Circular OPRAC 1-396. Fixed or Variable Rate Credit Operations. Clarification

CENTRAL BANK OF THE ARGENTINE REPUBLIC

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COMMUNICATION "A" 2390 03/11/95

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To FINANCIAL ENTITIES:
Ref.: Circular
OPRAC 1 - 396.
Fixed or Variable Rate Credit Operations.
Clarification

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

"1. To indicate to financial entities that they must abstain from designating as 'at fixed interest rate' -in any medium, whether advertising, credit application, or in contracts, etc.- loan operations in which there are clauses that provide for the possibility of modifying the agreed interest rate when certain circumstances arise, except those referring to changes that may eventually be ordered by a competent authority. Therefore, point 1.1 of Chapter II of Circular OPRAC -1 (Communication "A" 49) will be drafted as follows:
"1.1. Rates.
Financial entities may freely negotiate them with clients.
Loan contracts at fixed interest rate shall not contain clauses that provide for their modification under certain circumstances, except that they stem from decisions adopted by a competent authority. Loan contracts at variable interest rate must clearly specify the parameters that will be used for their determination and the periodicity of the change."

2. Incorporate after the first paragraph of point 2.1 of Chapter II of Circular OPRAC -1 (according to Communication "A" 2147), the following:
   "Likewise, explicit record must be made regarding whether the operation is agreed at fixed or variable interest rate, indicating in the latter case the usable parameters for its determination and the periodicity of the change."

3. Incorporate in point 2.2 of Chapter II of Circular OPRAC -1 (text according to Communication "A" 2147), the following paragraph:
   "Likewise, it must be clarified whether the advertised operations will be agreed at fixed or variable interest rate."

We greet you very attentively.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Alfredo A. Besio Miguel A. Kiguel
Manager of Standards for General Submanager
Financial Entities Area of Economics and Finance