Circular CAMCO 1 - 86. Regulation for the Creation and Operation of Funds Clearing Chambers

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
__________________________________________________________________ COMUNICACION " A " 2557 02/07/97 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
CAMCO 1 - 86.
Regulation for the creation and operation of funds clearing chambers

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

"1. Approve the regulation to which the creation and operation of the chambers organized by financial entities for the clearing of funds through electronic information processing must adhere, in accordance with the guidelines set forth in the Annex to this communication.
2. Repeal the provision contained in point 5.2 of the resolution disseminated through Communication "A" 2319 (text according to Communication "A" 2323)."

We salute you attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Alfredo A. Besio Hector O. Biondo
Manager of Standards for Subgeneral Manager of Financial Entities Area of Operations

ANEXO

+----------+---------------------------------------+---------------+ I B.C.R.A. I CAMARAS DE COMPENSACION DE FONDOS I Anexo a la I Reglamentación para su creación I y funcionamiento I Com. "A" 2557 I +----------+---------------------------------------+---------------+ -Index-
Section 1. Definition.
Section 2. Legal structure and corporate purpose.
Section 3. Functions.
Section 4. Requirements for authorization.
Section 5. Technical homologation requirements.
Section 6. Modification in the shareholding composition of the societies' capital.
Section 7. Participating entities.
Section 8. Clearable instruments.
Section 9. Balance settlement.
Section 10. Coverage of settlement risks.
Section 11. Transitional provision.
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+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 1. Definition. I +------------+-----------------------------------------------------+ The check and other values (clearable instruments) clearing service may only be provided by "clearing chambers" that comply with the conditions established in this regulation. +---------------+----------------------------------+---------------+ I Version: 1st. I Communication "A" 2557 I Page 1 I +---------------+----------------------------------+---------------+

+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 2. Legal structure and corporate purpose. I +------------+-----------------------------------------------------+ Clearing chambers must be legally constituted as anonymous societies, whose shareholders are financial entities. In cases where legal or statutory restrictions prevent such shareholding, indirect participation through companies or persons controlling the entity will be admitted. Clearing chambers shall have as their sole corporate purpose to clear the instruments admitted through their intermediation -via electronic processing- by financial entities (or other authorized persons) charged against others (or other authorized persons), originating from operations carried out or ordered by their clients or on their own account, finally settling the resulting differences. Complementary activities strictly necessary to fulfill this purpose may be provided for. +---------------+----------------------------------+---------------+ I Version: 1st. I Communication "A" 2557 I Page 1 I +---------------+----------------------------------+---------------+

+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 3. Functions. I +------------+-----------------------------------------------------+ Clearing chambers are responsible, among others, for the following functions:

• Electronically clear all clearable instruments, presented by an entity (or other authorized person) charged against another, and settle the resulting balances between them.
• Supply the Central Bank with the balances resulting from the clearings to enable their registration in accounts opened at this Institution, ordering -if applicable- the pertinent movements regarding their account.
• Exchange transactions with other clearing chambers.
• Consolidate data from originating entities and classify information by drawn or receiving entity, as applicable, generating and sending to each of these a file with the transaction details (presented session).
• Consolidate files sent by drawn or receiving entities and classify information by originating entity, generating and sending to each of these a file with the transaction details (rejected session).
• Calculate the multilateral positions of each entity permanently and make this information available to each of them and to the Central Bank.
• Organize a settlement system and settlement risk coverage system.
• Prepare and send statistical and control information required by the Central Bank.
• Establish agreements among themselves for the clearing of the creditor balances of their respective members.
• Administer commissions associated with the clearing process.
• Establish the costs of each operation to be paid by their members.
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+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 4. Requirements for authorization. I +------------+-----------------------------------------------------+
4.1. Interested parties wishing to provide the clearing service must request prior authorization from this Central Bank, for which purpose they will submit a request specifying:
4.1.1. Name.
4.1.2. Corporate domicile.
4.1.3. Nature of the operation to be developed (clearing of third-party values or financial entities' values).
4.1.4. Social capital, with identification of the shareholders who will integrate it and their respective participations. The direct or indirect participation of each entity may not exceed 10% of the social capital.
4.1.5. Founding act and statutes governing the society or its project, if not yet formalized.
4.1.6. Background of the members of the governing and administrative bodies of the entity and a sworn declaration stating that none of the disqualifications fixed by Article 10 of the Financial Entities Law applies to them, except in the case of persons regarding whom, due to the functions they perform in financial entities, this documentation has already been submitted to the Central Bank, noting this circumstance.
4.1.7. Additionally, they must submit a Criminal Record Certificate, issued by the National Directorate of the National Registry of Recidivism and Criminal Statistics, for each of them, with the caveat indicated in point 4.1.6.
Regarding persons who until that moment have their real domicile abroad, certificates of equivalent character issued by the competent governmental authority of the country where they reside, with signature certification by the Consulate of the Argentine Republic in that country and legalization by the Ministry of Foreign Affairs and +---------------+----------------------------------+---------------+ I Version: 1st. I Communication "A" 2557 I Page 1 I +---------------+----------------------------------+---------------+

+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 4. Requirements for authorization. I +------------+-----------------------------------------------------+ Cult or by the apostille system, in the case of States that have signed and ratified the Hague Convention of 10.5.61 and its translation into the national language, when applicable, carried out by a public translator with the visation of the professional college.
4.1.8. Administrative and functional organization, which must provide for the formation of two crisis committees responsible for managing the situation regarding i) difficulties for members to settle their balances and ii) technical issues in information processing.
4.1.9. Draft management regulation containing the following aspects:

• Proforma model for adherence of financial entities (or other authorized persons) to the Chamber.
• Grounds for exclusion of members.
• Forms of operation, management, internal audit plans, treatment of crisis situations, etc.
• Criteria to be adopted to cover debtor balances that arise between its members.
  4.2. Appoint as external auditor one of the persons registered in the Register of External Auditors of the Central Bank, which authorizes them to audit the accounting statements of this Institution.
  4.3. If applicable, the society's founding act must be executed within 30 (thirty) days from the date of the authorization granted by the Central Bank, which, along with the statutes, duly registered in the Public Commerce Registry, must be sent to the Superintendence of Financial and Exchange Entities.
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+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 4. Requirements for authorization. I +------------+-----------------------------------------------------+
4.4. The authorizations granted for the operation of the chambers will be subject to technical homologation to be issued by the Central Bank and, additionally, conditioned upon compliance, within the period set for the start of their activities, of the following requirements:
4.4.1. Submission to the Superintendence of Financial and Exchange Entities of the list of authorities appointed by the founding assembly and managers, accompanied by the data referred to in points 4.1.6. and 4.1.7, unless they are already in their possession, and the name of the appointed external auditor.
4.4.2. Bi-monthly submission to the aforementioned Superintendence, within the first fifteen days of each bi-month period, from the date of authorization until the start of operations, of a report detailing the progress achieved to date regarding the organization of the chamber and, in particular, the compliance with each of the established conditions.
4.4.3. Submission of the final text of the management regulation (conditions for entity adherence, grounds for exclusion, forms of operation, settlement risk coverage, etc.), adjusted to the indications issued by the Central Bank.
4.4.4. Any other condition or requirement determined in the respective authorization resolution.
All established requirements regarding the start of activities must be fulfilled no less than 30 (thirty) days prior to the scheduled date for such event, notifying the Superintendence of Financial and Exchange Entities so that it may issue a ruling on the matter. Failure to comply within the established terms with any of the established requirements will result in the cancellation of the granted authorization.
4.5. The authorized chamber must be enabled within a period of 180 days, counted from the date of the corresponding authorizing resolution. If this period expires without the chamber being enabled, the authorization will become void, and the proceedings will be archived without further procedure.
4.6. Subsequent modifications that may be introduced to the corporate statutes will be subject to the express approval of the Central Bank.
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+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 5. Technical homologation requirements. I +------------+-----------------------------------------------------+ Chambers providing the electronic clearing service must comply with the technical homologation conditions that the Central Bank establishes promptly for each specific topic, which will be verified by the Superintendence of Financial and Exchange Entities. These requirements refer to the following aspects:

• Operational capacity
• Security conditions
• Telecommunications infrastructure
• Contingency plan
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+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 6. Modification in the shareholding composition of the societies' capital. I +------------+-----------------------------------------------------+ The legal representative or members of the supervisory boards or auditors of the chambers must inform the Superintendence of Financial and Exchange Entities regarding any negotiation of shares or irrevocable contributions for future capital increases made by shareholders of the society, within 10 (ten) days from the date of the acts. The same obligation will apply to the sellers and buyers of shares. The restriction on shareholdings referred to in point 4.1.4. must be taken into account. +---------------+----------------------------------+---------------+ I Version: 1st. I Communication "A" 2557 I Page 1 I +---------------+----------------------------------+---------------+

+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 7. Participating entities. I +------------+-----------------------------------------------------+ Financial entities, as well as any other legal person of public or private character whose intervention is authorized by the Central Bank, that meet the admission requirements. The Central Bank also participates by itself. The admission requirements established by the chambers for entities requesting to use their services must be applied without discrimination to all applicants. Any entity meeting the requirements to participate must be accepted on equal terms with other entities, without differentiation in service prices or other operational concepts between shareholders and non-shareholders. Chambers may, according to their regulations, propose the exclusion of a financial entity as a member. This proposal must be authorized by the Central Bank prior to its implementation, for which purpose a report stating the grounds for the proposal with due justification will be sent to said Institution. Participation may be - at the entity's choice -:
i) direct as a full member of one or more chambers or ii) indirect through the designation of another member entity as its representative, using the technical means of the latter, by which it is excluded from intervening in the settlement phase of the respective clearing operations.
7.1. Clearing chambers for third-party values.
These are those that manage electronic clearing between financial entities of payment instruments originating from client or third-party operations unrelated to the financial entities.
In the case where there is more than one chamber in the system, they must interconnect to exchange transactions presented by entities affiliated with one of them charged against an entity affiliated with another chamber, a procedure that must be applied in all sessions. Through this mechanism, entities send data to the chosen chamber, which takes charge of the transactions with other entities, regardless of whether they are members of it or not. Chambers will send daily to the Central Bank information on all rejected effects to maintain a statistical record on the matter.
7.2. Clearing chambers for financial entities' values.
These are those that process electronic transfers of operations between financial entities, on their own account or on behalf of third parties.
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+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 8. Clearable instruments. I +------------+-----------------------------------------------------+ By clearable instrument is understood the electronic record that univocally reflects the physical effect to be cleared, whose clearing is authorized by the Central Bank. It includes the instruments listed below, issued in pesos or United States dollars, provided they meet the standardization requirements established by this Institution:
8.1. From clients or third parties.

• Common checks
• Deferred payment checks
• Certified checks
• Transferable nominative certificates representing deferred payment checks guaranteed
• Credit invoices
• Direct debits
• Transfers
• Time deposit certificates
• Bank payment orders
• Drafts and transfers (postal and telegraphic)
• Sight drafts drawn against the quota parts of a Common Investment Fund
  8.2. From financial entities.
• Transfers
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+------------+-----------------------------------------------------+ I I CAMARAS DE COMPENSACION DE FONDOS I I B.C.R.A. I-----------------------------------------------------I Section 9. Balance settlement. I +------------+-----------------------------------------------------+
9.1. Chambers must open an account at the Central Bank, in order to have access to the MEP (Electronic Payment Medium). These accounts will be used to record transactions related to the settlement of the daily clearing cycle with their members and chambers with each other when they must interconnect.
Therefore, in the latter case, the chamber that results as a debtor on a given day will pay the total amount to the creditor chamber and not to each of its members. The creditor chamber will then distribute that total among its members based on their respective credits, so that each chamber assumes responsibility for the total received to clear and which is not rejected.
9.2. The Central Bank will only accept that participating entities cancel the balances arising from the daily clearing cycle through bilateral operations carried out through the MEP, between the chamber and each of the members. That is, debtor or creditor financial entities pay or collect through the chamber to which they are affiliated.
Bilateral payments between members through the MEP or other payment mechanism are not recognized by the Central Bank as corresponding to the clearing process and are therefore not acceptable for implementing that process.
9.3. A clearing and settlement cycle will be carried out per day, the process of which will conclude at 17:30.
At that hour, each member registering a debtor balance with the chamber will have 30 (thirty) minutes to cancel it, debiting their current account at the Central Bank through the MEP and crediting the chamber's account.
9.4. At the daily closing time, chambers must communicate to the Central Bank, for strictly informative purposes, the set of individual balances resulting from the clearing cycle performed.
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Section 9. Settlement of Balances

9.5. After the 30 (thirty) minutes established in point 9.3. have elapsed, if all debtors have cancelled their balance with the clearing house, a normal settlement situation will exist, and the clearing house will proceed to pay its creditors, debiting its account at the Central Bank through the MEP and crediting the corresponding balance in the respective entities' accounts at the Central Bank through the MEP.

9.6. If, after the 30 (thirty) minutes established have elapsed, one or more of the debtors has not cancelled its balance with the clearing house, an abnormal settlement situation will exist. In this abnormal situation, the clearing house must proceed according to the mechanism it has provided for the coverage of settlement risks.

Section 10. Coverage of Settlement Risks

10.1. Each member is responsible to the clearing house for its debtor balance.

10.2. The clearing house will establish a maximum debtor balance for each member that must be respected throughout the entire clearing cycle. To implement this limit, clearing houses must have a computer system that, in real time, allows the calculation of each member's balance, thereby enabling the acceptance or suspension ("waiting queue") of operations processed against each clearing member. The "waiting queues" must function automatically, according to the "first in, first out" ("FIFO") criterion.

10.3. The maximum permissible debtor balance of a member will amount to the sum of the following items:

• The amount transferred to the clearing house's account at the Central Bank to affect this purpose.
• The value of assets deposited as collateral with the clearing house.
• The amount allowed by a risk mutualization system approved by the Central Bank (appropriation of the debtor balance not covered by one member by the other members).
• Credit lines from foreign banks with international rating "A" or higher, pledged as collateral for clearing operations and available upon simple request by the clearing house.

Section 11. Transitional Provision

The limitation on shareholding by financial entities, referred to in point 4.1.4., will take effect from January 1, 1998.