 1.1. “A” 2932 Unique 1.1.
1. 1.1.1. “A” 2216 I 1. 3º, a) According to Com. “A” 2443 and “A”
2932.
1. 1.1.2. “A” 2216 I 1. 3º, a) According to Com. “A” 2443 and “A”
2932.
1. 1.1.3. “A” 2216 I 1. 3º, b) According to Com. “A” 2932.
1. 1.1.4. “A” 2216 I 1. 3º, c) According to Com. “A” 2932.
1. 1.1.5. “A” 2216 I 1. 3º, d) According to Com. “A” 2932.
1. 1.1.6. “A” 2216 I 1. 3º, e) According to Com. “A” 2932.
1. 1.1.7. “A” 2216 I 1. 3º, f) According to Com. “A” 2932.
1. 1.1.8. “A” 2216 I 1. 3º, g) According to Com. “A” 2932.
1. 1.1.9. “A” 2216 I 1. 3º, h) According to Com. “A” 2932.
1. 1.1.10. “A” 2216 I 1. 3º, i) According to Com. “A” 2932.
1. 1.1.11. “A” 2932 unique 1.1.11. According to Com. “A” 3104.
1. 1.1.12. “A” 2932 unique 1.1.12.
1. 1.1.13. “A” 2932 unique 1.1.13.
1. 1.1.14. “A” 2932 unique 1.1.14.
1. 1.1.15. “A” 2932 unique 1.1.15.
1. 1.1.16. “A” 2932 unique 1.1.16.
1. 1.1.17. “A” 3114 1.
1. 1.1.18. “A” 3141
1. 1.2. “A” 2932 unique 1.2. According to Com. “A” 3104.
1. 1.2.1. “A” 2419 1. 1º Modified by Com. “A”
2563 (points 1. and 2.) and “A”
2932.
1. 1.2.2. “A” 2448 Status of debtors (point 6.1.2.2.2.)
and “A” 2932.
“A” 2448 Status of debtors (point 6.1.2.2.2.) and “A” 2932.
1. 1.2.3.
“A” 2410 7. According to Com. “A” 3141.
1. 1.2.4. “A” 3259 1.
1. 1.2.5. “A” 2932 unique 1.2.4.
1. 1.3. “A” 7 Specifications of the
items of “other guarantees received”, modified by Com. “A” 2932.
2. 2.1. 1º “A” 2448 Status of debtors (point 6.1.2.2.2.)
2. 2.1. 2º “A” 2932 unique 2.1. 2º
2. 2.2. “A” 2216 I 1. 4º

ORDERED TEXT ORIGIN RULE
Section Point Paragraph Com. Annex Point Paragraph Observations
3. 3.1. “A” 2932 unique 3.1.
3. 3.1.1. “A” 2932 unique 3.1.1.
3. 3.1.2. “A” 2932 unique 3.1.2.
3. 3.1.3. “A” 2932 unique 3.1.3.
3. 3.1.4. “A” 2932 unique 3.1.4.
3. 3.1.5. “A” 2932 unique 3.1.5.
3. 3.1.6. “A” 2932 unique 3.1.6.
3. 3.1.7. “A” 2932 unique 3.1.7.
3. 3.1.8. “A” 2216 I 1. 3º, g) According to Com. “A” 2932.
3. 3.1.9. “A” 2216 I 1. 3º, h) According to Com. “A” 2932.
3. 3.1.10. “A” 2216 I 1. 3º, i) According to Com. “A” 2932.
3. 3.1.11. “A” 2932 unique 3.1.11. According to Com. “A” 3104.
3. 3.1.12. “A” 2932 unique 3.1.12.
3. 3.1.13. “A” 2932 unique 3.1.13.
3. 3.1.14. “A” 2932 unique 3.1.14.
3. 3.1.15. “A” 2932 unique 3.1.15.
3. 3.1.16. “A” 2932 unique 3.1.16.
3. 3.1.17. “A” 2419 1. 1º, ii) Modified by Com. “A”
2932.
3. 3.1.18. “A” 2932 unique 3.1.18.
3. 3.1.19. “A” 2932 unique 3.1.19. According to Com. “A” 3141.
3. 3.1.20. “A” 3114 2.
3. 3.1.21. “A” 3259 2.
3. 3.2. “A” 2216 II 5º