Communication A 1465: Intermediation with National Public Securities and Asset-Liability Correlation in Australes and Foreign Currency

BANCO CENTRAL DE THE REPUBLIC OF ARGENTINA
COMMUNICATION "A" 1465 23/06/89
TO FINANCIAL ENTITIES:
Ref.: CIRCULARS LIQUIDITY AND SOLVENCY - LISOL - 1

• 29, ACTIVE OPERATIONS - OPRAC - 1 -
  241, PASSIVE OPERATIONS - OPASI - 2 -
  25 AND MONETARY REGULATIONS - REMON - 1 - 506. Intermediation operations with national public securities and correlation of assets and liabilities in australes and in foreign currency.

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

1. Establish, from 1.6.89, the regime on intermediation operations with national public securities contained in Annexes I and II.

2. Provide that the correlation between assets and liabilities in australes and in foreign currency will be subject to the following provisions.

2.1. The following assets, or the positive result of the global net foreign currency position, whichever is lesser, shall be imputed to unencumbered own funds.

2.1.1. Liquidity (including those incorporated into the General Exchange Position), public securities, loans, and other placements (including holdings of fixed-term deposit certificates in US dollars acquired through secondary negotiation) in foreign currency.

2.1.2. Adjustable assets with US dollar clause, excluding those attended with adjustable deposits with US dollar clause according to the provisions disseminated through Communication "A" 1337.

2.1.3. Holdings and loans of Austral Bonds of the National Government, Adjustable Titles of the National Government, Adjustable Letters of the National Treasury, and other public securities in australes whose yield is determined based on the exchange rate.

Assets that do not need to be affected to unencumbered own funds may be imputed to such funds and/or to the lending capacity of the segment at interest rate.

2.2. The absolute value of the negative result of the global net foreign currency position may not exceed the greater of the ratios indicated in point 1.1.1. of Annex II.

Excesses to this ratio will be subject to a charge equivalent to 2 times the maximum rediscount rate.

2.3. Funds corresponding to foreign currency liabilities (excluding forward operations for all concepts) and with US dollar clause (except deposits) will be applied within the segment at interest rate.

2.4. For the purposes of the provisions in the preceding points, the global net foreign currency position will be equivalent to the difference between the following assets and liabilities in foreign currency, adjustable with US dollar clause (excluding deposits and assets imputed to them) or in the public securities indicated in point 2.1.3.: liquidity, loans, other placements, and forward purchases for all concepts, minus deposits, obligations with other entities, with the Central Bank, and with the exterior, and forward sales for all concepts.

2.5. The preceding provisions do not include operations contracted with US dollar clause according to the regime made known through Communication "A" 1337.

These rules replace, where pertinent, the provisions disseminated by Communications "A" 990, 999, 1026, 1359, 1405, and 1412. As a consequence, the maximum limit established for the holding of the net long position of BONEX, based on the level registered at the close of 5.8.83, has become ineffective.

We clarify that national public securities transfer operations can be settled by differences.

Attached are the sheets to be incorporated into Circular OPASI - 2, replacing those previously provided.

We salute you very attentively.

BANCO CENTRAL DE THE REPUBLIC OF ARGENTINA
Eduardo C. Schweizer Submanager of Standards for Eduardo G. Castro General Manager Financial Entities

ANNEXES

Com. “A” 1465

1. Banks and financial companies may carry out transfer operations with national public securities, subject to the following conditions:

1.1. Passive transfers (spot sale and simultaneous forward purchase of securities to the same investor).

1.1.1. Term. Between 7 and 90 days.

1.1.2. Future premium. That freely agreed upon.

1.1.3. Tradable securities.

National public securities owned, resulting from active transfers or received in deposit, will be applied.

1.1.4. Coverage margin.

1.1.4.1. At the satisfaction of the entities, provided that the investor is granted the same treatment as credit recipients (opening of file, analysis and evaluation of their patrimonial and financial situation and estimates regarding the future evolution of their businesses, etc.).

In such cases, passive transfers, for 33% of the capital effectively traded, will be covered by the norms on credit risk fragmentation and credit grading.

1.1.4.2. In situations not covered by point 1.1.4.1., the investor will be required to constitute guarantees, for the duration of the operation, for an amount not less than 25% of the agreed forward purchase value of the traded securities.

Such caution must be effected indistinctly on:

1.1.4.2.1. Fixed-term deposit certificates, valued according to their capital, adjustments, and accrued interest.

1.1.4.2.2. National public securities, valued according to the last closing quotation in australes (spot immediate) in the Buenos Aires Securities Market or, if not quotable, according to their theoretical value on the day immediately preceding the constitution of the caution.

In case that due to decreases in the spot price of the securities affected as collateral the coverage margin is reduced to 20% or less, the investor must replenish the difference within a period of 24 hours.

The deposit certificates and securities affected as collateral may be replaced by any of the instruments provided, provided that the value of the new guarantee (capital, adjustments, and interest) is not lower than the minimum level of 25% previously established.

When the future price of the traded securities exceeds by more than 5% that agreed in the operation, the investor, within the indicated period, must reinforce the guarantee by an amount equivalent to the excess over the mentioned 5%.

If such requirements are not met, the entity will rescind the operation and execute the guarantee.

The certificates affected as collateral will be deposited in custody in the entity and registered in a book authorized for this purpose, with the safeguards established in the Commercial Code, identifying the documents and the operation to which they correspond. This register may be replaced by a system of movable sheets according to article 61 of Law 19.550.

The securities affected as collateral will be deposited in custody in the Securities Box or in the entity, in a determined and individualized area of its treasury, to which the Central Bank will have access. In the latter case indicated, the class, series, and numbering of the securities will be registered in the mentioned book.

1.1.5. Instrumentation.

Contracts for these operations must contain as a minimum the following statements.

Com. “A” 1465

1.1.5.1. The inscription "Contract of passive transfer operation of national public securities".

1.1.5.2. Name and domicile of the intervening entity.

1.1.5.3. Place and date of issuance.

1.1.5.4. Name, surname, domicile, and identity document of the investor, if a natural person, or name and domicile, if a legal entity.

1.1.5.5. Name, surname, domicile, and identity document of the representative, when applicable.

1.1.5.6. Denomination and series of the national public securities traded.

1.1.5.7. Total nominal value of the traded securities.

1.1.5.8. Identification of the deposit certificates affected as collateral, when applicable.

1.1.5.9. Series denomination and total nominal value of the securities affected as collateral, when applicable.

1.1.5.10. Place of custody deposit of the securities affected as collateral, when applicable.

1.1.5.11. Spot sale value.

1.1.5.12. Forward purchase value.

1.1.5.13. Place and date of forward purchase.

1.1.5.14. The following expression: "This operation is not guaranteed by the Central Bank of the Republic of Argentina".

1.1.5.15. Two authorized signatures of the receiving entity duly identified.

1.1.6. Minimum cash.

Passive transfers will observe the following requirements in australes:

Term Rate in % -
7 to 29 days 3
30 to 89 days 1.5
90 days 0

1.1.7. Application of resources.

Funds from these operations will be applied within the segment at interest rate.

1.1.8. Regulations.

These operations will be included in the ratio for deposits and other obligations.

1.1.9. Other provisions.

As far as not provided for in these norms, the provisions contained in point 3.5., except point 3.5.13.3., of Chapter I of Circular OPASI - 2 will apply.

1.2. Active transfers (spot purchase and simultaneous forward sale of securities to the same borrower).

1.2.1. Term.

Between 7 and 90 days.

1.2.2. Future premium.

That freely agreed upon.

1.2.3. Coverage margin.

At the satisfaction of the entities.

1.2.4. Instrumentation.

Contracts for these operations must contain as a minimum the following statements:

1.2.4.1. The inscription "Contract of active transfer operation of national public securities".

1.2.4.2. Spot purchase value.

1.2.4.4. Place and date of forward sale.

1.2.4.5. Those provided in points 1.1.5.2. to 1.1.5.10, 1.1.5.14., and 1.1.5.15.

1.2.5. Applicable resources.

Participating financial entities may apply to these operations funds from the lending capacity of the segment at interest rate and/or unencumbered own funds.

Com. “A” 1465

1.2.6. Regulations.

These operations, for 33% of the capital effectively traded, will be covered by the norms on credit risk fragmentation and credit grading.

1.3. Guarantees for transfers between third parties resident in the country.

1.3.1. Term.

Between 7 and 90 days.

1.3.2. Commission.

That freely agreed upon.

1.3.3. Coverage margin.

For the investor, that established in point 1.1.4., and for the borrower, that provided in point 1.2.3.

1.3.4. Minimum cash.

These operations will observe the following requirements in australes:

Term Rate

• in % -
  7 to 29 days 3
  30 to 89 days 1.5
  90 days 0

1.3.5. Regulations.

Those established in point 1.2.6. and the ratio for deposits and other obligations.

2. Banks and financial companies may carry out intermediation operations with national public securities, according to the following conditions:

2.1. Deposits.

2.1.1. Minimum term.

90 days.

2.1.2. Interest.

The rate freely agreed upon will be applied.

Interest, calculated on the nominal values of the deposited securities, will be paid in australes at the maturity of the deposit, converted according to the last closing quotation in australes (spot immediate) in the Buenos Aires Securities Market or, if the deposited securities are not quotable, according to their theoretical value on the day immediately preceding the maturity.

2.1.3. Instrumentation.

Certificates representing these operations will be issued, which must contain as a minimum the following statements:

2.1.3.1. The inscription "Transferable nominative certificate of fixed-term deposit of national public securities" or "Non-transferable nominative certificate of fixed-term deposit of national public securities", as applicable.

2.1.3.3. Place and date of issuance.

2.1.3.4. Name, surname, domicile, and identity document of the deposit holder, if a natural person, or name and domicile, if a legal entity.

2.1.3.5. Name, surname, domicile, and identity document of the representative, when applicable.

2.1.3.6. Denomination and series of the national public securities deposited.

2.1.3.7. Total nominal value of the deposited securities.

2.1.3.8. Agreed interest rate and effective annual interest rate.

2.1.3.9. Maturity date.

2.1.3.10. Place of payment.

2.1.3.11. On the front of the document and occupying no less than 10% of its surface, the following expression: "These deposits are not guaranteed by the Central Bank of the Republic of Argentina".

2.1.3.12. Two authorized signatures of the depositary entity, duly identified.

2.1.4. Minimum cash.

These deposits will not observe reserve requirements.

Com. “A” 1465

2.1.5. Regulations.

These deposits will be included in the ratio for deposits and other obligations.

2.1.6. Other provisions.

As far as not provided for in these norms, the provisions contained in point 3.5., except point 3.5.13.3., of Chapter I of Circular OPASI - 2 will apply.

2.2. Loans.

2.2.1. Term and interest rate.

Those freely agreed upon.

2.2.2. Tradable securities.

Those established in point 1.1.3.

2.2.3. Guarantees.

At the satisfaction of the entities.

2.2.4. Regulations.

These operations will be covered by the norms on credit risk fragmentation and credit grading.

2.3. Guarantees for loans between third parties resident in the country.

2.3.1. Minimum term.

90 days, counted from the date of granting the guarantee to the maturity of the loan.

2.3.2. Commission.

That freely agreed upon.

2.3.3. Minimum cash.

These operations will not observe reserve requirements.

2.3.4. Regulations.

Those established in point 2.2.4. and the ratio for deposits and other obligations.

3. Banks and financial companies may apply to the realization of operations at interest rate, funds derived from the sale of national public securities resulting from active transfers or received in deposit.

4. Forward purchases and sales of national public securities, not linked to transfer operations, carried out by financial entities will be subject to the following conditions:

4.1. Term

Between 7 and 90 days.

4.2. Future premium.

That freely agreed upon.

4.3. Coverage margin.

4.3.1. At the satisfaction of the entities, provided that the forward seller or buyer is granted the same treatment as credit recipients (opening of file, analysis and evaluation of their patrimonial and financial situation and estimates regarding the future evolution of their businesses, etc.).

In such cases, forward operations, for 33% of the total value traded, will be covered by the norms on credit risk fragmentation and credit grading.

4.3.2. In situations not covered by point 4.3.1., the following minimum margins will be observed:

4.3.2.1. For the forward seller.

That established in point 1.1.4.2.

4.3.2.2. For the forward buyer.

The constitution of guarantees will be required, for the duration of the operation, for an amount not less than 25% of the agreed forward sale value of the traded securities.

Such caution must be effected indistinctly on:

4.3.2.2.1. Fixed-term deposit certificates, valued according to their capital, adjustments, and accrued interest.

4.3.2.2.2. National public securities, valued according to the last closing quotation in australes (spot immediate) in the Buenos Aires Securities Market or, if not quotable,

Com. “A” 1465

according to their theoretical value on the day immediately preceding the constitution of the caution.

In case that due to decreases in the spot price of the securities affected as collateral this margin is reduced to 20% or less, the borrower must replenish the difference within a period of 24 hours.

The deposit certificates and securities affected as collateral may be replaced by any of the instruments provided, provided that the value of the new guarantee (capital, adjustments, and accrued interest or spot price, as applicable) is not lower than the minimum level of 25% previously established.

When the future price of the traded securities is lower by more than 5% than that agreed in the operation, the forward buyer, within the indicated period, must reinforce the guarantee, so that this difference is reduced to a minimum of 5%.

If such requirements are not met, the entity will rescind the operation and execute the guarantee.

The certificates affected as collateral will be deposited in custody in the entity and registered in a book authorized for this purpose, with the safeguards established in the Commercial Code, identifying the documents and the operation to which they correspond. This register may be replaced by a system of movable sheets according to article 61 of Law 19.550.

The securities affected as collateral will be deposited in custody in the Securities Box or in the entity, in a determined and individualized area of its treasury, to which the Central Bank will have access. In the latter case indicated, the class, series, and numbering of the securities will be registered in the mentioned book.

4.4. Regulations.

The forward position (buyer or seller, whichever is greater) will be covered by the ratio for deposits and other obligations.

5. Other provisions.

5.1. Operations referred to in points 1., 2.2., 2.3. (except when they are investors), and 4. may not be carried out with natural and legal entities linked to the intervening entities.

5.2. Authorized financial entities may carry out between themselves transfer, loan, and forward purchase and sale operations of national public securities, under the conditions they agree upon and subject to the provisions contained in point 4. of Communication "A" 630 and in Communication "A" 995.

Passive transfers, obligations from the mentioned loans, and the forward position (buyer or seller, whichever is greater) will be covered by the ratio for deposits and other obligations.

5.3. Exclusively for the purposes of guarantee reinforcement provided in points 1.1.4.2., 1.3.3., and 4.3.2., the future prices of the various tradable securities will be those published by the Central Bank based on a survey conducted for this purpose.

Until that publication is effective, reference will be taken to the prices in australes (spot immediate) in the Buenos Aires Securities Market, increased based on the last passive interest rate communicated by this Institution, determined based on the daily survey.

B.C.R.A. POSITIONS AND APPLICATION OF RESOURCES Annex II to Com. “A” 1465

1. Daily forward positions of national public securities will be subject to the following provisions:

1.1. Adjustable Bonds of Assured Real Income, Austral Bonds of Financial Support to the Provinces, and other national public securities in australes whose yield is determined based on the interest rate.

1.1.1. The net forward buyer position may not exceed the net "financial" seller position plus the greater of the following ratios: 5% of the computable patrimonial responsibility of the last day of the second month prior to the one in question or 15% of unencumbered own funds of the second prior month.

The bases of these ratios will be computed in values adjusted by the financial index between the last day of the second prior month and the day prior to the one referring to the daily position.

1.1.2. The net forward seller position may not exceed the net "financial" buyer position plus the greater of the ratios indicated in point 1.1.1.

1.2. External Bonds of the Argentine Republic, Austral Bonds of the National Government, Adjustable Titles of the National Government, Adjustable Letters of the National Treasury, and other national public securities in foreign currency or whose yield is determined based on the exchange rate.

1.2.1. The absolute value of the difference between the net forward buyer position and the net "financial" seller position may not exceed the greater of the ratios indicated in point 1.1.1.

1.2.2. The net forward seller position may not exceed the net "financial" buyer position plus the greater of the ratios indicated in point 1.1.1.

1.2.3. Such ratios will be observed independently for each of the mentioned securities.

1.3. The sum of the absolute values of the differences between the net forward positions and the net "financial" positions of the set of securities may not exceed the greater of the ratios indicated in point 1.1.1.

1.4. For the preceding purposes, the mentioned positions will be composed as follows:

1.4.1. Net forward: forward purchases (excluding those corresponding to passive transfers) minus forward sales (excluding those corresponding to active transfers).

1.4.2. Net "financial": holdings, loans, and forward purchases for passive transfers, minus deposits, inter-financial obligations, and forward sales for active transfers.

1.5. Excesses to such ratios will be subject to a charge equivalent to 2 times the maximum rediscount rate.

2. Holdings and loans of Adjustable Bonds of Assured Real Income, Austral Bonds of Financial Support to the Provinces, and other national public securities whose yield is determined based on the interest rate must be imputed to unencumbered own funds and/or to the lending capacity of the segment at interest rate.

Obligations in such securities will be considered a source of funds of the mentioned segment.

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
ORDERED TEXT
Circular PASSIVE OPERATIONS OPASI - 2
III - Operations with public securities.

1. Deposits.
   1.1. Participating entities.
   Banks and financial companies.
   1.2. Minimum term.
   90 days.
   1.3. Interest.
   The rate freely agreed upon shall be applied.
   Interest, calculated on the nominal values of the deposited securities, shall be paid in australes upon maturity of the deposit, converted according to the last closing quote in australes (spot) on the Buenos Aires Stock Exchange, or, if not quotable, according to their theoretical value on the day immediately preceding said maturity.
   1.4. Instrumentation:
   Certificates representing these operations shall be issued, which must contain at least the following statements:
   1.4.1. The inscription "Transferable registered certificate of deposit of national public securities" or "Non-transferable registered certificate of deposit of national public securities", as applicable.
   1.4.2. Name and address of the receiving entity.
   1.4.3. Place and date of issuance.
   1.4.4. Name, surname, address, and identity document of the deposit holder, if a natural person, or name and address, if a legal entity.
   1.4.5. Name, surname, address, and identity document of the representative, when applicable.
   1.4.6. Name and series of the deposited national public securities.
   1.4.7. Total nominal value of the deposited securities.
   1.4.8. Agreed interest rate and effective annual interest rate.
   Version Communication Date Page
   1st "A" 1465 (Circular OPASI - 2 - 25) 23.6.89 1

III - Operations with public securities. (continued). OPASI - 2
1.4.9. Maturity date.
1.4.10. Place of payment.
1.4.11. On the front of the document and occupying no less than 10% of its surface, the following expression: "These deposits are not guaranteed by the Central Bank of the Argentine Republic".
1.4.12. Two authorized signatures of the depositary entity, duly identified.
1.5. Other provisions.
Insofar as not provided for in these regulations, the provisions contained in point 3.5. of Chapter I shall apply, except for point 3.5.13.3.
Version Communication Date Page
1st "A" 1465 (Circular OPASI - 2 - 25) 23.6.89 2

B.C.R.A.
III - Operations with public securities. (continued) OPASI - 2
2. Guarantees for loans between third parties resident in the country.
2.1. Participating entities.
Banks and financial companies.
2.2. Holders.
Natural and legal persons linked to the participating entities may only operate as investors.
2.3. Minimum term.
90 days, counted from the date of granting the guarantee until the maturity of the loan.
2.4. Commission.
The one freely agreed upon.
Version Communication Date Page
1st "A" 1465 (Circular OPASI - 2 - 25) 23.6.89 1

B.C.R.A.
III - Operations with public securities. (continued) OPASI - 2
3. Repos.
3.1. Passive repos (spot sale and simultaneous forward purchase of securities to the same investor).
3.1.1. Participating entities.
Banks and financial companies.
3.1.2. Holders.
These operations may not be carried out by natural and legal persons linked to the participating entities.
3.1.3. Term.
Between 7 and 90 days.
3.1.4. Forward premium.
The one freely agreed upon.
3.1.5. Tradable securities.
Own national public securities, derived from active repos or received in deposit, shall be applied.
3.1.6. Coverage margin.
3.1.6.1. At the satisfaction of the entities, provided that the investor is granted the same treatment as credit recipients (opening of file, carrying out analysis and evaluations of their patrimonial and financial situation and estimates regarding the future evolution of their business, etc.).
In such cases, passive repos, for 33% of the capital effectively traded, shall be subject to the regulations on credit risk fragmentation and credit grading.
3.1.6.2. In situations not covered by point 3.1.6.1., the investor shall be required to provide guarantees, for the duration of the operation, for an amount not less than 25% of the agreed forward purchase value of the traded securities.
Such security shall be provided indistinctly on:
Version Communication Date Page
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B.C.R.A.
III - Operations with public securities. (continued) OPASI - 2
3.1.6.2.1. Time deposit certificate, valued according to its capital and adjustments and accrued interest.
3.1.6.2.2. National public securities, valued according to the last closing quote in australes (spot) on the Buenos Aires Stock Exchange or, if not quotable, according to their theoretical value on the day immediately preceding the constitution of the security.
In the event that due to decreases in the spot price of the securities affected as collateral the coverage margin is reduced to 20% or less, the investor must replenish the difference within a period of 24 hours. The deposit certificates and the securities affected as collateral may be replaced by any of the instruments provided for, provided that the value of the new security (capital and adjustments and accrued interest or spot price, as applicable) is not lower than the previously established minimum level of 25%. When the forward price of the traded securities exceeds the agreed price in the operation by more than 5%, the investor, within the indicated period, must reinforce the guarantee by an amount equivalent to the excess over the aforementioned 5%. If such requirements are not met, the entity shall rescind the operation and execute the guarantee. The certificates affected as collateral shall be deposited in custody with the entity and registered in a dedicated ledger, with the safeguards established in the Commercial Code, identifying the documents and the operation to which they correspond. This register may be replaced by a system of movable sheets in accordance with article 61 of Law 19,550. The securities affected as collateral shall be deposited in custody in the Securities Depository or in the entity, in a determined and individualized area of its treasury, to which the Central Bank shall have access. In the latter case mentioned, the class, series, and numbering of the securities shall be recorded in the aforementioned book. Version Communication Date Page 1st "A" 1465 (Circular OPASI - 2 - 25) 23.6.89 2

B.C.R.A.
III - Operations with public securities. (continued) OPASI - 2
3.1.7. Instrumentation.
The contracts for these operations must contain at least the following statements:
3.1.7.1. The inscription "Contract for passive operation of national public securities repo".
3.1.7.2. Name and address of the participating entity.
3.1.7.3. Place and date of issuance.
3.1.7.4. Name, surname, address, and identity document of the investor, if a natural person, or name and address, if a legal entity.
3.1.7.5. Name, surname, address, and identity document of the representative, when applicable.
3.1.7.6. Name and series of the traded national public securities.
3.1.7.7. Total nominal value of the traded securities.
3.1.7.8. Identification of the deposit certificates affected as collateral, when applicable.
3.1.7.9. Name, series, and total nominal value of the securities affected as collateral, when applicable.
3.1.7.10. Place of custody deposit of the securities affected as collateral, when applicable.
3.1.7.11. Spot sale value.
3.1.7.12 Forward purchase value.
3.1.7.13. Place and date of forward purchase.
3.1.7.14. The following expression: "This operation is not guaranteed by the Central Bank of the Argentine Republic".
3.1.7.15. Two authorized signatures of the receiving entity duly identified.
3.1.8. Other provisions:
Insofar as not provided for in these regulations, the provisions contained in point 3.5. of Chapter I shall apply, except for point 3.5.13.3.
Version Communication Date Page
1st "A" 1465 (Circular OPASI - 2 - 25) 23.6.89 3

III - Operations with public securities. OPASI - 2
3.2. Guarantees for repos between third parties resident in the country.
3.2.1. Participating entities, holders, and term.
Those established in points 3.1.1. to 3.1.3., respectively.
3.2.2. Commission.
The one freely agreed upon.
3.2.3. Coverage margin.
For the investor, that established in point 3.1.6., and for the borrower, that determined for active repos.
3.3. Other provisions.
3.3.1. Forward prices.
Exclusively for the purposes of guarantee reinforcement provided for in points 3.1.6. and 3.2.3., the forward prices of the different tradable securities shall be those published by the Central Bank based on a survey conducted for this purpose. Until such publication is effected, the prices in australes (spot) on the Buenos Aires Stock Exchange, increased in function of the last passive interest rate communicated by this Institution, determined based on the daily survey, shall be taken as reference.
3.3.2. Settlement.
Repo operations may be settled by differences.
Version Communication Date Page
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