Fixed Assets and Other Concepts: Ratio to Computable Equity

"1998 - Year of the Municipalities"
CENTRAL BANK OF THE ARGENTINE REPUBLIC
__________________________________________________________________ COMMUNICATION "A" 2736 07/17/98 __________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 193.
OPRAC 1 - 427.
Fixed assets and other concepts. Ratio regarding computable equity responsibility We address you to inform you that this Institution adopted the following resolution:
"1. Establish, effective from 09/01/98, that the assets indicated below shall not exceed -calculated jointly- 90% of the computable equity responsibility of each financial entity for the corresponding month:

• fixed assets, in accordance with the definitions in the annex that forms part of this communication.
• financing to related clients, without prejudice to the observance of the limits established in Annex I to Communication "A" 2140, point 2.
  Concepts that are deductible for the determination of computable equity responsibility are excluded from the aforementioned ratio.
  The included concepts will be computed based on the balances at the end of each month. In the case of financing to related clients, the balance at that moment or the highest amount recorded for that assistance during that period, whichever is greater, will be considered, computing for this purpose capital, interest, premiums, and exchange rate differences, as applicable, net of provisions for uncollectibility risk attributable to them, without deducting provisions for uncollectibility risk on the portfolio classified as "normal situation" or "normal compliance". Other assets will be considered net of provisions for impairment and accumulated depreciation and amortization attributable to them. Non-compliance with the established ratio will be subject to an 18% nominal annual charge, with the provisions of points 3.2.2. to 3.2.5. of Chapter V of Circular LISOL - 1 (text according to Communication "A" 2019) being applicable in this matter.

2. Replace, effective for the determination of computable equity responsibility required from 09/01/98, point 5. of the provisions disclosed by Communication "A" 2287 with the following:
   "Clarify that assets that must be deducted for the purpose of calculating computable equity responsibility in accordance with the provisions established in this matter by this Institution will not be considered for determining:

• the minimum capital requirement (Communication "A" 2136 and complementary),
• credit assistance limits (Annexes I and II to Communication "A" 2140),
• classification of debtors and minimum provisions for uncollectibility (Communication "A" 2729), and
• fixed assets and other concepts."

3. Establish that, from 09/01/98, the granting of credits related to the sale of fixed assets, including those taken in defense or in payment of credits, without prejudice to the provisions of point 1.5.1. of Section 1. of the rules on fixed assets referred to in point 1. of this communication, will be treated as financing included in the category of financial intermediation operations regarding debtor classification and provisioning, credit graduation, credit risk fractionation, and minimum capital.
4. Incorporate, effective from 09/01/98, into the Annex to Communication "A" 2227 (text according to Communication "A" 2649), the following point:
   "5.1.8. Fixed assets and other concepts."
5. Replace, from 09/01/98, point II.g. of the Annex to Communication "A" 2461 with the following:
   "g. Position in each asset (Vi): the net position must show the exposure that the entity has in each considered asset, therefore it will be constituted by (signs are shown in parentheses):
   Spot holding (+)
   Spot purchases to be settled and forward purchases (+) Spot sales to be settled and forward sales (-) Forward purchases linked to reverse repos (+) Forward sales linked to repos (-) Purchase of call options (multiplied by the option's delta) (+) Sale of call options (multiplied by the option's delta) (-) Purchase of put options (multiplied by the option's delta) (-) Sale of put options (multiplied by the option's delta) (+) Securities loans, net of provisions for uncollectibility risk (+) Securities deposits (-) Deposits of foreign currencies other than the US dollar (-) Loans of foreign currencies other than the US dollar (+) For the determination of Vi, the nominal values of bonds or shares included in each of the preceding operations must be multiplied by the spot price of the asset."
6. Point out that the holding of public and private securities and units of foreign mutual funds is only permitted for meeting minimum liquidity requirements.
7. Repeal, effective from 09/01/98, the following provisions:
   7.1. Communication "A" 1932.
   7.2. point 2.1. of Communication "A" 1465 (text according to Communication "A" 1512) and Communication "A" 2020.
   7.3. Chapter III of Circular LISOL - 1 (text according to Communication "A" 1214 and complementary), except with respect to point 5. and concordant provisions that are repealed effective 08/01/98.
   7.4. point 3. of Communication "A" 1054.
   7.5. information regime for the interest rate segment, application of own resources, and foreign currency position (formulas 4026 and 3926, respectively).
   7.6. point 6. of Communication "A" 2140."
   Sincerely yours,
   CENTRAL BANK OF THE ARGENTINE REPUBLIC
   Juan Carlos Isi Alfredo A. Besio
   Deputy Manager of Regulations Manager of Regulations for for Financial Entities Financial Entities
   ANNEX

B.C.R.A.	FIXED ASSETS	Annex to Comm. "A" 2736
-INDEX-
Section 1. Included Concepts.
Section 2. Excluded Concepts.
Section 3. Deductible Concepts.
Version: 1st.	Communication "A" 2736	Effective: 09/01/98

B.C.R.A.	FIXED ASSETS
	Section 1. Included Concepts.
1.1. Assets for own use.
1.2. Various assets.
1.3. Organization and development expenses -Not deductible for the determination of computable equity responsibility-.
1.4. Goodwill (incorporations registered prior to 05/30/97).
1.5. Various credits.
1.5.1. Facilities granted to enable the installment sale of the entity's assets, regardless of the nature of the asset, even if they meet the characteristics of financial operations, relevant analyses and evaluations of the acquirer's equity situation have been carried out, and the limitation on risk fractionation has been verified.
1.5.2. The balance in favor of the entity for Value Added Tax and advances of other taxes.
1.5.3. Assets pledged as collateral, including, among others, those related to the settlement of securities purchase and sale operations abroad or for repo or derivative operations, of obligations related to acting as agents in the stock market, over-the-counter market, and electronic fund clearing houses, except in the latter case when they are computable as part of the minimum liquidity requirements.
1.5.4. Other various credits not included in the preceding sections.
Version: 1st.	Communication "A" 2736

B.C.R.A.	FIXED ASSETS
	Section 1. Included Concepts.
1.6. Shares of domestic companies that are not publicly traded or are publicly traded when, in the latter case, the holding exceeds 2.5% of the company's capital and/or votes, or when, without exceeding said margin, the eventual liquidation of the holding could significantly affect the quotation taking into account the daily amount of transactions carried out.
The included concepts will be computed based on the balances (capital and interest, if applicable), net of accumulated depreciation and amortization and provisions attributable to them.
Version: 1st.	Communication "A" 2736

B.C.R.A.	FIXED ASSETS
	Section 2. Excluded Concepts.
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Deductible concepts for determining computable equity responsibility.
Version: 1st.	Communication "A" 2736

B.C.R.A.	FIXED ASSETS
	Section 3. Deductible Concepts.
3.1. Current debts arising from the acquisition of fixed assets included in Section 1., contracted with suppliers or corresponding to loans obtained with specific and verified allocation of funds.
3.2. Advances received for the sale of such assets.
3.3. Liabilities assumed with the National Treasury for the deferral of tax payments due to tax incentives granted by regional or sectoral promotion regimes, through the acquisition of social participations, up to one year after the legal impediments for the free availability of the participations have expired.
Version: 1st.	Communication "A" 2736