2017 - YEAR OF RENEWABLE ENERGIES

COMMUNICATION “A” 6344
20/10/2017

TO FINANCIAL INSTITUTIONS:
Ref.: Circular
LISOL 1 - 763

Minimum capital of financial institutions. Adjustments.

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

“1. Replace the first paragraph of point 2.5.11. and point 2.6.3.2. of the rules on “Minimum capital of financial institutions” with the following:

“2.5.11. For the purposes of determining the risk weight to be applied to the exposures referred to in points 2.6.2.4., 2.6.2.5., 2.6.2.6., 2.6.3.2., 2.6.4.2. and 2.6.5., the rating granted by an entity that is an external credit assessment institution (“External Credit Assessment Institution”, ECAI) admitted by the BCRA must be used, in accordance with the provisions of Section 10.”

“2.6.3.2. Others:

Rating	AAA to AA-	A+ to A-	BBB+ to BBB-	BB+ to B-	Lower than B-	Unrated
Risk weight	20 %	50 %	50 %	100 %	150 %	50 %”

2. Incorporate as point 5.3.4.4. of the rules on “Minimum capital of financial institutions” the following:

“5.3.4.4. Multilateral development banks referred to in point 2.6.3.”

On the other hand, we clarify that the financial institutions referred to in point 5.3.4.2. of the rules on “Minimum capital of financial institutions” include both local and foreign institutions.

Finally, we send you in annex the pages that, in replacement of those previously provided, should be incorporated into the ordered text of the reference. Likewise, it is recalled that on the page of this Institution www.bcra.gob.ar, by accessing “Financial System - LEGAL AND REGULATORY FRAMEWORK - Compilations and summaries - Ordered texts of general regulations”, you will find the modifications made with texts highlighted in special characters (strikethrough and bold).

CENTRAL BANK OF THE ARGENTINE REPUBLIC

We greet you attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Matías A. Gutiérrez Girault
Issuance Manager of Rules

Agustín Torcassi
Deputy General Manager of Rules

ANNEX

2.5.11. For the purposes of determining the risk weight to be applied to the exposures referred to in points 2.6.2.4., 2.6.2.5., 2.6.2.6., 2.6.3.2., 2.6.4.2. and 2.6.5., the rating granted by an entity that is an external credit assessment institution (“External Credit Assessment Institution”, ECAI) admitted by the BCRA must be used, in accordance with the provisions of Section 10.

The credit ratings contemplated in said points correspond to the methodology used by Standard & Poor’s and are used only as an example.

No exposure with unrated debtors may receive a risk weight lower than that applied to the country of incorporation, except in the case of the exposures referred to in points 2.6.2.2. and 2.6.2.3. However, exposures with unrated financial institutions incorporated in jurisdictions where the sovereigns have a rating between BB+ and B- will receive a risk weight of 100 %.

2.6. Table of risk weights.

Concept	Weight - in % -
2.6.1. Cash and cash equivalents.
2.6.1.1. Cash on hand, in transit (when the financial institution assumes the responsibility and risk of transport) and in ATMs.	0
2.6.1.2. Current and special accounts at the Central Bank of the Argentine Republic and payment orders charged to the BCRA.	0
2.6.1.3. Coined or bar gold of “good delivery”, in the latter case bearing the seal of any of the refining, smelting, assaying, former assaying and former smelting firms included in the list made known by the BCRA.	0
2.6.1.4. Cash items that are in the process of being collected (checks and drafts for collection), cash in securities transport companies and cash in custody at financial institutions.	20
2.6.2. Exposure to governments and central banks.
2.6.2.1. To the BCRA in pesos, when its source of funds is in that currency.	0
2.6.2.2. To the National Government and to provincial and municipal governments and the Autonomous City of Buenos Aires in pesos, when their source of funds is in that currency.	0

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International risk rating	AAA to AA-	A+ to A-	BBB+ to BBB-	BB+ to B-	Lower than B-	Unrated
Risk weight	20 %	50 %	100 %	150 %	200 %	200 %

2.6.3. Exposures to Multilateral Development Banks (MDBs).

2.6.3.1. Exposure to the following entities: International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), Asian Development Bank (ADB), African Development Bank (AFDB), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), European Investment Bank (EIB), European Investment Fund (EIF), Nordic Investment Bank (NIB), Caribbean Development Bank (CDB), Islamic Development Bank (IsDB), International Finance Facility for Immunisation (IFFIm), Multilateral Investment Guarantee Agency (MIGA) and Council of Europe Development Bank (CEB). 0

2.6.3.2. Others:

Rating	AAA to AA-	A+ to A-	BBB+ to BBB-	BB+ to B-	Lower than B-	Unrated
Risk weight	20 %	50 %	50 %	100 %	150 %	50 %

2.6.4. Exposure to financial institutions of the country.

2.6.4.1. Exposures denominated in pesos – whose source of funds is in that currency – for transactions whose original contractual term is up to 3 months. 20

2.6.4.2. Others. The risk weight corresponding to a category less favorable than that assigned to exposures with the National Government in foreign currency shall be applied, in accordance with the provisions of point 2.6.2.4., with a maximum cap of 100 %, except that the rating is lower than B-, in which case the risk weight shall be 150 %.

2.6.5. Exposure to financial institutions abroad, according to the credit rating assigned to the sovereign of the jurisdiction where they are incorporated.

Rating	AAA to AA-	A+ to A-	BBB+ to BBB-	BB+ to B-	Lower than B-	Unrated
Risk weight	20 %	50 %	100 %	100 %	150 %	100 %

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2.6.6. Exposure to companies and other legal persons in the country and abroad –including exchange entities, insurers, securities firms and companies in the country that are granted the treatment of the non-financial private sector based on the provisions of Section 1. of the rules on “Financing to the non-financial public sector”–, except as provided in point 2.6.12. 100

2.6.7. Exposures included in the retail portfolio.

2.6.7.1. Financing to natural persons –when the total of the installments for financing of the entity that have a periodic amortization system does not exceed, at the time of the agreements, thirty percent (30 %) of the debtor's income and/or, as applicable, of the co-debtors– and to MSMEs. 75

2.6.7.2. Others. 100

2.6.8. Exposures guaranteed by mutual guarantee companies or public guarantee funds registered in the Registries enabled in the BCRA. 50

2.6.9. Financing with first-degree mortgage guarantee, and whatever its degree of priority provided that the entity is the creditor in all degrees, on residential housing, to the extent that the debt balance at no time exceeds the appraisal value of the mortgaged property.

2.6.9.1. Single, family and permanently occupied.

i) With respect to credit support that does not exceed 75 % of the appraisal value of such assets. 35

ii) On the amount that exceeds 75 % of the appraisal value of such assets. 100

The condition of single, family and permanently occupied housing must be accredited in the terms set forth in the loan contract or in the deed by which the mortgage guarantee was constituted.

2.6.9.2. Others.

i) With respect to credit support that does not exceed 75 % of the appraisal value of such assets. 50

ii) On the amount that exceeds 75 % of the appraisal value of such assets. 100

2.6.10. Financing with first-degree mortgage guarantee, and whatever its degree of priority provided that the entity is the creditor in all degrees, on assets other than residential housing.

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2.6.10.1. Up to the amount equivalent to 50 % of the market value of the property or 60 % of the amount of the mortgage loan, whichever is lower. 50

2.6.10.2. On the rest of the financing referred to in point 2.6.10.1. 100

2.6.11. Loans more than 90 days past due.

2.6.11.1. Financing with first-degree mortgage guarantee on residential housing –single, family and permanently occupied–

i) With specific provisions equal to or greater than 20 % of the outstanding balance. 50

ii) With specific provisions less than 20 % of the outstanding balance. 100

2.6.11.2. Financing with mortgage guarantee on residential housing not contemplated in point 2.6.11.1.

i) With specific provisions equal to or greater than 50 % of the outstanding balance. 50

ii) With specific provisions equal to or greater than 20 % and less than 50 % of the outstanding balance. 75

iii) With specific provisions less than 20 % of the outstanding balance. 125

2.6.11.3. Loans or tranches not covered with guarantees of Section 5., and financing with mortgage guarantee not contemplated in points 2.6.11.1. and 2.6.11.2.

i) With specific provisions less than 20 % of the outstanding balance. 150

ii) With specific provisions equal to or greater than 20 % and less than 50 % of the outstanding balance. 100

iii) With specific provisions equal to or greater than 50 % of the outstanding balance. 50

2.6.11.4. Part of the financing covered with admissible guarantees. The provisions of Section 5 must be taken into account.

2.6.12. Equity participations in companies. 150

2.6.13. Securitization positions. The provisions of point 3.1 must be taken into account.

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2.6.14. Spot transactions to be settled not failed. 0

2.6.15. Failed DvP and non-DvP transactions. The provisions of point 4.1 shall be taken into account.

2.6.16. Exposures to central counterparties (CCPs). The provisions of point 4.3 shall be taken into account – except for the cases contemplated in point 4.1 –.

2.6.17. Transactions with derivatives not included in point 2.6.16. The provisions of point 4.2 shall be taken into account.

2.6.18. Other assets and/or off-balance sheet items. 100

2.7. Credit conversion factors (CCF).

Off-balance sheet transactions – including commitments for financing and correspondent lines to foreign entities, guarantees granted, guarantees granted on deferred payment checks, documentary credits and acceptances, documents rediscounted at other financial institutions and other credit agreements – shall be converted into credit equivalents using the following credit conversion factors (CCF), subsequently applying the risk weights established in point 2.6. and taking into account, where applicable, the provisions established in Section 5.:

Concept	CCF - in % -
a) Direct credit substitutes, such as general guarantees of indebtedness – including "stand-by" letters of credit used as financial guarantees – and acceptances and endorsements with liability.	100
b) Contingent items related to the client's commercial transactions – such as those arising from guarantees of performance of commercial obligations –.	50
c) Short-term commercial letters of credit – i.e., with a residual term of up to one year – self-liquidating that cover the movement of goods – such as documentary credits secured by the underlying documentation –. Both the issuing bank and the confirming bank shall be subject to the CCF provided in this subparagraph and the weight corresponding based on the counterparty.	20
d) Sales of assets with recourse for the transferor (shall be weighted according to the asset and not based on the counterparty).	100
e) Commitments to acquire assets not recorded in the balance sheet (shall be weighted according to the asset and not based on the counterparty).	100

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MINIMUM CAPITAL OF FINANCIAL INSTITUTIONS
B.C.R.A.
Section 5. Credit risk coverage.

5.3.3.5. If in order to proceed with the settlement of the credit protection it were necessary for the buyer of the protection to transfer the underlying obligation to the protection provider, the terms of the underlying obligation shall contemplate that the consent necessary to carry out said transfer may not be refused without justified cause.

5.3.3.6. The parties responsible for determining whether a credit event occurred shall be clearly identified. This responsibility shall not fall solely on the seller of protection, but its buyer may inform the former about the occurrence of a credit event.

5.3.3.7. A mismatch between the underlying obligation and the obligation used for purposes of determining whether a credit event has occurred is permitted provided that: i) the latter is of a similar or lower category than the underlying obligation; ii) both obligations are issued by the same debtor and iii) there are legally enforceable reciprocal clauses of cross-default or cross-acceleration.

When the restructuring of the underlying obligation is not contemplated by the credit derivative, but the requirements included in points 5.3.3.1. to 5.3.3.7. are met, partial recognition of the credit derivative shall be permitted. If the amount of the credit derivative were less than or equal to that of the underlying obligation, up to 60 % of the value of the coverage may be counted. If the amount of the credit derivative were greater than that of the underlying obligation, up to 60 % of the value of the underlying obligation may be counted as coverage.

Only credit default and total return "swaps" that provide credit protection equivalent to guarantees shall be recognized, with the following exception: when a financial institution buys credit protection through a total return "swap" and accounts for the net payments received under the "swap" as net income, but does not account for the deterioration in the value of the protected asset, the credit protection shall not be recognized.

Other types of credit derivatives may not be recognized as CRC.

5.3.4. Eligible guarantors (and counter-guarantors) and credit protection providers.

When the guarantees or credit derivatives are direct, explicit, irrevocable and unconditional, the credit protection provided by the following entities shall be recognized, when their risk weight is lower than that of the counterparty:

5.3.4.1. Non-financial public sector.

5.3.4.2. Financial institutions.

5.3.4.3. Mutual guarantee companies and public guarantee funds, registered in the Registries enabled at the BCRA.

5.3.4.4. Multilateral development banks referred to in point 2.6.3.

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CENTRAL BANK OF THE ARGENTINE REPUBLIC

MINIMUM CAPITAL OF FINANCIAL INSTITUTIONS

CONSOLIDATED TEXT			SOURCE RULE
Section	Point	Paragraph	Com.	Chap./ Annex	Point	Paragraph	OBSERVATIONS
2.	2.5.5.		“A” 2136	I			According to Com. “A” 2541, annex, criteria, g), 5369 (Annex I) and 5580.
	2.5.6.		“A” 5369	I
	2.5.7.		“A” 5580
	2.5.8.		“A” 5580
	2.5.9.		“A” 5580
	2.5.10.		“A” 5580
	2.5.11.		“A” 6004		4.		According to Com. “A” 6344.
	2.6.		“A” 5369	I			According to Com. “A” 6260.
	2.6.1.		“A” 5369	I
	2.6.1.1.		“A” 5369	I
	2.6.1.2.		“A” 5369	I
	2.6.1.3.		“A” 5369	I
	2.6.1.4.		“A” 5369	I
	2.6.2.		“A” 5369	I
	2.6.2.1.		“A” 5369	I			According to Com. “A” 5580.
	2.6.2.2.		“A” 5369	I			According to Com. “A” 5580 and 5831.
	2.6.2.3.		“A” 5369	I			According to Com. “A” 6024 and 6221.
	2.6.2.4.		“A” 5369	I			According to Com. “A” 6004.
	2.6.2.5.		“A” 5369	I			According to Com. "A" 6004.
	2.6.2.6.		"A" 6004		4.
	2.6.2.7.		"A" 5369	I			According to Com. "A" 6004.
	2.6.2.8.		"A" 6270
	2.6.3.		"A" 5369	I
	2.6.3.1.		"A" 5369	I			According to Com. "A" 5831.
	2.6.3.2.		"A" 5369	I			According to Com. "A" 6344.
	2.6.4.		"A" 5369	I
	2.6.4.1.		"A" 5369	I
	2.6.4.2.		"A" 5369	I			According to Com. "A" 6004 and 6006.
	2.6.5.		"A" 5369	I			According to Com. "A" 6004.
	2.6.6.		"A" 5369	I			According to Com. "A" 5580.
	2.6.7.		"A" 5369	I
	2.6.7.1.		"A" 5369	I			According to Com. "A" 5580 and 6221.
	2.6.7.2.		"A" 5369	I
	2.6.8.		"A" 5369	I
	2.6.9.		"A" 5369	I			According to Com. "A" 6004.
	2.6.9.1.		"A" 5369	I
	2.6.9.2.		“A” 5369	I
	2.6.10.		“A” 5369	I
	2.6.10.1.		“A” 5369	I
	2.6.10.2.		“A” 5369	I
	2.6.11.		“A” 5369	I
	2.6.11.1.		“A” 5369	I

MINIMUM CAPITAL OF FINANCIAL INSTITUTIONS

UPDATED TEXT			SOURCE RULE				OBSERVATIONS
Section	Point	Paragraph	Com.	Chap./ Annex	Point	Paragraph
	5.1.		“A” 5369	II
		2°	“A” 5369				According to Com. “A” 5580.
		3°	“A” 5831
	5.1.1.		“A” 5369	II			According to Com. “A” 5580 and 5867. Includes interpretive clarification.
	5.1.2.		“A” 5369	II			According to Com. “A” 5580 and 5867. Includes interpretive clarification.
	5.2.		“A” 5369	II
	5.2.1.		“A” 5369	II
	5.2.1.4.		“A” 5369	II			According to Com. “A” 5831.
	5.2.2.		“A” 5369	II
	5.2.2.1.		“A” 5369	II			According to Com. "A" 6004.
	5.2.2.2.	last	"A" 5369	II			According to Com. "A" 5580.
	5.2.3.		"A" 5369	II
		6°	"A" 5369	II			According to Com. "A" 5580.
		7°	"A" 5369	II			According to Com. "A" 5580 and 5831.
		8°	"A" 5369	II			According to Com. "A" 5580 and 5831.
	5.2.3.1.		"A" 5369	II			According to Com. "A" 5580.
	5.2.3.2.		"A" 5369	II			According to Com. "A" 5580 and 5831.
	5.2.3.3.		"A" 5369	II			According to Com. "A" 5580.
	5.2.3.4.		"A" 5821		4.
	5.3.		"A" 5369	II
	5.3.1.		"A" 5369	II
	5.3.2.		"A" 5369	II
	5.3.3.		"A" 5369	II
		last	"A" 5831	II
	5.3.3.1.		"A" 5369	II			According to Com. "A" 5831.
	5.3.4.		"A" 5369	II			According to Com. "A" 6344.
	5.3.5.		"A" 5369	II			According to Com. "A" 5580.
	5.3.5.1.		"A" 5369	II			According to Com. "A" 5580.
	5.3.5.2.		"A" 5831
	5.3.5.3.		"A" 5369	II			According to Com. "A" 5580 and 5831.
	5.3.5.4.		"A" 5369	II			According to Com. "A" 5580 and 5831.
	5.4.		"A" 5369	II			According to Com. "A" 5580.
		2°	"A" 5831
		3°	"A" 5831
	5.5.		"A" 5831
	5.6.		"A" 5831
5.	5.7.		"A" 5831
	6.1. to 6.5.		"A" 5867		1.
	6.6.		"A" 2461	sole	III		According to Com. "A" 3161, 4172, 5272 and 5867.
6.	6.7. to 6.9.		"A" 5867		1.
	6.10.		"A" 2461	sole	VI		According to Com. "A" 4172.
	6.11.		"A" 5867		1.