Circular LISOL 1-75: Credit Risk Fragmentation. Treatment of Provincial and Municipal Public Bonds

BANCO CENTRAL DE LA REPUBLICA ARGENTINA

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COMMUNICATION "A" 2150 15/10/93

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To FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 75.
Credit Risk Fragmentation.
Treatment of Provincial and
Municipal Public Bonds

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

"1. Incorporate into point 1. of Annex II to Communication "A" 2140, the following:
"1... public bonds, except national ones"

2. Add to point 2.1. of Annex II to Communication "A" 2140, the following paragraph:
   "For these purposes, in the case of assistance granted to provincial and municipal governments, financing provided through the holding of public bonds issued by the respective governments must also be calculated, with the scope indicated in point 3.9."

3. Incorporate into Annex II to Communication "A" 2140, the following point:
   "3.9. For the purposes of calculating the relationships established in point 2. and in this point, the National Government and each provincial or municipal government shall be considered as a client, including in the latter two cases the assistance provided by the holding of public bonds issued by the respective jurisdictions. Within the concept of government are included the central administration, ministries, secretariats and their decentralized and autarchic departments and other entities, with the exception of entities and/or companies in the public sector that have independent assets and that, additionally, sell their products or services primarily to the market."

4. Establish that what is established in the preceding points will be effective from 1.11.93, so that holdings as of 31.10.93 of the aforementioned provincial and municipal public bonds will be calculated together with pre-existing operations as of 1.7.93 of the respective governments, for the purposes set forth in point 5. of the resolution disseminated by Communication "A" 2140 (T.O.).
   The new situation must be reported to the Superintendency of Financial and Currency Entities no later than 30.11.93.

5. Clarify that financial entities that acquire debt securities issued by public banks must account for them under the item "Other credits for financial intermediation", considering them for the purposes of the regulations on risk fragmentation within the financings granted to the issuing entity (point 3.5. of Annex II to Communication "A" 2140) and for the purposes of determining the minimum capital requirement within assistance to the financial sector (point 4.5. of Annex I to Communication "A" 2136)."

We salute you very respectfully.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Juan Carlos Isi Alfredo A. Besio
Deputy Manager of Standards Deputy Manager of Standards for Financial Entities for Financial Entities