Treatment of Controlling Companies (Holding Companies). Net Stable Funding Ratio. Adjustments.

"2019 - YEAR OF EXPORTS"
COMMUNICATION "A" 6723 27/06/2019
TO FINANCIAL ENTITIES:
Ref.: Circular
OPRAC 1 - 978
LISOL 1 - 832
Treatment of Controlling Companies ("Holding Companies"). Net Stable Funding Ratio. Adjustments.
____________________________________________________________ We address you to inform you that this Institution has adopted the following resolution:

“1. It is ordered, with effect from 1.1.20, that financial entities belonging to Group “A” – in accordance with the regulations on “Authorities of Financial Entities” – whose controlling company is a “holding company” – (non-financial entity) – must comply with the regulations on “Minimum Capital of Financial Entities”, “Large Credit Risk Exposures”, “Liquidity Coverage Ratio” and “Net Stable Funding Ratio” in a consolidated manner that includes that holding company and all subsidiaries of that “holding company” or the financial entity, but excluding insurance companies and any other subsidiary of the group as long as it does not carry out activities of a financial nature. This is without prejudice to the compliance with such regulations on an individual and consolidated basis as provided for in the regulations on “Consolidated Supervision”. They must also submit, within the already established deadlines, the information regimes provided for in these regulations according to the significance of the subsidiaries to be considered (Section 3. of the regulations on “Consolidated Supervision”). For these purposes, financial nature activity comprises the activities that financial entities may carry out, those provided for in point 2.2. of the regulations on “Complementary Services of Financial Activity and Permitted Activities”, as well as others that the Superintendence of Financial and Exchange Entities considers to be auxiliary to the activity of financial entities, excluding insurance companies.

2. It is ordered that financial entities belonging to Group “A” may not grant – directly or indirectly – financial assistance of any kind to their controlling company when it is a “holding company” and not a financial entity.

3. The last paragraph of point 1.3. of the regulations on “Net Stable Funding Ratio” is hereby repealed.

-2-

4. Replace points 2.3.1.3., 2.3.3. and 5.1.6. of the regulations on “Net Stable Funding Ratio” with the following:
   “2.3.1.3. Loans and other liabilities – including time deposits – taken by the financial entity, secured and unsecured, with an effective residual maturity equal to or greater than one year. Retail time deposits with a residual maturity of more than one year in which the entity does not allow prepayment within that period without significant penalty are included. Cash flows that are payable within the one-year time horizon and arise from liabilities with a final maturity of more than one year are excluded.”

“2.3.3. Factor of 90 %.
2.3.3.1. Demand and/or time deposits of retail and SME customers with a residual maturity of less than one year not included in point 2.3.2. – i.e., “Other retail deposits” and “Other funding provided by SMEs”, respectively, provided for in the regulations on “Liquidity Coverage Ratio” –.
2.3.3.2. Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – without a final judgment.”

“5.1.6. Demand deposits and time deposits not included in point 2.3.2. with a residual maturity of less than one year, made by retail and SME customers (point 2.3.3.1.).”
90 %

5. Incorporate into points 2.3.5. and 5.1. of the regulations on “Net Stable Funding Ratio” the following:
   “2.3.5.5. Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – with a final judgment.”

“5.1…Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – without a final judgment (point 2.3.3.2.).”
90 %

“5.1…Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – with a final judgment (point 2.3.5.5.).”
0 %

Finally, we send you the sheets that, in replacement of those previously provided, must be incorporated into the regulations on “Net Stable Funding Ratio”. In this regard, it is recalled that on this Institution’s website www.bcra.gob.ar, by accessing “Financial System - LEGAL AND REGULATORY FRAMEWORK - Orders and Summaries - Consolidated Texts of General Regulations”, the modifications made with text highlighted in special characters (strikethrough and bold) can be found.

-3-
We salute you attentively.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Darío C. Stefanelli Agustín Torcassi
Principal Manager of Issuance and
Normative Applications
Deputy General Manager of Financial Regulation

ANEXO

The available and required stable funding amounts determined in accordance with these provisions are calibrated to reflect the expected stability of the financial entity’s liabilities and the expected liquidity of its assets over a one-year period.

1.4. Minimum value of the NSFR.
The NSFR must – at all times – be greater than or equal to 1: NSFR ≥ 1.
It will be complemented by the evaluation carried out by the Superintendence of Financial and Exchange Entities (SEFyC). The SEFyC may require the entity to adopt stricter standards in order to reflect its funding risk profile, taking into account for this purpose also the evaluation it has carried out of the entity’s compliance with the regulations on “Guidelines for Risk Management in Financial Entities” regarding liquidity.

1.5. Frequency of calculation and information.
Entities must observe the NSFR at all times and report it to the SEFyC quarterly through the information regime established for this purpose.

Validity:
28/6/2019
NET STABLE FUNDING RATIO
B.C.R.A.
Section 1. General Considerations.

2.2.2.2. When calculating liabilities arising from derivative transactions, guarantees constituted as variation margin must be deducted from the negative replacement cost regardless of the type of asset given as collateral. Such variation margin must not be included in the calculation of the entity’s MRFE.

2.3. Categories.
Liabilities and capital instruments will receive the following FDF factors.

2.3.1. Factor of 100 %.
2.3.1.1. Items that make up the entity’s computable equity responsibility (RPC) as follows:
i) Ordinary Level 1 capital (COn1) – point 8.2.1. of the regulations on “Minimum Capital of Financial Entities” – without deducting the items provided for in point 8.4.1. and, if applicable, in point 8.4.2. ii) Additional Level 1 capital (CAn1) – point 8.2.2. of the aforementioned regulations – without deducting the items provided for in point 8.4.2. of those regulations. iii) Supplementary equity (PNc) – Level 2 capital, point 8.2.3. of the aforementioned regulations – without deducting, if applicable, the items provided for in point 8.4.2. of those regulations, excluding the portion of instruments with a residual maturity of less than one year.

2.3.1.2. Capital instruments not included in point 2.3.1.1. with an effective residual maturity equal to or greater than one year, excluding any instrument with explicit or implicit options that, if exercised, would reduce the expected maturity to less than one year.

2.3.1.3. Loans and other liabilities – including time deposits – taken by the financial entity, secured and unsecured, with an effective residual maturity equal to or greater than one year. Retail time deposits with a residual maturity of more than one year in which the entity does not allow prepayment within that period without significant penalty are included. Cash flows that are payable within the one-year time horizon and arise from liabilities with a final maturity of more than one year are excluded.

2.3.1.4. Deferred tax liabilities whose earliest possible cancellation date is equal to or greater than one year.

2.3.1.5. Minority interests, in the case of consolidated basis measurement.

NET STABLE FUNDING RATIO
B.C.R.A.
Section 2. Available Stable Funding Amount (ASFA).
Validity:
28/6/2019

2.3.2. Factor of 95 %.
It will apply to demand and time deposits of retail and SME customers considered “stable” with a residual maturity of less than one year.
For these purposes, deposits considered “stable” will be computed in accordance with points 4.1. and 4.2.1., respectively, of the regulations on “Liquidity Coverage Ratio”, using a one-year time horizon for this purpose.

2.3.3. Factor of 90 %.
2.3.3.1. Demand and/or time deposits of retail and SME customers with a residual maturity of less than one year not included in point 2.3.2. – i.e., “Other retail deposits” and “Other funding provided by SMEs”, respectively, provided for in the regulations on “Liquidity Coverage Ratio” –.
2.3.3.2. Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – without a final judgment.

2.3.4. Factor of 50 %.
2.3.4.1. Secured and unsecured funding obtained from non-financial private sector customers – except SMEs – with a residual maturity of less than one year.
2.3.4.2. Operational deposits provided for in point 4.2.2. of the regulations on “Liquidity Coverage Ratio”.
2.3.4.3. Funding obtained from the National Government and the rest of the non-financial public sector in accordance with the definition in point 1.1. of the regulations on “Financing of the Non-Financial Public Sector”, from other sovereign states and entities of the non-financial public sector of those states, and from multilateral development banks, with a residual maturity of less than one year.
2.3.4.4. Other funding (secured and unsecured) not included in points 2.3.4.1. to 2.3.4.3. with a residual maturity from six months to less than one year, including funding from the Central Bank of the Argentine Republic (BCRA) and central banks of other sovereign states, as well as that from financial sector institutions.
2.3.4.5. Deferred tax liabilities whose earliest possible cancellation date is between six months and less than one year.

2.3.5. Factor of 0 %.
2.3.5.1. Capital instruments not included in points 2.3.1.1. and 2.3.1.2. and liabilities not included in points 2.3.1. to 2.3.4.
Other funding with a residual maturity of less than six months from the BCRA, central banks of other sovereign states, and financial sector institutions is also included.

NET STABLE FUNDING RATIO
B.C.R.A.
Section 2. Available Stable Funding Amount (ASFA).
Validity:
28/6/2019

2.3.5.2. Other liabilities with an indefinite maturity term. Includes sold positions and positions with an indefinite maturity term.
Deferred tax liabilities and minority interests are excluded, to which the factors provided for in points 2.3.1.4. and 2.3.4.5. and in point 2.3.1.5., respectively, will apply.

2.3.5.3. Liabilities arising from derivative transactions calculated in accordance with point 2.2.2., net of assets arising from derivative transactions calculated in accordance with point 3.2.5., if those liabilities exceed the aforementioned assets.

2.3.5.4. Pending payment amounts for purchases of financial instruments, currencies, or basic products – “commodities” – that:
i) are expected to be settled within the standard settlement cycle or the period that is usual for the relevant exchange or type of transaction; or ii) have not been settled, but are expected to be settled.

2.3.5.5. Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – with a final judgment.

NET STABLE FUNDING RATIO
B.C.R.A.
Section 2. Available Stable Funding Amount (ASFA).
Validity:
28/6/2019

5.1. Available Stable Funding Factors (FDF). Factor
5.1.1. Ordinary Level 1 capital (CO n1), Additional Level 1 capital (CA n1) and Level 2 capital (PNc) in accordance with Section 8. of the regulations on “Minimum Capital of Financial Entities” – without deducting the items admitted there – excluding Level 2 instruments with a residual maturity of less than one year (point 2.3.1.1.).
100 %

5.1.2. Capital instruments – not included in point 2.3.1.1. – with an effective residual maturity equal to or greater than one year (point 2.3.1.2.).
100 %

5.1.3. Loans and other liabilities – including time deposits – with an effective residual maturity equal to or greater than one year (point 2.3.1.3.).
100 %

5.1.4. Deferred tax liabilities whose earliest possible cancellation date is equal to or greater than one year and minority interests (points 2.3.1.4. and 2.3.1.5.).
100 %

5.1.5. “Stable” demand and time deposits with a residual maturity of less than one year, made by retail and SME customers (point 2.3.2.).
95 %

5.1.6. Demand deposits and time deposits not included in point 2.3.2. with a residual maturity of less than one year, made by retail and SME customers (point 2.3.3.1.).
90 %

5.1.7. Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – without a final judgment (point 2.3.3.2.).
90 %

5.1.8. Secured or unsecured funding from the non-financial private sector – except SMEs – with a residual maturity of less than one year (point 2.3.4.1.).
50 %

5.1.9. Operational deposits in accordance with point 4.2.2. of the regulations on “Liquidity Coverage Ratio” (point 2.3.4.2.).
50 %

5.1.10. Funding obtained from the National Government and the rest of the non-financial public sector, from other sovereign states and entities of the non-financial public sector of those states, and from multilateral development banks, with a residual maturity of less than one year (point 2.3.4.3.).
50 %

5.1.11. Other funding (secured or unsecured) not included in points 2.3.4.1. to 2.3.4.3. with a residual maturity from six months to less than one year – includes funding from the Central Bank of the Argentine Republic and central banks of other sovereign states and from financial sector institutions (point 2.3.4.4.).
50 %

NET STABLE FUNDING RATIO
B.C.R.A.
Section 5. Factors.
Validity:
28/6/2019

5.1.12. Deferred tax liabilities whose earliest possible cancellation date is between six months and less than one year (point 2.3.4.5.).
50 %

5.1.13. Capital instruments not included in points 2.3.1.1. and 2.3.1.2., and liabilities not included in points 2.3.1. to 2.3.4. – including funding with a residual maturity of less than six months from the BCRA, central banks of other sovereign states, and financial sector institutions (point 2.3.5.1.).
0 %

5.1.14. Other liabilities with an indefinite maturity term; includes sold positions and positions with an indefinite maturity term – excluding deferred tax liabilities and minority interests provided for in points 2.3.1.4. and 2.3.4.5. and in point 2.3.1.5., respectively – (point 2.3.5.2.).
0 %

5.1.15. Liabilities arising from derivative transactions net of assets arising from derivatives – calculated in accordance with points 2.2.2. and 3.2.5., respectively – if the liabilities exceed the assets (point 2.3.5.3.).
0 %

5.1.16. Pending payment amounts for purchases of financial instruments, currencies, or basic products (point 2.3.5.4.).
0 %

5.1.17. Demand and time deposits ordered by the Judiciary in cases in which it intervenes – judicial deposits – with a final judgment (point 2.3.5.5.).
0 %

5.2. Required Stable Funding Factors (RSF).
5.2.1. Cash in vault, in transit, in value transporters, and in automated teller machines (point 3.3.2.1.).
0 %

5.2.2. Deposits at the BCRA – including those computable as minimum cash integration – without considering amounts in special guarantee accounts (point 3.3.2.2.).
0 %

5.2.3. Exposures to the BCRA and central banks of other sovereigns with a residual maturity of less than six months (point 3.3.2.3.).
0 %

5.2.4. Pending settlement amounts from sales of financial instruments, currencies, or basic products (point 3.3.2.4.).
0 %

5.2.5. Unrestricted Level 1 assets (A n1), excluding assets with a residual maturity provided for in point 3.3.2. (point 3.3.3.):
5 %

NET STABLE FUNDING RATIO
B.C.R.A.
ORIGIN OF THE PROVISIONS CONTAINED IN THE REGULATIONS ON “NET STABLE FUNDING RATIO” CONSOLIDATED TEXT SOURCE REGULATION
Section Point Paragraph Com. Chapter Point Paragraph
OBSERVATIONS
1.1. “A” 6306 According to Comm. “A” 6475 and 6633.
1.2. “A” 6306
1.3. “A” 6306 According to Comm. “A” 6723.
1.4. “A” 6306
1.
1.5. ”A” 6306
2.1. “A” 6306
2.2. “A” 6306
2.3. “A” 6306
2.3.1.3. “A” 6306 According to Comm. “A” 6723.
2.3.3.1. “A” 6306 According to Comm. “A” 6723.
2.3.3.2. “A” 6723
2.
2.3.5.5. “A” 6723
3.1. “A” 6306
3.2. “A” 6306
3.3. “A” 6306
3.
3.4. “A” 6306
4.
“A” 6306
5.1. “A” 6306
5.1.6. “A” 6306 According to Comm. “A” 6723.
5.1.7. “A” 6723
5.1.17. “A” 6723
5.
5.2. “A” 6306
6.1. “A” 6306
6.
6.2. “A” 6306