Foreign Currency Forward and Swap Operations - LISOL 1-35, OPRAC 1-271, OPASI 2-35, REMON 1-547

BANCO CENTRAL DE LA REPÚBLICA ARGENTINA
COMMUNICATION "A" 1590 19/12/89
TO FINANCIAL ENTITIES:
Ref.: LIQUIDITY AND SOLVENCY CIRCULARS - LISOL - 1

• 35, ACTIVE OPERATIONS - OPRAC - 1 -
  271, PASSIVE OPERATIONS - OPASI - 2 - 35
  AND MONETARY REGULATIONS - REMON - 1
• 547. Foreign Currency Swap and Forward Operations

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

• Establish, from 19.12.89., the regime regarding swap and forward operations with foreign currency contained in Annexes I and II.
  Requests to participate in this regime must be submitted, via note, to the Management of Authorization of Financial Entities. In matters of the exchange information regime, the norms contained in
  Annex III will apply.
  Finally, we clarify that the provisions referred to in Annex II will be applicable to all financial entities. We salute you very respectfully. BANCO CENTRAL DE LA REPÚBLICA ARGENTINA Eduardo C. Schweizer Rodolfo Caporalini Deputy Manager of Standards for Deputy General Manager Financial Entities ANNEXES

B.C.R.A. REGIME ON SWAP AND FORWARD RELATIONSHIPS WITH FOREIGN CURRENCY
Annex I to
Comm. “A” 1590

1. Financial entities authorized to operate in foreign currency in Category "C" may perform, with prior authorization from the Central Bank, swap operations with foreign currency,
   subject to the following conditions:
   1.1. Passive Swaps (spot sale and simultaneous forward purchase of currency to the same investor).
   1.1.1. Minimum Term.
   7 days. Early cancellations may be admitted, starting from the seventh day of validity of the operations.
   1.1.2. Forward Premium.
   The one freely agreed upon.
   1.1.3. Tradable Currencies.
   The ones freely agreed upon.
   1.1.4. Coverage Margin.
   To the satisfaction of the entities.
   1.1.5. Instrumentation.
   The contracts for these operations must contain as a minimum the following statements:
   1.1.5.1. The inscription "Contract for foreign currency passive swap operation".
   1.1.5.2. Name and domicile of the intervening entity.
   1.1.5.3. Place and date of issuance.
   1.1.5.4. Name, surname, domicile, and identity document of the client, if an individual,
   or name and domicile, if a legal entity.
   1.1.5.5. Name, surname, domicile, and identity document of the representative, when
   corresponding.
   1.1.5.6. Designation of the traded currency.
   1.1.5.7. Total value of the traded currency.
   1.1.5.8. Spot sale value.

-2-
1.1.5.9. Forward purchase value.
1.1.5.10. Place and date of forward purchase.
1.1.5.11. The following expression: "This operation is not guaranteed by the Central Bank of the Republic Argentina".
1.1.5.12. Signature of the client or their representative, as appropriate.
1.1.5.13. Two authorized signatures of the intervening entity duly identified.
1.1.6. Settlement.
May be effected by difference or compensation.
1.1.7. Minimum Cash.
Passive swaps will observe the requirements in australes, not subject to compensation, as indicated below:
Term Rate

• in % -
  from 7 to 29 days 7 from 30 to 89 days 1.5 from 90 days or more 0
  1.1.8. Application of Resources.
  Funds derived from these operations will be applied within the interest rate segment.
  1.1.9. Regulations.
  These operations will be included in the report for deposits and other obligations.
  1.1.10. Other Provisions.
  As far as not provided for in these norms, the provisions contained in point 3.5., except point 3.5.13.3., of Chapter I of Circular OPASI - 2 will apply.

• 3 -
  B.C.R.A. REGIME ON SWAP AND FORWARD RELATIONSHIPS WITH FOREIGN CURRENCY
  Annex I to
  Comm. “A” 1590
  1.2. Active Swaps (spot purchase and simultaneous forward sale of currency to the same taker).
  1.2.1. Minimum Term.
  7 days. Early cancellations may be admitted, starting from the seventh day of validity of the operations.
  1.2.2. Forward Premium.
  The one freely agreed upon.
  1.2.3. Tradable Currencies.
  The ones freely agreed upon.
  1.2.4. Coverage Margin.
  To the satisfaction of the entities.
  1.2.5. Instrumentation.
  The contracts for these operations must contain as a minimum the following statements:
  1.2.5.1. The inscription "Contract for foreign currency active swap operation".
  1.2.5.2. Spot purchase value.
  1.2.5.3. Forward sale value.
  1.2.5.4. Place and date of forward sale.
  1.2.5.5. Those provided for in points 1.1.5.2. to 1.1.5.7. and 1.1.5.11 to 1.1.5.13.
  1.2.6. Settlement.
  May be effected by difference or compensation.
  1.2.7. Applicable Resources.
  Participating financial entities may apply to these operations funds derived from the lending capacity of the interest rate segment and/or unimmobilized own resources.
  1.2.8. Regulations.
  These operations, for 25% of the capital effectively traded, will be covered by the norms on credit risk fragmentation and credit grading.

-4-
2. Financial entities authorized to participate in this regime may apply to the realization of interest rate operations, funds derived from the sale of foreign currency coming from active swaps.
3. Financial entities authorized to participate in this regime may effect purchases and
sales of foreign currency forwards not linked to swap operations, subject to the following conditions:
3.1. Minimum Term.
7 days. Early cancellations may be admitted, starting from the seventh day of validity of the operations.
3.2. Forward Premium.
The one freely agreed upon.
3.3. Tradable Currencies.
The ones freely agreed upon.
3.4. Coverage Margin.
To the satisfaction of the entities.
3.5. Cancellation.
May be agreed in australes or, when dealing with arbitrage operations, in foreign currency. Arbitrage operations may be negotiated in the country or abroad.
3.6. Settlement.
May be effected by difference or compensation.
3.7. Regulations.
The forward position (purchased or sold, whichever is greater) will be covered by the report for deposits and other obligations.
4. Other Provisions.
4.1. Operations referred to in points 1. and 3. cannot be performed with individuals and legal entities linked to the intervening entities.
4.2. Financial entities authorized to participate in this regime may perform between themselves
or with unauthorized entities swap operations and forward purchase and sale of foreign currency, under the conditions they freely agree upon.

• 5 -
  B.C.R.A. REGIME ON SWAP AND FORWARD OPERATIONS WITH FOREIGN CURRENCY
  Annex I to
  Comm. “A” 1590
  Passive swaps and the forward position (purchased or sold, whichever is greater) will be covered by the report for deposits and other obligations.

B.C.R.A. POSITIONS Annex II to
Comm. ”A” 1590
Daily foreign currency forward positions will be subject to the following provisions:

1. The absolute value of the difference between the net purchased forward position and the net "financial" sold position cannot exceed the greater of the following ratios: 5% of
   the calculable equity responsibility of the last day of the second month prior to the one corresponding or 15% of the non-immobilized own funds of the second month prior. The bases of these ratios will be calculated in values adjusted by the financial index between the last day of the second month prior and the day preceding the one referred to the daily position.
2. The net sold forward position cannot exceed the net "financial" purchased position plus the greater of the ratios indicated in point 1.
3. Such limits will be observed independently for each currency.
4. For the foregoing purposes, the mentioned positions will be composed as follows:
   4.1. Net Forward: forward purchases (excluding those corresponding to passive swaps)
   minus forward sales (excluding those corresponding to active swaps). It will be considered "purchased" when the result is positive and "sold" otherwise.
   4.2. Net "Financial": availability, loans, other placements and forward purchases for passive swaps, minus deposits, other obligations and forward sales for
   active swaps. It will be considered "purchased" when the result is positive and "sold" otherwise.
   4.3. Regarding United States dollars, the positions defined in points 4.1. and
   4.2. will be determined considering jointly said currency and External Bonds
   of the Argentine Republic.
5. Excesses to these maximum ratios will be subject to a charge equivalent to 2 times the maximum rediscount rate.

B.C.R.A. EXCHANGE INFORMATION REGIME Annex III to Comm. “A” 1590 The negotiation of operations with clients must be declared via forms 4001A, 4002A and 4005, depending on whether they are forward purchases, forward sales and swap and arbitrage operations, respectively. Operations negotiated between entities authorized to operate in exchanges must be declared in forms 112 (swaps and arbitrages) and 116 (purchases and sales), while forward arbitrage operations with correspondents abroad must be declared in Form 4005. The settlement of operations originally declared in forms 4001A, 4002A and 4005 must be declared in Form 4004A or 4004B, depending on whether they are purchases or sales, while operations originally declared in forms 112 and 116, must be declared in Form 116, informing in red the cancellation of the forward operation and in black the negotiation of the spot operation, in both cases regardless of the type of operations negotiated (swap, arbitrage or forward purchase/sale). All movements must be summarized in Form 4009 together with spot operations negotiated on the same date and reflected in the balances declared in Form 111.