Circular LISOL 1-454: Modifications to Rules on 'Guarantees' and 'Classification of Debtors'

"2006 - Year of Tribute to Dr. Ramón CARRILLO" CENTRAL BANK OF THE ARGENTINE REPUBLIC COMMUNICATION "A" 4529 26/04/2006 TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 454
Rules on "Guarantees" and "Classification of Debtors". Modifications.

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

"1. Replace the first paragraph of point 1.1.16. of Section 1. of the rules on "Guarantees" with the following:
"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 the scope of a public buyer", regardless of the term of the operation. The policy covering commercial risk must contemplate the realization of credits within 180 calendar days of their maturity and be issued by:"

2. Replace point 1.2.5. of Section 1. of the rules on "Guarantees" with the following:
   "1.2.5. Export credit insurance, to the extent that the deadlines for the realization of claims for commercial risk exceed 180 days without exceeding 270 days counted in a continuous manner from the maturity of the credits, regardless of the term of the operation, and the other requirements provided for in point 1.1.16. are observed."

3. Replace the second paragraph of point 4.6. of Section 4. of the rules on "Classification of Debtors" with the following:
   "The insurance company will be classified based on delinquency according to the criteria applicable to the consumer portfolio, taking into account the due date of the first unpaid overdue obligation, from the moment when, having not rejected the claim, the lack of payment of the claim is verified after the deadlines committed in the policy have expired (180 or 270 days, as applicable)."

We send you attached the sheets that, in replacement of those previously provided, correspond to replace in the ordered texts of the rules on "Guarantees" and "Classification of Debtors".

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Likewise, it is recalled that on the website of this Institution www.bcra.gov.ar, accessing "regulations" ("ordered texts"), the modifications made with texts highlighted in special characters (strikethrough and bold) will be found. We salute you very attentively. CENTRAL BANK OF THE ARGENTINE REPUBLIC Darío C. Stefanelli José I. Rutman Manager of Issuance of Regulations a/c Deputy General Manager 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 the scope of a public buyer", regardless of the term of the operation. The policy covering commercial risk must contemplate the realization of credits within 180 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 rating 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 rating company, or ii) from abroad that have international risk rating "A" or higher. The amount of reinsurance must be adjusted to the regulations issued by the Superintendence of Insurance of the Nation. b) Local branches of foreign insurance companies that have an international risk rating of "A" or higher. c) Local subsidiaries of foreign insurance companies to the extent that the following conditions are met with respect to the controlling company:
• have the rating cited in the preceding section b) and
• have explicitly guaranteed the obligations of the subsidiary.

1.2. Preferred "B".
They are constituted by real rights over goods or third-party commitments that, faithfully instrumented, ensure that the entity will be able to dispose of the funds as cancellation of the obligation contracted 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. Classes.
Version: 8 COMMUNICATION "A" 4529
Validity:
26/04/2006

The following are included in this category, with the character of a taxative enumeration:
1.2.1. First-degree mortgage on real estate, and regardless of its degree of precedence 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 (to the extent that 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, to the extent that the requirement mentioned in point 1.1.15. is not met.
1.2.4. Goods 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 (to the extent that 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, to the extent that the deadlines for the realization of claims for commercial risk exceed 180 days without exceeding 270 days counted in a continuous manner from the maturity of the credits, regardless of the term of the operation, and the other requirements 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 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 real estate, provided that, at a minimum, the following requirements are met:
1.2.7.1. The owner cedes to the guarantee trust the real estate on which the construction of the project will be carried out and the rights and other assets resulting from the execution and completion of the works and their commercialization in fiduciary ownership, with the scope agreed upon in the trust contract.
1.2.7.2. The proceeds from such commercialization shall be destined to the partial or total cancellation of the obligations contracted by the borrower for the financing agreed upon in the terms established in the trust contract.

GUARANTEES
B.C.R.A.
Section 1. Classes.
Version: 8 COMMUNICATION "A" 4529
Validity:
26/04/2006

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE RULES ON "GUARANTEES" ORDERED TEXT ORIGIN RULE
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, "A"
4242 and "A" 4522
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 and "A" 4465.
1.1.16. "A" 3314 According to Com. "A" 4529
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 financial position (point 6.1.2.2.2.), Com.
   "A" 2932 and "A" 3918.
   "A" 2448 Statement of financial position (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 According to Com. "A" 4529
   1.2.6. "A" 2932 unique 1.2.4. According to Com. "A" 4242
   1.2.7. "A" 4491 1. According to Com. "A" 4501
   1.
   1.3. "A" 7 Specifications of the items of "other guarantees received", modified by Com.
   "A" 2932.

4.1. Classification levels.
Levels of grouping of clients have been foreseen in decreasing order of quality, directly proportional to the risk of uncollectability that derives from the situations they present.
4.2. Basic classification criterion.
The basic criterion to be used to carry out such classification is the future payment capacity of the debt or of the commitments subject to the guarantee of the financial entity.
4.3. Evaluation of payment capacity.
4.3.1. When evaluating repayment capacity, the emphasis must be placed on the analysis of
the cash flows performed by the entity.
4.3.2. Secondly, the possibility of liquidation of assets not essential for the company's operations must be considered.
4.4. Financing covered with preferred guarantees "A".
The evaluation of repayment capacity will not correspond for financing that is backed by such guarantees.
4.5. Debtors that should not be subject to classification.
Debtors whose financing is fully covered with preferred guarantees "A" will not be subject to classification, without prejudice to their information according to the regulations established in the respective regimes.
4.6. Financing -without liability for the assignor- backed by export credit insurance for
commercial risk and by credit risk insurance "with the scope of a public buyer".
The insurance company will be classified based on delinquency according to the criteria applicable to the consumer portfolio, taking into account the due date of the first unpaid overdue obligation, from the moment when, having not rejected the claim, the lack of payment of the claim is verified after the deadlines committed in the policy have expired (180 or 270 days, as applicable). Those who result as debtors in assignment operations without liability for the assignor to finance exports that have coverage by an insurance company for commercial risk will not be subject to classification. The preceding criteria will only be applied when dealing with insurance companies that, at origin, have met the pertinent requirements established in the rules on "Guarantees".

DEBTOR CLASSIFICATION
B.C.R.A.
Section 4. Classification Criteria.
Version: 4 COMMUNICATION "A" 4529
Validity:
26/04/2006

DEBTOR CLASSIFICATION
ORDERED TEXT ORIGIN RULE Observations
Sec. Point Para. Com. Annex Point Para.
3.3. last "A" 2216 I 2. 2nd
3.4.1. 1st "A" 2216 I 7. 1st
"A" 2287 3. last
3.4.1. 2nd "A" 2216 I 6. 2nd
3.4.1. 3rd "A" 2216 I I.d. 3rd
3.4.2. 1st "A" 2216 I 7. 1st
3.4.2. 2nd "A" 2932 2.
3.4.2. 3rd "B" 5644 2.
3.4.2. 4th "A" 2216 I 7. 3rd
3.4.2. 5th "A" 2216 I 7. 4th Includes interpretative clarification
3.4.2. 6th "A" 2573 1. 7th
3.4.2. 7th "A" 2287 3. last
3.4.2. last "A" 467 3rd
3.4.3. "A" 2563 I II. According to Com. "A" 2677
"A" 2586 unique II. According to Com. "A" 2677. Explicitates criterion.
3.4.4. 1st "A" 2216 I 7. 1st
3.4.4. 2nd "A" 2216 7. last
3rd "A" 2216 I 7. 2nd Modified by Com. "A" 2223 (point 1.)
3.4.4. last "A" 2563 I II. According to Com. "A" 2677
"A" 2586 unique II. According to Com. "A" 2677
3.4.5. Incorporates criterion not previously disclosed in general
3.5. "A" 2216 I 3. 1st
3.5.1. "A" 2216 I 3. 1st
3.5.2. 1st "A" 2216 I 3. 1st
3.5.2. 2nd "A" 2216 I 3. 2nd
3.5.2. 3rd "A" 2216 I 3. 3rd Modified by Com. "A" 2223
(point 1.)
3.5.2. last "A" 2216 I 3. last
3.5.3. Incorporates criterion not previously disclosed in general
3.6. 1st "A" 2373 8. and 3. Includes interpretative clarification
3.6. 2nd "A" 2373 8.
3.
3.6. last "B" 5902 3. Includes interpretative clarification
4.1. "A" 2216 I 1. 1st
4.2. "A" 2216 I 1. 2nd
4.3.1. "A" 2216 I 1. 3rd According to Com. "A" 2932 (point 3.)
4.3.2. "A" 2216 I 1. last
4.4. "A" 2932 4.
4.5. "A" 2932 4.
4.
4.6. "A" 3314 8. According to Com. "A" 4529
5.1. "A" 2216 I 6. 1st
5.
5.1.1. 1st "A" 2216 I I. 1st According to Com. "A" 2410