Circular LISOL 1 - 178. CONAU 1 - 240. Consolidation of Financial Statements. Modification of Regulations

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMUNICACIÓN "A" 2649 02/01/98
TO FINANCIAL ENTITIES:
Ref.: Circular LISOL 1 - 178. CONAU 1 - 240. Consolidation of Financial Statements. Modification of Regulations

We address you to bring to your attention that this Institution has adopted the following resolution:

"1. Substitute, with effect from 31.1.98, points 5.1. and 5.2.1. of the Annex to Communication "A" 2227 with the following:

"5.1. Controlling financial entities covered by these provisions shall observe the relationships and norms mentioned based on consolidated information:
5.1.1. Minimum capital requirement and integration (Communication "A" 2136 and its complementary provisions).
5.1.2. Operations with related persons or companies (Annex I to Communication "A" 2140 and its complementary provisions).
5.1.3. Fragmentation of credit risk (Annex II to Communication "A" 2140 and its complementary provisions).
5.1.4. Holding of participations in companies whose corporate object is not the provision of services complementary to financial activity (third paragraph of point 1. of the Annex to Communication "A" 467, text according to point 1. of Communication "A" 2373).
5.1.5. Classification of debtors and minimum provisions for uncollectibility risk (Communication "A" 2216 and its complementary provisions).
5.1.6. Liquidity position indicators (Communication "A" 2374).
5.1.7. Capital requirements for market risk (Communication "A" 2461).

"5.2.1. Monthly consolidation.
Data from the local financial entity, its subsidiaries in the country and abroad, and the subsidiaries included in the obligation to consolidate monthly shall be taken.
The limits referred to in the norms mentioned in points 5.1.2. and 5.1.3. must be observed at all times on a consolidated basis, that is, considering the operations included from the respective clients in the entities and companies subject to monthly consolidation. The determination of computable net worth shall be carried out by applying the norms established in this matter (Communication "A" 2136 and complementary provisions and Communication "A" 2461), both regarding the requirement and integration, with respect to consolidated bases. This, without prejudice to the observance in individual form of the regulations referred to in point 5.1. In such cases, the controlling entity - headquarters or parent company and subsidiaries in the country and abroad - and each of the local financial subsidiary entities - if any - shall be considered separately, for which purpose the exclusions established in points 3.5. of Annex I and 4.6. of Annex II to Communication "A" 2140 apply, with respect to the operations they carry out among themselves."

2. Substitute the third paragraph of point 1.1.1. of the Annex to Communication "A" 2227, with the following:

"Any other modality of control or Participation in which, in the judgment of the Superintendence of Financial and Exchange Entities and even when shareholdings are less than 50%, a situation of control is configured, or may be inferred according to the elements of judgment gathered, shall also be considered as "indirect", and therefore the status of subsidiary of an entity or company, from the country or abroad."

3. Establish that non-compliance with the observance in individual form of the regulations referred to in point 5.1. of the Annex to Communication "A" 2227 shall not be considered as such, to the extent that they are a consequence of the application of the modification introduced by point 1. of this resolution and relate to transactions effected until the day of issuance of this communication.

To this effect, the entities covered must present to the Superintendence of Financial and Exchange Entities, by 28.2.98 (Errata "C" 17456), a gradual adaptation plan that contemplates the classification under the referenced norms no later than 31.8.98.

4. Substitute, with effect for the facilities granted from 5.1.98, points 3.5. of Annex I and 4.6. of Annex II to Communication "A" 2140 (text according to point 3. of the resolution disseminated by Communication "A" 2227), with the following:

"3.5. Operations with financial entities from the country that the financial entity consolidates in the terms established in point 2. of the "Provisions for the consolidation of financial statements of financial entities."

"4.6. Operations with financial entities from the country that the financial entity consolidates in the terms established in point 2. of the "Provisions for the consolidation of financial statements of financial entities."

In both cases, to define the scope of the concept "facilities", the provisions of point 4. of Chapter II of Circular LISOL - 1 (Communication "A" 414) shall be observed."

We salute you attentively.
BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
Juan Carlos Isi
Deputy Manager of Regulations
For Financial Entities
Alfredo A. Besio
Manager of Regulations for
Financial Entities