Consolidated Global Supervision: Holdings in Companies of Complementary Activity - Amendments

1999 - Year of Export
CENTRAL BANK OF THE ARGENTINE REPUBLIC

__________________________________________________________________ COMMUNICATION " A " 2988 I 17/09/99 __________________________________________________________________

TO FINANCIAL INSTITUTIONS:

Ref.: Circular
LISOL 1 - 260.
OPRAC 1 - 462.
RUNOR 1 - 360.
Supervision global consolidated.
Holdings in companies of complementary activity.
Modifi- cations

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

"1. Replace point 2.3.5. of the Annex to Communication "A" 2227 with the following:

"2.3.5. The entities or companies in which more than 12.5% of the total votes are held or controlled, in the cases in which the Superintendent of Financial and Exchange Entities determines it by resolution."

2. Repeal point 1.2. of the Annex to Communication "A" 2227, which defines the associated entity or company.

3. Replace, with effect from 1.10.99, the first and last paragraphs of the resolution disseminated through Communication "A" 2619, with the following:

• 1st paragraph:

"Provide that the acquisition or direct or indirect incorporation by financial entities of corporate holdings in companies whose purpose is the development of complementary activities of the financial one, which exceed 12.5% of the total votes in assemblies of said companies and without prejudice to the specific regulatory treatment applicable in each case, will be subject to the prior authorization of the Superintendency of Financial and Exchange Entities for which the fulfillment of the requirements contained in points 1.1. to 1.3. of Chapter II, Section 1., of Circular CREFI - 2 will be a condition."

• last paragraph:

"When more than 12.5% of the total votes of any instrument with voting rights is held or controlled but this does not determine the requirement of consolidation, in accordance with the rules on consolidated supervision, the Superintendency of Financial and Exchange Entities will establish in each case whether or not the obligation to consolidate the information of the company with respect to which the participation is authorized, with the general scope provided in that regime."

In an annex we send you the updated text of the rules applicable in matters of prior authorization for the incorporation of holdings in companies that develop complementary activities of financial intermediation.

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Juan Carlos Isi
Deputy Manager of Regulatory
Regime
Alfredo A. Besio
Manager of Standards for
Financial Entities

ANNEX:
2 sheets

+----------+--------------------------------------+--------------+ |
|UPDATED TEXT OF THE RULES ON|
Annex
|
| B.C.R.A. |INCORPORATION OF HOLDINGS IN|
to the
|
|
| COMPANIES OF COMPLEMENTARY ACTIVITY |Com. "A" 2988|
+----------+--------------------------------------+--------------+

"- Provide that the acquisition or direct or indirect incorporation by financial entities of corporate holdings in companies whose purpose is the development of complementary activities of the financial one, which exceed 12.5% of the total votes in assemblies of said companies and without prejudice to the specific regulatory treatment applicable in each case, will be subject to the prior authorization of the Superintendency of Financial and Exchange Entities for which the fulfillment of the requirements contained in points 1.1. to 1.3. of Chapter II, Section 1., of Circular CREFI - 2 will be a condition.

With the pertinent authorization requests, the following information must be accompanied, in accordance with the procedure established for that purpose:

• name, corporate purpose and description of the company's activities and specification of its degree of linkage with the financial activity and the intention to exercise or not exercise corporate control.

• bylaws.

• amount of the investment and schedule of disbursements.

• participation in the share capital, its total percentage distribution and list of shareholders who have influence in the decisions of the company.

• background of the partners that exercise corporate control.

• degree of liquidity of the investment (negotiability -current or future- in securities markets).

• involvement of the management and senior management of the financial institution in the management of the company's business.

• use of the institution's infrastructure for the offering of services provided by the company.

• any other information that, in the opinion of the financial institution, is useful for the Central Bank to evaluate the impact of the investment on its solvency, managerial capacity and management.

The Superintendency of Financial and Exchange Institutions shall evaluate the characteristics of each project, emphasizing the impact of the investment on the solvency of the financial institution and its management capacity.

Non-compliance with the presentation of the required information and the fact that the bylaws do not expressly provide for the following shall be considered grounds for denial of the authorization:

a) that amendments to the corporate purpose must be previously authorized by the Superintendency of Financial and Exchange Institutions, and

b) that the verification of its operations with the scope provided for in the Law on Financial Institutions is allowed.

Regarding the deadlines for approval of authorization applications, the provisions of point 3.3. of Section 3. of Chapter II of Circular CREFI - 2 shall apply.

When more than 12.5% of the total votes of any instrument with voting rights is held or controlled but this does not determine the requirement for consolidation, in accordance with the rules on consolidated supervision, the Superintendency of Financial and Exchange Institutions shall establish in each case whether or not the information of the company in which the participation is authorized must be consolidated, with the general scope provided for in that regime.