Financing to the Non-Financial Public Sector: Regulatory Adaptation

2010 - YEAR OF THE BICENTENNIAL OF THE MAY REVOLUTION

COMMUNICATION “A” 5154
10/12/2010

TO FINANCIAL INSTITUTIONS:

Ref.: Circular
OPRAC 1 - 650
LISOL 1 - 527

Financing to the non-financial public sector. Regulatory adaptation.

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

“1. Replace point 2.1. of Section 2. of the rules on “Financing to the non-financial public sector” with the following:

“Financial institutions, including their branches and their domestic and foreign subsidiaries, may not refinance or grant financial assistance to the non-financial public sector, unless it is destined to trusts or fiduciary funds constituted for specific purposes and compliance with the requirements set forth in Section 5 has been previously verified.”

2. Delete point 1.2. of Section 1. of the rules on “Financing to the non-financial public sector”.”

Lastly, we send you the pages that, replacing those previously provided, should be incorporated into the ordered texts of the rules on “Financing to the non-financial public sector” and “Credit rating”. Likewise, it is recalled that on this Institution's website www.bcra.gov.ar, by accessing “regulations” (“ordered texts”), you will find the amendments made with texts highlighted in special characters (strikethrough and bold).

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Darío C. Stefanelli
Issuance Manager of Regulations
Alfredo A. Besio
Deputy General Manager of Regulations

ANNEX

B.C.R.A.
ORDERED TEXT OF THE RULES ON
“FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR”

-Index-

Section 1. Non-financial public sector.

1.1. Concept.

1.2. Exclusions.

Section 2. Financial assistance.

2.1. Limitation.

2.2. Responsibility.

Section 3. Covered transactions.

3.1. Included concepts.

3.2. Excluded concepts.

Section 4. Exceptions.

Section 5. Assistance to trusts or fiduciary funds constituted for specific purposes. Requirements.

Section 6. Other required conditions.

Correlation table.

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1.1. Concept.

The non-financial public sector comprises the National Government and the provincial and municipal governments and the Autonomous City of Buenos Aires, including the central administration, ministries, secretariats and their decentralized and autonomous agencies, and other entities controlled by them.

It also comprises trusts and fiduciary funds whose final beneficiary or trustee, determined by the respective contracts or provisions governing them, belongs to the non-financial public sector, including the remaining trusts or fiduciary funds in which the works being financed have said sector as their final recipient.

1.2. Exclusions.

1.2.1. State Companies.

The Central Bank of the Argentine Republic may grant State Companies governed in accordance with Law 20.705 the general treatment provided for persons of the non-financial private sector, for all purposes of the rules applicable in that matter, provided they comply with the following requirements:

a) Not requiring to carry out their activity resources from the state budget -national, municipal, provincial, or of the Autonomous City of Buenos Aires- in the form of transfers, capital contributions -except those corresponding to incorporation as a company- or repayable financial assistance destined to cover expenses and/or investments of their normal and usual business, with the sole exception of those that could have been contemplated in the Budgets corresponding to fiscal years 2001 and 2002.

b) Technical and professional independence of their managerial staff for the implementation of corporate policies.

c) Marketing their goods and/or services at market prices.

d) Having fixed assets whose use in the activity is not subject to any condition by their shareholders.

e) Not distributing dividends among their shareholders.

f) All the above conditions must have been verified -uninterruptedly- during at least the ten years immediately preceding the date of granting the financial assistance.

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1.2.2. Energy sector.

The Central Bank of the Argentine Republic may agree to the general treatment provided for persons in the non-financial private sector, for all purposes of the rules applicable in that matter -except for the provisions established in the rules on “Credit Rating”- to public sector companies not included in the provisions of point 1.2.1. and that, in addition, comply with the following requirements:

a) Their creation has been ordered by national law.

b) Constitute a Corporation subject to the regime of Chapter II, Sections V and VI of the Commercial Companies Law -Law 19.550-.

c) Have majority participation of the National State, direct or indirect, according to the provisions contained in that legal provision.

d) Have as specific purpose the development of activities in the energy sector.

e) Be subject to internal and external controls of the National Public Sector under the terms of the Financial Administration and Control Systems of the National Public Sector Law -Law 24.156-.

1.2.3. Specific procedure.

For the purposes of obtaining the general treatment provided for private sector companies in accordance with the provisions of points 1.2.1. and 1.2.2. as applicable, companies must:

i) Prior to the first financial assistance they request from financial entities under this regime, they must petition by note signed by their legal representative and addressed to the Central Bank of the Argentine Republic, for the general treatment provided for private sector companies, attaching for that purpose a sworn declaration signed by all members of their board of directors stating compliance with the conditions set forth above and a commitment to provide the information requested for that purpose, as well as to reliably notify the Central Bank of the Argentine Republic and the lending financial entity of any modification of the circumstances taken into account for their assimilation to private sector companies.

ii) In the event that the Central Bank of the Argentine Republic agrees to the general treatment provided for private sector companies, the company, when requesting any type of financing from a financial entity, must present to it an authentic copy of the resolution granting it, together with a sworn declaration signed by all members of its board of directors stating that it continues to comply with the conditions taken into account to grant it said treatment.

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iii) The sworn declarations referred to in subsections i) and ii) above must be accompanied by a certification from a public accountant with signature legalized by the competent Professional Council of Economic Sciences in which that professional states on the compliance with the requirements established in subsections a), d) and e) of point 1.2.1. during the term referred to in subsection f) of that point or the requirements of point 1.2.2., as applicable.

It will be the responsibility of the lending financial entities to verify, prior to granting each credit assistance, the required intervention of this Institution, the maintenance at all times of the requirements set for the purposes of the treatment established above. In the case of State Companies, the existence of the corresponding authorization must also be verified by virtue of the provisions of article 25 of Law 25.917, granted by the competent authority in that matter.

When a company ceases to observe the conditions taken into account to agree to the general treatment provided for private sector companies, the provisions applicable to the non-financial public sector will be applied to new financings granted to it, from the moment that circumstance is verified.

Consequently, companies that receive said treatment will be exempted -for all purposes- from the application of the provisions on financial assistance to holders of the non-financial public sector.

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FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR B.C.R.A.
Section 2. Financial assistance.

2.1. Limitation.

Financial entities, including their branches and subsidiaries in the country and abroad, may not refinance or grant financial assistance to the non-financial public sector, unless they are destined to trusts or fiduciary funds constituted for specific purposes and compliance with the requirements contemplated in Section 5 has been previously verified.

2.2. Responsibility.

Financial entities must verify, for the purposes of the application of these provisions and through the documentation they deem necessary to require, whether the client is included within the non-financial public sector.

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ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE RULES ON “FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR”

CONSOLIDATED TEXT			SOURCE RULE			Observations
Section	Point	Paragraph	Com.	Annex	Point	Paragraph
1.	1.1.		“A” 3054	sole	1.1.		According to Com. “A” 4798, 4838 (point 12.) and 4937.
	1.2.		“A” 4527				According to Com. “A” 4581, “C” 51182, “B” 9745 and “A” 5154.
2.	2.1.		“A” 3054	sole	2.1.		According to Com. "A" 4937, 5062, "B" 9745 and "A" 5154.
	2.2.		"A" 3054	sole	2.2.
3.	3.1.		"A" 3054	sole	3.1.		According to Com. "A" 5067.
	3.2.		"A" 3054	sole	3.2.		According to Com. "A" 4838 (point 10.), 4932 (points 1. 3. and 4.), 4937 (points 2 and 3.), 4996 (point 1.), 5015 (annex), 5062, 5069, 5125 and "B" 9745.
4.	4.1.1.		"A" 3054	sole			According to Com. "A" 3548 and 3911 -point 9. subsection c)-.
	4.1.1.1.		"A" 3054	sole			According to Com. "A" 3911 -point 9., subsection b)-, 4798 and "B" 9745.
	4.1.1.2.		"A" 4798				According to Com. "A" 4947.
	4.1.1.3.		"A" 4798
	4.1.2.		"A" 3054	sole			According to Com. "A" 4718 and "B" 9745.
	4.1.3.		"A" 3054	sole			According to Com. "A" 3144 and 5062.
5.	5.1.		"A" 4838		1.		According to Com. "A" 4926, 4937, 5062 and "B" 9745.
	5.1.1.		"A" 4838		1.1.		According to Com. "A" 4926, 4937 (point 4.) and "B" 9745.
	5.1.2.		"A" 4838		1.2.		According to Com. "A" 4926, 4937 (point 4.), 5015 and "B" 9745.
	5.1.3.		"A" 4838		1.3.		According to Com. "A" 4926, 4937 (point 4.).
	5.1.4.		"A" 4838		1.4.		According to Com. “A” 4926, 4937 (point 4.) and 5036.
	5.1.5.		“A” 4838		1.6.		According to Com. “A” 4937 (point 4.) and 5062.
	5.1.6.		“A” 4838		6. and 10.		According to Com. “A” 4926, 4937 (point 4.), 4996 (point 1.), 5015 (annex), 5062 and “B” 9745 and regulatory interpretation.
	5.1.7.		“A” 4838		1.5.		According to Com. “A” 4926, 4937 (point 4.), 5062 and “B” 9745.
	5.1.8.		“A” 4937		4.		According to Com. “B” 9745 and “A” 5062.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

B.C.R.A.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

CLASSIFICATION OF CREDIT B.C.R.A.
Section 2. Financings included.

2.2.11. Credits that have guarantees extended by mutual guarantee companies registered in the Registry enabled in the Central Bank of the Argentine Republic or by national and provincial funds constituted with the same purpose as those companies, admitted by this Institution.

2.2.12. Loans to other local financial institutions.

2.2.13. Financings granted to the non-financial public sector considering for such purposes the definition of point 1.1. of the rules on “Financing to the non-financial public sector”, except those granted to State Companies provided for in point 1.2.1. of that body of rules.

2.2.14. Commitments to provide funds assumed in loan syndication operations, until they are reflected in debt balances in the so-called “managing bank” or in the event that in that subsequent stage the latter assumes the obligation to guarantee to the remaining participating institutions the repayment of the funds they contribute for the required financing.

2.2.15. Export financings -operations without liability for the transferor- covered by commercial risk credit insurance and, where applicable, extraordinary risks (borne by the National State, Law 20.299), including credit risk insurance “with public buyer coverage”. The policy covering commercial risk must be issued by:

a) Local insurance companies that have:

• an “AA” or higher rating granted by any of the risk rating companies registered in the registry of the National Securities Commission and

• reinsurance with insurance companies:

  i) local ones that have an “AA” or higher rating assigned by a national risk rating company, or

  ii) foreign ones that have an international risk rating of “A” or higher.

The amount of the reinsurance must comply with the regulations issued by the National Insurance Superintendency.

b) Local branches of foreign insurance companies that have an international risk rating of “A” or higher.

c) Local subsidiaries of foreign insurance companies provided that, with respect to the controlling company, the following conditions are met:

• it has the rating cited in the preceding subparagraph b) and

• it has explicitly guaranteed the obligations of the subsidiary.

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B.C.R.A.

CENTRAL BANK
OF THE ARGENTINE REPUBLIC

ORIGIN OF THE PROVISIONS INCLUDED IN THE RULES ON “CLASSIFICATION OF CREDIT”

CONSOLIDATED TEXT SOURCE RULE
Section Point Paragraph Com. Annex Point Paragraph Observations
1.1. 1st “A” 467 sole 2.
“A” 467 sole 6.1. last
1.
1.1. 2nd “A” 3002 Incorporates interpretive clarification.
tive.
2.1. “A” 467 sole 2.
2.2.1. “A” 467 sole 4.1.
2.2.2. 1st “A” 467 sole 3.1.
2.2.2. last “A” 490 sole 2.
2.2.3. “A” 467 sole 3.2.
2.2.4. “A” 467 sole 3.3.
2.2.5. “A” 467 sole 4.2.
2.2.6. 1st "A" 467 sole 4.3.
2.2.6. last "A" 490 sole 4. and 5.
2.2.7. "A" 467 sole 4.4.
2.2.8. except
"A" 467 sole 4.5. According to Com. "A" 2054.
2.2.8.1. viii "A" 467 sole 4.5.8. According to Com. "A" 2074.
2.2.9. "A" 467 sole 4.6. According to Com. "A" 2054.
2.2.10. "A" 467 sole 4.7. According to Com. "A" 2098, "B"
5477, "A" 4310 (point 3.) and "A"
4975.
2.2.11. "A" 467 sole 4.8.
"A" 2410 7.
According to Com. "A" 2410, 3307,
4093 (penultimate paragraph) and
4465.
2.2.12. "B" 5902 10. last According to Com. "A" 5013.
2.2.13 "B" 5902 10. last According to Com. "A" 5013 and 5154
2.2.14 "B" 5902 10. last According to Com. "A" 5013.
2.2.15. "A" 3314
2.
2.2.16. "A" 4891 5.
3.1.1. "A" 467 sole 1. 1st According to Com. "A" 2373.
3.1.2.1. "A" 467 sole 1. 2nd According to Com. "A" 2373.
3.1.2.2. 1st to 6th "A" 467 sole 1. 2nd According to Com. "A" 2373 and "B"
5902. Includes interpretative clari-
fication.
3.1.2.2. 7th "B" 5902 10. 1st
3.1.2.2. last "A" 3002 Incorporates interpreta-
tive clarification.
3.2.1. "A" 467 sole 1. 3rd According to Com. "A" 2373, modif-
ied by Com. "A" 2960.
Incorporates interpretative criterion.
3.2.2. "A" 2206 2. According to Com. "A" 3183.
3.2.2.1. "A" 2206 2. According to Com. "A" 3086 and 3183.
3.2.2.2. "A" 2056 1. According to Com. "A" 3086 and 4093
(penultimate paragraph).
3.2.2.3. "A" 2384 1. 1st and 2nd According to Com. "A" 3086 and 4093
(penultimate paragraph).
3.2.2. last "A" 3086 1.
3.
3.3. "A" 2156 5.
4. 4.1. "A" 467 sole 5.