Circular LISOL 1-450: Modifications to Rules on 'Guarantees' and 'Minimum Capital of Financial Entities'

"2006 - Year of Tribute to Dr. Ramón CARRILLO" BANCO CENTRAL DE LA REPÚBLICA ARGENTINA COMMUNICATION "A" 4491 03/02/2006 TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 450
Rules on "Guarantees" and "Minimum Capital of Financial Entities". Modifications.

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

"1. Incorporate into the rules on "Guarantees" the following points:

• Section 1.
  "1.2.7. Guarantee trusts constituted in accordance with the provisions of Title I of Law 24.441 with the object of backing the payment of financing granted for the construction of housing, provided that, at a minimum, the following requirements are verified:
  1.2.7.1. The titleholder cedes to the guarantee trust the real estate on which the construction of the development will take place and the rights and other assets resulting from the execution and completion of the works and the commercialization of the housing in fiduciary ownership. The proceeds from such commercialization shall be destined to the partial or total cancellation of the obligations incurred by the borrower in connection with the financing agreed upon in the terms established in the trust contract.
  1.2.7.2. The trustee of the guarantee trust is not the lending financial entity or persons linked to it.
  1.2.7.3. The trustee has broad powers to effectively control the tasks provided for in point 1.2.7.1., as well as to remove from their functions the natural or legal persons who have been designated to carry them out and to designate their replacements, in case of non-compliance or poor performance of their functions.
  1.2.7.4. The ceded assets are free of encumbrances.
  1.2.7.5. In cases where there are other beneficiaries in addition to the lending financial entity, the respective contracts must include a clause establishing that in the event of non-compliance by the borrower, in the payment -partial or total- of the financing granted, the lending financial entity/beneficiary will have priority in collection against the remaining beneficiaries of the proceeds of the trust.
  1.2.7.6. The deed of fiduciary transfer of the trust real estate and the trust contracts must contain a clause by which the settlor grants in advance the required consent in such a way that in the event that the objective conditions of non-compliance contained in the trust contract are verified, the trustee is enabled to dispose of the asset and transfer its full ownership, with the corresponding registry effect.
  1.2.7.7. In the Bill of Sale of the housing, whose model will be included in an annex forming part of the guarantee trust contract, it must be indicated through a specific clause that there is fiduciary ownership over the real estate on which the construction takes place, in which the identification data of the trustee of the guarantee trust will be recorded.
  1.2.7.8. The financing does not exceed 75% of the total investment planned for the construction development, nor at any time can the disbursements exceed 75% of the appraised value of the real estate ceded to the trust (land plus work in progress)."
• Section 3.
  "3.1.21. Guarantee trusts (point 1.2.7.): 75% of the appraised value of the real estate ceded to the trust (land plus work in progress)."

2. Incorporate into Section 4. of the rules on "Minimum Capital of Financial Entities" the following point:
   "3.1.1.13. Guarantee trusts constituted with the object of backing the payment of financing granted for the construction of housing. a) With respect to credit support that does not exceed 75% of the total investment planned for the construction development (land plus work in progress). 50 b) For the amount that exceeds 75% of the value of the total investment planned. 100"

Likewise, the opportunity is taken to update the consolidated text of the rules on "Guarantees" by eliminating points 1.1.17. of Section 1. and 3.1.20. of Section 3. related to reprogrammed deposit certificates "CEDROS". We send you attached the sheets that, in replacement of those previously provided, must replace the consolidated texts of the rules on "Guarantees" and "Minimum Capital of Financial Entities".

-3-
It is recalled that on this Institution's website www.bcra.gov.ar, accessing "regulations" ("consolidated texts"), the modifications made with texts highlighted in special characters (strikethrough and bold) can be found. We greet you very attentively. BANCO CENTRAL DE LA REPUBLICA ARGENTINA Ana M. Lemmi José I. Rutman Submanager of Regulation Issuance General Submanager of Regulations

ANNEX

1.1.16. Export credit insurance -operations without liability for the assignor- that cover commercial risk and, where applicable, extraordinary risks (borne by the National State, Law 20.299), including credit risk insurance "with public buyer scope", regardless of the term of the operation. The policy covering the commercial risk must contemplate the effectiveness of the credits within 90 calendar days of their maturity and be issued by:
a) Local insurance companies that have:

• "AA" or higher rating granted by any of the risk assessment companies registered in the registry of the National Securities Commission and
• reinsurance in insurance companies:
  i) local that have "AA" or higher rating assigned by a national risk assessment company, or ii) from abroad that have international risk rating "A" or higher. The amount of reinsurance must comply with the regulations issued by the Superintendence of Insurance of the Nation. b) Local branches of foreign insurance companies that have international risk rating "A" or higher. c) Local subsidiaries of foreign insurance companies insofar as the following conditions are met regarding the controlling company:
• it has the rating cited in the preceding section b) and
• it has explicitly guaranteed the obligations of the subsidiary.

1.2. Preferred "B".
They are constituted by real rights over assets or third-party commitments that, faithfully instrumented, ensure that the entity can dispose of the funds for the cancellation of the obligation incurred by the client, having previously complied with the procedures established for the execution of guarantees, and by the guarantees defined in point 1.1. with the exception of those included in point 1.1.10., as long as the residual term of the operations exceeds the term of 6 months.

GUARANTEES
B.C.R.A.
Section 1. Types.
Version: 7th COMMUNICATION "A" 4491
Validity:
03/02/2006

The following are included in this category, with an exhaustive enumeration character:
1.2.1. First-degree mortgage on real estate, and regardless of its degree of priority as long as the entity is the creditor in all degrees.
1.2.2. Fixed pledge with first-degree registration or with displacement towards the entity on motor vehicles and agricultural, road, and industrial machinery (insofar as they are registered in the pertinent national registry of motor vehicle ownership and have a market that allows obtaining a reference value).
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 national and provincial funds constituted with the same object as those societies, admitted by this Institution, regardless of the term of the operation, insofar as the requirement mentioned in point 1.1.15. is not met.
1.2.4. Assets in financial leasing that had been agreed upon in accordance with the provisions of Law 25.248 on real estate and on motor vehicles and agricultural, road, and industrial machinery (insofar as they are registered in the pertinent national registry of motor vehicle ownership and have a market that allows obtaining a reference value).
1.2.5. Export credit insurance, insofar as the terms for the effectiveness of claims for commercial risk exceed 90 days without exceeding 180 days counted in a continuous manner from the maturity of the credits, regardless of the term of the operation, and the other safeguards provided for in point 1.1.16. are observed.
1.2.6. Preferred "A", in operations with a residual term greater than 6 months or to the term that is specifically established.
Operations referred to in point 1.1.10. that exceed the term of 6 months are not included.
1.2.7. Guarantee trusts constituted in accordance with the provisions of Title I of Law 24.441 with the object of backing the payment of financing granted for the construction of housing, provided that, at a minimum, the following requirements are verified:
1.2.7.1. The titleholder cedes to the guarantee trust the real estate on which the construction of the development will take place and the rights and other assets resulting from the execution and completion of the works and the commercialization of the housing in fiduciary ownership. The proceeds from such commercialization shall be destined to the partial or total cancellation of the obligations incurred by the borrower in connection with the financing agreed upon in the terms established in the trust contract.

GUARANTEES
B.C.R.A.
Section 1. Types.
Version: 6th COMMUNICATION "A" 4491
Validity:
03/02/2006

1.2.7.2. The trustee of the guarantee trust is not the lending financial entity or persons linked to it.
1.2.7.3. The trustee has broad powers to effectively control the tasks provided for in point 1.2.7.1., as well as to remove from their functions the natural or legal persons who have been designated to carry them out and to designate their replacements, in case of non-compliance or poor performance of their functions.
1.2.7.4. The ceded assets are free of encumbrances.
1.2.7.5. In cases where there are other beneficiaries in addition to the lending financial entity, the respective contracts must include a clause establishing that in the event of non-compliance by the borrower, in the payment -partial or total- of the financing granted, the lending financial entity/beneficiary will have priority in collection against the remaining beneficiaries of the proceeds of the trust.
1.2.7.6. The deed of fiduciary transfer of the trust real estate and the trust contracts must contain a clause by which the settlor grants in advance the required consent in such a way that in the event that the objective conditions of non-compliance contained in the trust contract are verified, the trustee is enabled to dispose of the asset and transfer its full ownership, with the corresponding registry effect.
1.2.7.7. In the Bill of Sale of the housing, whose model will be included in an annex forming part of the guarantee trust contract, it must be indicated through a specific clause that there is fiduciary ownership over the real estate on which the construction takes place, in which the identification data of the trustee of the guarantee trust will be recorded.
1.2.7.8. The financing does not exceed 75% of the total investment planned for the construction development, nor at any time can the disbursements exceed 75% of the appraised value of the real estate ceded to the trust (land plus work in progress).

1.3. Remaining guarantees.
Guarantees not explicitly included in the preceding points, such as mortgages in degrees other than first and pledge or surety of shares or commercial documents and encumbrances constituted abroad subject to legislations other than the local -except for the cases expressly provided for- shall be considered non-preferred.

B.C.R.A. GUARANTEES
Section 1. Types.
Version: 1st COMMUNICATION "A" 4491
Validity:
03/02/2006

3.1.18.4. Road and industrial machinery: 60% of the appraised value of the asset.
3.1.19. Export credit insurance (points 1.1.16. and 1.2.5.): 100% of the nominal value of the documents.
3.1.20. Guarantee trusts (point 1.2.7.): 75% of the appraised value of the real estate ceded to the trust (land plus work in progress).

3.2. Partial coverage with preferred guarantees.
When existing preferred guarantees do not cover the entirety of the client assistance, the part not reached with that coverage shall have the treatment established for debts without preferred guarantees. To this effect, the market value of those assets that have a quotation must be taken into account permanently, as contemplated in points 1.1.1., 1.1.2., 1.1.5. and 1.1.13. of Section 1.

B.C.R.A. GUARANTEES
Section 3. Calculation.
Version: 3rd COMMUNICATION "A" 4491
Validity:
03/02/2006

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE RULES ON "GUARANTEES" CONSOLIDATED TEXT ORIGINATING NORM
Section Point Paragraph Com. Annex Point Paragraph
Observations
1.1. "A" 2932 Unique 1.1. According to Com. "A" 4242
1.1.1. "A" 2216 I 1. 3rd, a) According to Com. "A" 2443, "A"
2932, "A" 3918 and "A" 4242.
1.1.2. "A" 2216 I 1. 3rd, a) According to Com. "A" 2443, "A"
2932 and "A" 3918.
1.1.3. "A" 2216 I 1. 3rd, b) According to Com. "A" 2932,"A"
3918 and "A" 4242 .
1.1.4. "A" 2216 I 1. 3rd, c) According to Com. "A" 2932 and "A"
4242.
1.1.5. "A" 2216 I 1. 3rd, d) According to Com. "A" 2932.
1.1.6. "A" 2216 I 1. 3rd, e) According to Com. "A" 2932,"A"
3918 and "A" 4242.
1.1.7. "A" 2216 I 1. 3rd, g) According to Com. "A" 2932.
1.1.8. "A" 2216 I 1. 3rd, h) According to Com. "A" 2932.
1.1.9. "A" 2216 I 1. 3rd, i) According to Com. "A" 2932.
1.1.10. "A" 2932 unique 1.1.11. According to Com. "A" 3104 and "A"
4242.
1.1.11. "A" 2932 unique 1.1.12. According to Com. "A" 4141.
1.1.12. "A" 2932 unique 1.1.13. According to Com "A" 4242
1.1.13.
1.1.13. 2nd
"A" 2932 unique 1.1.14.
According to Com. "A" 3918.
1.1.14. "A" 3114 1.
1.1.14.1. 1st "A" 3114 According to Com. "A" 3918 and "A"
4055.
1.1.14.2. "A" 3114 1. According to Com. "A" 3918 and "A"
4055.
1.1.15. "A" 3141 According to Com. "A" 3307 and "A"
3918.
1.1.16. "A" 3314
1.2. "A" 2932 unique 1.2. According to Com. "A" 3104.
1.2.1. "A" 2419 1. 1st According to Com. "A" 2563 (points

1. and 2.), "A" 2932 and "A" 3314.
   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.
   1.2.3.
   "A" 2410 7. According to Com. "A" 3141.
   1.2.4. "A" 3259 1. According to Com. "A" 3314.
   1.2.5. "A" 3314
   1.2.6. "A" 2932 unique 1.2.4. According to Com. "A" 4242
   1.2.7. "A" 4491 1.
   1.
   1.3. "A" 7 Specifications of the items of "other guarantees received", modified by Com.
   "A" 2932.

GUARANTEES
CONSOLIDATED TEXT ORIGINATING NORM
Section Point Paragraph
Com. Annex Point Paragraph Observations
2.1. 1st "A" 2448 Statement of debtors (point 6.1.2.2.2.).
2.1. 2nd "A" 2932 unique 2.1. 2nd
2.
2.2. "A" 2216 I 1. 4th
3.1. "A" 2932 unique 3.1.
3.1.1. "A" 2932 unique 3.1.1. According to Com "A" 3918.
3.1.2. "A" 2932 unique 3.1.2.
3.1.3. "A" 2932 unique 3.1.3. According to Com "A" 3918.
3.1.4. "A" 2932 unique 3.1.4.
3.1.5. "A" 2932 unique 3.1.5. According to Com. "A" 3918 and "A"
4242.
3.1.6. "A" 2932 unique 3.1.6. According to Com. "A" 3918.
3.1.7. "A" 2216 I 1. 3rd, g) According to Com. "A" 2932.
3.1.8. "A" 2216 I 1. 3rd, h) According to Com. "A" 2932.
3.1.9. "A" 2216 I 1. 3rd, i) According to Com. "A" 2932.
3.1.10. "A" 2932 unique 3.1.11. According to Com. "A" 3104.
3.1.11. "A" 2932 unique 3.1.12. According to Com "A" 3918.
3.1.12. "A" 2932 unique 3.1.13.
3.1.13. "A" 2932 unique 3.1.14.
3.1.14. "A" 2419 1. 1st, ii) According to Com. "A" 2932, "A"
3314 and "A" 3918.
3.1.15. "A" 2932 unique 3.1.18. According to Com "A" 3918.
3.1.16. "A" 2932 unique 3.1.19. According to Com. "A" 3141,"A"
3918 and "A" 4242.
3.1.17. "A" 3114 2. According to Com. "A" 4242
3.1.18. "A" 3259 2. According to Com. "A" 3314.
3.1.18.1. "A" 3259 2 According to Com. "A" 3314 and "A"
3918.
3.1.18.2. "A" 3259 2 According to Com. "A" 3314 and "A"
3918.
3.1.19. "A" 3314
3.1.20. "A" 4491 1.
3.
3.2. "A" 2216 II 5th According to Com "A" 3918.

3.1.1.13. Guarantee trusts constituted with the
object of backing the payment of financing granted for the construction of housing. a) With respect to credit support that does not exceed 75% of the total investment planned for the construction development (land plus work in progress). 50 b) For the amount that exceeds 75% of the value of the total investment planned. 100
3.1.2. Documentary credits used, except those with deferred payment, 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 and City of Buenos Aires governments and their companies -regardless of the legal nature- that do not have the express guarantee of the National Government or 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 surety of banks from abroad.
3.4.1. Parent company or controlling bank of the local financial entity
or its branches in other countries and their subsidiaries, provided they are subject to a consolidated supervision regime and that the parent or controlling company is located in countries members of the Organization for Economic Cooperation 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 B.C.R.A. agreements on cooperation in banking supervision matters. 0
3.4.2 Other foreign banks with international risk rating
included in the "investment grade" category. 20
3.5. To foreign banks.
3.5.1. Parent company or controlling bank of the local financial entity
or its branches in other countries and to their subsidiaries, provided they are subject to a consolidated supervision regime and that the parent or controlling company is located in countries members of the Organization for Economic Cooperation 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 B.C.R.A. agreements on cooperation in banking supervision matters. 0
3.5.2. Others with 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 tenant housing and motor vehicles. 50
4.3.2. Of other assets. 75
4.4. Forward purchases of national public securities and foreign currency securities, linked or not to reverse 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 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 securities, linked or not to forward repos.
MINIMUM CAPITAL OF FINANCIAL ENTITIES B.C.R.A.
Section 4. Risk weighting table.
Version: 8th COMMUNICATION "A" 4491
Validity:
03/02/2006

4.5.1. With a coverage margin of 20% or more. 0
4.5.2. With counterparties with international risk rating
included in the "investment grade" category. 0
4.5.3. Others. 20
4.6. Cash purchases for settlement of securities and foreign currency,
and their corresponding premiums to accrue. 0
4.7. Debtors from cash sales for settlement of foreign currency and
securities. 0
4.8. Forward purchases of private securities and others, except
national public, linked or not to reverse repos, and their corresponding premiums to accrue.
4.8.1. With counterparties with international risk rating
included in the "investment grade" category. 0
4.8.2. Others. 50
4.9. Debtors from forward sales of private securities and others,
except national public, linked or not to forward repos.
4.9.1. With counterparties with international risk rating
included in the "investment grade" category. 0
4.9.2. Others. 50
4.10. Overdue operations for cash settlement and forward of national public, private and other securities and foreign currency, linked or not to repos, in which the financial entity
has already effectively provided its service and is pending receipt of the agreed counterparty, regardless of the accounting registration modality used.
4.10.1. With counterparties with international risk rating
included in the "investment grade" category. 20
4.10.2. Others. 100
4.11. Other forward purchases, their corresponding premiums to accrue and debtors from other forward sales.
4.11.1. With counterparties with international risk rating
included in the "investment grade" category. 0
4.11.2. Others. 50
MINIMUM CAPITAL OF FINANCIAL ENTITIES B.C.R.A.
Section 4. Risk weighting table.
Version: 7th COMMUNICATION "A" 4491
Validity:
03/02/2006

MINIMUM CAPITAL OF FINANCIAL ENTITIES
CONSOLIDATED TEXT

Section Point Paragraph Com.
Chap./
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).

1º “A” 2136 I According to Com. “A” 2541, annex, criteria, c).

3.5.2.4.
2º 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 Coms. “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

3.1.1.13. “A” 4491 2.

4.

3.1.2. “A” 2136 I According to Com. “A” 2541, annex.