Circular Monetary Regulations REMON 1 - 4

CENTRAL BANK OF THE ARGENTINE REPUBLIC
COMMUNICATION "A" 26 08/05/81
TO FINANCIAL ENTITIES:
Ref.: Circular MONETARY REGULATIONS REMON - 1 - 4

We address you with reference to the regime of loans intended to enable the extension of credit operation terms for companies in the private sector.

In order to have information regarding the development of this operational activity, it has been decided that financial entities must maintain consolidated in their head offices or parent companies a detailed list of the operations they carry out, ordered chronologically, to which officials and inspectors of the Central Bank will have access.

The aforementioned information will contain the following minimum data:

1. Borrower's activity name.
2. Total debt as of 30.4.81 (includes interest and adjustments accrued up to that date).
3. Amount of interest and adjustments that accrue subsequently until the moment of refinancing.
4. Amount of the new payment agreement formalized:
   4.1. With allocation to the Central Bank loan
   4.2. With other resources
5. Agreed interest rate and adjustment clause.
6. Term of the operation and amortization regime.

In the case of operations between financial entities, the aforementioned detail must be maintained by the entity receiving the funds. The transferring entity will adapt this information as appropriate to register the name of its borrower, amount, and term of the agreed operation.

New credits granted within this regime will also be identified and equally centralized in the entity's head office.

Likewise, in order to ensure the best understanding of the requirements to be observed in the administration of this line of Central Bank loans, we send you attached the main questions received and the interpretative criteria that correspond to apply in each case.

We salute you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC
Néstor j. Taró
Manager of Standards for
Financial Entities
Horacio A. Alonso
Deputy General Manager

ANNEX

B.C.R.A. QUERIES Annex to
Comm. “A” 26

1. Does the non-participation of an entity in a bidding process or the rejection of the submitted offer mean the definitive loss of the funds distributed in the corresponding call?
2. Entities that do not have debtors from the primary sector or manufacturing industry, or whose loan portfolios to those sectors are insufficient to apply no less than 85% of the obtained resources to the refinancings provided for in this regime (point 4.7. of Communication “A” 22), can they direct the excess funds to refinance obligations of the remaining activities?
3. In the same refinancing agreement, can the maximum proportion established on the client's debt status as of 30.4.81 be exceeded, affecting the loan line of Communication “A” 22 with the amount resulting from those limitations and attending to the excess with ordinary lendable resources?
4. Does the approval of a refinancing agreement by the competent decision-making body of the entity and its acceptance by the debtor, even if the effective constitution of the guarantees required in the agreement is pending, satisfy the requirement of point 4.1. of Communication “A” 22 and, consequently, enable the financial entity to request the accreditation of the corresponding funds?
5. Must the documents offered to the Central Bank as collateral for the loans received necessarily be those resulting from the refinancings contracted under this operational activity?

NO. As indicated in point 2.2. of Communication “A” 22 and the operational clarification of point 5.7., the maximum amount of the offer is determined in each bidding process by the proportion established on deposits, reduced by the amount of debts registered within this loan regime. Therefore, the non-existence of debt towards the Central Bank, whether due to non-attendance at previous bidding processes, rejection of offers, or failure to use allocated quotas, leaves open the possibility of accessing this line of resource provision for the full amount resulting from applying the cumulative proportion determined in each new price contest on deposits.

NO. In those cases, it corresponds to choose between providing the surplus resources to another financial entity that, due to the composition of its portfolio, is in a position to use them in the manner established or granting new credits - under the same conditions set by this regulation - to clients from the indicated sectors, to whom priority has been granted for the mobilization of these Central Bank loans, up to 30% of the credit rating assigned to them.

YES. There are no inconveniences in proceeding in the indicated manner. On the contrary, it is a prudent attitude, which aligns with the purpose that entities contribute to expanding the possibilities offered by this operational activity to extend the repayment terms of credit operations.

YES.

NO. Any liquid portfolio document serves for such purposes, taking care to proceed with its replacement when, due to maturity or other circumstances, the established guarantee margin may be reduced.

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6. What will be the interest settlement regime with the Central Bank, when accepted offers are at negative interest rates?
7. According to the modification established by Communication “A” 24 to point 4.3. of this loan regime, in the case where the debt existing as of 30.4.81 has been reduced by the date the refinancing is formalized, on what basis must the established maximum proportions of 30% be applied, depending on whether they are clients dedicated to primary production or manufacturing industry and to the rest of activities, respectively?

The Central Bank will proceed in each annual period, starting from the day of accreditation of the funds, to readjust the debt amount by applying the financial adjustment index of Circular R.F. 1050. On the resulting value, the agreed negative interest rate will be calculated, which will yield a new debt balance that will constitute the basis for future adjustments. Consequently, in such circumstances, there will be no movement of funds in the entities' current accounts at the Central Bank.

It will always be calculated on the debt amount recorded as of 30.4.81, plus interest and adjustments, unless the reduction achieved places the new owed balance below the amount resulting from applying the indicated proportions, in which case it is feasible to refinance the existing debt in full. Example:
Debt as of 30.4.81 $ 100
Interest and adjustments accrued until May 15, 1981 (theoretical date of a refinancing) $ 10 Base Amount: $ 110 Hypothetical Debt on: Refinanciable Amount 15.5.81: $ 120 $ 33 $ 110 idem. $ 33 $ 90 idem. $ 33 $ 20 idem. $ 20