Guarantees, Credit Risk Fractioning and Credit Policy: Adjustments

2017 - YEAR OF RENEWABLE ENERGIES

CENTRAL BANK OF THE ARGENTINE REPUBLIC

COMMUNICATION “A” 6328
22/09/2017

TO FINANCIAL INSTITUTIONS:
Ref.: Circular
LISOL 1 - 759
OPRAC 1 - 914

"Guarantees". "Credit risk fractioning". "Credit policy". Adjust- ments.

---

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

“1. Replace points 1.1.6. and 3.1.6. of the rules on “Guarantees” with the following:

“1.1.6. Guarantees and letters of credit issued by foreign banks or multilateral development banks that comply with the provisions of point 3.1. of the rules on “Credit Assessments” –requiring for that purpose an international risk rating of “AA” or higher–, that are not the parent or controlling company and its subsidiaries and branches, or controlled companies or branches of the local entity, or that maintain other forms of linkage, whatever the term of the transaction, to the extent that they are unrestricted and that the funds are made available immediately upon simple request of the beneficiary entity.

When the foreign or multilateral development bank complies with the provisions of point 3.1. of the rules on “Credit Assessments” –requiring for that purpose an international risk rating of “A”– the computable term of the credit transaction must not exceed six months.”

“3.1.6. Guarantees and letters of credit from foreign banks or multilateral development banks (point 1.1.6): 100 %.”

2. Replace point 1.2.1. of the rules on “Credit risk fractioning” with the following:

“1.2.1. Guarantees and letters of credit issued by foreign banks or multilateral development banks (point 1.1.6. of the rules on “Guarantees”): to the guarantor or issuing bank.”

3. Replace point 2.1.17. of the rules on “Credit policy” with the following:

“2.1.17. Financings to residents of the country that are guaranteed by letters of credit (“stand-by letters of credit”) issued by foreign banks or multilateral development banks that comply with the provisions of point 3.1. of the rules on “Credit Assessments”, requiring for that purpose an international risk rating of “invest-

ment grade”, to the extent that such letters of credit are unrestricted and that the funds are made available immediately upon simple request of the beneficiary entity.”

We send you in annex the sheets that, in replacement of those previously provided, should be incorporated into the respective compilations. Likewise, it is recalled that on the page of this Institution www.bcra.gob.ar, accessing “Financial System - LEGAL AND REGULATORY FRAMEWORK - Compilation and Summaries - Ordered texts of general regulations”, you will find the modifications made with texts highlighted in special characters (strikethrough and bold).

We greet you attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Darío C. Stefanelli
Principal Manager of Issuance and Regulatory Applications

Agustín Torcassi
General Deputy Manager of Regulations

ANNEX

GUARANTEES
B.C.R.A.
Section 1. Classes.

1.1. Preferred “A”.

They are constituted by the assignment or pledge of rights with respect to securities or documents of any nature that, duly instrumented, ensure that the entity may dispose of the funds for the cancellation of the obligation contracted by the client, without the need to previously require payment from the debtor since the realization depends on solvent third parties or on the existence of markets in which the aforementioned securities or documents, or the effects they represent, may be settled directly, whether their maturity coincides with or is subsequent to the maturity of the loan or of the periodic payments committed or whether the proceeds are applied to the cancellation of the debt or transferred directly to the entity for that purpose, provided that the credit transactions do not exceed, measured residually, the term of 6 months except in cases where a different term is established.

Included in this category, as a taxative enumeration, are the following:

1.1.1. Guarantees constituted in cash, in pesos, or in the following foreign currencies: US dollars, Swiss francs, pounds sterling, yen and euros, taking into account permanently their quotation value.

When the guarantee is constituted in the currency of the credit transaction, the computable term must not exceed one year.

1.1.2. Guarantees constituted in gold, taking into account permanently their quotation value.

1.1.3. Pledges of fixed-term deposit certificates issued by the financial entity itself, constituted in the currencies referred to in point 1.1.1.

When the deposit certificate is issued in the currency of the credit transaction, the computable term must not exceed one year.

1.1.4. Automatic reimbursements of export transactions, charged to the Central Bank of the Argentine Republic (BCRA), in accordance with the respective regimes of bilateral or multilateral agreements, whatever the term of the transaction.

1.1.5. Guarantees or pledges of national public securities or of BCRA monetary regulation instruments, contemplated in the volatility list published monthly by this Institution.

1.1.6. Guarantees and letters of credit issued by foreign banks or multilateral development banks that comply with the provisions of point 3.1. of the rules on "Credit Assessments" – requiring for that purpose an international risk rating of "AA" or higher –, that are not the parent or controlling company and its subsidiaries and branches, or controlled companies or branches of the local entity, or that maintain other forms of linkage, whatever the term of the transaction, to the extent that they are unrestricted and that the funds are credited immediately upon simple request of the beneficiary entity.

Version: 8th. COMMUNICATION "A" 6328
Effective date:
23/9/2017
Page 1

GUARANTEES
B.C.R.A.
Section 1. Classes.

When the foreign or multilateral development bank complies with the provisions of point 3.1. of the rules on "Credit Assessments" – requiring for that purpose an international risk rating of "A" – the computable term of the credit transaction must not exceed six months.

1.1.7. "Warrants" on fungible goods that have normal and habitual quotation in local or international markets, widely disseminated and easily accessible to public knowledge.

1.1.8. Guarantees constituted by the assignment of collection rights of invoices to consumers for services already rendered, issued by companies providing services to the public (companies supplying electricity, gas, telephone, water, etc.), provided that it is a set of invoices representing a number of no less than 1,000 clients.

1.1.9. Guarantees constituted by the assignment of collection rights regarding credit card coupons.

1.1.10. Credit instruments (deferred payment checks, promissory notes, bills of exchange and credit invoices) discounted with recourse to the assignor, to the extent that the following conditions are observed:

1.1.10.1. In the set of transactions carried out with each assignor, it must be verified with respect to any of the parties legally obligated to pay other than the assignor:

a) That at least 85%, measured in relation to the face value of the documents, are classified in "normal situation" (category 1) according to the latest information available in the "Central de deudores del sistema financiero".

b) That, at most, 15%, measured in relation to the face value of the documents, are classified in category 2 or are persons not reported in said central registry.

c) That, at most, 20% of the face value of the documents corresponds to the same party obligated to pay. This limitation shall not apply when dealing with documents of up to the equivalent of 1% of the reference amount established in point 1.4.

These requirements must be observed considering the face value of documents still pending maturity and the new documents that are discounted, when carrying out each discount transaction.

Version: 9th. COMMUNICATION "A" 6328
Effective date:
23/9/2017
Page 2

GUARANTEES
B.C.R.A.
Section 3. Computation.

iii) For coverage of a transaction in a different foreign currency: 80% of the quotation value, calculated on the principal amount.

3.1.4. Reimbursements of export transactions (point 1.1.4.): 100%.

3.1.5. National public securities and BCRA monetary regulation instruments (point 1.1.5.): 85% and 100% of their quotation value, respectively.

3.1.6. Guarantees and letters of credit from foreign banks or multilateral development banks (point 1.1.6): 100%.

3.1.7. "Warrants" (point 1.1.7.): 80% of the market value of the goods.

3.1.8. Invoices to consumers for services already rendered, issued by companies providing services to the public (point 1.1.8.): 80% of the face value of the documents.

3.1.9. Credit card coupons (point 1.1.9.):

3.1.9.1. Issued by financial entities: 90% of the face value of the documents.

3.1.9.2. Issued by companies that are not financial entities that meet the conditions required to be a credit subject: 80% of the face value of the documents.

3.1.9.3. Issued by the remaining non-financial companies: 50% of the face value of the documents.

3.1.10. Credit instruments (point 1.1.10.).

3.1.10.1. Documents corresponding to parties obligated to pay classified in Category 1 in the "Central de deudores del sistema financiero": 100%.

3.1.10.2. Documents corresponding to parties obligated to pay classified in category 2 or that have not been classified in the "Central de deudores del sistema financiero": 90%.

Version: 9th. COMMUNICATION "A" 6328
Effective date:
23/9/2017
Page 2

B.C.R.A.
ORIGIN OF THE PROVISIONS CONTAINED IN THE RULES ON "GUARANTEES"

TEXT AS AMENDED			SOURCE RULE				OBSERVATIONS
Section	Point	Paragraph	Com.	Annex	Point	Paragraph
1.	1.1.		"A" 2932	sole	1.1.		According to Com. “A” 4242.
	1.1.1.		“A” 2216	I	1.	3°, a)	According to Com. “A” 2443, 2932, 3918 and 4242.
	1.1.2.		“A” 2216	I	1.	3°, a)	According to Com. “A” 2443, 2932 and 3918.
	1.1.3.		“A” 2216	I	1.	3°, b)	According to Com. “A” 2932, 3918 and 4242.
	1.1.4.		“A” 2216	I	1.	3°, c)	According to Com. “A” 2932 and 4242.
	1.1.5.		“A” 2216	I	1.	3°, d)	According to Com. “A” 2932, 4741 and 6091.
	1.1.6.		“A” 2216	I	1.	3°, e)	According to Com. “A” 2932, 3918, 4242, 5671, 5740 and 6328.
	1.1.7.		“A” 2216	I	1.	3°, g)	According to Com. “A” 2932.
	1.1.8.		“A” 2216	I	1.	3°, h)	According to Com. “A” 2932.
	1.1.9.		“A” 2216	I	1.	3°, i)	According to Com. “A” 2932.
	1.1.10.		“A” 2932	único	1.1.11.		According to Com. “A” 3104, 4242, 4522, 4957 and 5998.
	1.1.11.		“A” 2932	sole	1.1.12.		According to Com. “A” 4141, 5671 and 5740.
	1.1.12.		“A” 2932	sole	1.1.13.		According to Com. “A” 4242.
	1.1.13.		“A” 2932	sole	1.1.14.		According to Com. “A” 3918, 5671 and 5740. Includes interpretive clarification.
	1.1.14.		“A” 3114		1.
	1.1.14.1.	1°	“A” 3114				According to Com. “A” 3918, 4055, 5671, 5740 and 5998. Includes interpretive clarification.
	1.1.14.2.		“A” 3114		1.		According to Com. “A” 3918, 4055, 5671, 5740 and 5998.
	1.1.15.		“A” 3141				According to Com. “A” 3307, 3918, 4465 and 5275.
	1.1.16.		“A” 3314				According to Com. “A” 4529, 5671 and 5740.
	1.2.		“A” 2932	sole	1.2.		According to Com. “A” 3104.
	1.2.1.		“A” 2419		1.	1°	According to Com. “A” 2563 (points 1. and 2.), 2932, 3314, 6250 and 6297.
	1.2.2.		“A” 2448				Statement of debtors' situation (point 6.1.2.2.2.). According to Com. “A” 2932, 3918 and 6162.
	1.2.3.		“A” 6162		4.
	1.2.4.		“A” 2448				Statement of debtors' situation (point 6.1.2.2.2.). According to Com. “A” 2932, 3918 and 5275.
			“A” 2410		7.		According to Com. “A” 3141.
	1.2.5.		“A” 3259		1.		According to Com. “A” 3314, 5067 and 6250.
	1.2.6.		“A” 3314				According to Com. “A” 4529.
	1.2.7.		“A” 2932	sole	1.2.4.		According to Com. “A” 4242.

GUARANTEES

CENTRAL BANK OF THE ARGENTINE REPUBLIC

	CONSOLIDATED TEXT			SOURCE RULE			OBSERVATIONS
Section	Point	Paragraph	Com.	Annex	Point	Paragraph
1.	1.2.8.		"A" 4491		1.		According to Com. "A" 4501, 5998 and 6250.
	1.2.9.		"A" 6250				According to Com. "A" 6297.
	1.2.10.		"A" 6250				According to Com. "A" 6297.
	1.3.		"A" 7				Specifications of the "other guarantees received" items, amended by Com. "A" 2932.
	1.4.		"A" 5998		1.
2.	2.1.	1st	"A" 2448				Statement of debtors' situation (point 6.1.2.2.2.).
		2nd	"A" 2932	sole	2.1.	2nd
	2.2.		"A" 2216	I	1.	4th
3.	3.1.		"A" 2932	sole	3.1.
	3.1.1.		"A" 2932	sole	3.1.1.		According to Com. "A" 3918.
	3.1.2.		"A" 2932	sole	3.1.2.
	3.1.3.		"A" 2932	sole	3.1.3.		According to Com. "A" 3918.
	3.1.4.		"A" 2932	sole	3.1.4.
	3.1.5.		"A" 2932	sole	3.1.5.		According to Com. "A" 3918, 4242 and 4741.
	3.1.6.		"A" 2932	sole	3.1.6.		According to Com. "A" 3918 and 6328.
	3.1.7.		"A" 2216	I	1.	3°, g)	According to Com. "A" 2932.
	3.1.8.		"A" 2216	I	1.	3°, h)	According to Com. "A" 2932.
	3.1.9.		"A" 2216	I	1.	3°, i)	According to Com. "A" 2932.
	3.1.10.		"A" 2932	sole	3.1.11.		According to Com. "A" 3104 and 4522.
	3.1.11.		"A" 2932	sole	3.1.12.		According to Com. "A" 3918.
	3.1.12.		"A" 2932	sole	3.1.13.
	3.1.13.		"A" 2932	sole	3.1.14.
	3.1.14.		"A" 2419	1.	1º, ii)		According to Com. "A" 2932, 3314, 3918, 4551 (point 2.), 4559 (point 3), 5998 and 6297.
	3.1.15.		"A" 2932	sole	3.1.18.		According to Com. "A" 3918 and 6162.
	3.1.16.		"A" 6162		4.
	3.1.17.		"A" 2932	sole	3.1.19.		According to Com. "A" 3141, 3918, 4242, 4465 and 5275.
	3.1.18.		"A" 3114		2.		According to Com. "A" 4242.
	3.1.19.		"A" 3259		2.		According to Com. "A" 5067.
	3.1.19.1.		"A" 4559		5.		According to Com. "A" 5998.
	3.1.19.2.		"A" 4559		5.		According to Com. "A" 5998.
	3.1.19.3.		"A" 3259		2.		According to Com. "A" 3314, 3918 and 4559 (point 5.).
	3.1.19.4.		"A" 3259		2.		According to Com. "A" 3918 (point 4.).
	3.1.19.5.		"A" 3259		2.		According to Com. "A" 3314 (point 3.).
	3.1.19.6.		"A" 3314		6.
	3.1.20.		"A" 3314
	3.1.21.		"A" 4491		1.		According to Com. "A" 4501.
	3.1.22.		"A" 6250
	3.1.23.		"A" 6250				According to Com. "A" 6297.

CREDIT RISK SPLITTING B.C.R.A.
Section 1. Allocation of financings.

1.1. General criterion.

Financings granted directly by financial institutions shall be allocated to the respective clients, residents in the country, from the public and private, financial and non-financial sectors, and residents abroad.

The client shall be considered to be the economic unit receiving the funds or with respect to which a guarantee is granted – contingent liability for the institution – which, in turn, must be the one that applies or obtains benefit from them, regardless of the legal form adopted to instrument the transaction.

Cases in which the financial assistance is granted for the account and order of the parent company or the controlling bank abroad are excluded.

Claims for transactions carried out in markets with a central counterparty shall be allocated to the company that performs the function of clearing and settlement house (contractual counterparty in the transactions).

Financings to trusts that do not fall under the rules on “Financing to the non-financial public sector” shall be allocated to the recipients or beneficiaries in the proportion corresponding to each of them. The same criterion shall be applied with respect to holdings of debt instruments corresponding to such trusts.

1.2. Financings covered by certain preferred guarantees “A”.

Financings covered by the following preferred guarantees “A” shall be allocated to the obligors by reason of them indicated in each case:

1.2.1. Avales and letters of credit issued by foreign banks or multilateral development banks (point 1.1.6. of the rules on “Guarantees”): to the guarantor or issuing bank.

1.2.2. Discount of credit instruments (points 1.1.10. and 1.1.14. of the rules on “Guarantees”): to the drawer, endorser, acceptor or guarantor taken into account to consider the transaction with preferred guarantee “A”.

If the obligor taken into account is a client of the institution, the corresponding maximum limits established in Section 5. shall apply, while if it is not, those set in points 1.1.10.3. and 1.1.14. of the rules on “Guarantees” must be observed, as the case may be.

1.2.3. Direct guarantees of central governments, their agencies or dependencies, of countries members of the Organization for Economic Cooperation and Development (O.E.C.D.) (point 1.1.11. of the rules on “Guarantees”): to the guaranteeing government.

Financings covered by other preferred guarantees “A” shall be treated in accordance with the provisions of points 1.3. and 1.4. below, and in points 3.2.1.6. to 3.2.1.9. and 6.1.1.

Version: 2nd. COMMUNICATION “A” 6328
Effective date:
23/9/2017
Page 1

B.C.R.A.
ORIGIN OF THE PROVISIONS CONTAINED IN THE RULES ON “CREDIT RISK SPLITTING”

ORDERED TEXT				SOURCE RULE					OBSERVATIONS
Sect.	Point	Para.	Comm.	Annex	Chap.	Sect.	Point	Para.
1.	1.1.	1st	“A” 3051			1.	1.1.1.	2nd	According to Comm. “A” 5472.
		2nd	“A” 3051			1.	1.1.1.	1st
		3rd	“A” 3051			1.	1.1.1.	3rd	According to Comm. “A” 5472.
		4th	“A” 4725				5.		According to Comm. “A” 5472.
		last	“A” 5472
	1.2.1.		"A" 2932				12. to 14.		Includes interpretive clarification. According to Com. "A" 5472 and 6328.
			"A" 3129
	1.2.2.		"A" 2932				12. to 14.		According to Com. "A" 5472.
			"A" 3129
	1.2.3.		"A" 2932				12. to 14.		Includes interpretive clarification. According to Com. "A" 5472.
			"A" 3129
	1.3.		"A" 2410				3. and 4.		According to Com. "A" 5472 and 6023.
			"A" 2932				12. to 14.
			"A" 3129
	1.4.		"A" 3314				10.		According to Com. "C" 32071 and "A" 5472.
	1.5.1.		"A" 3911				7.		According to Com. "A" 4230 (point 2.) and 5472.
	1.5.2.		"A" 3911				7.		According to Com. "A" 4230 (point 2.) and 5472.
	1.6.	1st	"A" 2140	II		4.2.			According to Com. "A" 5472.
		2nd	"A" 2932			10.			According to Com. "A" 3918 (point 3.) and 5472.
		3rd	"A" 2140	I		1.3.	3rd and 4th		According to Com. "A" 2932 (point 8.) and 5472.
		last	"A" 5472
	1.7.	1.7.1.	"A" 2140	I		1.3.	3rd and 4th		According to Com. "A" 2932 (point 8.), 3918 (point 3.) and 5472.
		1.7.2.	“A” 2140	I		1.3.	4°		According to Com. “A” 2932 (point 8.), 3918 (point 3.) and 5472.
	1.8.	1.8.1.	“A” 5472
		1.8.2.	“A” 2140	II		3.2.	2°		According to Com. “A” 5472.
	1.9.		“A” 2156				5.		According to Com. “A” 5472 and 5496.
2.	2.1.		“A” 5472
	2.2.1.1.	1°	“A” 2140	I		1.1.	1°
		i)	“A” 2140	I		1.1.1.			According to Com. “A” 5472.
		ii)	“A” 2140	I		1.1.1.			According to Com. “A” 5472.
		iii)	“A” 2140	I		1.1.2.			According to Com. “A” 5472.
		iv)	“A” 5472
		v)	“A” 2140	I		1.1.3.			According to Com. “A” 5472.
		vi)	“A” 5472
		vii)	“A” 2140	I		1.1.4.			Includes interpretive clarification. According to Com. “A” 5472.

CREDIT POLICY
B.C.R.A. Section 2. Application of the lending capacity of deposits in foreign currency.

2.1.10. Interfinancial loans. Entities may allocate interfinancial loans to these resources if they identify them and report that circumstance to the borrowers.

2.1.11. Bills and Notes of the Banco Central de la República Argentina in US dollars.

2.1.12. Direct investments abroad by companies resident in the country, whose purpose is the development of productive activities of non-financial goods and/or services, whether through contributions and/or purchases of interests in companies, insofar as they are constituted in countries or territories considered cooperative for the purposes of tax transparency in accordance with the provisions of article 1 of Decreto N°589/13 and complementary provisions.

2.1.13. Financing of investment projects, including their working capital, that allow an increase in production in the energy sector and have firm sales contracts and/or total guarantees or collateral in foreign currency.

2.1.14. Primary subscription of debt instruments in foreign currency of the Tesoro Nacional, for up to the amount equivalent to one third of the total applications made in accordance with the provisions of this section.

2.1.15. Financing of investment projects intended for bovine livestock farming, including their working capital, without exceeding 5 % of the entity's foreign currency deposits.

2.1.16. Financing to importers abroad for the acquisition of goods and/or services produced in the country, whether directly or through lines of credit to banks abroad.

2.1.17. Financing to residents of the country that is secured by letters of credit (“stand-by letters of credit”) issued by banks abroad or multilateral development banks that comply with the provisions of point 3.1. of the rules on “Credit assessments”, requiring for that purpose an international risk rating of “investment grade”, insofar as such letters of credit are unrestricted and the funds are credited immediately upon simple request of the beneficiary entity.

The application of the lending capacity of foreign currency deposits to destinations linked to import operations (provided for in points 2.1.6., 2.1.7. and the portion attributable to them by application of points 2.1.8. and 2.1.9.), may not exceed the value resulting from the following expression:

Ct x max (Fbase / Cbase ; 0.05)

Where:

Ct : lending capacity of the corresponding month.

Version: 12a. COMMUNICATION “A” 6328
Vigencia:
23/9/2017
Página 3

B.C.R.A.
ORIGIN OF THE PROVISIONS CONTAINED IN THE
NORMAS SOBRE “POLÍTICA DE CRÉDITO”

ORDERED TEXT SOURCE STANDARD
Sect. Point Para. Comm. Annex Chap. Sect. Point Para.
OBSERVACIONES
1.1. “A” 49
OPRAC-1
I 1.1. According to Comm. “A” 6031.
1.2. “A” 4311 Includes concept according to
puntos 6. y 7.5. de la
Com. “A” 2736. Según
Com. “C” 50798, “A”
4851 y 5067.
1.3. “A” 49
OPRAC-1
I 1.2.
1.
1.4. “A” 5909 sole According to Comm. “A” 5916 and
6231.
2.1. “A” 3528 1. According to Comm. “A” 4147,
Anexo.
2.1.1. 1° “A” 3528 1.1. According to Com. “A” 4015,
4311, 4423, 4851 y 5908.
2.1.2. “A” 5908
2.1.3. “A” 4015 1.2. Includes clarification inter-
pretativa. Según Com.
“A” 4851 y 5908.
2.1.4. “A” 4015 1.3. According to Com. “A” 5908 and
6105.
2.1.5. “A” 6105 2.
2.1.6. “A” 4423 According to Com. “A” 5908.
2.1.7. “A” 4453 According to Com. “A” 4577 and
5908.
2.1.8. “A” 4011 1.4. 1° According to Com. “A” 4015,
4311, 4851, 5908, 6031 y
6305.
2.1.9. “A” 4015 1.4. last According to Com. “A” 4311,
4851 y 5908.
2.1.10. “A” 3528 1.2. According to Com. “A” 4140 and
4311.
2.1.11. “A” 5534 2. According to Com. “A” 5859.
2.1.12. “A” 6031 2.
2.1.13. “A” 6031 2.
2.1.14. "A" 6105 2.
2.1.15. "A" 6162 1.
2.1.16. "A" 6231 1.
2.1.17. "A" 6245 1. According to Com. "A" 6328.
2.1. last "A" 4851 4.
2.2. "A" 4015 1. 2nd According to Com. "A" 4311,
4453, 4577, 5908, 6105,
6162 and 6305 (includes interpretive clarification).
2.3. "A" 4311
2.
2.4. "A" 4311