Financing to the Non-Financial Public Sector, Minimum Capital of Financial Institutions, and Breaches of Minimum Capital and Technical Ratios: Applicable Criteria, Amendment

2009 - Year of Homage to Raúl SCALABRINI ORTIZ

CENTRAL BANK OF THE ARGENTINE REPUBLIC

COMMUNICATION “A” 4996
22/10/2009

TO THE FINANCIAL INSTITUTIONS:

Ref.: Circular
OPRAC 1 - 633
LISOL 1 - 507

Financing to the non-financial public sector. Minimum capital of financial institutions. Breaches of minimum capital and technical ratios. Applicable criteria. Amendment .

---

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

“1. Replace points 4., 5., 6. and 7. of the Annex to Communication “A” 4937, with the following:

“4. Increase by 15 percentage points the individual limits for operations with the non-financial public sector provided in subparagraphs i) to iii) of point 7. of Communication “A” 3911 and amendments, and by 50 percentage points the global limits established therein -second paragraph of subparagraph iii) and subparagraph iv)-, to the extent that the increases in each jurisdiction are applied to the financial assistance granted or to the holding of debt instruments issued by trusts or fiduciary funds under the provisions of point 1. of this regime or to financings established under point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector”.

For those institutions that record excesses admitted to the credit limits with the non-financial public sector provided by point 7. of the resolution disseminated through Communication “A” 3911, the expanded individual credit quotas provided in the previous paragraph shall be up to the amount resulting from the positive difference between 15% of the computable net worth and the excess admitted to each individual ratio provided in that point 7. This, without prejudice to the possibility of reinvesting the capital amortizations of the public debt instruments referred to in point 8. of the resolution disseminated through Communication “A” 3911. Likewise, for these institutions, the increase in the global credit quotas provided in the previous paragraph shall not apply.

For the purposes of calculating the general and expanded limits mentioned above as well as the limit provided by point 12. of Communication “A” 3911 and amendments, the financings referred to in point 1. of this regime shall be computed by:

4.1. 25% of its balance for all concepts, when it concerns the first and second paragraph of point 1.2.5.

CENTRAL BANK
OF THE ARGENTINE REPUBLIC

4.2. 50% of its balance when the situation provided in subparagraph i) and in the first paragraph of subparagraph ii), both corresponding to the third paragraph of point 1.2.5, occurs.

4.3. 75% of its balance when the situation provided in the second paragraph of subparagraph ii) of point 1.2.5 occurs.

5. Increase by one time the limits established in matters of risk concentration -points 2.2.1. and 2.2.2. of Annex II of Communication “A” 2140-, setting them at 4 times and 6 times, respectively, the computable net worth of the institution as of the last day of the month prior to the corresponding one, when the excesses to the limits provided generally in said regulations originate as a consequence of the application of the provisions referred to in point 1. of this regime and/or point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector”.

6. Provide that, in the month prior to that in which the financial assistance or each subscription of debt instruments and/or debt instruments of the trusts or fiduciary funds referred to in point 1. of this regime is made, the financial institution that makes use of the expanded credit quotas referred to in points 4. and/or 5. must record an excess of minimum capital integration that exceeds at least the sum of the amount corresponding to that subscription plus its accumulated holding, as of that date, of such types of instruments.

Additionally, in the Business Plan and Projections submitted by that financial institution, in compliance with the provisions of the reporting regime in that matter, in force at the time of evaluation by the intervening financial institution, a projected monthly excess of minimum capital integration -individual position- must arise for the reported periods of such magnitude that it allows eventually absorbing the greater minimum capital requirement derived from the incorporation as “INC” referred to in point 7. of this regime. When the information corresponding to said projections refers to a half-year period, the projected computation to be considered must be proportional.

7. Incorporate within the expression “INC” (increase in minimum capital for credit risk) provided in point 3.1. of Section 3. of the rules on “Minimum capital of financial institutions” the excesses to the financial assistance granted or to the holdings of debt instruments of trusts or fiduciary funds referred to in point 1. of this regime and point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector” for the part of the holding imputed to the expanded credit quotas referred to in points 4. and/or 5. computed according to the following schedule, which shall operate from the time the works have begun to be economically used or the equipment generates income to the trust or fiduciary fund through tariffs, rates, fees or other similar concepts.

Computation as “INC” of the use of the expanded quota -in % of said utilization-	From the
25	First month
50	Seventh month
100	Thirteenth month”

CENTRAL BANK OF THE ARGENTINE REPUBLIC

2. Replace subparagraph ii) of point 3.1. of Section 3. of the rules on “Minimum capital
   of financial institutions”, with the following:

“ii) the use of the expanded credit quotas referred to in points 4. and 5. of Communication “A” 4838 and complementary (for the excesses over the limits established in points 7. and 8. of Communication “A” 3911 and amendments) with respect to the financial assistance granted and/or the holdings of debt instruments of financial trusts or trust funds referred to in point 1. of said Communication and point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector” computed in accordance with the following schedule, which will operate from the time the works have begun to be economically used or the equipment generates income for the trust or trust fund through tariffs, rates, fees or other similar concepts.

Computation as “INC” of the use of the expanded quota -in % of said utilization-	As of the
25	First month
50	Seventh month
100	Thirteenth month”

3. Replace the first paragraph of Section 2. of the rules on “Minimum capital breaches and technical ratios. Applicable criteria”, with the following:

“They will be subject to the following treatment:

• the excesses to:

  • the ratio of immobilized assets and other concepts,

  • credit grading,

  • the limits of financing to related clients,

  • financial assistance to the non-financial public sector (point 12. of Communication “A” 3911 -text according to point 3. of Communication “A” 4546- and point 5. of Communication “A” 4861),

  • the limits of credit risk fragmentation (including the expanded credit quotas referred to in points 4. and 5. of Communication “A” 4838 and complementary).

• the expanded credit quotas referred to in points 4. and 5. of Communication “A” 4838 and complementary (financial assistance to financial trusts or trust funds), to the extent that the works have begun to be economically used or the equipment generates income for the trust or trust fund through tariffs, rates, fees or other similar concepts, as provided by point 7. of Communication “A” 4838 and complementary.

• the credit exposure resulting from the sum of positions not covered by contracts sold to cover price variations of basic products -“commodities”-.”

Finally, we send you the sheets that, in replacement of those previously provided, should be incorporated into the ordered texts of the reference. Likewise, it is recalled that on the page of this Institution www.bcra.gov.ar, accessing “regulations” (“ordered texts”), you will find the modifications made with texts highlighted in special characters (strikethrough and bold).

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Darío C. Stefanelli
Manager of Issuance of Rules

José I. Rutman
Deputy General Manager of Rules

ANNEX

MINIMUM CAPITAL OF FINANCIAL INSTITUTIONS
B.C.R.A.
Section 3. Minimum capital for credit risk.

• to the credit exposure resulting from:

i) the sum of positions not covered by contracts to cover price variations of basic products -“commodities”-. Positions sold to clients that do not correspond to the coverages acquired by the financial institution, whatever the underlying and/or the client, will be considered uncovered positions,

ii) the use of the expanded credit quotas referred to in points 4. and 5. of Communication “A” 4838 and complementary (for the excesses over the limits established in points 7. and 8. of Communication “A” 3911 and amendments) with respect to the financial assistance granted and/or the holdings of debt instruments of financial trusts or trust funds referred to in point 1. of said Communication and point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector” computed in accordance with the following schedule, which will operate from the time the works have begun to be economically used or the equipment generates income for the trust or trust fund through tariffs, rates, fees or other similar concepts.

Computation as “INC” of the use of the expanded quota -in % of said utilization-	As of the
25	First month
50	Seventh month
100	Thirteenth month

• to the limits of credit grading (Section 3. of the respective ordering), and

• to the limits on financial assistance to the non-financial public sector -point 12. of Communication “A” 3911 (text according to point 3 of Communication “A” 4546) and point 5. of Communication “A” 4861-.

In the matter, the provisions contained in Section 2. of the rules on “Minimum capital breaches and technical ratios. Applicable criteria” will be applicable, unless the provisions of Section 3. thereof are applicable.

IP : increase due to the expansion of the general limit of the net negative global position in foreign currency, in accordance with the provisions contained in point 2.1. of Section 2. of the rules on “Net global position in foreign currency” (in force as of 1.1.07).

Version: 9a. COMUNICACIÓN “A” 4996
Validity:
22/10/2009
Page 3

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE
ORDERED TEXT OF THE RULES ON
MINIMUM CAPITAL OF FINANCIAL INSTITUTIONS

ORDERED TEXT			SOURCE STANDARD				Observations
Section	Point	Paragraph	Com.	Chap./Annex	Point	Paragraph
1.	1.1.		"A" 2136		1.	1st	According to Com. "A" 2859 and 3558.
	1.2.1.		"A" 2237		b)		According to Com. "A" 2923 (point 3.1.2.3. of Section 3.), 4631 and "B" 9186.
	1.2.2.		"A" 2923	3.	3.2.2.
	1.2.3.		"A" 2923	3.	3.3.
	1.3.		"A" 2136		2.	1st	According to Com. "A" 2223.
	1.4.1.		"A" 2136		3.1.
	1.4.2.1.		"A" 3171				According to Com. "A" 3959.
		i)	"A" 2136		3.2.	2nd	According to Com. "A" 3959.
		ii)	"A" 2136		3.2.4.		According to Com. "A" 2241 and 4771.
		iii)	"A" 414 LISOL-1	VI	6.1.
	1.4.2.2.		"A" 3171				According to Com. "A" 3959.
2.	2.1.		"A" 2241 CREFI-2	I	1.3.1.		According to Com. "A" 4368.
	2.2.		"A" 2650		2.		According to Com. "A" 3128, 4238 and 4368 and 4771.
	2.3.1.		"A" 2237		a)		According to Com. "A" 2923 (point 3.1.1.2. of Section 3.).
	2.3.2.		"A" 2923	3.	3.2.1.
	2.3.3.		"A" 2923	3.	3.3.
3.	3.1.		"A" 2136		1.		According to Com. "A" 2541, 2736, 2938, 3039, 3307, 3959, 4598, 4702 (incorporates clarification) and 4741, 4742, 4961 and 4996.
	3.2.		"A" 2136	I			According to Com. "A" 2541, annex, criteria, d), 2nd paragraph and 3040.
	3.3.1.		"A" 2136	I			According to Com. "A" 2541, annex, criteria, d), 2nd paragraph.
	3.3.2.		"A" 2287		5.
	3.3.3.		"A" 2412				In the second paragraph of point 3.3.3.3. it incorporates a criterion not previously disclosed on a general basis. According to Com. "A" 3959.
	3.4.1.		"A" 2768		2.		According to Com. "A" 2948, 3911, 3925, 3959, 4180 and "B" 9074.
	3.4.2.		"A" 2227	sole	5.2.2.	3rd
	3.5.1.		"A" 2136		1.1.

BREACHES OF MINIMUM CAPITAL AND TECHNICAL RATIOS.
B.C.R.A.
APPLICABLE CRITERIA
Section 2. Excesses over technical ratios and uncovered derivative positions.

They will be subject to the following treatment:

• excesses over:

  • the ratio of immobilized assets and other items,

  • credit grading,

  • the limits of financing to related clients,

  • financial assistance to the non-financial public sector (point 12. of Communication "A" 3911 -text according to point 3. of Communication "A" 4546- and point 5. of Communication "A" 4861),

  • the limits of credit risk splitting (including the expanded credit quotas referred to in points 4. and 5. of Communication "A" 4838 and complementary ones).

• the expanded credit quotas referred to in points 4. and 5. of Communication "A" 4838 and complementary ones (financial assistance to financial trusts or fiduciary funds), to the extent that the works have begun to be economically used or the equipment generates income for the trust or fiduciary fund through tariffs, rates, fees or other similar items, as provided by point 7. of Communication "A" 4838 and complementary ones.

• the credit exposure resulting from the sum of positions not covered by contracts sold to cover variations in prices of basic products -"commodities"-.

2.1. Breaches reported by the entities.

2.1.1. Information submitted on time.

They will give rise to an increase in the minimum capital requirement for credit risk in an amount equivalent to 100% of the excess over the ratio, from the month in which the breaches are recorded and for as long as they persist.

In the case of credit relationships, the calculation of the deviation shall be made on the basis of the monthly average of the daily excesses.

2.1.2. Information submitted late.

They will give rise to an increase in the minimum capital requirement for credit risk in an amount equivalent to 100% of the excess over the ratio, from the month in which the information is submitted, for as long as the breach persists and, additionally, once regularized, for a number of months equal to the number of periods during which the excess not timely reported by the entity occurred.

The calculation of the deviation shall be made considering the largest excess amount recorded in the periods covered by the information submitted late and in the following ones, as long as the breach persists and even when the information for the following periods is submitted in due time and form.

Version: 6a. COMUNICACIÓN “A” 4996
Effective date:
22/10/2009
Page 1

BREACHES OF MINIMUM CAPITAL AND TECHNICAL RATIOS.
B.C.R.A. APPLICABLE CRITERIA
Section 2. Excesses over technical ratios and uncovered derivative positions.

In the case of credit relationships, such calculation shall be made considering the largest daily excess amount, with respect to the customers that originated it, recorded in such periods.

2.1.3. Repeated breaches.

2.1.3.1. Definition.

It refers to the non-observance of the ratios -considering each of them separately- in successive periods or with an interval of less than 3 months, derived from voluntary acts (for example: granting of financing to a customer whose assistance already exceeds the limits, distribution of profits that reduce the computable net worth, excesses of assistance to different customers in different periods).

2.1.3.2. Consequences.

It will determine that the increase in the minimum capital requirement for credit risk be equivalent to 130% of the excess recorded in the respective ratio.

2.2. Breaches detected by the Superintendency of Financial and Exchange Entities.

2.2.1. Response.

The entity shall have 30 calendar days counted from the notification of the determination made by the Superintendency of Financial and Exchange Entities in order to file its response, on which it must rule within the following 30 calendar days after the filing.

2.2.2. Final determination.

2.2.2.1. When the entity does not file its response within the period indicated in point 2.2.1., the determination shall be considered final on the date of expiration of the period to file the response.

2.2.2.2. If the response filed is rejected -totally or partially- by the Superintendency of Financial and Exchange Entities, the breach shall be considered final on the date of notification of the decision adopted.

2.2.3. Treatment of the determined breach.

It will give rise to an increase in the minimum capital requirement for credit risk in an amount equivalent to 150% of the excess over the ratio from the month in which it becomes final, for as long as the breach persists and, additionally, once regularized, for a number of months equal to the number of periods during which the breach detected by the Superintendency occurred.

Version: 5a. COMUNICACIÓN “A” 4996
Effective date:
22/10/2009
Page 2

BREACHES OF MINIMUM CAPITAL AND TECHNICAL RATIOS.
B.C.R.A.
APPLICABLE CRITERIA
Section 2. Excesses over technical ratios and uncovered derivative positions.

The calculation of the deviation shall be made considering the largest excess amount recorded in the mentioned periods and in the following ones, as long as the breach persists and even when the information for the following periods is submitted in due time and form.

In the case of credit relationships, such calculation shall be made considering the largest daily excess amount, with respect to the customers that originated it, recorded in such.

2.3. Limitations on deposit growth.

When the sum of the increases in the minimum capital requirement for credit risk resulting from the breaches of the technical ratios included in this section exceeds the equivalent of 5% of said requirement -without considering the increases- and while this situation persists, the total amount of deposits -in national and foreign currency- may not exceed the level reached during the month in which that event is recorded.

Said limit and its observance shall be calculated on the basis of the balances recorded on the last day of each of the months included.

2.4. Accounting exposure.

The breaches must be reported in notes to the financial statements according to the criteria established by the Superintendency of Financial and Exchange Entities.

2.5. Application of article 41 of the Law on Financial Entities.

Summary proceedings shall be initiated in accordance with the guidelines defined by the Superintendency of Financial and Exchange Entities.

Version: 5a. COMUNICACIÓN “A” 4996
Effective date:
22/10/2009
Page 3

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE TEXT
CONSOLIDATED TEXT OF THE RULES ON
BREACHES OF MINIMUM CAPITAL AND TECHNICAL RATIOS.
APPLICABLE CRITERIA

CONSOLIDATED TEXT			SOURCE RULE				Observations
Section	Point	Paragraph	Com.	Cap.	Point	Paragraph
1.	1.1.	1°	“A” 3161		1.1.
		2°	“A” 3161		1.1.		According to Com. “A” 3171 (point 1.).
		3°	“A” 3171		1.
	1.2.		“A” 3161		1.2.
	1.2.1.		“A” 3161		1.2.1.
	1.2.2.		“A” 3161		1.2.2.
	1.2.2.1.		“A” 3161		1.2.2.1.
	1.2.2.2.		“A” 3161		1.2.2.2.
	1.3.		“A” 3161		1.3.
	1.3.1.		“A” 3161		1.3.1.
	1.3.2.		“A” 3161		1.3.2.
	1.3.2.1.		“A” 3161		1.3.2.1.
	1.3.2.2.		“A” 3161		1.3.2.2.
	1.4.		“A” 3161		1.4.
2.	2.		“A” 3161				According to Com. “A” 4546, 4742, 4961 and 4996.
	2.1.1.		“A” 3161		2.1.1.
	2.1.2.		“A” 3161		2.1.2.		According to Com. “A” 3171 (point 2.).
	2.2.		"A" 3161		2.2.
	2.2.1.		"A" 3161		2.2.1.
	2.2.2.		"A" 3161		2.2.2.
	2.2.2.1.		"A" 3161		2.2.2.1.
	2.2.2.2.		"A" 3161		2.2.2.2.
	2.2.3.		"A" 3161		2.2.3.		According to Com. "A" 3171 (point 3.).
	2.3.		"A" 3161		2.3.		According to Com. "A" 3171 (point 4.).
	2.4.		"A" 3161		2.4.
	2.5.		"A" 3161		2.5.
3.	3.1.		"A" 3161		3.1.
	3.2.		"A" 3161		3.2.