Circular LISOL 1-422: Minimum Capital of Financial Entities and Guarantees Update

"2004 - Year of the Argentine Antarctic"
BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 4141 18/05/2004
TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 422
"Minimum Capital of Financial Entities" and "Guarantees". Update.

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We address you to communicate the update of points 1.2., 2.3., 3.4.1., 3.5.1., 4.13.1., 4.15.1., 6.2.2.2., and 7.4.1. of Section 4. of the regulations on "Minimum Capital of Financial Entities" and of point 1.1.11. of Section 1. of the regulations on "Guarantees". This is motivated by the adjustment of the international risk rating requirement that a member country of the Organisation for Economic Co-operation and Development (O.E.C.D.) must have - "AA" or higher. Likewise, point 2.1. of Section 4. of the regulations on "Minimum Capital of Financial Entities" is updated to contemplate the different modalities of debt securities issued by the C.B.R.A. and that may be issued in the future, and the omission incurred in the transcription of point 7.5.3. of Section 7. of said consolidated text when Communication "A" 3959 was disseminated is rectified. We send you attached the sheets that, in replacement of those previously provided, correspond to be incorporated into the consolidated texts of the referenced regulations. 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

MINIMUM CAPITAL OF FINANCIAL ENTITIES
C.B.R.A.
Section 4. Risk Weighting Table.
Version: 5th COMMUNICATION "A" 4141
Effective Date:
18/05/2004
Concept Weighting

• in % -

1. Funds.
   1.1. Current and special accounts at the Central Bank of the
   Argentine Republic and payment orders charged to the C.B.R.A. 0
   1.2. Current, correspondent or demand accounts at the
   head office or controlling bank of the local financial entity or in its branches in other countries and in its subsidiaries, provided they are subject to a consolidated supervision regime and that the head office or controlling bank is located in countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher or in other countries whose central banks or equivalent supervisory authority have signed with the C.B.R.A. agreements on cooperation in banking supervision. 0
   1.3. Cash on hand (in pesos, US dollars, euros,
   Swiss francs, British pounds and yen) and in ATMs. 0
   1.4. Gold and other precious metals that meet the following
   conditions: 0
   1.4.1. They must have a market value arising from
   daily quotations of relevant transactions and that cannot be significantly distorted in the event of liquidation of holdings.
   1.4.2. They must be coined or form bars of
   "good delivery", in the latter case with the seal of one of the refining firms, smelters and assay houses and former assay houses and smelters included in the list published by the C.B.R.A.
   1.5. Other current accounts, correspondent accounts and other
   demand accounts in banks in the country and in banks abroad with an international risk rating included in the "investment grade" category. 20

MINIMUM CAPITAL OF FINANCIAL ENTITIES
C.B.R.A.
Section 4. Risk Weighting Table.
Version: 7th COMMUNICATION "A" 4141
Effective Date:
18/05/2004
2. Public Bonds.
2.1. Subject to minimum capital requirement for market risk
and debt instruments of the Central Bank of the Argentine Republic. 0
2.2. Others from the country.
2.2.1. From provincial, municipal governments and the City of Buenos Aires, including their companies - whatever their legal nature - whose issuance does not
have the express guarantee of the National Government or of resources from the federal tax sharing or the Federal Housing System (Law 24.464), through the assignment (direct or indirect) of the corresponding rights, with the pertinent intervention of the Ministry of Economy and Production of the Nation. 100
2.2.2. From National Government companies that do not have their express guarantee. 100
2.3. Bonds of agencies or departments of central governments of countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher. 20
3. Loans.
3.1. To the non-financial private sector.
3.1.1. With preferred guarantees.
3.1.1.1. In cash (in pesos, US dollars, Swiss francs, British pounds,
yen and euros) and gold. 0
3.1.1.2. Certificates of deposit
fixed-term certificates issued by the creditor entity itself. i) In pesos, US dollars, Swiss francs, British pounds, yen and euros. 0 ii) In national public securities for 75% of their market value. 0
3.1.1.3. Automatic reimbursements of export operations corresponding to multilateral and
bilateral foreign trade credit agreements. 0

MINIMUM CAPITAL OF FINANCIAL ENTITIES
C.B.R.A.
Section 4. Risk Weighting Table.
Version: 7th COMMUNICATION "A" 4141
Effective Date:
18/05/2004
3.1.2. Documentary credits used, except deferred payment ones, whose shipping documentation has not yet been
delivered to the client. 50
3.2. To the non-financial public sector.
3.2.1. National Government companies without their express guarantee. 100
3.2.2. Provincial, municipal governments and the City of
Buenos Aires and their companies - whatever their legal nature - that do not have the express guarantee of the National Government or of resources from the federal tax sharing or the Federal Housing System (Law 24.464) through the assignment (direct or indirect) of the corresponding rights and that have the pertinent intervention of the Ministry of Economy and Production of the Nation. 100
3.3. To the financial sector.
Official banks of the Nation - whose operations have the guarantee of the National State -, and banks of provinces, municipalities and the Government of the City of Buenos Aires, regarding financing that has the guarantee of resources from the federal tax sharing or the Federal Housing System (Law 24.464), through the assignment (direct or indirect) of the corresponding rights. 50
3.4. With guarantee of banks abroad.
3.4.1. Head office or controlling bank of the local financial
entity or its branches in other countries and its subsidiaries, provided they are subject to a consolidated supervision regime and that the head office or controlling bank is located in countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher or in other countries whose central banks or equivalent supervisory authority have signed with the C.B.R.A. agreements on cooperation in banking supervision. 0
3.4.2. Other banks abroad with an international risk rating
included in the "investment grade" category. 20

MINIMUM CAPITAL OF FINANCIAL ENTITIES
C.B.R.A.
Section 4. Risk Weighting Table.
Version: 7th COMMUNICATION "A" 4141
Effective Date:
18/05/2004
3.5. To banks abroad.
3.5.1. Head office or controlling bank of the local financial
entity or its branches in other countries and to its subsidiaries, provided they are subject to a consolidated supervision regime and that the head office or controlling bank is located in countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher or in other countries whose central banks or equivalent supervisory authority have signed with the C.B.R.A. agreements on cooperation in banking supervision. 0
3.5.2. Others with an international risk rating included in the "investment grade" category. 20
4. Other credits by financial intermediation.
4.1. For operations with the Central Bank of the Argentine Republic. 0
4.2. Negotiable obligations and other debt securities purchased corresponding to own issuances. 0
4.3. Accrued rents receivable from financial leases.
4.3.1. Of real estate for the tenant's housing and vehicles
automobiles. 50
4.3.2. Of other goods. 75
4.4. Forward purchases of national public securities and of
foreign currency, linked or not to passive repos, and their corresponding premiums to accrue.
4.4.1. With a coverage margin of 20% or more. 0
4.4.2. With counterparties with an international risk rating
included in the "investment grade" category. 0
4.4.3. Others. 20
4.5. Debtors from forward sales of national public securities and foreign currency, linked or not to active repos.
4.5.1. With a coverage margin of 20% or more. 0
4.5.2. With counterparties with an international risk rating
included in the "investment grade" category. 0
4.5.3. Others. 20

MINIMUM CAPITAL OF FINANCIAL ENTITIES
C.B.R.A.
Section 4. Risk Weighting Table.
Version: 6th COMMUNICATION "A" 4141
Effective Date:
18/05/2004
4.12. Pledges and stock market repos.
4.12.1. Of national public securities.
4.12.1.1. With a coverage margin of 20% or more. 0
4.12.1.2. With other coverage margins. 20
4.12.2. With counterparties with an international risk rating included in the "investment grade" category. 0
4.12.3. Others. 50
4.13. With banks abroad.
4.13.1. Head office or controlling bank of the local financial entity or with its branches in other countries and with its
subsidiaries, provided they are subject to a consolidated supervision regime and that the head office or controlling bank is located in countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher or in other countries whose central banks or equivalent supervisory authority have signed with the C.B.R.A. agreements on cooperation in banking supervision. 0
4.13.2. Others with an international risk rating included in the "investment grade" category. 20
4.14. With the financial sector.
Official banks of the Nation - whose operations have the guarantee of the National State -, and banks of provinces, municipalities and the Government of the City of Buenos Aires, regarding financing that has the guarantee of resources from the federal tax sharing or the Federal Housing System (Law 24.464), through the assignment (direct or indirect) of the corresponding rights. 50
4.15. With guarantee of banks abroad.
4.15.1. Head office or controlling bank of the local financial entity or its branches in other countries and its subsidiaries, provided they are subject to a consolidated supervision regime and that the head office or controlling bank
is located in countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher or in other countries whose central banks or equivalent supervisory authority have signed with the C.B.R.A. agreements on cooperation in banking supervision. 0

MINIMUM CAPITAL OF FINANCIAL ENTITIES
C.B.R.A.
Section 4. Risk Weighting Table.
Version: 8th COMMUNICATION "A" 4141
Effective Date:
18/05/2004
6.2.2.2. Bonds of agencies or departments of central governments of countries that are members of the
Organisation for Economic Co-operation and
Development (O.E.C.D.) that have an international risk rating of "AA" or higher. 20
6.2.3. Others. 100
7. Guarantees, sureties and other contingent liabilities.
7.1. Deferred payment documentary credits whose shipping documentation
has not yet been delivered to the client. 50
7.2. For compliance with contractual obligations and/or maintenance of offers. 100
7.3. To the non-financial public sector.
7.3.1. National Government companies without their express guarantee. 100
7.3.2. Provincial, municipal governments and the City of
Buenos Aires and their companies - whatever their legal nature - that do not have the express guarantee of the National Government or of resources from the federal tax sharing or the Federal Housing System (Law 24.464) through the assignment (direct or indirect) of the corresponding rights and that have the pertinent intervention of the Ministry of Economy of the Nation. 100
7.4. Differences between market and exercise prices when
favorable to the entity, arising from rights emerging from purchase and sale option contracts.
7.4.1. Covered with guarantee or replacement margins, in
institutionalized markets in the country or in countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher. 0
7.4.2. With official banks of the Nation, whose operations
have the guarantee of the National State. 50
7.5. Others, except those included in the concept "Fspn". 100
The international risk ratings required above must be granted by any of the rating agencies admitted by the regulations on "Evaluation of Financial Entities".

MINIMUM CAPITAL OF FINANCIAL ENTITIES
C.B.R.A.
Section 7. Minimum Capital for Market Risk.
Version: 5th COMMUNICATION "A" 3959
Effective Date:
01/06/2003
Communication "A" 4141
7.5. Definitions and values.
7.5.1. Usual Quotation.
The assets included must have usual quotation in the markets, which arises daily from relevant transactions in whose amount the eventual liquidation of the assets in question cannot significantly distort their market value.
7.5.2. Excluded Operations.
"Swaps" and other derivatives on assets not covered by this regulation will be excluded from portfolios subject to the calculation of their value at risk, provided that such operations have the object of covering risks of financial intermediation operations, without prejudice to which the contracting of such contracts must be reported to the Superintendence of Financial and Currency Entities in the form and opportunity that are established. Nor will the assets that must be deducted for the purposes of the calculation of the computable net worth be counted.
7.5.3. Position in each asset (Vi).
Opposite positions in the same instrument may be netted.
The resulting net position must show the exposure that the entity has in each considered asset, for which it will be constituted by (the signs are exposed in parentheses):
Spot holding (+)
Spot purchases to settle and forward purchases (+) Spot sales to settle and forward sales (-) Forward purchases linked to passive repos (+) Forward sales linked to active repos (-) Purchase of call options (notional value multiplied by the delta of the option) (+) Sale of call options (notional value multiplied by the absolute value of the delta of the option) (-) Purchase of put options (notional value multiplied by the absolute value of the delta of the option) (-) Sale of put options (notional value multiplied by the delta of the option) (+)

MINIMUM CAPITAL OF FINANCIAL ENTITIES
CONSOLIDATED TEXT ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE REGULATIONS ON "MINIMUM CAPITAL OF FINANCIAL ENTITIES"
Section Point Paragraph Com.
Cap./
Annex Point Paragraph Observations
3.5.2.1. "A" 2136 I According to Com. "A" 2541, annex,
criteria, g).
3.5.2.2. "A" 2136 I According to Com. "A" 2541, annex,
criteria, d), 1st paragraph.
3.5.2.3. "A" 2136 I According to Com. "A" 2541, annex,
criteria, b).
1st "A" 2136 I According to Com. "A" 2541, annex, criteria, c).
3.5.2.4.
2nd Incorporates interpretative clarification.
3.5.2.5. "A" 2136 I According to Com. "A" 2541, annex,
criteria, i).
3.5.2.6. "A" 2249
3.
3.5.2.7. "A" 2136 I According to Com. "A" 2541, annex,
criteria, k).
1.1. "A" 2136 I According to Com. "A" 2541, annex,
"A" 3274 and "A" 3558.
1.2. "A" 2136 I According to Com. "A" 2541, annex and
"A" 4141.
1.3. "A" 2136 I According to Com. "A" 2541, annex.
1.4. "A" 2136 I According to Com. "A" 2541, annex.
1.4.1. "A" 2192 penultimate
1.4.2. "A" 2290 1st and 2nd
1.5. "A" 2136 I According to Com. "A" 2541, annex.
2. "A" 2136 I According to Com. "A" 2541, annex.
Modified by Com. "A"
2793, 2872, 3039, 3274, 3925,
3959 and 4141. Point 2.2.1. includes interpretative clarification.
3.1.1.1. a
3.1.1.5.
"A" 2136 I According to Com. "A" 2541, annex,
"A" 3925 and "A" 3959.
3.1.1.6. i) "A" 2136 I According to Com. "A" 2632, "A" 2939,
"A" 3314 and "A" 3959. ii) "A" 2136 I According to Com. "A" 2541, annex, "A" 3314 and "A" 3959.
3.1.1.7. "A" 2136 I According to Com. "A" 3314 and "A"
3959.
3.1.1.8. a
3.1.1.10.
"A" 2136 I According to Com. "A" 3959.
3.1.1.11. "A" 2136 I According to Com. "A" 2541, annex,
"A" 3141, "A" 3314 and "A" 3959.
3.1.1.12. "A" 3314
3.1.2. "A" 2136 I According to Com. "A" 2541, annex.
4.

MINIMUM CAPITAL OF FINANCIAL ENTITIES
CONSOLIDATED TEXT ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE REGULATIONS ON "MINIMUM CAPITAL OF FINANCIAL ENTITIES" Sec. Point Paragraph Com. Cap./
Annex Point Paragraph Observations
3.2. "A" 2136 I According to Com. "A" 2541, annex, "A"
3133 and "A" 3959.
3.3. "A" 2136 I According to Com. "A" 2541, annex, "A"
3133, "A" 3238 and "A" 3959. Includes interpretative clarification.
3.4. and
3.5.
"A" 2136 I According to Com. "A" 2541, annex and "A" 4141.
4.1. and
4.2.
"A" 2136 I According to Com. "A" 3133.
4.3. to
4.13.
"A" 2136 I According to Com. "A" 2541, annex, "A" 3133, "A" 3274, "A" 3959 and "A" 4141.
4.14. "A" 2136 According to Com. "A" 2541, "A" 3133,
"A" 3238 and "A" 3959. Includes interpretative clarification.
4.15. "A" 2136 According to Com. "A" 2541, "A" 3133 and
"A" 4141.
4.16. "A" 3064 3.
5.1. "A" 2136 I According to Com. "A" 2632, "A" 3314 and
"A" 3959.
5.2. and
5.3.
"A" 2136 I According to Com. "A" 2541, annex and "A" 3314.
6. "A" 2136 I According to Com. "A" 2541, annex, "A"
2793, "A" 2872, "A" 3959 and "A"
4141.
7.1. to
7.3.
"A" 2136 I According to Com. "A" 2541, annex and "A" 3133.
7.4. "A" 2136 According to Com. "A" 2541, annex, "A"
3133, "A" 3238, "A" 3959 and "A"
4141.
7.5. "A" 2136 According to Com. "A" 2541, annex and
"A" 3133.
4. last "A" 2136 I According to Com. "A" 2541, annex and "A" 3307.
5. According to Com. "A" 3959.
6.1. "A" 2922 I According to Com. "A" 3959.
6.2. "A" 2922 I According to Com. "A" 3959 and "A"
4032.
6.3. "A" 2922 I
6.4.1.1. to
6.4.1.8.
"A" 2922 I
Modified by Com. "B" 6523.
Includes interpretative clarifications.
6.4.1.9. "A" 2922 I Modified by Com. "B" 6523
and "A" 3064.
6.4.2. "A" 2922 According to Com. "A" 3959.
6.5. "A" 2922 I Modified by Com. "A" 2948
and "A" 3959 and "B" 6523.
6.
6.6. "A" 2922 I Modified by Com. "B" 6523.
Point 6.6.4.5. mod. by Com.
"A" 3274 and "A" 3959.

GUARANTEES
C.B.R.A
Section 1. Classes.
Version: 6th COMMUNICATION "A" 4141
Effective Date:
18/05/2004
In all cases where "subject/s obligated/s for payment" is mentioned in this point, it refers to any of the signatories of the documents that hold that condition in their capacity as drawer, endorser, acceptor or guarantor.
1.1.11. Direct guarantees issued by central governments, agencies or departments of central governments of countries that are members of the Organisation for Economic Co-operation and Development (O.E.C.D.) that have an international risk rating of "AA" or higher granted by any of the rating agencies admitted by the regulations on "Evaluation of Financial Entities".
1.1.12. Guarantees constituted by the assignment of rights over the collection of
tariffs and taxes in public works concessions, provided they do not exceed 50% of the projected income.
1.1.13. Guarantees or pledges of securities (shares or bonds) private
issued by national or foreign companies, taking into account permanently their market value, which must respond to a normal and usual quotation in the local or international markets, widely disseminated and easily accessible to public knowledge. The local issuing companies must maintain active debt papers that have a local risk rating of "A" or higher, granted by any of the rating agencies admitted by the regulations on "Evaluation of Financial Entities". Foreign securities must correspond to companies whose debt papers have an international risk rating of "A" or higher granted by any of those rating agencies.
1.1.14. Credit instruments (deferred payment checks, promissory notes, bills of exchange and credit invoices), discounted with recourse to the assignor, in which any of the subjects legally obligated for payment, holding that
condition in their capacity as drawer, endorser, acceptor or guarantor, meets at least one of the following conditions:
1.1.14.1. Register a level of indebtedness with the system equal to or greater than $ 2,000,000, according to the latest information available in the
"Central Registry of Debtors of the Financial System" and being informed by at least two financial entities in which the indebtedness - in each of them - is at least $ 1,000,000.

C.B.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE REGULATIONS ON "GUARANTEES" CONSOLIDATED TEXT ORIGIN OF THE PROVISIONS
Section
Point Paragraph Com. Annex Point Paragraph Observations
1. 1.1. "A" 2932 Unique 1.1.
1. 1.1.1. "A" 2216 I 1. 3rd, a) According to Com. "A" 2443, "A" 2932
and "A" 3918.
1. 1.1.2. "A" 2216 I 1. 3rd, a) According to Com. "A" 2443, "A" 2932
and "A" 3918.
1. 1.1.3. "A" 2216 I 1. 3rd, b) According to Com. "A" 2932 and "A"
3918.
1. 1.1.4. "A" 2216 I 1. 3rd, c) According to Com. "A" 2932.
1. 1.1.5. "A" 2216 I 1. 3rd, d) According to Com. "A" 2932.
1. 1.1.6. "A" 2216 I 1. 3rd, e) According to Com. "A" 2932 and "A"
3918.
1. 1.1.7. "A" 2216 I 1. 3rd, g) According to Com. "A" 2932.
1. 1.1.8. "A" 2216 I 1. 3rd, h) According to Com. "A" 2932.
1. 1.1.9. "A" 2216 I 1. 3rd, i) According to Com. "A" 2932.
1. 1.1.10. "A" 2932 unique 1.1.11. According to Com. "A" 3104.
1. 1.1.11. "A" 2932 unique 1.1.12. According to Com. "A" 4141.
1. 1.1.12. "A" 2932 unique 1.1.13.
1. 1.1.13.
1.1.13. 2nd
"A" 2932 unique 1.1.14.
According to Com. "A" 3918.
1. 1.1.14. "A" 3114 1.
1. 1.1.14.1. 1st "A" 3114 According to Com. "A" 3918 and "A"
4055.
1. 1.1.14.2. "A" 3114 1. According to Com. "A" 3918 and "A"
4055.
1. 1.1.15. "A" 3141 According to Com. "A" 3307 and "A"
3918.
1. 1.1.16. "A" 3314
1. 1.1.17. "A" 3918 5.
1. 1.2. "A" 2932 unique 1.2. According to Com. "A" 3104.
1. 1.2.1. "A" 2419 1. 1st According to Com. "A" 2563 (points
1. and 2.), "A" 2932 and "A" 3314.
1. 1.2.2. "A" 2448 Statement of debtors (point 6.1.2.2.2.), Com. "A"
2932 and "A" 3918.
"A" 2448 Statement of debtors (point 6.1.2.2.2.), Com. "A" 2932 and "A" 3918.
1. 1.2.3.
"A" 2410 7. According to Com. "A" 3141.
1. 1.2.4. "A" 3259 1. According to Com. "A" 3314.
1. 1.2.5. "A" 3314
1. 1.2.6. "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. 1st "A" 2448 Statement of debtors (point 6.1.2.2.2.).
2. 2.1. 2nd "A" 2932 unique 2.1. 2nd
2. 2.2. "A" 2216 I 1. 4th