Circular Monetary Regulations - REMON 1 - 22. Allocation of Loans to the Financial System

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 144 05/07/82
TO FINANCIAL ENTITIES:
Ref.: Circular MONETARY REGULATIONS - REMON - 1 - 22. Allocation of loans to the financial system.

We address you to inform you that, in accordance with the objectives recently exposed by the National Government, with a view to achieving a substantial change in the conditions currently facing the development of the country's economic and financial activity, the Central Bank has decided to bring into force the regulation set forth below, to which the entities included in Law 21,526 and its amendments will adhere, within the process of sanitation to be carried out in this matter.

I - REGIME OF THE BASIC LOAN

1. Credit operations and other peso-denominated investments of financial entities, valid as of June 30, 1982, will be assigned to the loan assigned by the Central Bank with value as of July 1, 1982. Recoveries of said portfolio obtained until September 30, 1982, may be invested exclusively in new credits. Amounts not applied by that date will be used to amortize the basic loan.

Within that period, the portfolios will be reconversioned under the conditions indicated in Title III, observing, where appropriate, the provisions of the following points.

2. The amount of said loan will be fixed for each entity based on the balances of deposits and other peso-denominated obligations registered as of June 30, 1982, subject to the single effective minimum rate.

2.1. Such sum will be reduced by the amount of liquidity registered on the indicated date.

2.2. The resulting figure will be increased by the amount of interfinancial loans taken as of June 30, 1982, and reduced by the amount of those granted on that day.

It shall be the obligation of the debtor entities to proceed to the immediate cancellation of said loans, providing the interests for the time elapsed since their granting.

3. Funds corresponding to any cancellation or amortization of loans to the non-financial public sector and of securities of the same origin, will be applied to the reduction of this basic loan.

External Bonds, Adjustable National Securities, and Argentine Mortgage Certificates that financial entities hold may only be maintained funded with own resources, net of immobilizations. Entities will have a period of 15 days to liquidate the excess. The proceeds from that liquidation will be applied to reduce the basic loan.

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4. On October 1, 1982, the basic loan will be reduced by an amount equivalent to the value of investments in assets taken in defense or payment of credits and of loans that are under judicial management or from debtors declared bankrupt or in administrative liquidation, net of their corresponding provisions, registered as of September 30, 1982.

5. Financial entities must send to the Central Bank, before October 1, 1982, a schedule for the cancellation of the total debts attributed to this basic loan, obtained from the sum of the cancellation schedules of each client. According to this schedule, the reduction of the assigned funds will proceed, independently of the compliance of each client. This plan will contemplate a maximum amortization regime of twenty monthly installments of 2.50% each, twenty-nine subsequent monthly installments of 1.66% each, and one final subsequent installment of 1.86%. The first of these installments will be due on November 30, 1982. Exceptions to these maximum deadlines will only be admitted when existing non-refinanced credits originally exceeded these limits. In such case, the admissible flexibility will be the necessary one so that said credits continue to be financed until the expiration of the original deadlines.

6. Cancellations made by clients in advance of the dates contemplated by the entity in its schedule will not modify the amortization regime reported to the Central Bank, except for the situation contemplated in point 2 of Title III, which will advance the entity's schedule.

7. On this basic loan, the Central Bank will apply three different interest rates, which will be fixed monthly, as appropriate for general clientele operations, for those of the users described in the following point, and for mortgage loans that meet the characteristics established in point 3 of Title III.

8. The interest rate that the Central Bank will apply to the basic loan for operations with the clients described below will be fixed monthly at the level of the passive rate in the free market for non-transferable fixed-term deposits of 90 days.

a) Clients who as of June 30, 1980, had financial debts with the exterior for more than 10 million dollars and as of June 30, 1982, have reduced them by more than 30%.

b) To debtors for new operations carried out from July 6, 1982, up to 2% of the basic loan to clients who do not fit into the credit distribution criteria described in point IV.

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B.C.R.A. COMMUNICATION “A” 144 5.7.82

II - REGIME OF THE ADDITIONAL LOAN

Financial entities will have, from July 1, 1982, an additional loan intended to cover the operations referred to in Title IV, whose initial amount will be communicated separately and will be increased with monthly periodicity from October 1.

The monthly increase of this additional loan will never be less than the interest on the basic loan that the entity pays for the previous month. What exceeds globally this amount will be distributed only among the entities for which the deposits captured with the regulated rate exceed the balance of the basic loan plus the balances of the accumulated additional loans. The distribution will be strictly proportional to the difference between these two concepts.

III - RECONVERSION OF THE PORTFOLIOS OF VALID CREDITS

1. The term of valid credits will be re-examined to adapt it to the payment possibilities and perspectives arising from the analysis of the economic-financial situation of each client, ensuring that the individual refinancings agreed upon do not globally exceed the terms provided for the cancellation of this line of loans from the Central Bank.

2. Debtors will commit to cancel in advance the refinanced credit by an amount equivalent to the decrease registered in their level of indebtedness in foreign currency valued at the commercial exchange rate net of the payments that the debtor makes in concept of exchange insurance. These payments will be imputed in reverse order to the maturity of the terms of the agreed refinancing.

3. In the case of mortgage credits for housing, the treatment indicated in point 4 will apply always:

3.1. That these credits are intended to finance the acquisition of the unique home, for own and permanent use. The presentation of the corresponding sworn declaration will be requested.

3.2. That they be operations formalized until June 30, 1981.

3.3. That the debtors of these loans expressly waive continuing with the litigation related to these credits.

4. The difference in interest that entities cease to pay for these operations due to the attenuated interest rate applied to them, compared to that corresponding to general clientele credits, must be destined to reduce the balances of such mortgage loans.

The allocation of these operations to the lower rate fixed can only be carried out until the indicated interest difference reaches 15% of the debts valid as of June 30, 1982.

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5. Within these applications, loans intended for the reacquisition of assets delivered in payment or in defense of credits will be admitted when this is agreed upon with the original debtor.

IV APPLICATION OF RESOURCES FROM PORTFOLIO RECOVERIES DURING THE FIRST NINETY DAYS AND OF THE ADDITIONAL LOAN

1. They will be destined to new credit operations of:

1.1. Companies that employ the largest amount of labor, a requirement that must be accredited with the record of payment of social security contributions during the penultimate month, which will be intervened by the entity.

The amount of facilities to be granted in the set of entities may reach up to the proportion that will be fixed monthly on the amount of said payment.

Initially, it will be two times.

Clients who, even meeting this requirement, had owed, in concept of financial loans, more than 10 million dollars as of June 30, 1980, and had reduced that indebtedness by more than 30% as of June 30, 1982, will not receive this assistance.

This limitation will disappear from the moment their indebtedness in dollars has returned to the level of June 30, 1980.

1.2. From the family sector, intended to cover personal and household needs for users who work as employees and whose income does not exceed $4 million monthly.

1.3. Persons who require mortgage loans for purposes linked to the unique home, for up to an amount of $100 million.

2. Up to 2% of the basic loan and of the additional loans may be destined to any other type of client and need under the cost conditions of the loan described in point I. 8.

3. The income level and the amount of the loan referred to in points 1.2. and 1.3. will be updated monthly according to the variations of the Consumer Price Index.

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B.C.R.A. COMMUNICATION “A” 144 5.7.82

4. The quantitative limit cited in point 1.3. will not apply with respect to individual loans that derive from the subdivision of global credits already assigned to construction companies of buildings for housing.

We salute you very attentively.

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA

Néstor J. Taró
Manager of Standards for
Financial Entities

Daniel E. de Pablo
General Deputy Manager