Circular RUNOR 1-132: Custody of Securities Representing Investments of Pension and Retirement Funds. Consolidated Text

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMUNICACION " A " 2237 25/08/94 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
RUNOR 1 - 132.
Custody of securities representing the investments of the pension and retirement funds. Consolidated text

We address you to deliver the consolidated text of the regulations cited in the reference, taking into account the joint resolutions adopted by the Superintendency of Administrators of Pension and Retirement Funds and the Central Bank, disseminated through Communications "A" 2230 and 2235:

"- Establish, for the purposes foreseen in the last 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 the pension and retirement funds, whichever is greater.
For this purpose, it will be admitted to compute, for the necessary complement to reach the minimum requirement, a bond or guarantee that backs globally all the operations of the guaranteed entity up to said amount, extended by banks abroad with at least two credit ratings equivalent to level "A" or superior granted by any of the international agencies included in the list of point 2. of Communication "A" 2229 of the Central Bank or local banks whose ratings for the receipt of deposits from the aforementioned funds are superior to "L4" under the terms of the resolution disseminated through that communication or those that eventually substitute or modify it. In the case of entities that are branches of foreign banks, the net worth of the parent house will be considered, under the terms defined by the supervisory body for the purposes of fulfilling the capital requirement, provided that it is subject to a consolidated supervision regime and that its rating -granted by at least two of the aforementioned agencies- reaches the minimum level fixed.

The determination of the requirement and verification of its compliance will be carried out based on the balances at the close of each month.

b) Excess of computable net worth with respect to the minimum capital requirement -independently of what is established in the previous section and therefore additional to what is provided there- 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 affected as collateral in favor of that Institution, to respond to eventual defaults. The securities affected as collateral must be deposited in a special account opened for this purpose at Caja de Valores S.A. in the name of the entity and at the order of the Central Bank. The determination of the amount to be invested in securities must be carried out based on the balances at the close of each month and deposited in the aforementioned account within the next 72 business hours, informing the Superintendency of Financial and Exchange Entities within the same term.

c) Rating of long-term liabilities at the minimum level or superior that the Central Bank may determine, granted by at least two risk rating societies 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 minimum, quarterly and reported to the Superintendency of Financial and Exchange Entities of the Central Bank within 5 calendar days of being granted. When it concerns branches of foreign entities or entities constituted in the country that are subsidiaries of foreign banks, subject to a consolidated supervision regime, ratings issued with respect to the parent house or controlling entity by at least two of the international agencies whose list is detailed in point 2. of Communication "A" 2229 will be admitted. This requirement will be applicable from 1.10.94.

d) Have an independent custody area -not necessarily specific for the securities of the Administrators of Pension and Retirement Funds- 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 Superintendency 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.
Operations of primary subscription of securities issued by the Nation that the administrators carry out directly or through the entities authorized to act as custodians are excluded from the observance of this requirement.

f) Maintain records totally separate from the other activities of the entity and one for each fund with respect to 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, book-entry or certificated). The operational scheme to be implemented must ensure the continuity of tasks, through an adequate backup copy protection system ("backup"), even in cases of significant force majeure events.

i) Assign in the treasury of the entity a predetermined and individual physical place for each fund, for the purposes of the storage and conservation of the documentation. This place must be separated 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 minimum quarterly- of the tasks of the area in charge of the custody function and the inventory of the funds' securities in the treasuries of the pension and retirement funds.

k) Employ sub-custodians and/or registration agents, in the cases of securities that require it, approved by the Central Bank. To this end, entities authorized to operate in the country as such, accepted international value boxes (e.g.: CEDEL, Euroclear, DTC) and foreign banks with credit rating "AA" -or equivalent- or superior, according to evaluation carried out by at least two of any of the international agencies included in the list of point 2. of Communication "A" 2229 of the Central Bank will be taken into account.

In all cases where the rating of foreign banks is required, it may be understood that it may refer to the entity as such or to its debt instruments that do not have guarantees affecting the bank's assets.

Entities that wish to assume the function of custodians of the securities representing the investments of the pension and retirement funds must demonstrate to the Superintendency of Financial and Exchange Entities that they meet the required requirements, informing it by note with a 5 business days advance prior to accepting a designation as custodian. In addition, they will have the same term to update the information on the requirements established in the case of any modification of the last information provided."

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Alfredo A. Besio Miguel A. Kiguel
Manager of Standards for General Manager
Financial Entities Area of Economy and Finance