Circular LISOL 1-474. CONAU 1-820. OPRAC 1-605. Debt Instruments of the Central Bank of the Republic of Argentina. Investment Accounts

"2007 - Year of Road Safety"
CENTRAL BANK OF THE ARGENTINE REPUBLIC
COMMUNICATION "A" 4698 24/08/2007
TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 474
CONAU 1 - 820
OPRAC 1 - 605
Debt Instruments of the Central Bank of the
Republic of Argentina. Investment Accounts
.
____________________________________________________________ We address you to inform you that this Institution has adopted the following resolution:

"1. Establish that holdings of debt instruments issued by the Central Bank of the Republic of Argentina may be classified in the category known as "Investment Accounts". With respect to such holdings, the following provisions shall be observed:

1. Included Securities.
   The debt instruments of the Central Bank expressly contemplated in the volatility list that this Institution publishes monthly for the calculation of the minimum capital requirement for market risk. Securities with respect to which this Institution ceases to report their volatility in the aforementioned lists must remain subject to this regime.

2. Holding Period.
   The entity that decides to compute the securities included in this category must keep them subject to this regime until their maturity.

3. Adoption of the Decision.
   The decision to assign holdings to investment accounts must be adopted, prior to their incorporation, by the Board of Directors or equivalent authority of the entity.

4. Reverse Repo Operations.
   Holdings may be applied to reverse repo operations, provided that the counterparty is:

• another financial entity in the country.
• a foreign bank that has an international rating of "A" or higher granted by one of the international rating agencies admitted according to the "Evaluation of Financial Entities" regulations.
• Central Bank of the Republic of Argentina.

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5. Accounting Valuation Criteria.
   Holdings incorporated into investment accounts shall be recorded accounting-wise at their cost value -taking into account what is provided in the following paragraphs-, which shall be increased monthly based on the internal rate of return arising from the discount rate that equates the present value of the cash flows of the respective instrument with its cost value at the date of incorporation (including, if applicable, capital adjustments or quotation differences). When dealing with pre-existing holdings registered in intermediation accounts, the market quotation of the instruments included at the close of operations on the day prior to the date of their incorporation into investment accounts shall be considered as the cost value. If they are holdings without quotation that come to have volatility published by this Institution, for their incorporation into this regime, the last unquoted value shall be considered, provided that the decision is taken on the first business day of the month in which the security begins to register volatility; otherwise, the market value shall be considered. To this end, for the same security, as many internal rates of return as incorporation dates exist must be used. Furthermore, in the case of securities with variable rate yields, the "IRR" must be recalculated when modifications occur in the variable component of said rate. The valuation criterion employed with respect to holdings in investment accounts and the quantification of the difference in relation to their valuation at market prices shall be disclosed in the notes to the quarterly and annual financial statements.

6. Accounting Exposure.
   6.1. Holdings.
   Holdings in investment accounts shall be disclosed separately, according to the currency of issuance of the instruments, in the accounts enabled for that purpose.

6.2. Forward Purchases Linked to Reverse Repo Operations.
They shall be accounted for separately, maintaining the valuation criterion established according to points 5. and 6.1. of these provisions, in the accounts that will be specifically enabled for that purpose.

7. Derecognition of Holdings.
   The derecognition of the holdings of the present methodology is only admitted for the collection of the corresponding capital amortization services.

8. Non-Compliance.

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The non-observance of the holding period will determine that the entity must cease to use, definitively, the present methodology, proceeding to register the securities included in this category at their market value or accounting value at that moment, depending on whether they are or are not contemplated in the volatility list that this Institution publishes monthly, respectively.

2. Admit that, until 8/31/07, financial entities may impute to the "Investment Accounts" category, all holdings of debt instruments of the Central Bank of the Republic of Argentina registered at the date of issuance of this communication, which for August 2007, have volatility published by this Institution (Communication "B" 9046), considering as their incorporation value their accounting valuation on 7/31/07 (market or cost increased by the internal rate of return, as applicable), or their acquisition cost, if purchased subsequently.

3. Substitute the first paragraph of point 2.1.2. of Section 2. of the regulations on "Distribution of Results" with the following:
   "2.1.2. the positive difference resulting between the accounting value and the market quotation value, in the case that the financial entity registers public bonds and/or debt instruments of the Central Bank not valued at market prices."

Finally, we send you attached the sheets that, in replacement of those previously provided, must replace the ordered texts of the regulations on "Distribution of Results", "Consolidated Supervision" and "Investment Accounts", which replaces the regulations on "Holdings of Securities in Investment Accounts". Likewise, it is recalled that on this Institution's website 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
General Manager of Regulations

ANNEX

2.1. Determination of Distributable Result.
Entities not included in any of the situations foreseen in point 1.1. may distribute results up to the positive amount resulting from deducting, off-balance sheet, from the balances at the close of the annual fiscal year to which they correspond, registered in the account "Undistributed Results" (code 450000), the amounts of the legal and statutory reserves -whose constitution is mandatory- and then those corresponding to the concepts -registered on the same date- detailed below:

2.1.1. the balances for the activation of differences resulting from payments made in compliance with judicial measures originating from cases in which the current regulations applicable to "pesified" deposits are challenged, regardless of whether or not new long-term loans are granted, as referred to in the resolution disseminated by Communication "A" 4439.

2.1.2. the positive difference resulting between the accounting value and the market quotation value, in the case that the financial entity registers public bonds and/or debt instruments of the Central Bank not valued at market prices.
For public debt instruments that do not have a quotation value, the lesser amount resulting from comparing the technical value and the present value discounting the cash flows of the mentioned instruments at the interest rates of the month of close of the annual fiscal year to which the holdings correspond, and taking into account the "TM" rate, which this Institution will publish monthly for these purposes, shall be used in their place. Likewise, the criteria indicated above shall apply for the determination of valuation differences in participation certificates (or debt titles) of financial trusts, in the proportion that corresponds, when their underlying consists of the aforementioned instruments not valued at market price.

2.1.3. the asset valuation adjustments notified by the Superintendence of Financial and Exchange Entities -accepted or not by the entity- that are pending registration and/or those indicated by the external audit that have not been registered accounting-wise.

2.1.4. the individual franchises -for asset valuation- granted by the Superintendence of Financial and Exchange Entities, including adjustments derived from not considering the agreed adaptation plans.

2.1.5. the balances for the activation of the difference existing between the equivalent value in pesos of considering judicial deposits in the original currency of the deposit, and the accounting value of those deposits constituted in foreign currency that, on 1/5/02, were reached by what was established in Law 25.561 and Decree 214/02.

DISTRIBUTION OF RESULTS B.C.R.A.
Section 2. General Procedure.
Version: 3rd COMMUNICATION "A" 4698
Validity:
24/08/2007

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE REGULATIONS ON "DISTRIBUTION OF RESULTS" ORDERED TEXT ORIGINATING REGULATION OBSERVATIONS
Section Point Para. Com. Annex Cap. Section Point Para.
1.1. "A" 4589 1.
1.1.1. "A" 4589 1.1.
1.1.2. "A" 4589 1.2. According to Com. "A" 4591
(point 6.).
1.1.3. "A" 4589 1.3.
1.
1.1.4. "A" 4589 1.4.
2.1. "A" 4589 2. According to Com. "A" 4591
(point 6.).
2.1.1. "A" 4589 2.1.
2.1.2. 1st "A" 4589 2.2. 1st According to Com. "A" 4698.
2nd "A" 4589 2.2. 2nd According to Com. "A" 4591 (point 7.) and 4664.
3rd "A" 4589 2.2. 3rd
2.1.3. "A" 4589 2.3.
2.1.4. "A" 4589 2.4.
2.1.5. "A" 4686 3.
2.2. "A" 4589 3. According to Com. "A" 4591
(point 8.).
2.2.1. "A" 4589 3.1. According to Com. "A" 4591
(point 8.).
2.2.2. "A" 4589 3.2. According to Com. "A" 4591
(point 8.).
2.2.3. "A" 4589 3.3. iv) According to Com. "A" 4591
(point 8.).
2.2.4. "A" 4589 3.3. According to Com. "A" 4591
(point 8.).
2.
2.3. "A" 4589 4.
3.1. "A" 4591 1.
3.1.1. "A" 4591 1. Incorporates the interpretative criterion of Com.
"C" 46841.
3.
3.1.2. "A" 4591 1. According to Com. "A" 4686.

CONSOLIDATED SUPERVISION
B.C.R.A.
Section 5. Compliance with regulations.
5.4. Other aspects.
5.4.1. Fund collection for terms less than 30 days.
Stock exchange companies subject to consolidated supervision may not conduct stock exchange operations for terms less than 30 days, or cancel them prematurely before 30 days have elapsed, that directly or indirectly imply a fund collection.

5.4.2. Holdings in investment accounts.
Controlling financial entities subject to consolidated supervision shall observe the investment accounts regime on individual and consolidated bases.

5.4.3. Restrictions regarding common investment funds.
The limitations on the holding of shares in common investment funds and on the transactions that grant liquidity to said funds shall be observed on individual and consolidated bases.

5.5. Responsibilities.
It shall be the obligation of the local financial entity to ensure full compliance on a consolidated basis of the regulations subject to that observation. When this requirement is not observed, the entity shall be subject to the charges and other provisions that, for cases of non-compliance, each of the regulations provide.

Version: 3rd COMMUNICATION "A" 4698
Validity:
24/08/2007

CONSOLIDATED SUPERVISION
ORDERED TEXT ORIGINATING REGULATION
Section Point Paragraph Com. Annex Point Paragraph Observations
5.2.1.6. "A" 2690 unique 6.
5.2.1.7. "A" 2227 unique 5.1.8. According to Com. "A"
2736.
5.2.2. "A" 2227 unique 5.1. According to Com. "A"
2649. Complemented by Com. "A"
2461, 2736 and 2839 and
"B" 5902.
5.3.1. "A" 2227 unique 5.2.1. According to Com. "A"
2649.
5.3.2. "A" 2227 unique 5.2.2.
5.4.1. "B" 6115 3rd
5.4.2. "A" 2793 unique 3. According to Com. "A"
4698.
5.4.3. "B" 6566 1.
5.
5.5. "A" 2227 unique 5.3. Modified by Com.
"A" 2649.

-Index
Section 1. Debt Instruments Subject to Allocation.
1.1. Included Securities.
1.2. Holding Period of Holdings.
1.3. Reverse Repo Operations.
Section 2. Procedure for the Allocation of Debt Instruments.
Section 3. Valuation.
3.1. Accounting Registration.
3.2. Accounting Exposure.
3.3. Exposure in Financial Statements.
Section 4. Derecognition of Holdings.
Section 5. Non-Compliance.
Section 6. Bases of Compliance with Regulations.
6.1. Individual Basis.
6.2. Consolidated Basis.
Section 7. Transitional Provisions.
B.C.R.A.
ORDERED TEXT OF THE REGULATIONS ON
"INVESTMENT ACCOUNTS"
Version: 5th COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 1. Debt Instruments Subject to Allocation.
1.1. Included Securities.
1.1.1. Securities representing debt of the country received by financial entities
as a result of the compensation established in articles 28 and 29 of Decree 905/02.
1.1.2. The debt instruments issued by the Central Bank expressly contemplated
in the volatility list that this Institution publishes monthly for the purposes of calculating the minimum capital requirement for market risk. Securities with respect to which this Institution ceases to report their volatility in the aforementioned lists must remain subject to this regime.
1.2. Holding Period of Holdings.
The entity that decides to compute the securities included in point 1.1.2. must keep them subject to this regime until their maturity.
1.3. Reverse Repo Operations.
Holdings may be applied to reverse repo operations, provided that the counterparty is:

• another financial entity in the country.
• a foreign bank that has an international rating of "A" or higher granted by one of the international rating agencies admitted according to the "Evaluation of Financial Entities" regulations.
• Central Bank of the Republic of Argentina.

Version: 5th COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 2. Procedure for the Allocation of Debt Instruments.
The decision to allocate holdings to investment accounts must be adopted:

• with the intervention of the highest responsible person designated by the entity regarding compliance with the regulations on minimum capital requirement for market risk, for the securities provided for in point 1.1.1.
• by the Board of Directors or equivalent authority of the entity, prior to their incorporation, for the debt instruments contemplated in point 1.1.2.

Version: 3rd COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 3. Valuation.
3.1. Accounting Registration.
3.1.1. Treatment of National Government bonds received by financial entities
-articles 28 and 29 of Decree 905/02 and Chapter II of Law 25.796 (Annex II to Decree 117/04)-.
The National Government bonds that financial entities receive, within the framework of what is established in Chapter VI, articles 28 and 29 of Decree 905/02 -"National Government Bonds in pesos 2% 2007" and/or "National Government Bonds in US dollars Libor 2012"- and in Chapter II of Law 25.796 (Annex II to Decree 117/04) -"National Government Bonds in pesos at variable rate 2013"-, may be recorded at their technical value.
3.1.2. Treatment of Debt Instruments of the Central Bank.
Holdings incorporated into investment accounts shall be recorded accounting-wise at their cost value -taking into account what is provided in the following paragraphs-, which shall be increased monthly based on the internal rate of return arising from the discount rate that equates the present value of the cash flows of the respective instrument with its cost value at the date of incorporation (including, if applicable, capital adjustments or quotation differences). When dealing with pre-existing holdings registered in intermediation accounts, the market quotation of the instruments included at the close of operations on the day prior to the date of their incorporation into investment accounts shall be considered as the cost value. If they are holdings without quotation that come to have volatility published by this Institution, for their incorporation into this regime, the last accounting value shall be considered, provided that the decision is taken on the first business day of the month in which the security begins to register volatility; otherwise, the market value shall be considered. To this end, for the same security, as many internal rates of return as incorporation dates exist must be used. Furthermore, in the case of securities with variable rate yields, the "IRR" must be recalculated when modifications occur in the variable component of said rate.
3.2. Accounting Exposure.
3.2.1. Holdings.
Holdings in investment accounts shall be disclosed separately, according to the currency of issuance of the instruments, in the accounts enabled for that purpose.

Version: 4th COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 3. Valuation.
3.2.2. Forward Purchases Linked to Reverse Repo Operations.
3.2.2.1. Treatment of National Government bonds received by financial entities
-articles 28 and 29 of Decree 905/02 and Chapter II of Law 25.796 (Annex II to Decree 117/04)-:
Holdings that are allocated to the execution of admitted repo operations shall be recorded at their accounting value.
Forward purchases of public securities shall be accounted for in "Other Credits for Financial Intermediation - Forward Purchases of Public Securities for Repo Operations with Holdings in Investment Accounts". The difference between the cost value of the securities allocated to the execution of those repo operations and their quotation value or the purchase value of the Central Bank, shall be reflected until the settlement of the forward purchase in "Other Credits for Financial Intermediation - Forward Purchases of Public Securities for Repo Operations with Holdings in Investment Accounts - Valuation Difference".
3.2.2.2. Treatment of Debt Instruments of the Central Bank.
They shall be accounted for separately, maintaining the valuation criterion established according to points 3.1.2. and 3.2.1., in the accounts that will be specifically enabled for that purpose.
3.3. Exposure in Financial Statements.
The valuation criterion employed with respect to holdings in investment accounts and the quantification of the difference in relation to their valuation at market prices shall be disclosed in the notes to the quarterly and annual financial statements.

Version: 4th COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 4. Derecognition of Holdings.
The derecognition of the holdings of the securities included in point 1.1.2. of the present methodology is only admitted for the collection of the corresponding capital amortization services.

Version: 3rd COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 5. Non-Compliance.
The non-observance of the holding period, for debt instruments of the Central Bank, will determine that the entity must cease to use, definitively, with respect to the securities included in point 1.1.2., the present methodology, proceeding to register the securities included in this category at their market value or accounting value at that moment, depending on whether they are or are not contemplated in the volatility list that this Institution publishes monthly, respectively.

Version: 3rd COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 6. Bases of Compliance with Regulations.
6.1. Individual Basis.
Financial entities shall observe the regulations on investment matters on an individual basis.
6.2. Consolidated Basis.
Without prejudice to compliance on an individual basis, controlling financial entities subject to consolidated supervision shall observe the regulations on investment matters on a monthly consolidated basis and, additionally and independently, on a quarterly basis.

Version: 1st COMMUNICATION "A" 4698
Validity:
24/08/2007

INVESTMENT ACCOUNTS
B.C.R.A.
Section 7. Transitional Provisions.
Until 8/31/07, financial entities may impute to this category, all holdings of debt instruments of the Central Bank of the Republic of Argentina registered on 8/24/07, which for August 2007, have volatility published by this Institution (Communication "B" 9046), considering as their incorporation value their accounting valuation on 7/31/07 (market or cost increased by the internal rate of return, as applicable), or their acquisition cost, if purchased subsequently.

Version: 1st COMMUNICATION "A" 4698
Validity:
24/08/2007

ORDERED TEXT ORIGINATING REGULATION
Section Point Paragraph Com. Annex Point Paragraph Observations
1.1.1. "A" 2793 unique 1. According to Com. "A" 3039,
3857, 4084 and 4698.
1.1.2. "A" 4698 1.
1.2. "A" 4698 1.
1.
1.3. "A" 2793 unique 1. According to Com. "A" 3039,
3857, 4084 and 4698.
2. "A" 2793 unique 2. According to Com. "A" 3039 and
4698.
3.1.1. "A" 3785 According to Com. "A" 4114 and
4698.
1st "A" 3039 According to Com. "A" 3278 and
4698.
2nd "A" 2793 unique 4. 2nd According to Com. "A" 4698.
3.1.2.
3rd to 5th "A" 4698 1.
3.2. "A" 3039 According to Com. "A" 3083.
3.
3.3. "A" 2793 unique 4. 3rd According to Com. "A" 4698.
4. "A" 4698 1.
5. "A" 4698 1.
6. 6.1. and 6.2. "A" 2793 unique 3. According to Com. "A" 4698.
7. "A" 4698 2.
B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE ORDERED TEXT OF THE REGULATIONS ON "INVESTMENT ACCOUNTS"