Circular OPRAC 1 - 358. LISOL 1 - 71. Operations with clients linked to financial entities and credit assistance limits. Complementary rules

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
__________________________________________________________________ COMUNICACION " A " 2126 03/08/93 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
OPRAC 1 - 358.
LISOL 1 - 71.
Operations with clients linked to financial entities and li- mits on credit assistance. Complementary rules

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

"1. Replace point 3 of the Resolution disseminated by Communication "A" 2109, with the following:

"3. Establish that, until 7/31/94, excesses to the relationships referred to in the preceding point 2 and points 2.1., 2.2., 2.4. and the last paragraph of point 3 of Annex I, originating exclusively from the application of the new limits, will not constitute defaults to the extent that these excesses arise from operations preexisting to 7/1/93.

If such operations fall within the limits previously established, until 7/31/94 these excesses will not be subject to any charges, while defaults to those previously in force limits will be subject to the charges and other provisions duly established.

Entities that register excesses to the new limits, originating from preexisting operations, must report such excesses and the conditions agreed upon for said operations to the Superintendency of Financial and Exchange Entities before 9/1/93.

Until 10/31/93, extensions, prorogations, renewals or other express or tacit facilities agreed upon on operations preexisting to 7/1/93, will not be considered as new operations and, therefore, from 11/1/93, these extensions, prorogations, renewals or other facilities must be computed for the purposes of the limits established in Annex I."

2. Replace point 5 of the aforementioned Resolution, with the following:

"5. Establish that, until 7/31/94, excesses to the relationships referred to in points 2 and 3 of Annex II, originating exclusively from the application of the new

limits, will not constitute defaults to the extent that these excesses arise from operations preexisting to 7/1/93.

If such operations fall within the limits previously established, until 7/31/94 these excesses will not be subject to any charges, while defaults to those previously in force limits will be subject to the charges and other provisions duly established.

Entities that register excesses to the new limits, originating from preexisting operations, must report such excesses and the conditions agreed upon for said operations to the Superintendency of Financial and Exchange Entities before 9/1/93.

Until 10/31/93, extensions, prorogations, renewals or other express or tacit facilities agreed upon on operations preexisting to 7/1/93, will not be considered as new operations and, therefore, from 11/1/93, these extensions, prorogations, renewals or other facilities must be computed for the purposes of the limits established in Annex II."

3. Add as point 3.4. of Annex I to the aforementioned Resolution:

"3.4. Exceptionally, the Superintendent of Financial and Exchange Entities will determine additional and/or special exclusions -for persons or operations- in those particular cases where such exceptions are consistent with the spirit and objectives of this norm."

4. Replace point 6 of the aforementioned Resolution, with the following:

"6. Provide that financings and participations in the share capital of companies that provide services complementary to the activity developed by the financial entity, without prejudice to the application of the provisions contained in Annexes I and II, will be considered as immobilized assets, from July 1993, for the purposes of determining the minimum capital required from August, in those cases where there is participation in the share capital of said companies."

5. Add as point 10 of the aforementioned Resolution:

"10. Establish that until 12/31/95, participations in companies whose corporate object is not the provision of services complementary to the activity developed by the financial entity, exceeding 12.5% of its computable equity, will not constitute defaults to these norms, provided that such participations are preexisting to 7/1/93 and were included in the previously in force norms. Entities must provide the Superintendency of Financial and Exchange Entities with a detail of such participations, before 9/1/93."

6. Replace point 3.3. of Annex II to the aforementioned Resolution, with the following:

"3.3. Total holding of non-marketable shares, excluding participations in companies that provide services complementary to the financial entity's activity and participations necessary to obtain the provision of public services: 15% of RPC."

7. Eliminate the second paragraph of point 4.3. and replace point 3.6. of Annex II to the aforementioned Resolution, without prejudice to the validity of the Resolution disseminated through Communication "A" 2120, with the following:

"3.6. Balances in demand accounts and placements or financings in each correspondent bank abroad, except those made in accounts computable for the integration of the minimum cash referred to in Annex I to Communication "A" 1820:
3.6.1. in banks included in the highest quality categories for investment ("investment grade"), according to rating granted by an international risk rating agency (Moody's, Standard and Poors or equivalents): 25% of RPC.
3.6.2. in other banks: 5% of RPC.
Defaults to these limits will not be considered for excesses in correspondent demand account balances that, on a temporary and circumstantial basis, originate from client operations (for example: those related to the settlement of foreign trade operations or other types of credits ordered by third parties, without financial liability for the entity)."

8. Replace point 3.5. of Annex II to the aforementioned resolution:

"3.5. Financings granted to another local financial entity, in the country or in foreign subsidiaries, including correspondent account balances, except that they are accounts computable for the integration of the minimum cash in national and foreign currency: 25% of RPC."

9. Replace point 1.3.7. of Annex I to the aforementioned resolution, with the following:

"1.3.7. Financings in all their modalities granted by and/or through foreign subsidiaries and foreign banks over which the local entity exercises control under the terms provided in point 1.2., when -in the latter case- they correspond to financing lines assigned to them by the local financial entity."

10. Replace point 1.7. of Annex II to the aforementioned resolution, with the following:

"1.7. Financings in all their modalities granted by and/or through foreign subsidiaries and foreign banks over which the local entity exercises control under the terms provided in point 1.2. of Annex I, when -in the latter case- they correspond to financing lines assigned to them by the local financial entity."

11. Include as point 11 of said Resolution:

"11. In the case of foreign subsidiaries, local banks must not deduct the balance sheet item "Foreign Subsidiaries" for the purposes of calculating RPC. Likewise, they must present consolidated financial statements and complementary information, with the same monthly accounting information regime applicable to a local branch applying to said subsidiaries."

12. Replace point 4.1.2. of Annex I to the aforementioned resolution with the following:

"4.1.2. 100% in the case of money deposit certificates -in national or foreign currency- in the own creditor entity."

13. Replace point 5.1.1. of Annex II to the aforementioned resolution, with the following:

"5.1.1. 100% when it comes to public securities of the National Government, taking into account their market value, and in the case of money deposit certificates -in national or foreign currency- in the own creditor entity.
Financings to the National Government will be considered as guaranteed."

14. Add in point 3.1.3.1. of the procedure norms of the "Statement of situation of debtors" (text according to Communication "A" 1112) and consider as preferred guarantee to:

"- Guarantee or surety of a foreign bank, when there is a legal opinion on the legal validity of the guarantee or surety and said granting bank is included in the highest quality categories for investment ("investment grade"), according to rating granted by an international risk rating agency (Moody's, Standard and Poors or equivalents)."

15. Render ineffective the second and third paragraphs of point 1.3. of Annex I and the last two paragraphs of point 1. of Annex II, to the aforementioned resolution.

16. Include as point 12 of the aforementioned Resolution:

"Provide that, from 11/1/93, repurchase, term, cash for settlement and stock pledge and mortgage operations are covered by the limitations established in Annexes I and II, to the extent that the financial entity had already effected the payment (or delivered the agreed counterparty) and the delivery of the agreed counterparty was pending (or the agreed cash payment had not been received).

Under such circumstances, regardless of the accounting registration modality used, the party obliged to deliver the agreed counterparty or effect the agreed payment will be considered a credit subject, until the moment these acts have occurred.

Consequently, the operations mentioned in which no discrepancy in the fulfillment of the respective obligations is verified, are not computable for the purposes of the relationships established in Annexes I and II.

Until 10/31/93, the repurchase operations mentioned in the first paragraph of this point, will be computed according to the regulations in force on 6/30/93."

17. Include as point 4.5. of Annex II to the aforementioned Resolution:

"4.5. Credits with the Central Bank, regardless of the modality of the operation."

We greet you very respectfully.
BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
Juan Carlos Isi Alfredo A. Besio
Submanager of Norms Manager of Norms for for Financial Entities Financial Entities