Circular LISOL 1-346 Minimum Liquidity Requirements. Temporary Reduction of the Minimum Daily Requirement

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
COMMUNICATION "A" 3302 I 19/07/01
TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 – 346
Minimum liquidity requirements. Temporary reduction of the minimum daily requirement

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

"- Substitute, with effect from the date of this communication and until 30.9.01, point 2.2. of Section 2. of the rules on "Minimum liquidity requirements", with the following:

"2.2. Calculation.
The compliance with the integration of the minimum liquidity requirements will be measured based on the monthly average of daily balances of the concepts admitted for such effect, registered during the same month to which the requirements correspond, dividing the sum of said balances by the total number of days in the period. On days when no movement is registered, the balance corresponding to the immediately preceding business day must be repeated.

On no day of the month shall the sum of the balances of the admitted concepts, registered at the close of each day, be less than 60% of the total requirement determined for the immediately preceding month, recalculated based on the requirements and concepts in force in the month to which the requirements correspond, without considering the effects of the application of what is provided in point 1.7.1. of Section 1.

This daily requirement shall be 80% when, in the previous calculation period, a deficiency in integration in monthly average higher than the admitted transfer margin has been registered."

We send you attached the grounds for the measure adopted and the sheets that, in replacement of those previously provided, correspond to be incorporated into the ordered text of the rules on "Minimum liquidity requirements".

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Alfredo A. Besio José Rutman
Manager of Standards Issuance Principal Manager of Standards

ANNEX

B.C.R.A.
GROUNDS FOR THE RESOLUTION ON MINIMUM
LIQUIDITY REQUIREMENTS. TEMPORARY REDUCTION OF THE MINIMUM DAILY REQUIREMENT
Annex I
to Com. "A"
3302

1. The minimum liquidity requirements constitute a reserve of financial entities, to meet in a timely manner their commitments, especially in critical situations of systemic liquidity.
   In pursuit of that objective, the rules on "Minimum liquidity requirements" establish that on no day of the month shall the integration of those requirements be less than 75% of the total requirement determined in the immediately preceding month to which it corresponds. This daily requirement is raised to 80% when, in the previous calculation period, a deficiency in integration in monthly average higher than the admitted transfer margin has been registered. The objectives of this requirement are to smooth the effects on the market interest rate linked to the intramonth seasonality of money demand and to guarantee a stable level of systemic liquidity as well as the international reserves of the financial system.

2. In recent days, a drop in the level of deposits of greater relative importance than what could be expected for seasonal reasons has been observed, reaching term operations, which has motivated entities to tend to accumulate higher levels of technical reserve to face withdrawals.
   The aforementioned situation determined that a unified calculation of the July/August 2001 positions was established, a measure that, based on the evolution of deposits, can be complemented with a reduction of the daily requirement in order to facilitate entities' compliance with reserve requirements. Indeed, since that requirement is determined on data from the previous month and considering the aforementioned decrease in deposits and greater cash needs, it is considered convenient to establish at 60% the minimum daily integration of the minimum liquidity requirements until September 30, since by then it is estimated that the temporary liquidity needs will have been overcome. This measure will contribute to strengthening confidence in the liquidity of the financial system by dispensing entities with a greater margin of maneuver in front of the oscillations experienced at the system level and, in parallel, decompressing the interbank interest rate.

MINIMUM LIQUIDITY REQUIREMENTS B.C.R.A. Section 2. Integration.
2.1.12. Guarantees for the operation with canceling checks.
The concepts admitted for the integration of the minimum liquidity requirements may be considered for such purpose, even when they are affected as guarantee for the operation with canceling checks and deposited in special accounts at the Central Bank of the Argentine Republic.
2.2. Calculation.
The compliance with the integration of the minimum liquidity requirements will be measured based on the monthly average of daily balances of the concepts admitted for such effect, registered during the same month to which the requirements correspond, dividing the sum of said balances by the total number of days in the period. On days when no movement is registered, the balance corresponding to the immediately preceding business day must be repeated. On no day of the month shall the sum of the balances of the admitted concepts, registered at the close of each day, be less than 60% of the total requirement determined for the immediately preceding month, recalculated based on the requirements and concepts in force in the month to which the requirements correspond, without considering the effects of the application of what is provided in point 1.7.1. of Section 1. This daily requirement shall be 80% when, in the previous calculation period, a deficiency in integration in monthly average higher than the admitted transfer margin has been registered.
2.3. Maximum calculation limits.
The integration in the admitted concepts will only be computable up to the following maximum limits, measured with respect to the minimum requirement of each period:

Concept Max computable
-in %- i) Points 2.1.1, 2.1.11. and 2.1.12. (together). 100 ii) Point 2.1.2. 20 iii) Point 2.1.3. to 2.1.10. (together). 80 a) Points 2.1.7. and 2.1.8. (within the margin of 80%) 30 b) Point 2.1.9. (within the margin of 80%) 10 c) Point 2.1.10. (within the margin of 80%) 5 Version: 4th Communication “A” 3302 Validity:
19.07.01

ORDERED TEXT ORIGIN NORM
Section Point Paragraph Com. Annex Point Paragraph Observations
2. 2.1.4. “A” 2422 unique 3.1.10. According to Com. “A” 2648, “A”
3231, 3274 and “A” 3290.
2. 2.1.5. “A” 2422 unique 3.1.3. According to Com. “A” 2663, “A”
3274 and “A” 3290.
2. 2.1.6. “A” 2422 unique 3.1.8. According to Com. “A” 2648, “A”
3274 and “A” 3290.
2. 2.1.7. “A” 2422 unique 3.1.11. According to Com. “A” 2648,
2705, “A” 3274 and “A” 3290.
2. 2.1.8. “A” 2422 unique 3.1.9. According to Com. “A” 2648, “A”
3274 and “A” 3290.
2. 2.1.9. “A” 2422 unique 3.1.5. According to Com. “A” 2663,
2648, “A” 3274 and “A” 3290.
2. 2.1.10. “A” 2422 unique 3.1.7. According to Com. “A” 2648 and “A”
3274.
2. 2.1.11 “A” 3274
2. 2.1.12. “A” 3274
2. 2.2. “A” 2422 unique 3. 1st and 2nd According to Com. “A” 2663,
2833, 2915, 3195, 3246,
3274 and 3302.
2. 2.3. “A” 2422 unique 3.2. According to Com. “A” 2705, 2817
and 3274.
3. 3.1.1. “A” 2422 unique 5. According to Com. “A” 2490, modified by the Com. “A”
2833 and 2915.
3. 3.1.2. “A” 2422 unique 5. According to Com. “A” 2490.
3. 3.1.3. “A” 2422 unique 5. According to Com. “A” 2490 and “A”
3100.
3. 3.1.4. “A” 2422 unique 5. According to Com. “A” 2490 and “A”
3274.
“B” 5159
3. 3.2.1. “A”3274
3. 3.2.2. “A” 2895 According to Com. “A” 2991 and “A”
3274.
3. 3.3. “A” 2833 2. According to Com. “A” 2895 and “A”
3274.
3. 3.3.2. “A” 2833 According “A” 3274.
4. 4.1. Explicit criterion.
5. “A” 2422 unique 6. According to Com. “A” 2490, with
interpretative clarification.
6. 6.1. “A” 2422 unique 3.3. According to Com. “A” 2705, 2694
and “A” 3274.
6. 6.2. “A” 2422 unique 8. According to Com. “A” 3274.
6. 6.3. “A” 2422 unique 9. According to Com. “A” 2648 and “A”
3112.
6. 6.4. “A” 3132 unique
6. 6.5. “A” 3290
7. 7.1. “A” 3251 According to Com. “A” 3274.