Valuation of National Public Securities and Monetary Regulation Instruments. Special Investment Account — BCRA — AR

"2008 - Year of Science Education"
COMMUNICATION "A" 4861 30/10/2008
TO FINANCIAL ENTITIES:
Ref.: Circular
CONAU 1 - 864
LISOL 1 - 491
OPRAC 1 - 617
Valuation of National Public Securities and
Monetary Regulation Instruments.
Special Investment Account..

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

"1. Establish that, from 31.10.08, financial entities will be permitted to transfer, in whole or in part, both national public securities and monetary regulation instruments of the Central Bank, expressly contemplated in the volatility list published monthly by this Institution for the purpose of calculating the minimum capital requirement for market risk, to "Investment Accounts" and/or "Special Investment Account" (valuation regime provided for in point 3. of the resolution made known through Communication "A" 4676, with the modifications set forth in point 3. of this communication). To this effect, the incorporation value will be the purchase price if the option is exercised on the same day of acquisition or, when carried out after incorporation into the asset, the market price corresponding to the close of operations on the day that option is exercised is used. Subsequently, that value will be increased monthly based on the internal rate of return arising from the interest rate used as discount that equates the present value of the cash flow with the incorporation value. The positions will be computed according to the guidelines contemplated in the second paragraph (after subsection iv)-) of the point incorporated below point 3. of Annex II to Communication "A" 2140 -text according to point 2. of Communication "A" 4230-. The last paragraph of Section 2. and Section 6. of the rules on "Investment Accounts" shall apply. In other respects, the provisions of the regime provided for in point 3. of the resolution made known through Communication "A" 4676 shall be observed.

Provide that, for the purpose of computing the internal rate of return of portfolios in "Investment Accounts" and "Special Investment Account", foreign currency items must be computed by their value and cash flows in that currency and the resulting book value must be revalued at the close of each period based on the exchange rate applicable.

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For the case of items whose capital adjusts by the reference stabilization coefficient ("CER"), the internal rate of return must be obtained without considering the future evolution of said coefficient, in accordance with the rules for its lag established in the issuance conditions of the instruments, and the book value thus obtained must be adjusted at the end of each period based on the evolution verified by said indicator.

Admit that the position as of 31.10.08 of national public securities, denominated in pesos or in foreign currency, expressly contemplated in the volatility list published monthly by this Institution for the purpose of calculating the minimum capital requirement for market risk, not exceeding that recorded as of 30.9.08, measured by the corresponding residual values of each item, can be accounted for, in whole or in part, in "Special Investment Account" at its book value registered on that latter date. The excess, i.e., the net increases during October, will be valued at the acquisition price.
Admit, until 31.10.08, the de-designation of national public securities included in the regime provided for in point 1. of Communication "A" 4825 (margin for buy/sell or intermediation operations admitted in the case of registering excesses in the fragmentation limits of credit risk due to financing to the non-financial public sector -point 8. of Communication "A" 3911, text according to point 2. of Communication "A" 4676-), for their imputation, in whole or in part, to the regime contemplated in points 1. and 3. of this communication.
The instruments de-designated from the margin for buy/sell or intermediation operations admitted, provided for in Communication "A" 4825, will continue to be computed within the limit of 25% of the computable equity liability referred to in the second paragraph of point 1. of said communication.
Establish that, effective from 1.11.08, the total value of national public securities, denominated in pesos or in foreign currency, accounted for in "Investment Accounts" and "Special Investment Account" cannot exceed 7.5% of the total assets of the last day of the previous month.
In cases where said limit is exceeded, 100% of the excess will determine an equivalent increase in the minimum capital requirement for credit risk ("INC"), without prejudice to the application of the provisions of Article 41 of the Financial Entities Law.
The eventual excesses registered by financial entities considering their position as of 30.9.08 with respect to said limit, applied to the total assets in October 2008, will be considered admitted.
The provisions foreseen in this point will be observed individually. Controlling financial entities subject to consolidated supervision will also observe them on a monthly consolidated basis and, additionally and independently, quarterly.
Establish that until 31.10.08, national public securities, denominated in pesos, included in point 3. of the resolution made known through Communication "A" 4676 (primary subscription of national public securities denominated in pesos, with a term equal to or greater than 5 years, at a fixed rate -without adjustment by the Reference Stabilization Coefficient- that financial entities carry out from 1.6.07), may be de-designated, in whole or in part, from said regime and imputed to "Investment Accounts" at the net book value of the attributable part of the amount of the regularizing account.

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Admit, until 31.10.08, the de-designation of monetary regulation instruments of the Central Bank included in "Investment Accounts", for their imputation, in whole or in part, to the "Special Investment Account" regime.
Substitute point 6. of the "Available for Sale" regime contained in point 1. of the resolution made known through Communication "A" 4702 with the following:
"6. De-designation of holdings.
The de-designation of holdings under this methodology will be admitted only in the following cases:
6.1. sale,
6.2. collection of amortization and/or capital income services corresponding,
6.3. when it no longer has volatility published by this Institution, in which case it must be registered as unquoted holdings, or
6.4. when the option is taken to use the valuation method of "Special Investment Account" or "Investment Account".
In the situations foreseen in points 6.1. to 6.4., the corresponding valuation difference must be de-designated with a counterpart in results.
In the case foreseen in point 6.3., the value of such holdings will be increased based on accrued interest according to the internal rate of return.
Establish that the disclosure of the imputation of the positions of assets included in accordance with these provisions must be formulated by means of a note to the financial statements, in which information will be provided on the valuation criterion employed with respect to positions in "Investment Accounts" and "Special Investment Account" and the quantification of the difference in relation to their valuation at market prices, in terms of the procedural standards established for this purpose."

At the appropriate time, we will send you the sheets that correspond to replace in the ordered texts of the rules on "Investment Accounts", "Minimum Capital Defaults and Technical Relations" and "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
Deputy General Manager of Standards