Minimum Capital of Financial Entities. Modifications

"2006 - Year of Tribute to Dr. Ramón CARRILLO" CENTRAL BANK OF THE ARGENTINE REPUBLIC COMMUNICATION "A" 4576 28/09/2006 TO FINANCIAL ENTITIES:
Ref.: Circular
LISOL 1 - 461
Minimum Capital of Financial Entities. Modifications ______ We address you to communicate the relevant part of the resolution related to the subject of reference that this Institution adopted:

"1. Substitute, with effect from 1.10.06, point 7.2.1. of Section 7. of the rules on "Minimum Capital of Financial Entities" with the following:

"7.2.1. Basic Net Worth.
It comprises the following items of net worth:
7.2.1.1. Share capital.
7.2.1.2. Non-capitalized contributions.
7.2.1.3. Adjustments to net worth.
7.2.1.4. Profit reserves.
7.2.1.5. Undistributed results. The positive result of the last closed fiscal year will be counted once the auditor's report is available.
7.2.1.6. Debt-representative instruments, issued under the conditions established in point 7.......
Likewise, the amounts of the respective reserve funds that are specifically constituted for the payment of financial services in case of insufficiency of distributable profits, according to the procedure established for that purpose, will be counted, provided that their maturities operate before 31.12.12. Also, from that date, the remaining reserve fund will be counted. The total of this concept will be subject to the condition that it does not exceed, on the basic net worth - points 7.2.1.1. to 7.2.1.7.-, the percentages detailed below:
i) 30% until 31.12.08, ii) 25% until 31.12.10, iii) 20% until 31.12.12 and iv) 15% from 1.1.13.
Furthermore, in cases of consolidation, it includes:
7.2.1.7. Third-party participation.
The balances in favor from the application of the minimum presumed profit tax - net of provisions for devaluation risk - that exceed 10% of the amount resulting from the sum of the concepts contained in points 7.2.1.1. to 7.2.1.7. or 10% of the computable net worth liability corresponding to the previous month, whichever is lower, will be deducted."

2. Incorporate, with effect from 1.10.06, in Section 7. of the rules on "Minimum Capital of Financial Entities" the following point:

"Debt-representative instruments.
For their computation in the computable net worth liability, they must be fully subscribed and paid in and observe the following requirements:
Issuance conditions that must be included in the issuance prospectuses made publicly available. i) They must have prior authorization from the shareholders' assembly or equivalent corporate body, at the time of their issuance. ii) They must be denominated in pesos or in foreign currency. iii) The accrual of the remuneration recognized, in no case, may exceed the accounting profits of the issuing financial entity. iv) They must have a maturity of no less than 30 years. v) The payment of financial services cannot be made with a frequency lower than quarterly. vi) The redemption of the obligation, if provided for, can only be exercised at the issuer's option provided that:
a) 5 years have elapsed since its integration, b) It has prior authorization from the Superintendence of Financial and Exchange Entities before exercising the option, and c) It is replaced by one or more of the concepts included in points 7.2.1.1. or 7.2.1.6. vii) An increase in the interest rate to be paid is admitted only once during the life of the instrument and after 10 years from its integration. viii) They must not contain clauses under which the obligation is secured or covered by any guarantee of the issuer or affiliates that affects the order of priority contemplated in the following subsection. ix) They must provide that, in the event of the entity's bankruptcy and once all debts with other creditors, including contractually subordinated debt, have been satisfied in full, their holders will have priority in the distribution of funds only and exclusively with respect to shareholders - regardless of the class of shares - with express waiver of any general or special privilege. x) They must not contain clauses that declare the obligation due in case of non-payment of their financial services or other debts or for any other reason, except bankruptcy. xi) They must provide the conditions under which the payment of the corresponding financial services will be made. These payments can be made to the extent that the situations preventing the distribution of profits are not verified and they comply with the procedure established by this Institution on a general basis, without prejudice to the application of subsection xiii). xii) Unpaid services will not be cumulative, so they cannot be deferred and accumulated to be paid after their maturity. The failure to meet this requirement by the entity will not imply any responsibility for the Central Bank of the Argentine Republic, an aspect that must be expressly stated in the offering prospectuses and in the issued instrument. xiii) If the constitution of a reserve fund is provided for, it must be integrated at the time of subscription and cannot exceed 10% of the respective issuance. These amounts can be used for the payment of financial services maturing until 31.12.12, when there are not enough distributable profits. In case of bankruptcy, this fund is subject to the collection priority provided for in subsection ix). xiv) They must have authorizations both for their public offering and for listing on stock exchanges or self-regulated markets in the country or abroad. Prior Authorization. Computation as basic net worth will only be admitted if there is prior authorization for the issuance by the Superintendence of Financial and Exchange Entities, whose intervention will have the purpose of verifying compliance with the enumerated requirements and, in particular, that the entity meets the minimum capital requirement. The documentation delivered to subscribers must expressly state that said authorization is granted solely for the purpose of computing the respective instrument in the computable net
worth liability of the issuing entity.

The Superintendence will issue an express ruling within the term of 30 business days counted from the date it considers the submission of the information and other pertinent elements related to the authorization request complete. Purchase and Re-placement. Prohibition. Financial entities cannot buy for subsequent re-placement their own issuances of debt-representative instruments that have been or are considered for the determination of the computable net worth liability. Nor can they acquire issuances made by other financial entities. Computable Amounts. i) In case the placement is made below par:
For the determination of the computable net worth liability, the amount actually received will be taken into account, that is, deducting issuance discounts, not considering as such the commissions retained by the intervening placement agent. ii) Of instruments issued in foreign currency:
They will be computed, at all times, at the peso value at the exchange rate corresponding to the date of placement. iii) Of the reserve fund:
a) The amounts of these funds that are effectively applied to the payment of financial services, when there are not enough distributable profits, before 31.12.12 and from that date also the amounts that have not been used, can be computed as basic net worth, to the extent that they do not exceed the limits provided in point 7.2.1.6., while the excess can be computed, if applicable, as complementary net worth. b) Before 31.12.12, amounts from the remaining reserve fund cannot be computed for the purposes of determining the computable net worth liability. iv) As complementary net worth:
a) Debt-representative instruments and the amounts of the respective reserve funds - applied to financial services before 31.12.12 and from that date also the unused amounts -, to the extent that they exceed the limits provided in point 7.2.1.6. b) Debt-representative instruments with a residual term of less than 10 years. c) Debt-representative instruments when unpaid financial services are cumulative.

From the beginning of each of the last five years of life of each issuance, the computable amount will be decreased by 20% of the issued nominal value.
The total of the debt-representative instruments and their respective reserve funds computed as complementary net worth, together with debt securities, contractually subordinated to other liabilities, cannot exceed the equivalent to 50% of the basic net worth."

3. Incorporate, with effect from 1.10.06, as a computable concept within the complementary net worth (Section 7. of the rules on "Minimum Capital of Financial Entities") the following point:

"7.2.2.... Debt-representative instruments and amounts of the respective reserve funds - applied to financial services before 31.12.12 and from that date also the unused amounts -, according to the conditions established in point 7.2......"

4. Substitute in Section 7. of the rules on "Minimum Capital of Financial Entities" the first paragraph of point 7.2.3. relating to computable subordinated debt with the following:

"Debt securities or other obligations of the entity, contractually subordinated to other liabilities, that are admitted to be computed for the purposes of determining the computable net worth liability, must have authorizations both for their public offering and for listing on stock exchanges or self-regulated markets in the country or abroad (for issuances after 30.9.06) and observe the following requirements:"

5. Incorporate, with effect from 1.10.06, in point 7.2.3.1. of Section 7. of the rules on "Minimum Capital of Financial Entities" the following subsection:

"vi) They may have an interest coupon linked to the results of the financial entity."

6. Substitute, from 1.10.06, point 7.2.3.2. of Section 7. of the rules on "Minimum Capital of Financial Entities" with the following:

"7.2.3.2. Computable Amount.
From the beginning of each of the last five years of life of each issuance, the computable amount will be decreased by 20% of the nominal value issued net of effective amortizations.
In no case, the computable amount at the beginning of each of these periods can be greater than the result of applying said percentage cumulatively on the residual obligation at the end of each of these years, according to the capital amortization service schedule fixed. The total of this concept, together with the debt-representative instruments and their respective reserve funds computed as complementary net worth, can reach up to the equivalent to 50% of the basic net worth.

In case the placement is made below par, for the determination of the computable net worth liability, the amount actually received will be taken into account, that is, deducting issuance discounts, not considering as such the commissions retained by the intervening placement agent. Subordinated debt issued in foreign currency from 1.10.06 will be computed, at all times, at the peso value at the exchange rate corresponding to the date of placement. The computable amount will be decreased in proportion to the amortizations that are made effective."

7. Replace in Section 7. of the rules on "Minimum Capital of Financial Entities" the following point:

"7.2.4.4. Debt-representative instruments and debt securities, contractually subordinated to other liabilities, issued by other financial entities that have been acquired until 30.9.06.
This deduction will be made by the amount of the highest balance registered during the month to which the determination of the computable net worth liability corresponds."

8. Substitute point 7.2.3.5. of Section 7. of the rules on "Minimum Capital of Financial Entities" with the following:

"7.2.3.5. Purchase and Re-placement. Prohibition.
Financial entities cannot buy for subsequent re-placement their own issuances of subordinated debt that have been or are considered for the purposes of determining the computable net worth liability. Nor can they acquire from 1.10.06 issuances made by other financial entities."

We will timely send you the sheets that correspond to replace in the ordered text of the rules on "Minimum Capital of Financial Entities".
We salute you very attentively.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Darío C. Stefanelli José I. Rutman
Manager of
Issuance of Standards on behalf of
General Manager of Standards