Circular RUNOR 1 - 135. Asset Classification for Investments in Pension and Retirement Funds. Modifications

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMUNICACION " A " 2248 16/09/94 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
RUNOR 1 - 135.
Asset Classification for Investments with Pension and Retirement Funds. Modifications

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

"1. Replace points 2, 3, and 4 of the resolution disseminated by Communication "A" 2229, with the following:

"2. Establish that for the purposes foreseen in points 1.1 and 1.2, the Central Bank will delegate - with the exception of the situations contemplated in point 6 and when the entity opts for that alternative regime - the function of classification to risk rating societies registered in the Registry enabled by the National Securities Commission that have been admitted by the Central Bank. To this effect, such societies must submit a request manifesting their interest in performing the classifications of the aforementioned instruments. Along with the request, they must ratify - under the terms of a sworn declaration - that the incompatibilities mentioned in articles 11 and 12 of Decree 656/92 are not present. The Central Bank reserves the faculty to exclude rating companies when, in its judgment, it deems it appropriate. In the case of classification of deposits in financial entities, the evaluating companies must take into account the minimum guidelines contained in the Annex that forms part of this communication."

"3. State that rating societies will provide the corresponding classification reports for the assets indicated in points 1.1, 1.2, and 1.3 of this communication to the Superintendence of Administrators of Pension and Retirement Funds, with a copy to the Central Bank, within 5 calendar days of their issuance. Likewise, along with said copy, the rating society must send to the Central Bank a note signed by its president or legal representative in which it expressly states that said society and the persons performing the various functions indicated in Decree 656/92, comply with the provisions of articles 17, 18, and 19 of that instrument, particularly regarding the classification of deposits and debts of the financial entity, regarding which they submit the report."

"4. Establish that, until 9/30/94, the entities covered by the Financial Entities Law are qualified to receive time deposits and/or checking account deposits from pension fund administrators, with resources from the funds and their reserves, provided that - measured individually by each receiving entity - these deposits from the set of administrators do not exceed 5% of the total of checking, savings, and time deposits. This limit must be observed upon receiving each new deposit, with respect to the balance of the total of calculable deposits on the last day of the month immediately preceding the one in question. This provision will expire prior to the indicated date as soon as the qualifications referred to in point 1.1 are provided, from which moment the possibility of continuing to receive deposits and its collection limit will depend on the number and level of the qualifications, as provided in the common provisions."

2. Incorporate into the resolution disseminated by Communication "A" 2229, the following points:

"6. Establish that the Central Bank will be responsible for the classification, replacing the regime established in point 2 of this communication and when so requested by the covered entities wishing to collect the deposits referred to in point 1.1, in the following cases:
a) local branches of foreign financial entities. b) financial entities that have guarantees or sureties issued by banks abroad that expressly guarantee the timely and proper repayment of deposits - principal and, if applicable, interest - constituted by pension fund administrators. To these effects, the covered entities must provide the Central Bank with at least two international qualifications issued by some of the following international risk rating agencies, regarding the parent company of the branch operating in the country or the foreign bank issuing its guarantee:

• Duff & Phelps
• Fitch Investors Service
• International Bank Credit Analysis (IBCA)
• Moody's Investors Service
• Standard & Poor's Corporation
• Thompson Bank Watch
  The extended qualifications must expressly contemplate the case of deposits collected in the country under alternative economic scenarios.
  The submission, with a copy of the classification reports, must be made to this Institution, within 5 calendar days of their issuance.
  In cases where the classification of foreign banks is required, it may be understood that it refers to the entity as such or to its debt instruments that do not have guarantees affecting the bank's assets."

"7. Establish that, until 11/1/94, it will be required that at least one of the qualifications required regarding the foreign securities referred to in point 1.3 of this communication must be formulated by Moody's Investors Service or by Standard & Poor's Corporation."

"8. Establish that the financial entity regarding which the local rating society issues an opinion on deposit and debt instruments, must address a note to the Central Bank, upon obtaining each qualification, in which it expressly states that said society is not affected by the incompatibilities established in subsections a) and e) of article 17 of Decree 656/92, to the extent known by the entity."

3. Consider that it corresponds to assign to the deposits made in the Bank of the Nation Argentina the same treatment applicable to national public titles, therefore it will not be subject to the evaluation requirement by rating companies referred to in point 2 of Communication "A" 2229."

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