CENTRAL BANK OF THE ARGENTINE REPUBLIC

COMMUNICATION “A“ 4311
06/03/2005

TO THE FINANCIAL INSTITUTIONS:

Ref.: Circular
OPRAC 1 - 582
Credit policy. Ordered text.

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

“- Approve the rules on “Credit policy” referred to in the Annex to this communication.”

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Alfredo A. Besio
Issuance Manager of Rules
José I. Rutman
Principal Manager of Research and Regulatory Issuance

ANNEX

B.C.R.A.
ORDERED TEXT OF THE RULES ON
“CREDIT POLICY”

-Index-

Section 1. General credit policy.

1.1. General criterion.

1.2. Financings covered.

1.3. Credit management.

Section 2. Application of the lending capacity of deposits in foreign currency.

2.1. Destinations.

2.2. Conditions.

2.3. Effectiveness.

2.4. Allocation of incorporated financings.

2.5. Financings recorded in memorandum accounts.

2.6. Lending capacity.

2.7. Application defects.

Section 3. Application of liquid own resources.

3.1. Liquid own resources.

3.2. Application.

Section 4. Financing to the country's non-financial public sector.

4.1. Applicable rules.

Section 5. Financing to residents abroad.

5.1. General criterion.

5.2. Placements in banks abroad.

5.3. Holding of foreign securities.

Section 6. Bases of observance.

6.1. Individual basis.

6.2. Consolidated basis.

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CREDIT POLICY B.C.R.A.
Section 1. General credit policy.

1.1. General criterion.

The credit assistance granted by financial institutions must be oriented to financing the investment, production, marketing and consumption of goods and services required both by domestic demand and by the country's exports.

1.2. Financings covered.

All financings that are recorded must be adequate to the criteria applicable in matters of credit policy, whatever the modalities used, whether granted directly or incorporated by purchase or assignment, including those comprising asset portfolios with respect to which debt securities or participations are held (financial trusts, mutual investment funds, etc.), and whatever the sources of funds to which they may be allocated, without prejudice to the observance of special rules to which they are subject for their application.

1.3. Credit management.

Financial institutions may freely define the conditions and the instrumentation of their credit operations, in accordance with the rules on “Credit management” and “Interest rates in credit operations”.

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2.1. Destinations.

The lending capacity of foreign currency deposits must be applied, in the corresponding currency of collection, indistinctly, to the following destinations:

2.1.1. Prefinancing and financing of exports made directly or through agents, consignees or other intermediaries acting for the account and order of the owner of the goods, subject to the rules on compliance with the obligation to bring in and settle the corresponding collections.

Included are operations intended to finance working capital and/or the acquisition of all kinds of goods, including temporary imports of inputs, linked to the production of goods for export. Even when the income of exporting companies does not come entirely from their sales abroad, financings may be allocated for whose cancellation the flow of foreign currency income from their exports is sufficient.

2.1.2. Financings to producers, processors or collectors of goods, provided they have firm sales contracts for the merchandise to an exporter, with the price set in foreign currency and it involves fungible goods with a normal and usual quotation, in foreign currency, in local or foreign markets, widely disseminated and easily accessible to public knowledge.

2.1.3. Financings to producers of goods to be exported, whether in the same state or as an integral part of other goods, by third-party purchasers thereof, provided they have total guarantees or warranties in foreign currency from such third parties.

2.1.4. Debt securities or participation certificates in financial trusts - including other collection rights specifically recognized in the trust agreement to be constituted under the “IDB Loan No. 1192/OC-AR” - whose trust assets are loans originated by financial institutions under the conditions referred to in points 2.1.1. to 2.1.3.

2.1.5. Debt securities or participation certificates in financial trusts, issued in foreign currency and with public offering authorized by the National Securities Commission, whose trust assets are documents guaranteed by mutual guarantee companies registered in the Registry enabled in the Central Bank of the Argentine Republic, or by provincial funds constituted with the same purpose as those companies admitted by this Institution, purchased by the trustee in order to finance operations under the terms and conditions referred to in points 2.1.1. to 2.1.3.

The guarantees granted by the mutual guarantee companies or provincial funds must cover all risks inherent to the transaction, in order to assure the holders the payment in time and form of the aforementioned participation instruments.

2.1.6. Financings with destinations other than those mentioned in the preceding points, included in the credit program referred to in the loan from the Inter-American Development Bank cited in point 2.1.4., without exceeding 10% of the lending capacity.

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2.1.7. Interfinancial loans. Entities may allocate to these resources interfinancial loans if they identify them and inform that circumstance to the borrowing entities.

2.1.8. Bills of the Central Bank of the Argentine Republic in US dollars, acquired in auctions or through secondary negotiation.

2.2. Conditions.

The financing agreed and the maturities established must be related to the flow of income expected in the currency of granting of the loans.

2.3. Effectiveness.

The loans granted must be settled in the Single and Free Exchange Market.

2.4. Allocation of incorporated financings.

Financings for the destinations established in point 2.1., transferred by other financial institutions, may be allocated to the lending capacity of foreign currency deposits, provided that the transferring entities have complied with the requirements set in points 2.2. and 2.3.

2.5. Financings recorded in memorandum accounts.

Financings to debtors classified in the “irrecoverable” category and recorded in memorandum accounts, as established in the rules on “Minimum provisions for bad debt risk”, may not be allocated to the lending capacity of foreign currency deposits.

2.6. Lending capacity.

The lending capacity shall be determined for each foreign currency collected and shall result from the sum of deposits and interfinancial loans received, which have been reported by the granting financial institution as coming from its lending capacity of foreign currency deposits, net of the minimum cash requirement on deposits.

The computation of assets and liabilities shall be made based on the monthly average of daily balances (principal and interest) recorded in each calendar month.

Financings shall be allocated net of provisions for bad debt and impairment risks attributable to them and, where applicable, of the “difference for portfolio acquisition”.

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2.7. Application defects.

Application defects shall be subject to an equivalent increase in the minimum cash requirement in the respective foreign currency.

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CREDIT POLICY B.C.R.A.
Section 3. Application of liquid own resources.

3.1. Liquid own resources.

Liquid own resources shall be understood as the excess of computable net worth with respect to immobilized assets and other concepts, computable in accordance with the rules on the “Ratio for immobilized assets and other concepts”.

3.2. Application.

The application of net own resources must conform to the general criterion on credit policy indicated in Section 1.

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CREDIT POLICY B.C.R.A.
Section 4. Financing to the country's non-financial public sector.

4.1. Applicable rules.

In relation to the granting of financing to holders of the country's non-financial public sector, the rules on “Financing to the non-financial public sector” shall apply.

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CREDIT POLICY B.C.R.A.
Section 5. Financing to residents abroad.

5.1. General criterion.

The granting of financial assistance to residents abroad shall proceed only insofar as it conforms to the general criterion on credit policy indicated in Section 1.

Accordingly, credit lines may be granted to foreign banks, whether correspondents or not, intended to facilitate local exports.

Also permitted is the existence of credits to residents abroad corresponding to settlement lags of transactions with quoted securities or foreign currencies.

5.2. Placements in foreign banks.

Financial institutions may only maintain in foreign banks correspondent accounts and demand accounts necessary for their operations.

5.3. Holding of foreign securities.

Holdings of foreign public and private securities may not be recorded, including debt securities or participations corresponding to asset portfolios among which foreign securities are counted, nor may Argentine depositary certificates (CE-DEAR).

The holding of debt securities or participations corresponding to asset portfolios constituted abroad is permitted, provided they are composed exclusively of national public and/or private securities of the country, as well as of “depository receipts” corresponding to said securities.

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CREDIT POLICY B.C.R.A.
Section 6. Bases of observance.

6.1. Individual basis.

Financial institutions (exclusively comprising their domestic head offices) shall observe the rules on “Credit policy” on an individual basis.

Said provisions shall also apply to branches abroad, to the extent that they operate with resources originating from the entity's domestic head offices, additional to assigned capital.

6.2. Consolidated basis.

Without prejudice to compliance on an individual basis, controlling financial institutions subject to consolidated supervision shall observe the rules on “Credit policy” on a monthly consolidated basis and, additionally and independently, quarterly (excluding their subsidiaries abroad).

Subsidiaries abroad shall be included, to the extent that they operate with resources originating from the entity's domestic head offices, additional to the participation in capital.

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B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE RULES ON “CREDIT POLICY”

CONSOLIDATED TEXT			ORIGINATING RULE					OBSERVATIONS
Sect.	Point	Para.	Com.	Annex	Chap.	Sect.	Point	Para.
1.	1.1.		"A" 49 OPRAC-1		I		1.1.
	1.2.		"A" 4311					Includes concept according to points 6. and 7.5. of Com. "A" 2736
	1.3.		"A" 49 OPRAC-1		I		1.2.
2.	2.1.		"A" 4168	sole			1.
	2.1.1.	1st	"A" 4168	sole			1.1.
		last	"A" 4015					penultimate
			"C" 40315				2nd
	2.1.2.		"A" 4168	sole			1.2.	Includes interpretive clarification
	2.1.3.		"A" 4168	sole			1.3.
	2.1.4.		"A" 4168	sole			1.4.	1st
	2.1.5.		"A" 4168	sole			1.7.
	2.1.6.		"A" 4168	sole			1.4.	last
	2.1.7.		"A" 4168	sole			1.5.
	2.1.8.		"A" 4168	sole			1.6.
	2.2.		"A" 4168	sole			1.	2nd
	2.3.		"A" 4168	sole			1.	3rd
	2.4.		"A" 4311
	2.5.		"A" 4311
	2.6.	1st	"A" 4168	sole			1.	4th
		2nd and last	"A" 4159			3.1.	5th and last	Section 3. of the reporting regime on minimum cash and application of resources. Includes interpretive clarification
	2.7.		"A" 4168	sole			1.	last
3.	3.1.		"A" 4140	II			1.	2nd
	3.2.		"A" 4311					Includes concept according to points 6. and 7.5. of Com. "A" 2736
4.	4.1.		"A" 4311
5.	5.1.		"A" 4311
	5.2.		"A" 4311
	5.3.	1st	"A" 2736				6.	Includes interpretive clarification
		last	"A" 4311
6.	6.1.		"A" 4311
	6.2.		"A" 4311