Circular RUNOR 1 - 128. Custody of securities representing investments of pension and retirement funds

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 2230 26/07/94
TO FINANCIAL ENTITIES:
Ref.: Circular RUNOR 1 - 128. Custody of securities representing investments of pension and retirement funds

We address you to inform you that the Superintendence of Pension and Retirement Fund Administrators and the Central Bank have jointly adopted the resolution transcribed below:

"- Establish, for the purposes foreseen in the last sentence of the first paragraph of Article 81 of Law 24.241, that commercial banks meeting the following requirements may access the function of custody of the securities representing the investments of the funds:

a) Computable net worth equal to or greater than $ 50 million or equivalent to 5% of the amount of the securities in custody, coming from pension and retirement funds, whichever is greater.
For this purpose, the guarantee of banks from abroad with a credit rating equivalent to level "A" or higher granted by Moody's Investors Service or Standard & Poor's Corporation or of local banks whose rating for the receipt of deposits from the aforementioned funds is higher than "L4" under the terms of the resolution disseminated through Communication "A" 2229 of this Institution or those that may eventually replace or modify it, will be admitted to compute the necessary complement to reach the minimum requirement.

b) Excess of computable net worth regarding the minimum requirement equivalent to 0.25% of the amount of the aforementioned securities in custody, which must be maintained invested in national public securities or other destinations authorized by the Central Bank and pledged in favor of that Institution, to respond to eventual defaults.

c) Long-term liability rating at the minimum level or higher that the Central Bank may determine, granted by at least two risk rating agencies registered in the Registry enabled by the National Securities Commission and admitted by the Central Bank as established in point 2 of the resolution disseminated through Communication "A" 2229.

The ratings must be updated at least quarterly and reported to the Superintendence of Financial and Exchange Entities of the Central Bank within 5 calendar days of being granted.
This requirement will be enforceable from 1.10.94.

d) Have an independent custody area - not necessarily specific for the securities of the Pension and Retirement Fund Administrators - from other sectors of the bank for the exercise of this function. This task will be under the control of responsible officials whose names and backgrounds must be reported to the Superintendence of Financial and Exchange Entities.

e) Apply the "payment against delivery" or "delivery against effective receipt" criterion in relation to the orders received for the movements of the securities in custody.

f) Maintain totally separate records regarding the other activities of the entity and one for each fund for which it acts as custodian.

g) Keep the securities in custody apart from the assets and liabilities of the entity, registering them in off-balance sheet accounts, in that capacity.

h) Implement a procedures manual containing the detailed development of the operations circuit to provide the custody service, contemplating the modalities to be used according to the characteristics of the different securities (in the case of securities: if they are public or private, national or foreign, registered or bearer).

The operational scheme implemented must ensure the continuity of tasks, through an adequate backup copy system, even in cases of significant force majeure events.

i) Assign in the entity's treasury a predetermined and individual physical place for each fund, for the safekeeping and conservation of documentation. This place must be separate from that used for the rest of the bank's activities.

j) Include in the annual work plan for the evaluation of internal control, the internal audit - at least every four months - of the tasks of the area in charge of the custody function and the cash count in the treasuries of the securities of the pension and retirement funds.

k) Employ sub-custodians and/or registration agents, in the case of securities that require it, approved by the Central Bank. To this end, entities authorized to operate in the country as such, accepted international securities depositories (e.g.: CEDEL, Euroclear, DTC) and banks from abroad with a credit rating of "AA" - or equivalent - or higher, according to evaluation performed by Moody's Investors Service or Standard & Poor's Corporation, will be taken into account."

We salute you very respectfully.
BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
Juan Carlos Isi Alfredo A. Besio
Deputy Manager of Standards Deputy Manager of Standards for Financial Entities for Financial Entities