Circular Monetary Regulations - REMON 1 - 198 and Active Operations - OPRAC 1 - 56. New provisions applicable to active and passive operations adjustable by price index

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
COMMUNICATION "A" 611 29/03/85
TO FINANCIAL ENTITIES:
Ref.: Circular MONETARY REGULATIONS - REMON - 1 - 198. ACTIVE OPERATIONS - OPRAC - 1 - 56. New provisions applicable to active and passive operations adjustable by price index

We address you to inform you that this Institution has resolved to replace the provisions contained in Annexes III and IV of Communication "A" 566 and complementary ones with those added in the annex.
This measure will be applicable from 1.4.85

We greet you very respectfully.

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
Liliana M. Conti
Department Head
Deputy Manager for Standards for
Financial Entities to/c
Néstor J. Taró
Departmental Manager c/f General Deputy Manager

ANNEXES

B.C.R.A. RULES ON LENDING CAPACITY OF THE SYSTEM ADJUSTABLE BY COMBINED PRICE INDEX
Annex III to
Com. “A” 566
(Com. “A” 611)

1 - Medium-term non-transferable fixed-term deposits adjustable to price index will not observe a minimum cash requirement and will be subject to the norms mentioned in Annex I.

2 - For the attention of the financing operations provided for in Annex II, the entities will have the following resources:
2.1. The lending capacity of the deposits mentioned in the preceding point.
2.2. Inter-financial obligations adjustable by combined price index.
2.3. Net own resources of immobilized assets.
2.4. Additional support from the Central Bank, under the conditions established in point 5 of Annex IV.

3 - When combined price-index-adjustable financing operations exceed lending capacity, investment excesses will be subject to a charge equivalent to 0.55 times the maximum rediscount rate in effect for the month in question. The determination of such differences will be verified based on the monthly average of daily balances of capitals and accrued adjustments pending settlement of the following items adjustable by price indices:

• Assets: Credits - except those attended with own resources -, Central Bank certificates and indispensable deposit.
• Liabilities: Deposits, inter-financial obligations and Central Bank resources.

4 - The adjustments of unused deposits and inter-financial obligations will be at the expense of the entity.

B.C.R.A. TRANSITIONAL REGIME APPLICABLE TO OPERATIONS VALID AS OF 31.3.85 ADJUSTABLE BY PRICE INDICES
Annex IV to
Com. “A” 566
(Com. “A” 611)

1 - The differences between the balances (capitals and adjustments) as of 31.3.85 of: a) loans - net of investment excesses not admitted for the month of March 1985 and excluding inter-entity ones - and b) deposits, will determine situations of over- or under-expansion on that date, which will be governed by the following norms:
1.1. Under-expanded entities (deposits higher than loans):
They must constitute an unavailable deposit, not countable for the integration of the minimum cash, which will be released at the time and services determined by the Central Bank.
This imposition will be adjusted by the variation experienced by the combined price index (base 15.10.84 = 100) and will accrue interest at the rate that the Central Bank will periodically establish, which will be paid on the first day of the month following the corresponding one.

1.2. Over-expanded entities (loans higher than deposits):
The Central Bank will enable a complementary loan line that must be reimbursed monthly according to the payment schedule arising from affecting to it the credit operations valid as of 31.3.85. Such imputation must be made taking into account the chronological order of loan maturities, starting with the nearest ones. The cost of this line will be determined by the variation of the indices agreed with clients for the updating of the loans affected to them. The increase in lending capacity due to the formation of new deposits must be destined, in the proportion that the Central Bank periodically establishes, to cancel in advance the last installments of the payment schedule of the line, except for what is provided in point 5.2.

2 - With effect from the 1st of each month and from 1.5.85, the Central Bank will collect or pay, as appropriate, the differences resulting from the adjustments accrued monthly by the credits not imputed to the complementary loan line and the updates that would derive from using for these purposes the combined price index. When it concerns credits to small and medium-sized enterprises, granted in accordance with the provisions disseminated by Communications “A” 246, 261 and 386, it will also compensate the effect of the application of the attenuated interest rate established for such operations.

3 - Financial entities must cancel with value as of 1.4.85 the inter-financial loans adjustable by the combined price index valid as of 31.3.85, providing the interests for the time elapsed since their granting.

4 - At the request of the entities, the Central Bank will cancel in advance the holdings of certificates adjustable by combined price index as of 31.3.85, at the values updated to the date of the required return.

5 - To facilitate the development of entities that experience insufficient evolution of their deposits adjustable by combined price index with respect to the loans granted as of 31.3.85, the Central Bank has provided a financing regime that will adjust to the conditions detailed below:

• 2 -
  5.1. Fund Request: When entities observe insufficient growth of deposits, they may submit a request for funds to the Rediscount Department of this Institution for the amount they estimate is strictly necessary to cover this financial insufficiency.
  The Central Bank may limit the access of entities to this advance regime.

5.2. Maximum Amount: It will be given by the positive difference between the monthly average of daily balances (capitals and adjustments) of the following concepts adjustable by price index valid in each month: a) loans existing as of 31.3.85 and unavailable deposit; b) deposits and net inter-financial obligations.
In cases where excesses are verified, entities must dedicate to canceling such excesses first, the recoveries of credits, without prejudice to being able to also apply the increase in lending capacity.

5.3. Interest Rate: It will be that resulting from the following expression:

i = [(1 + Ic(t-1)) / (1 + Ic(t))] * (1 + f) - 1

Where:
i = Monthly interest rate expressed as a fraction.
Ic(t) = Combined price index of the last day of the month to which the settlement corresponds Ic(t-1) = Idem previous. f = Real interest rate that will be periodically established by the Central Bank, which will be increasing taking into account the volume of assistance granted with respect to loans adjustable by price indices. Initially these rates will be:

• up to 50%, 1% monthly
• more than 50%, 1.25% monthly
  The settlement of interests will be carried out by this Institution on the 1st business day of the following month, based on the simple average of the daily balances of utilization of this line.

5.4. Guarantees: Financial entities must constitute a pledge in favor of the Central Bank over the documents of their liquid portfolio for a value not lower at all times than 100% of the sum owed by capital and adjustment.
The Central Bank may demand additional guarantees that it considers necessary.

5.5. Resolution of Requests: Financing requests will be resolved on the same day of their presentation, provided they enter the Rediscount Department until 12 hours of the day for which the disposition of funds is requested.

5.6. Defaults: For the amounts used in excess of the limits established in point 5.2, entities will pay with effect on the first day of the month following that in which the excess utilization is registered, a charge equivalent to 0.55 times the maximum rediscount rate in effect for the respective month.

-3-
B.C.R.A.
TRANSITIONAL REGIME APPLICABLE TO THE
OPERATIONS VALID AS OF 31.3.85
ADJUSTABLE BY PRICE INDEX
Annex IV to
Com. “A” 566
(Com. “A” 611)

6 - The balance of the unavailable deposit constituted on 1.1.85 as established by Communication “A” 566 will be released with value 1.4.85.

7 - From 1.4.85, investment excesses admitted for March of the current year will cease to be counted in the integration of the minimum cash.