UPDATED OFFERING MEMORANDUM BANCO HIPOTECARIO SA

Transcription

UPDATED OFFERING MEMORANDUM
BANCO HIPOTECARIO S.A.
Global Program for the Issue of Simple, Non-Convertible, Secured or Unsecured, Subordinated Or
Unsubordinated Notes
for a principal amount of up to US$ 500,000,000 (or its equivalent in pesos)
Under its Global Program for the Issue of Simple, Non-Convertible, Secured or Unsecured, Subordinated or Unsubordinated
Notes for a principal amount of up to US$ 500,000,000 (or its equivalent in pesos), (hereinafter referred to as the “Program”), Banco
Hipotecario S.A. (hereinafter “BHSA” or the “Bank” or the “Issuer”, indistinctly) may from time to time issue notes denominated in U.S.
Dollars or their equivalent in Pesos (hereinafter, indistinctly, the “Notes” and/or the “Securities”). Such Notes under the Program will be
issued in series (each, a “Series”) and each Series may include one or more Tranches (each, a “Tranche”).
The notes issued under the Program may (i) bear interest at a fixed rate; (ii) bear interest at a variable rate; or (iii) be issued at a
discount and not bear interest. The principal amount, maturity, interest rate and interest payment dates of each Series of notes issued under
the Program will be described in a pricing supplement to this offering memorandum (“Offering Memorandum”) relating to such series.
Specific terms and conditions applicable to the notes that supplement, modify or amend the general terms and conditions of the notes
described in this Offering Memorandum will be described in the pricing supplement applicable to such series.
The Bank may offer and distribute the notes issued under the Program directly or through dealers and agents that the Bank may
designate from time to time. Any such dealers and agents will be set forth in the applicable pricing supplement. This Offering Memorandum
may not be used to consummate sales of notes issued under the Program unless accompanied by the applicable pricing supplement. The Bank
reserves the right to withdraw, cancel or modify any offering of notes contemplated by this Offering Memorandum or any pricing
supplement with prior notice.
Unless otherwise specified in the applicable pricing supplement, the notes will be secured or unsecured and will qualify pari
passu without any preference among them, except with respect to certain obligations that are granted preferential treatment by the Argentine
laws and except for any notes issued with special, fixed or floating guarantee. In addition, the Bank may issue subordinated Notes in
accordance with the regulations issued by the Central Bank of the Republic of Argentina (hereinafter, the “BCRA” or the “Central Bank”
indistinctly) in effect at such time.
The notes issued under this Program will qualify as non-convertible notes (obligaciones negociables no convertibles) pursuant to
Law No. 23,576, as amended (the “Negotiable Obligations Law”), will be issued in accordance with such law and Law No. 19,550 of the
Republic of Argentina, as amended (the “Argentine Companies Law”) and will be publicly placed in Argentina in accordance with the
provisions of Law No. 26,831 on Capital Markets (the “Capital Markets Law”) and the Argentine Securities Commission Rules in force until
the Capital Markets Law is regulated by the Argentine Securities Commission pursuant to Section 155 of such law and General Resolution
615/13 of the Argentine Securities Commission, and in particular, pursuant to Resolution 597/11 (the “Resolution 597/2011”) of the
Argentine Securities Commission, as amended and supplemented, and any other applicable laws and/or regulations.
The notes issued under the Program may be listed or not in one or more stock exchanges, securities markets or self-regulated
entities of Argentina or abroad, as set forth in the applicable pricing supplement relating to each Series and/or Tranche. The creation of the
Program was approved by resolution of the Bank’s shareholders’ meeting dated May 23, 2008 and resolutions of the Bank’s board of
directors dated February 9, 2011, March 14, 2012, and February 15, 2013
Public Offering authorized by Resolution No. 16,573 dated May 24, 2011 of the Argentine Securities Commission. This
authorization means only that the reporting requirements have been satisfied. The Argentine Securities Commission (the
“Argentine Securities Commission” or “CNV”, indistinctly) has not rendered any opinion in respect of the information
contained in this Offering Memorandum. The accuracy of the accounting, financial, economic and all other information
contained in this Offering Memorandum is the sole responsibility of the company’s board of directors and, to the extent
applicable, its supervisory committee and the auditors who signed their reports on the financial statements attached hereto.
The Bank’s Board of Directors hereby represents and warrants that, as of the date hereof, this Offering Memorandum
contains true and complete information regarding any material fact that may affect the company’s equity, economic and
financial condition, as well as all other information that is required to be furnished to investors in respect of this issue in
accordance with applicable laws and regulations. In addition, in accordance with the provisions of the Capital Markets
Law (i) the intermediary entities and agents acting in the market as arrangers and/or dealers of securities will be liable to
the extent they have not diligently reviewed the information contained in the Offering Memorandum; (ii) the individuals
who sign the Offering Memorandum will be liable for all the information included in it; and (iii) the experts or third parties
who pass upon certain parts of the Offering Memorandum will be liable for the information on which they have rendered
an opinion.
See “Risk Factors” on page 26 of this Offering Memorandum for a description of certain material risks related to an
investment in the notes.
The notes issued under the Program are excluded from the deposit insurance system established pursuant to Argentine
Law No. 24,485, as amended, and will not benefit from the exclusive priority right granted to depositors pursuant to Section 49(e) of
Financial Institutions Law No. 21.526 (the “FIL”), as amended. The notes are not secured by any floating security interest or special
guarantee or guaranteed by any other means or by any other financial entity.
THIS PROGRAM HAS NO CREDIT RATING. IF IT WERE DECIDED TO RATE THE NOTES ISSUED
UNDER THE PROGRAM, THE CREDIT RATINGS ASSIGNED AND RELATED INFORMATION WILL BE
DISCLOSED IN THE PRICING SUPPLEMENT APPLICABLE TO SUCH NOTES.
No action has been (or will be) taken to permit a public offer of the notes issued under the
program in any jurisdiction outside the Republic of Argentina (“Argentina”). The notes have not been
registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), any state’s securities
laws or the securities laws of any other jurisdiction (other than Argentina) and may not be offered or sold
in the United States or to U.S. persons (as defined in Regulation S of the Securities Act, or “Regulation
S”), except in transactions exempt from, or not subject to, the registration requirements of the Securities
Act. Accordingly, the Bank will only offer and sell notes registered under the Securities Act or in
transactions exempt from registration under the Securities Act to “qualified institutional buyers” (as
defined in Rule 144A under the Securities Act) (“QIBs”) or outside the United States to non-U.S. persons
in compliance with Regulation S under the Securities Act.
Pursuant to Law No. 24,587 (“Law on Corporate Notes’ Mandatory Registered Form”),
Argentine companies are not authorized to issue certificated securities in bearer form unless they are
authorized by the Argentine Securities Commission to be placed by means of a public offering in
Argentina and are represented by global or individual securities, registered or deposited with common
depositary systems authorized by the Argentine Securities Commission. Therefore, for as long as the
provisions of the Law on Corporate Notes’ Mandatory Registered Form are in effect, the Bank will only
issue registered, non-endorsable notes (“registered notes”) or notes deposited with a custodian or clearing
system, not exchangeable for bearer certificated notes, as agreed by the Bank with the arrangers and
dealers.
This Offering Memorandum should be read together with all the documents incorporated herein
by reference and the information contained herein should be construed considering that such documents
form part of this Offering Memorandum.
We, having made all reasonable inquiries, confirm that this Offering Memorandum contains or
incorporates all information regarding the Bank and the notes that is material in the context of the
issuance and offering of the notes, that the information contained in or incorporated by reference to this
Offering Memorandum is true and accurate in all material respects and is not misleading and that there
are no other facts the omission of which would make this Offering Memorandum as a whole or any of
such information misleading in any material respect. Notwithstanding the foregoing, the information
provided in this Offering Memorandum or in any pricing supplement that relates to Argentina and its
economy is based upon publicly available information, and the Bank does not make any representation or
warranty with respect thereto. Neither Argentina, nor any governmental agency or political subdivision
thereof, in any way guarantees or otherwise backs, the Bank’s obligations in respect of the notes.
The Bank does not intend either this Offering Memorandum or any other information supplied in
connection with the program to provide the basis of any credit or other evaluation, nor should it be
considered as a recommendation by the Bank or the dealers that any recipient of this Offering
Memorandum or any other such information should purchase any of the notes.
You are advised to make, and shall be deemed to have made, your own independent
investigation of the Bank’s financial condition and affairs and your own appraisal of the Bank’s
creditworthiness. The dealers expressly do not undertake to review the Bank’s financial condition or
affairs during the life of the program or the notes of any particular series or to advise any investor in the
notes of any information coming to their attention.
Potential investors should rely only on the information contained in this Offering Memorandum.
The Bank has not, and the relevant dealers have not, authorized any other person to provide you with
different information. No reliance should be placed on any other or inconsistent information provided by
any person. You should assume that the information contained in this Offering Memorandum is accurate
only as of the date on the front cover of this Offering Memorandum. The Bank’s business, financial
condition, results of operations and prospects may have changed since such date.
This Offering Memorandum does not constitute an offer to sell or a solicitation of an offer to buy
any notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such
jurisdiction, nor does this Offering Memorandum constitute an invitation to subscribe for or purchase any
notes. The distribution of this Offering Memorandum or any part of it, including any pricing supplement,
and the offering, sale and delivery of the notes in certain jurisdictions may be restricted by law. The Bank
and the dealers require persons into whose possession this Offering Memorandum comes to inform
themselves about and to observe any such restrictions. For a description of certain further restrictions on
offers, sales and deliveries of notes and on the distribution of this Offering Memorandum and other
offering material relating to the notes, see “Transfer Restrictions.”
The accuracy of the accounting, financial, economic and all other information contained in the
Offering Memorandum is the sole responsibility of the Bank’s board of directors, members of its
supervisory committee, all the persons signing the Offering Memorandum and any applicable pricing
supplement registered by the Bank before the Argentine Securities Commission, and to the extent
applicable, the arranger, dealers, and other agents pursuant to the Capital Markets Law.
Upon adopting an investment decision in connection with the notes, investors should rely on
their own analysis of the Bank, the terms and conditions of the notes and the benefits and risks involved.
The contents of this Offering Memorandum and/or the applicable pricing supplement should not be
construed as legal, business, financial, tax or other advice. Potential investors are advised to consult their
own attorney, accountant and business adviser as to legal, tax, business, financial and related matters
concerning an investment in the Bank’s notes.
This Offering Memorandum and any pricing supplement applicable to a Series and/or Tranche
will be valid only for the purpose of listing the notes on the Buenos Aires Stock Exchange (the “BCBA”
or the “Buenos Aires Stock Exchange”, indistinctly) and trading them in Argentina through Mercado
Abierto Electrónico (“MAE”) for a total principal amount which, added to the total principal amount of
all the notes issued previously or simultaneously under the Program which are outstanding at such time
shall not exceed US$ 500,000,000 or its equivalent in pesos.
The Bank is a corporation (sociedad anónima) organized under the laws of Argentina in
accordance with the Argentine Companies Law. Therefore, the liability of the Bank’s shareholders is
limited to the shares subscribed by each of them.
The date of this Offering Memorandum is April 12, 2013.
TABLE OF CONTENTS
PAGE
GENERAL INVESTMENT CONSIDERATIONS
5
INCORPORATION BY REFERENCE
5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
6
AVAILABLE INFORMATION
7
OFFERING MEMORANDUM SUMMARY
8
INFORMATION ABOUT DIRECTORS, SENIOR MANAGEMENT, LEGAL COUNSEL AND MEMBERS
OF THE SUPERVISORY COMMITTEE
10
PROGRAM SUMMARY
18
KEY INFORMATION ABOUT THE ISSUER
22
SUMMARY OF FINANCIAL INFORMATION AND INDICATORS
22
CAPITALIZATION AND INDEBTEDNESS
25
USE OF PROCEEDS
25
RISK FACTORS
26
INFORMATION ABOUT THE ISSUER
38
HISTORY AND DESCRIPTION OF THE BANK’S BUSINESSES
38
ARGENTINE BANKING REGULATION
52
CERTAIN LEGAL ASPECTS OF MORTGAGES IN ARGENTINA
77
STRUCTURE AND ORGANIZATION OF THE BANK AND ITS ECONOMIC GROUP
81
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
84
OPERATIONS
DIRECTORS, SENIOR MANAGEMENT AND MEMBERS OF THE SUPERVISORY COMMITTEE
98
PRINCIPAL SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
116
OFFERING AND LISTING
120
DESCRIPTION OF THE NOTES
120
PLAN OF DISTRIBUTION
135
ADDITIONAL INFORMATION
138
EXCHANGE CONTROLS
149
TAXATION
158
LEGAL MATTERS
168
ADVISORS AND AUDITORS
168
SUPPLEMENTARY INFORMATION
168
GENERAL INVESTMENT CONSIDERATIONS
The terms “Argentine Government” or the “Government” or the “Federal Government” refer to
the federal government of the Republic of Argentina. The terms “U.S. Dollar” and “U.S. Dollars” and the
symbol “US$” refer to the legal tender of the United States. The terms “Argentine Pesos”, “Ps.”, “Peso”
and “Pesos” and the symbol “$” refer to the legal tender of Argentina. References to the “Argentine
Banking GAAP” refer to the Central Bank’s accounting rules. The term “GDP” refers to gross domestic
product and all references in this Offering Memorandum to GDP growth are to real GDP growth.
INCORPORATION BY REFERENCE
The following documents published or issued from time to time after the date of this Offering
Memorandum and prior to the termination of the offering of a particular series of notes in respect of
which this Offering Memorandum is delivered shall be deemed to be incorporated by reference into this
Offering Memorandum and to be a part hereof from the date of publication or issuance of such
documents:
•
the Bank’s most recently published audited annual financial statements and the Bank’s published
unaudited quarterly or semiannual financial statements;
•
any amendment or supplement to this Offering Memorandum that the Bank prepares from time to
time; and
•
with respect to any series of notes, any pricing supplement in respect of such notes.
Any statement contained in this Offering Memorandum or in a document that is incorporated by
reference shall be deemed modified or superseded to the extent a statement contained in any subsequent
document that is also incorporated by reference modifies or supersedes any such statement. Any
statement so modified or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Offering Memorandum. References to this Offering Memorandum shall be taken
to mean this document and all the documents from time to time incorporated by reference herein and
forming a part hereof including any pricing supplement in respect of a particular series of notes.
The Bank will make available, free of charge, a copy of any or all the documents incorporated by
reference herein at the Bank’s domicile, located at Reconquista 101 – C1003ABC, City of Buenos Aires,
Argentina, and in the Bank’s web page, www.hipotecario.com.ar. In addition, any inquiries may be addressed
to Investor Relations by calling (+5411) 4347-5122 or by sending an e-mail to
tgodino@hipotecario.com.ar. Finally, this Offering Memorandum and the notices related to the issuance
and the financial statements therein mentioned are available on the Argentine Securities Commission’s
web site, www.cnv.gob.ar, under the item “Financial Information”.
5
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Offering Memorandum includes forward-looking statements, principally under the captions
“Offering Memorandum Summary,” “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Business.” These forward-looking statements are
based largely on current beliefs, expectations and projections about future events and financial trends
affecting the Bank’s business.
Many important factors, in addition to those discussed elsewhere in this Offering Memorandum,
could cause our actual results to differ substantially from those anticipated in our forward-looking
statements, including, among other things:
•
changes in general economic, financial, business, political, legal, social or other conditions
in Argentina or elsewhere in Latin America or changes in either developed or emerging
markets;
•
changes in capital markets in general that may affect policies or attitudes toward lending to
or investing in Argentina or Argentine companies;
•
inflation;
•
changes in interest rates and the cost of deposits;
•
unanticipated increases in financing or other costs or the inability to obtain additional debt
or equity financing on attractive terms;
•
government regulation;
•
adverse legal or regulatory disputes or proceedings;
•
risks of lending, such as increases in defaults by borrowers;
•
fluctuations and declines in the value of Argentine public debt;
•
increased competition in the banking, financial services, and related industries, and loss of
market share;
•
increase in the allowances for loan losses;
•
technological changes or an inability to implement new technologies;
•
changes in consumer spending and saving habits;
•
deterioration of the business and financial conditions in the regional and national sphere;
•
fluctuations in the exchange rate of the Peso; and
•
the risk factors discussed under “Risk Factors”.
The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,”
“expect,” “forecast” and similar words are intended to identify forward-looking statements. Forwardlooking statements include information concerning possible or assumed future results of operations,
business strategies, financing plans, competitive position, industry environment, potential growth
opportunities, the effects of future regulation and the effects of competition. Forward-looking statements
speak only as of the date they were made, and the Bank undertakes no obligation to update publicly or to
revise any forward-looking statements after the distribution of this Offering Memorandum because of
new information, future events or other factors. In light of the risks and uncertainties described above, the
6
forward-looking events and circumstances discussed in this Offering Memorandum might not occur and
do not constitute guarantees of future performance.
AVAILABLE INFORMATION
This Offering Memorandum and the financial statements to which reference is made herein are
available to the interested parties at the Bank’s offices, located at Reconquista 101 - C1003ABC, City of
Buenos Aires, Argentina and in the Bank’s web page www.hipotecario.com.ar. In addition, any inquiries
may be addressed to Investor Relations by calling (+5411) 4347-5122 or by sending an e-mail to
tgodino@hipotecario.com.ar. Finally, this Offering Memorandum, the notices related to the issuance and
the financial statements therein mentioned are available on the Argentine Securities Commission’s web
site, www.cnv.gob.ar, under the item “Financial Information”.
7
OFFERING MEMORANDUM SUMMARY
The Bank was created in 1886 by the Argentine Government and privatized in 1999.
Historically, the Bank has led the Argentine mortgage loan market and has been ranked as the largest
supplier of insurance products and services in the field of mortgages and mortgage loans in Argentina. All
of the Bank’s transactions and customers are located in Argentina, where the Bank runs a national
network spanning 54 branches throughout the Argentine territory and an additional 16 points of sales.
The Bank is a commercial bank that provides universal banking services and offers a broad range
of banking activities and related financial services to individuals, small and medium enterprises and large
companies. The Bank seeks differentiation through its focus on home mortgages and consumer loans as it
considers that these products offer attractive continued growth opportunities. The Bank considers that it
tops the ranking of mortgage lenders in Argentina and it also offers its customers a wide array of personal
and corporate loans, deposits, credit and debit cards and additional financial services.
As of December 31, 2012, the Bank ranked tenth amongst Argentine banks in terms of net
shareholders’ equity, with net shareholders’ equity of Ps. 3,456.0 million and thirteenth in terms of total
assets, with assets for Ps. 16,003.7 million. The Bank’s net income for the fiscal years ended December
31, 2010, 2011 and 2012 was Ps. 195.3 million, Ps. 251.5 million, and Ps. 343.6 million, respectively,
which stands for an average return on equity of 6.7%, 8.1% and 10.2%, respectively and a return on
average assets of 1.7%, 2.2% and 2.5%, respectively.
The Bank’s shares have been listed on the Buenos Aires Stock Exchange since 1999. Since 2006
the Bank carries a Level I ADR Program.
Strategy
In the last years the Bank has materialized a change in its universal banking-based business
structure. Such change implied the release of various products, making necessary changes in the systems,
processes and strengthening its market positioning. Therefore, the Bank has changed from a financial
intermediary focused on trading mortgage loans to a commercial Bank offering a wide range of products
and services. Banco Hipotecario adopted a new vision as a contemporaneous, straightforward and
inclusive Bank. In particular, actions were taken to reduce costs, make changes in the volumes of loan
origination so that they can fit in the new context of lower liquidity, give priority to deposit attraction
efforts, design programs together with governmental agencies and diversified growth.
For 2013, the main actions will be focused on:
•
Universal banking related to housing solutions: To bring into the consumers’ mind the slogan
“Everything for your home (Todo para tu casa)” basing the Bank products on such concept;
•
Making changes in the levels of Liquidity: Aim at maintaining an adequate level of liquid resources
to ensure a proper development of the Bank's business cycles and to enable placement of liquid
resources surplus in more profitable transactions;
•
Improving diversity of short-term funding and maximizing long-term funding: To obtain a more
balanced structure in line with the guidelines laid down by the financial system and take advantage of
capital market opportunities. Accordingly, special emphasis will be placed on attracting demand
deposits while continuing to work on the scope of the loan securitization program by issuing new
series of Argentine mortgage-backed securities (Cédulas Hipotecarias), and evaluating the
possibility of issuing debt securities as long as it is possible under market conditions;
•
Improved focus on the interaction between the Bank and customers, employees and suppliers:
Achievement of synergies in the interaction between the Bank and its domestic and foreign clients
and suppliers;
•
Laying down the foundations for greater operating efficiency and transaction automation: Continued
search for improvements in quality and productivity through the systematization of processes and
systems. Continuous technology innovation. Strong change in process engineering paving the way
8
towards minimization of waste and process-associated costs. The “industrial metaphor” has a leading
role in the Institution's operating organization system;
•
Maintaining portfolio quality: To maintain the credit quality of new loans; to perform segmented
actions on the retail banking portfolio; to encourage the atomization of the corporate banking
portfolio;
•
Seeking greater profitability per client: Continuous search for portfolio loyalty generation, taking
actions on key variables in order to increase income from commissions, contributing multiproduct
offers and giving priority to cross-selling. Therefore, there will be an increase in operating income
and the share in the Bank's total income;
•
Continuing to boost the Corporate Banking business: To maintain a balance between individual and
commercial loans. The Bank will seek to identify entrepreneurs with a high potential to support them
in developing their projects, for which purpose greater support will be given to small and mediumsized companies (PyME) banking. The Bank's contribution in relation to corporate funding will not
only be limited to loan granting but it will also continue to play an active role so that the companies
may obtain access to the capital markets;
•
Improving risk management: To set out the process for continued improvement in global risk
management towards implementing the best practices; Program intended to further develop the
cultural insertion on risk management in the organization;
•
Implementing a model of leadership and assessment of potential at all management levels: To
encourage management of knowledge and intellectual capital of all collaborators to increase their
strengths in critical aspects through greater involvement and motivation;
•
Branding reinforcing: Continuous actions intended to further promote the concept of a
contemporaneous, straightforward and inclusive bank. Establishing a comprehensive communication
plan through the Internet to lead the Internet 2.0 channel (Facebook, Twitter, Google+, and other
social networks).
•
Maintaining the dynamism displayed in the previous year in relation loan granting, paying
continuous attention to changes in the local market conditions in a global scenario of crisis;
•
Furthering the use of tools enabling better management and business development control. For such
purpose, a comprehensive management scheme consisting of five strategic environments (Business,
Employees, Clients, Sustainability and Organizational Intelligence) will continue to be used.
Together with the analysis of profitability by Business Unit, it will be aimed at monitoring and
controlling the organizational strategy by measuring strategic goals, which enables to make the
corporate vision more clear and align business units with resources under a consistent strategy;
•
Furthering the comprehensive program for quality and process reengineering in order to identify the
“client’s opinion”, aligning their expectations with those of the Bank, and further increasing
profitability and reducing costs from waste or “no quality”;
•
Encouraging leadership and communication, mainly in relation to middle management and further
improving coordination between different areas upon planning and executing different projects.
9
INFORMATION ABOUT DIRECTORS, SENIOR MANAGEMENT, LEGAL COUNSEL AND
MEMBERS OF THE SUPERVISORY COMMITTEE
a) Directors, Senior Management and Members of the Supervisory Committee
Board of Directors
The Bank is managed by a board of directors, which is currently composed of thirteen directors
and eight alternate directors. The members of the board of directors are elected to hold office for two-year
terms by the Bank's shareholders at their annual general meeting, and may be reelected indefinitely. The
directors are in charge of the administration of the Bank. The Executive Committee conducts the ordinary
business of the Bank and is supervised by the board of directors. The board of directors is composed of:
two members representing Class A shares;
one member representing Class B shares;
one member representing Class C shares; and
nine members representing Class D shares;
and their respective alternates.
Members of the Board of Directors
The following table sets forth the current members of the Bank's board of directors:
Date of birth
Position
Beginning of
current term
Expiration of current
term
Class
Elsztain, Eduardo Sergio
01-26-60
Chairman
03-27-12
12-31-13
D
Blejer, Mario
06-11-48
Vice Chairman
03-14-11
12-31-12
D
Bossio, Diego Luis
Cufre, Marcelo Gustavo
Vergara del Carril, Pablo
Daniel
Reznik, Gabriel Adolfo
Gregorio
Zang, Saúl
Viñes, Ernesto Manuel
Dreizzen, Jacobo Julio
Wior, Mauricio Elías
Písula, Carlos Bernardo
Fornero, Edgardo Luis
José
Maza, Ada Mercedes(1)
09-09-79
06-26-58
10-03-65
Director
Director
Director
03-14-11
03-14-11
12-31-12
12-31-12
A
A
03-27-12
12-31-13
D
11-18-58
Director
03-14-11
12-31-12
D
12-30-45
02-05-44
10-13-55
10-23-56
12-16-48
10-14-51
Director
Director
Director
Director
Director
Director
03-27-12
03-14-11
03-14-11
03-27-12
03-27-12
12-31-13
12-31-12
12-31-12
12-31-13
12-31-13
04-30-10
12-31-11
D
D
D
D
D
B
09-17-58
Director
03-27-12
12-31-13
C
Elsztain, Daniel Ricardo
Efkhanian, Gustavo
Daniel
Elsztain, Alejandro
Gustavo
Ocampo, Andrés Fabián
12-22-72
Alternate Director
03-27-12
12-31-13
D
10-28-64
Alternate Director
03-27-12
12-31-13
D
03-31-66
11-09-56
Alternate Director
Alternate Director
03-14-11
03-14-11
12-31-12
12-31-12
D
D
Parrado, Mario César
Blasi, Gabriel Pablo
Alvarez Jorge Augusto
Bensadón, Federico León
04-11-59
11-22-60
01-11-60
01-17-33
Alternate Director
Alternate Director
Alternate Director
Alternate Director
03-27-12
03-27-12
04-30-10
03-27-12
12-31-13
12-31-13
12-31-11
12-31-13
D
D
B
D
Last and first name
(1)
Class C Regular Director took office on an interim basis until the BCRA issues a formal authorization (pursuant to
Communication “A” 4490) .
Below is a summarized biography of the Bank’s directors and alternate directors:
10
Eduardo Sergio Elsztain. Mr. Elsztain studied Economics at Universidad de Buenos Aires. He
has been engaged in the real estate business for more than 20 years and has been Chairman of the Board
of Directors and CEO of IRSA Inversiones y Representaciones Sociedad Anónima since 1991. He
founded Consultores Assets Management S.A. and has served as its President since 1989. He is also
Chairman of the Board of Cresud S.A.C.I.F. y A., Alto Palermo S.A. (APSA) and BrasilAgro Companhia
Brasilera de Propiedades Agricolas, among other companies. Eduardo Sergio Elsztain is the brother of
Alternate Directors Daniel R. Elsztain and Alejandro G. Elsztain.
Mario Blejer. Mr. Blejer obtained a PhD in Economics from the University of Chicago. From
1980 to 2001, he served as a senior consultant to the IMF in its European and Asia Departments. He was
Vice Chairman and subsequently Chairman of the Central Bank from 2001 to 2002. He served as Director
of the Center for Central Banking Studies of the Bank of England from 2003 to 2008 and as Advisor to
the Governor of the Bank of England during the same period. He is Director of IRSA Inversiones y
Representaciones Sociedad Anónima, Gems Investments and MAG Macroeconomic Advisory Group. He
is also an external advisor to the Monetary Policy Board of the Central Bank of Mauritius and professor
of post-graduate courses at Universidad Torcuato Di Tella.
Diego L. Bossio. Mr. Bossio joined the Bank in January 2009. He obtained a degree in
Economics from Universidad de Buenos Aires and a Master’s degree in Economics from Universidad de
San Andrés. Before joining the Bank, Mr. Bossio served as Undersecretary of Public Administration
under the jurisdiction of the General Secretariat of the Government of Mendoza, and as a coordinator of
the International Financing Unit (UFI) under the Treasury Department. Prior to that, he served as Head of
advisors to national senator Celso Alejandro Jaque. He also provided advice and coordinated the senator’s
work in the Federal Revenue Sharing Committee and the Budget and Treasury and Infrastructure,
Housing and Transportation Committees. He also served as junior economist at Exante Consultora
Económica’s International Economy division. In July 2009, President Cristina Fernández de Kirchner
appointed Mr. Bossio as Executive Director of ANSES (Federal Social Security Agency).
Marcelo Gustavo Cufre. Mr. Cufre joined the Bank in April 2009. He has a degree in
Architecture from Universidad de La Plata (UNLP). Mr. Cufre served as National Director of the
Architecture Division of the Ministry of Federal Planning, Public Investment and Services. Formerly, Mr.
Cufre served as Chairman of the Institute for Urban Development and Housing and as general Director of
the Housing Program in the Province of Santa Cruz. He also served as advisor in the Ministry of Federal
Planning, Public Investment and Services and as executive coordinator in the Ministry of Economy and
Public Works.
Pablo Daniel Vergara del Carril. Mr. Vergara del Carril obtained a degree in Law from
Universidad Católica de Argentina, where he teaches Commercial Law and Contract Law. He also
teaches Corporate Law, Contracts and Capital Markets in post-graduate courses. Mr. Vergara del Carril is
a member of the Legal Advisory Committee of the Argentine Chamber of Corporations (Cámara de
Sociedades Anónimas) as well as Vice President of the Competition Law Committee of the Colegio de
Abogados de la Ciudad de Buenos Aires. He is a member of the board of directors of Emprendimiento
Recoleta S.A. and Nuevas Fronteras S.A. and alternate director of Alto Palermo S.A. (APSA). He is one
of the partners at Zang, Bergel & Viñes Abogados law firm.
Gabriel Adolfo Gregorio Reznik. Mr. Reznik has been a Director of Banco Hipotecario since
June 2002. He has served as Director and Manager of the Technology Department of IRSA Inversiones y
Representaciones Sociedad Anónima. He currently serves as Director of Cresud S.A.C.I.F. y A.,
Emprendimiento Recoleta S.A. and IRSA Inversiones y Representaciones Sociedad Anónima. Mr. Reznik
has been responsible for the control over the execution of engineering works for IRSA Inversiones y
Representaciones Sociedad Anónima and Alto Palermo S.A. (APSA), and for the Office Building
Operation and Maintenance areas. He has a degree in Civil Engineering from Universidad de Buenos
Aires and a Master’s degree in Administration of Real Estate and Construction Businesses from Escuela
Politécnica de Madrid, Spain.
Saúl Zang. Mr. Zang obtained a Law degree from Universidad de Buenos Aires. He is a member
of the International Bar Association and the Interamerican Federation of Lawyers. He is a founding
partner of the law firm Zang, Bergel & Viñes Abogados. He is also Vice Chairman of IRSA Inversiones y
Representaciones Sociedad Anónima and Alto Palermo S.A. (APSA), Puerto Retiro and Fibesa, and first
11
Vice Chairman of Cresud S.A.C.I.F. y A. He is also a member of the board of directors of Nuevas
Fronteras S.A., Tarshop, Palermo Invest S.A. and BrasilAgro Companhia Brasilera de Propiedades
Agricolas, among other companies.
Ernesto Manuel Viñes. Mr. Viñes graduated in Law from Universidad de Buenos Aires where he
took post-graduate courses. He has been a court officer and Subsecretary of State. He has been a
university professor and has worked on a self-employed basis. He is a founding partner of the law firm
Zang, Bergel & Viñes Abogados.
Jacobo Julio Dreizzen. Mr. Dreizzen holds a degree in Economics from Universidad de Buenos
Aires and a Master’s degree in Economics from the Catholic University of Río de Janeiro. In 1986, he
was Deputy Executive Director of the IMF. In 1987, Mr. Dreizzen acted as advisor to the Presidency of
the Central Bank and in the period from 1987 to 1989, he was Director of that institution. From 1990 to
1999 he served as executive Director of the Investment Banking Division of Banco Galicia. Also, he
served as alternate Director at Banco de Inversión y Comercio Exterior S.A. (BICE). From 2000 to 2001,
he was Undersecretary of Finance for the Ministry of Economy. He served as a consultant to the IADB
(2002), UNDP (2005) and CAF (2005). From 2002 to 2005 he was President of Constellation, an
investment trust. He is currently IMPSA S.A.’s CFO and Director of Banco Hipotecario. Mr. Dreizzen
has been professor of Corporate Finance at the Universidad de Buenos Aires Capital Markets Graduate
Program since 1993.
Mauricio Elías Wior. Mr. Wior obtained a bachelor’s degree in Economics and Accounting from
Tel Aviv University in Israel and a Master’s degree in Business Administration from the same university.
Mr. Wior served as President of Radio Comunicaciones Móviles (Movicom) and as regional Vice
President for the Southern Cone for Bell until 2004.
Carlos Bernardo Písula. Mr. Písula obtained a degree in Accounting from Universidad de
Buenos Aires in 1973, where he subsequently completed various professional development and
specialization courses. Mr. Písula is a Class D Director of the Bank. During the period from 1996 through
1999 he acted as advisor to the Bank’s vice-presidency. Mr. Písula is the President of the Finance
Commission and Vice President of the Housing Commission of the Cámara Argentina de la
Construcción (CAC). He is also a board member of various private construction and real estate
companies.
Edgardo Luis José Fornero. Mr. Fornero has studied Law at Universidad de Lomas de Zamora.
He has been a Class B Director of the Bank since September 1997. Mr. Fornero currently serves as
Housing Secretary for La Bancaria banking association and as representative of the Bank's employee
union.
Ada Mercedes Maza. Mrs. Maza completed the Technical Degree in Legislative Administration
at the Legislative Power of the Province of La Rioja. She worked for 3 years at Compañía Financiera
Condecor and subsequently took office as Municipal Councilor in the Province of La Rioja for four years.
She later served as Private Secretary of the Vice Governor. In 1995 she took office as Operating Manager
of the Governor of La Rioja and later served as National Senator of such province for 10 years. She also
participated as member of the Latin Parliament.
Daniel R. Elsztain. Mr. Elsztain graduated with a major in Economic Sciences from Universidad
Torcuato Di Tella and has a Master’s degree in Business Administration from the same university. He
currently serves as Chief Operating Officer of IRSA Inversiones y Representaciones Sociedad Anónima,
and as Director at Alto Palermo S.A. (APSA) and Supertel Hospitality Inc., among other companies. Mr.
Daniel R. Elsztain is the brother of the Bank President Eduardo S. Elsztain and of the Alternate Director
Alejandro G. Elsztain.
Gustavo Daniel Efkhanian. Mr. Efkhanian served as Executive Director of the Bank from 1997
to 1999, Director since 1993 and has held various positions at the Bank since 1991. Mr. Efkhanian
supervises corporate business-related issues. He had formerly served as a government-appointed advisor
to the Bank in connection with the 1989-1993 Restructuring. Mr. Efkhanian has also served as an
alternate Director of Banco de Inversión y Comercio Exterior S.A. (BICE). From 1988 to 1991, he was an
economist for the Instituto de Estudios Económicos de la Realidad Argentina y Latinoamericana
12
(IEERAL). Mr. Efkhanian obtained a degree in Economics from Universidad de Córdoba. He currently
serves as alternate Director and Manager of the Bank’s Risk and Controlling division.
Alejandro G. Elsztain. Mr. Elsztain obtained a degree in Agricultural Engineering from
Universidad de Buenos Aires. He currently serves as General Manager and Second Vice Chairman of
Cresud S.A.C.I.F. y A. He also serves as Second Vice Chairman of IRSA Inversiones y Representaciones
Sociedad Anónima, Executive Vice Chairman of Alto Palermo S.A. (APSA), Vice Chairman of Nuevas
Fronteras and Hoteles Argentinos and Regular Director of Inversora Bolivar S.A. Mr. Alejandro G.
Elsztain is the brother of the Bank President Eduardo S. Elsztain and of the Alternate Director Daniel R.
Elsztain.
Andrés Fabián Ocampo. Mr. Ocampo obtained a law degree from the School of Law and
Political Sciences of Universidad Católica Argentina. He completed post-graduate studies at the Instituto
de Altos Estudios Empresariales of Universidad Austral under the Senior Management Program and in
Operating Finance, and in Banking Law at Universidad Argentina de la Empresa.
Mario César Parrado. Mr. Parrado obtained a degree in Business Administration from
Universidad Argentina de la Empresa (UADE). He has more than twenty years of experience in finance,
having served as President of The Boston Investment Group, Director of BankBoston Argentina and
Director of Fleet International Advisors S.A.
Gabriel P. Blasi. Mr. Blasi obtained a degree in Business Administration and carried out postgraduate studies in Finance at Universidad del CEMA—Centro de Estudios Macroeconómicos
Argentinos and in the IAE (Universidad Austral). He held several management positions in the areas of
Investment Banking and Capital Markets at Citibank and Banco Río (BSCH). Prior to joining IRSA
Inversiones y Representaciones Sociedad Anónima, he served as Financial Director of the Argentine
Carrefour Group and Goyaique SACIFIA (Pérez Companc Group). Until 2011, he was Financial Manager
of IRSA Inversiones y Representaciones Sociedad Anónima, Cresud S.A.C.I.F. y A. and Alto Palermo
S.A. (APSA). Currently, he is the Bank’s Chief Financial Officer.
Jorge Augusto Álvarez. Mr. Álvarez studied Systems Programming at Universidad de
Champagnat in Mendoza. He has been Head of Division at Banco Hipotecario S.A. since 1979.
Federico León Bensadón. Mr. Bensadon graduated as civil engineer from Universidad de
Buenos Aires in 1957. He has been Class C Director of the Bank since September 2002. He is a member
of the board of directors of Telemetrix S.A. (Costa Salguero), Emaco S.A., Edilcenter S.A., Rafoy S.A.,
and DR S.A., among other companies. He is also Treasurer of the Cámara Argentina de la Construcción
and Secretary of the Unión Argentina de la Construcción.
Employment Contracts with Directors
The Bank has entered into employment contracts with some of its Directors. Ernesto Manuel
Viñes and Edgardo Fornero perform executive and/or administrative functions at the Bank and, therefore,
they are considered as Bank’s employees.
13
Senior Management
As of December 31, 2012, the Bank’s senior management consists of the following officers:
Name
Position
Fernando Rubín
Gerardo Rovner
Ernesto Manuel Viñes
Gustavo Daniel Efkhanian
Manuel Herrera
Esteban Guillermo Vainer
Roland Costa Picazo
Favio Gabriel Podjarny
Gabriel Pablo Blasi
Javier Varani
General Manager
Auditing Manager
Legal Department Manager
Risk and Controlling Manager
Corporate Banking Manager
Retail Banking Manager
Organizational and Quality Development Manager
Corporate Services Manager
Finance Manager
Institutional Relations Manager
Below is a summarized biography of the Bank’s senior managers:
Fernando Rubín. Mr. Rubín joined the Bank as Organization Development manager in July
2001. He obtained a degree in Psychology from Universidad de Buenos Aires and a post-graduate degree
in Human Resources and Organizational Analysis in E.P.S.O. (Organizations Social Psychology School).
Prior to joining the Bank, he served as Human Resources Corporate Manager for IRSA Group. He
worked as Human Resources Director of LVMH (Louis Vuitton Moet Hennessy) and Chandon Wineries
in Argentina and Brazil. He also served as Human Resources Manager for Roland Berger & PartnerInternational Management Consultant.
Gerardo Rovner. Mr. Rovner holds a degree in Economics from Universidad de Buenos Aires.
He has been working at Banco Hipotecario for sixteen years, acting as Manager of the Risk Policy,
Collections Management and Operating Risks divisions. In February 2012, he was appointed Internal
Audit Manager. He has specialized in statistics and has been teaching that subject at the School of
Economic Sciences since 1994.
Zang, Bergel & Viñes.
(IEERAL). Mr. Efkhanian obtained a degree in Economics from Universidad de Córdoba.
Manuel Herrera. Mr. Herrera joined the Bank in 2009. He holds a degree in Business
Administration from Universidad Católica de Argentina. He carried out post-graduate studies at Harvard
University. Mr. Herrera has sixteen years of experience in the Argentine and US financial systems. Prior
to joining the Bank, he headed various areas within the Corporate Banking and Investment Banking units
at BankBoston Argentina, subsequently acquired by StandardBank South Africa and US.
Esteban Guillermo Vainer. Mr. Vainer joined the Bank on August 17, 2004. He obtained a
degree in Business Administration from Universidad Argentina de la Empresa and a Master’s degree in
Business Administration from the IAE. He was Head of Banco Galicia’s Insurance Banking Division for
nine years.
14
Roland Costa Picazo. Mr. Costa Picazo holds a degree in Employment Relationships from
Universidad de Buenos Aires. He has taken different updating courses and programs both in Argentina
and abroad. He gained professional experience at IRSA Inversiones y Representaciones Sociedad
Anónima, CRESUD S.A.C.I.F. y A. and Alto Palermo S.A. (APSA) as Human Resources Manager and at
Bodegas Chandon and LVMH Argentina as Head of Recruitment and Development.
Favio Gabriel Podjarny. Mr. Podjarny joined the Bank in December 2005. He is the Manager of
the Administration, Logistics and Collections division. He served as representative of the Board of
Directors of IRSA Inversiones y Representaciones S.A., being in charge of the Abril Club de Campo
Project. Formerly, he had been Director of the Centro de Empleo y Emprendimientos Ariel Job Center,
being in charge of the overall administration and management of the organization. He was also in charge
of the overall management of Sociedad Hebraica Argentina in the capacity as the entity’s Executive
Director.
Javier Varani. Mr. Varani joined the Bank in June 2005 as Institutional Relations Manager. He
had formerly worked in the Media and Institutional Affairs divisions of Telecom Argentina and Telecom
Personal. From 1995 to 1999, Mr. Varani was city councilor for Vicente López (Province of Buenos
Aires). He is a university professor specialized in municipal matters.
b) Supervisory Committee
Article 20 of the bylaws of the Bank provides for a Supervisory Committee consisting of five
members (“Syndics”) and five alternate members. Pursuant to Article 20 (b) of the bylaws, the members
of the Supervisory Committee are elected as follows: three members of the Supervisory Committee and
three alternates are elected jointly by the Class C and Class D Shares, one member and one alternate are
elected by the Class B Shares (to the extent such shares represent more than 2.0% of the Bank’s
outstanding capital stock) and one member and one alternate are elected by the Class A Shares. Syndics
and alternate syndics are appointed for a two-year period. Pursuant to Argentine law, only lawyers and
accountants admitted to practice in Argentina may serve as syndics of an Argentine sociedad anónima.
If Class B Shares do not represent 2.0% of the Bank’s capital stock and the Class C Shares do
not represent 3.0% of the Bank’s capital stock, the Supervisory Committee will be reduced to three
members and three alternates. Two members and two alternate members will be elected jointly by the
Class B, C and D Shares and one member and one alternate member will be elected by the Class A
Shares.
Meetings may be called by any of the syndics and shall be held with the presence of the absolute
majority of its members, and resolutions shall be adopted by a majority of votes. Pursuant to article 294
of the Corporate Law 19.550, as amended, the primary duties and powers of the Supervisory Committee
are to: (i) supervise and inspect the corporate books and records whenever necessary, but at least
quarterly; (ii) attend meetings of the directors, executive committee and shareholders; (iii) prepare an
annual report concerning the Bank’s financial condition and submit it to the shareholders at the ordinary
meeting; (iv) provide certain information concerning the Bank upon written request of any shareholder
holding at least 2.0% of the Bank’s outstanding capital; (v) call an extraordinary shareholders’ meeting
when necessary, on its own initiative or at the request of the shareholders, or an ordinary one when the
board of directors fails to do so; (vi) include matters for the agendas of any meeting the Supervisory
Committee must attend; (vii) supervise and monitor the Bank’s compliance with laws and regulations, the
bylaws and the shareholders’ decisions; (viii) investigate written complaints submitted by holders of at
least 2.0% of the Bank’s capital; (ix) request judicial dissolution of the Bank and supervise the process;
(x) designate directors when there are none remaining on the board of directors and the shareholders have
failed to appoint replacements; and (xi) request judicial intervention in extraordinary circumstances, such
15
as executive officer malfeasance threatening the Bank’s condition. In performing these duties, the
Supervisory Committee does not control the operation of the Bank.
On April 29, 2009, Class A, B, C and D shareholders held extraordinary shareholders’ meetings.
At those meetings: a) Class D and C shareholders appointed José Daniel Abelovich, Marcelo Héctor
Fuxman and Ricardo Flammini as syndics to hold office for two-year terms and Roberto Murmis, Noemí
Cohn and Silvana Cecilia de Feo as alternate syndics; b) Class A shareholders appointed Alfredo Groppo
as syndic and Silvana Gentile as alternate syndic; and c) Class B shareholders appointed Martín Scotto as
syndic and Nora Tibis as alternate syndic.
Currently the Supervisory Committee is composed of five syndics and five alternate syndics:
Name
Martin Scotto
Alfredo Groppo
José Daniel Abelovich
Marcelo Héctor Fuxman
Ricardo Flammini
Nora Tibis
Silvana Gentile
Roberto Murmis
Noemí Cohn
Silvia Cecilia De Feo
Position
Class
Expiration of Term
Syndic
Syndic
Syndic
Syndic
Syndic
Alternate Syndic
Alternate Syndic
Alternate Syndic
Alternate Syndic
Alternate Syndic
B
A
C and D
C and D
C and D
B
A
C and D
C and D
C and D
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
Below is a summarized biography of the members of the Bank’s Supervisory Committee:
Martín Esteban Scotto. Mr. Scotto holds a degree in Law from Universidad de Buenos Aires
(1996) and works for the Sindicatura General de la Nación. Mr. Scotto has been Syndic of Banco de
Inversión y Comercio Exterior S.A. (BICE) and Nación Seguros de Vida S.A since 2001. Since 2002, Mr.
Scotto is a member of the supervisory committee of Nuevo Banco Bisel S.A., Nuevo Banco Suquía S.A.
and Bisel Servicios S.A.
Alfredo Héctor Groppo. Mr. Groppo holds a degree in Accounting from Universidad de Buenos
Aires (1977) and works of the Sindicatura General de la Nación (SIGEN). He has been Syndic of Nación
Factoring S.A., Nación Bursátil S.A., Nación Servicios S.A. and Polo Tecnológico Constituyentes S.A.
since 2006.
José D. Abelovich. Mr. Abelovich obtained a degree in Accounting from Universidad de Buenos
Aires. He is a founding member and partner of Abelovich, Polano & Asociados S.R.L., a member firm of
Nexia International, an accounting firm in Argentina. Formerly, he had been Manager of Harteneck,
López y Cía/Coopers & Lybrand, and served as a senior advisor in Argentina for the United Nations and
the World Bank. He is a member of the Supervisory Committees of Cresud S.A.C.I.F. y A., IRSA
Inversiones y Representaciones Sociedad Anónima, Alto Palermo S.A. (APSA), Hoteles Argentinos e
Inversora Bolívar S.A., among other companies.
Marcelo H. Fuxman. Mr. Fuxman obtained a degree in Accounting from Universidad de Buenos
Aires. He is a partner of Abelovich, Polano & Asociados S.R.L., a member firm of Nexia International,
an accounting firm in Argentina. He is also a member of the Supervisory Committee of Cresud S.A.C.I.F.
y A., IRSA Inversiones y Representaciones Sociedad Anónima and Alto Palermo S.A. (APSA), among
other companies.
Ricardo Flammini. Mr. Flammini holds a degree in Accounting from Universidad Nacional de
La Plata. Mr. Flammini acted as syndic of the Bank from September 1997 until August 2001 and on May
30, 2003 he was elected for a two-year term. Mr. Flammini worked as auditor for the Tribunal de Cuentas
de la Nación from 1957 to 1976 and was a member of the former Corporación de Empresas Nacionales
(ex SIGEP and SIGEN) from 1976 until August 2001. Formerly, he had acted as syndic of Segba S.A.,
Hidronor S.A., YPF S.A., YCF S.E., Encotesa, Intercargo S.A., Banco Caja de Ahorro S.A., Pellegrini
S.A. Gerente de Fondos Comunes de Inversión, Nación Bursátil Sociedad de Bolsa S.A., Garantizar
S.G.R. and Nación AFJP. He currently serves as syndic of BACS Banco de Crédito y Securitización S.A.,
BHN Sociedad de Inversión S.A., BHN Vida S.A., BHN Seguros Generales S.A. and ACH S.A.
16
Nora Lía Tibis. Ms. Tibis holds a Law degree from Universidad de Buenos Aires and works for
the Sindicatura General de la Nación (SIGEN). She is a Syndic in Banco de Inversión y Comercio
Exterior S.A. (BICE), AFJP Nación, Nación Leasing S.A., Nación Factoring S.A. and Dioxitek S.A.
Silvana María Gentile. Ms. Gentile has been a member of the Supervisory Committee of the
Bank since 1997. She has served as a member of Sindicatura General de la Nación (SIGEN) since 1979
and currently serves as a Syndic of Pellegrini S.A. and Nación AFJP S.A. Ms. Gentile holds degrees in
Accounting and Business Administration from Universidad de Lomas de Zamora.
Roberto Murmis. Mr. Murmis holds a degree in Accounting from Universidad de Buenos Aires.
Mr. Murmis is a partner at Abelovich, Polano y Asociados S.R.L., a member firm of Nexia International.
Mr. Murmis worked as an advisor to the Secretariat of Federal Revenue under the Ministry of Economy.
Furthermore, he is a member of the supervisory committee of Cresud S.A.C.I.F. y A., IRSA Inversiones y
Representaciones Sociedad Anónima, Futuros y Opciones S.A and Llao Llao Resorts S.A.
Noemí Cohn. Ms. Cohn graduated as an Accountant from Universidad de Buenos Aires. She is a
partner of Abelovich, Polano & Asociados S.R.L./Nexia International, an accounting firm in Argentina,
and serves in the Auditing division. She worked at the auditing firm Harteneck, López and Company,
Coopers & Lybrand in Argentina and in Los Angeles, California. Mrs. Cohn is a member of the
Supervisory Committees of Cresud S.A.C.I.F. y A., IRSA Inversiones y Representaciones Sociedad
Anónima and Alto Palermo S.A. (APSA), among other companies.
Silvia De Feo. Ms. De Feo holds a degree in Accounting from Universidad de Belgrano. She is a
manager at Abelovich, Polano & Asociados S.R.L, a member firm of Nexia International, an accounting
firm in Argentina, and acted as manager at Harteneck, López & Cía/Coopers & Lybrand.
c) Legal counsel
Unless otherwise specified in the applicable pricing supplement, the validity of the creation of
the Program and the issuance of each Series of Notes thereunder and certain matters in connection with
Argentine law will be passed upon by Zang, Bergel & Viñes Abogados, legal counsel to the Bank
domiciled at Florida 537, 18th floor of the City of Buenos Aires. Saúl Zang, Ernesto Viñes and Pablo
Vergara del Carril, directors of the Bank, are also partners of Zang, Bergel & Viñes Abogados.
d) Auditors
The Bank’s audited financial statements included in this offering memorandum have been
audited by Price Waterhouse & Co. S.R.L., member firm of PricewaterhouseCoopers, an accounting firm
of certified independent public accountants, as stated in their reports appearing herein, registered with the
Professional Council in Economic Sciences (CPCE) of the Autonomous City of Buenos Aires, Volume 1,
Folio 17, and domiciled at Bouchard 557 7th floor (C1106ABG), in the Autonomous City of Buenos
Aires, Argentina. Certified public accountants Norberto F. Montero (CPCE Autonomous City of Buenos
Aires Volume 167 – Folio 179) and Carlos Horacio Rivarola (CPCE Autonomous City of Buenos Aires
Volume 124 – Folio 225) were designated as external auditor and alternate external auditor, respectively,
by the Shareholders' Meetings held on May 23, 2008, April 29, 2009 and April 30, 2010. At the General
Ordinary Shareholders' Meeting dated March 27, 2012 Accountant Marcelo Alejandro Trama (CPCE
Autonomous City of Buenos Aires Volume 252 – Folio 159) was designated as regular external auditor
and Accountant Carlos Horacio Rivarola was reelected as alternate external auditor.
17
PROGRAM SUMMARY
This summary highlights important information regarding this program. We urge you to read
the entire Offering Memorandum. The terms and conditions contained in this section will govern the
notes to be issued under the Program, but the applicable pricing supplements will contain the specific
terms and conditions of the particular notes to be issued, which will supersede, supplement and/or modify
these general terms and conditions, always safeguarding the investors’ interests.
In this offering memorandum, references to “notes” are to any notes that the Bank may issue
under the Program, unless the context otherwise requires.
Issuer
Banco Hipotecario S.A.
Dealers
The notes issued under the Program may be offered directly by the Bank
or through such dealers and/or agents as appointed by it from time to
time in each applicable pricing supplement. This Offering Memorandum
may not be used to make sales of notes issued under the Program unless
it is accompanied by the applicable pricing supplement.
Program amount
The Bank may issue notes provided that the outstanding amount under
the Program does not exceed at any time the aggregate principal amount
of US$ 500,000,000 (or its equivalent in Pesos).
Program duration
Five years since the approval of this Program by the Argentine Securities
Commission.
Issuance in series
The Bank may issue notes in series. Within each series, the Bank may
issue classes and/or tranches of notes that will be repaid within the terms
set forth in the applicable laws, always provided that the outstanding
amount under the Program does not exceed the maximum principal
amount of US$ 500,000,000 (or its equivalent in Pesos).
The Bank will set out the specific terms of each series and/or tranche in a
pricing supplement to this Offering Memorandum.
Further Issues of notes
If permitted by applicable Argentine banking regulations and the rules
issued by the Argentine Securities Commission, the Bank may, from time
to time, without the consent of, and/or notice to, the holders of any
outstanding notes, create and issue further notes of the same or a new
series.
Ranking
The notes issued under this Program will qualify as obligaciones
negociables simples no convertibles en acciones (simple, non-convertible
notes) under Argentine law and will be issued pursuant to, and in
compliance with, all of the requirements of the Negotiable Obligations
Law and any other applicable Argentine laws and regulations.
As specified in the applicable pricing supplement, the notes will
constitute direct, unconditional, simple, unsecured, subordinated or
unsubordinated obligations of the Bank and will rank at least pari passu
in right of payment with all its other existing and future unsecured and
unsubordinated indebtedness (other than obligations preferred by statute
or by operation of law).
If so specified in the applicable pricing supplement, the Bank may issue
subordinated notes, which will be junior in right of payment to the
Bank’s unsubordinated indebtedness, in accordance with the applicable
laws.
18
Placement of the Notes
The public offering and in particular the placement of the notes to be
issued under this Program will be made in accordance with the provisions
of Law No. 26,831 on Capital Markets and the CNV Rules in effect until
the Capital Markets Law is regulated by the CNV –pursuant to the
provisions of Section 155 of such Law and General Resolution No.
615/2013 of the CNV, and in particular, pursuant to Resolution 597/2011
of the CNV, as amended and supplemented, and any other applicable law
and/or regulations.
This Offering Memorandum will be available to the general public in
Argentina. Placement of the notes in Argentina will be made in
accordance with the provisions of Section 16 of the Argentine Public
Offering Law and the applicable CNV Rules.
The notes have not been registered under the Securities Act, any state’s
securities laws or the securities laws of any other jurisdiction (other than
Argentina) and may not be offered or sold in the United States or to U.S.
persons (as defined in Regulation S), except in transactions exempt from,
or not subject to, the registration requirements of the Securities Act.
Accordingly, the Bank will only offer and sell notes registered under the
Securities Act or in transactions exempt from registration under the
Securities Act to QIBs or outside the United States to non-U.S. persons
in compliance with Regulation S under the Securities Act.
Notwithstanding the foregoing, each pricing supplement will detail the
placement efforts to be undertaken pursuant to the applicable
jurisdictions.
Repayment
The Bank may issue notes that are fully repayable upon maturity or with
periodical repayment terms, such as annual, semi-annual, quarterly, etc.
Issue Price
The Bank may issue notes at their principal amount or at a discount or
premium to their principal amount as specified in the applicable pricing
supplement.
Currencies
The Bank may issue notes in U.S. dollars or their equivalent in Pesos, as
specified by the Bank in the applicable pricing supplement.
Maturities
The notes will be issued subject to such terms and with such maturities as
specified by the Bank in the applicable pricing supplement relating to
each series and/or tranche, all subject to compliance with the laws and
regulations that may be applicable from time to time.
Interest
Notes may bear interest at a fixed rate or at a margin above or below a
floating rate based on LIBOR, U.S. Treasury rates or any other base rate,
as the Bank will specify in the applicable pricing supplement to the
extent permitted by the applicable Argentine regulations including but
not limited to the BADLAR rate and the Reference Stabilization Index
(Coeficiente de Estabilización de Referencia or “CER”). The Bank may
also issue notes on a non-interest bearing basis, as may be specified in
the applicable pricing supplement.
Redemption
The applicable pricing supplement may provide that a series of notes will
be redeemable (i) at the option of the Bank and/or (ii) at the option of the
holders, in whole or in part, at a price or prices as set forth in the
applicable pricing supplement. Partial redemption will be made on a pro
rata basis, by lot or otherwise, provided that the applicable pricing
supplements will establish the specific procedures for redemption of the
particular notes that may be issued, which shall supersede, supplement
19
and/or modify these general terms and conditions, always safeguarding
the investors’ interests. In addition, any notices by the Bank to the
holders will be made through the CNV’s Financial Information Highway
(www.cnv.gob.ar) as a “Material Event”.
Redemption for tax
reasons
Notes may be redeemed at the Bank’s option, in whole but not in part, at
a price equal to 100% of the principal amount plus accrued and unpaid
interest upon the occurrence of specified Argentine tax events. See
“Description of the Notes—Redemption and Repurchase—Redemption
for Taxation Reasons.” Any notices by the Bank to the holders will be
made through the CNV’s Financial Information Highway
(www.cnv.gob.ar) as a “Material Event”.
Covenants
The Bank may assume covenants in connection with each series and/or
tranche of notes to be issued, which will be specified in the applicable
pricing supplement relating to each series and/or tranche.
Use of proceeds
The Bank will use the net proceeds from the issuance of notes under this
Program in compliance with the requirements set forth in Article 36 of
the Negotiable Obligations Law, Communication “A” 3046, as amended,
of the Central Bank and other applicable regulations, as specified in the
applicable pricing supplement. Under such law and regulations, the use
of proceeds is restricted to certain purposes, including working capital in
Argentina, investment in tangible assets located in Argentina, refinancing
of debt, contributions to the capital of a controlled or related corporation,
provided that such corporation uses the proceeds of such contribution for
the purposes specified above, or making loans in accordance with the
Argentine Banking GAAP, provided that the use of proceeds of such
loans is one of the aforementioned purposes. See “Use of Proceeds.”
Withholding
Taxes; The Bank will make payments in respect of the notes without
withholding or deduction for any taxes or other governmental charges
Additional Amounts
imposed by Argentina, or any political subdivision or any taxing
authority thereof. In the event that such withholdings or deductions are
required by law, the Bank will, subject to certain exceptions, pay such
additional amounts to ensure that the holders receive the same amount as
the holders would otherwise have received in respect of payments on the
notes in the absence of such withholdings or deductions.
See
“Description of the Notes—Additional Amounts.”
Denominations
The Bank will issue notes in the minimum denominations and other
denominations specified in the applicable pricing supplement.
Form
Unless otherwise permitted by applicable law and specified in the
applicable pricing supplement, notes will be issued in registered form
without interest coupons. Unless otherwise permitted by applicable law,
the Bank will only issue notes in registered non-endorsable form or
deposited with a custodian or a clearing system, not exchangeable for
certificated bearer notes, as determined in the applicable pricing
supplement. In the event that the notes were offered in the United States
to qualified institutional buyers in reliance on Rule 144A under the
Securities Act, they will be represented by one or more Rule 144A global
notes. See “Description of the Notes – Form and Denomination.”
Transfer Restrictions
The Bank has not registered the notes under the Securities Act; therefore,
the notes may not be transferred except in compliance with certain
transfer restrictions.
Registration Rights
If so specified in the applicable pricing supplement, the Bank may
provide holders of a series of notes registration rights.
20
Listing
The Bank may apply to have the notes of any series listed on the
Luxembourg stock exchange for trading on the EuroMTF and/or the
BCBA, which circumstance will be specified in the applicable pricing
supplement. However, no assurance may be given that these applications
will be accepted. In addition, notes may be issued under this Program
that are not listed on any stock exchange, and the applicable pricing
supplement relating to a series of notes will specify whether the notes of
such series will be listed or not on the Luxembourg stock exchange for
trading on the EuroMTF, on the BCBA or on any other securities
exchange. The Bank expects that certain series of notes, as described in
the applicable pricing supplement, will be eligible for trading on the
MAE.
Summary Action
Pursuant to Section 29 of the Negotiable Obligations Law, the notes that
qualify as obligaciones negociables entitle their holders to file a
summary action (“acción ejecutiva”); therefore, in accordance with the
Capital Markets Law, any depositary is entitled to issue certificates
evidencing the notes represented by global securities to any beneficial
holder. These certificates entitle their beneficial holders to file a legal
action before any competent court of Argentina, including a summary
action, to enforce collection of any sums outstanding under the notes.
Governing Law
The Negotiable Obligations Law establishes the requirements for the
notes to qualify as obligaciones negociables thereunder, and such law,
together with the Argentine Companies Law, as amended, and other
Argentine laws and regulations will govern the Bank’s capacity and
corporate authorization to issue and deliver the notes and the Argentine
Securities Commission’s authorization for the creation of the Program
and the offer of the notes. All matters with respect to the notes will be
exclusively governed by, and construed in accordance with, the laws of
Argentina. However, such matters with respect to the notes may be
governed by, and construed in accordance with, the laws of the State of
New York or the Argentine laws, or the laws of any other jurisdiction if
so specified in the applicable pricing supplement.
Clearing systems
If applicable, the clearing systems will be those specified in the
applicable pricing supplement relating to each series and/or tranche.
Trustees and agents
The notes may or not be issued under indentures and/or agency
agreements entered into from time to time by the Bank with entities
acting as trustees and/or agents. Such trustees and/or agents will perform
their duties only with respect to the series specified in the applicable
pricing supplements and will have such rights and obligations as therein
specified.
The appointment of trustees and agents will be set out in the applicable
pricing supplements.
Risk Factors
See “Risk Factors” beginning on page 26 of this Offering
Memorandum and the applicable pricing supplement for a
description of certain significant risks involved in making an
investment in the notes.
21
KEY INFORMATION ABOUT THE ISSUER
Summary of Financial Information and Indicators
The following table presents a summary of financial and other information of the Bank as of the
dates and for the years indicated. The financial information as of December 31, 2012, 2011 and 2010, and
for each of the years then ended has been derived from the Bank’s financial statements audited by Price
Waterhouse & Co. S.R.L. The following data should be read in conjunction with and are qualified in their
entirety by reference to the chapter "Management’s Discussion and Analysis of Financial Condition and
Results of Operations" and the Bank’s audited financial statements included in this Offering
Memorandum.
The Bank's audited financial statements have been prepared in accordance with the Argentine
Banking GAAP, which differ in certain significant respects from Argentine Generally Accepted
Accounting Principles (“Argentine GAAP”) and from U.S. Generally Accepted Accounting Principles
(“U.S. GAAP”). The Bank’s audited financial statements do not contain a reconciliation to Argentine
GAAP or U.S. GAAP of the Bank's shareholders' equity at December 31, 2012, December 31, 2011 or
December 31, 2010, or the Bank’s net income for the years then ended. Potential investors should consult
with their professional advisors for an understanding of the differences between the accounting principles
implemented by the Bank and the Argentine GAAP and U.S. GAAP, and how those differences affect the
financial information herein contained.
On September 14, 2010 the Bank acquired 80% of the capital stock of Tarshop S.A. (“Tarshop”).
Therefore, the accounting and financial information included in this Offering Memorandum reflects the
consolidated financial position and results of the Bank, BACS Banco de Crédito y Securitización S.A.,
BHN Sociedad de Inversión S.A., BH Valores S.A. Sociedad de Bolsa and of Tarshop for the fiscal years
ended December 31, 2012, 2011 and 2010 and of Tarshop for the fiscal year ended December 31, 2012,
December 31, 2011 and the interim fiscal period ended December 31, 2010.
Effective January 1, 1995 pursuant to Resolution No. 388 of the Central Bank’s Superintendency
of Financial and Exchange Institutions (Superintendencia de Entidades Financieras), the Bank
discontinued its prior practice of adjusting financial statements for inflation. Effective January 1, 2002,
however, as a result of application of Communication “A” 3702 which repealed any regime that did not
allow companies to restate their accounting balances at period-end currency values, the Bank resumed the
application of the adjustment for inflation. On March 25, 2003, Decree No. 664/03 ceased to require that
financial statements be prepared in constant currency, effective for financial periods on or after March 1,
2003 and on April 8, 2003, the Central Bank issued Communication “A” 3921 discontinuing inflation
accounting effective as of March 1, 2003. As a result, the Bank’s audited financial statements as of
December 31, 2012, 2011 and 2010 do not include the effects of inflation.
22
2010
Ps.
As of December 31,
2011
2012
in thousands of:
Ps.
Ps.
2012
US$(8)
Consolidated Income Statement
Financial income
Financial expenses
Net financial income
Provision for losses on loans
Net contribution from insurance(1)
Other net income from services(2)
Administrative expenses
Miscellaneous income (loss), net(3)
Minority interest
Income tax
Net income (loss)
1,321,906
(728,860)
593,046
(96,783)
180,246
266,768
(709,009)
(11,156)
(5,705)
(22,092)
195,315
1,562,782
(832,645)
730,137
(119,292)
248,404
542,835
(1,104,980)
4,545
(8,797)
(41,335)
251,517
2,180,725
(1,138,629)
1,042,096
(200,922)
313,985
666,838
(1,440,391)
26,666
(9,569)
(55,096)
343,607
443,480
(231,556)
211,924
(40,860)
63,853
135,611
(292,923)
5,423
(1,946)
(11,205)
69,877
849,067
2,682,377
658,005
1,807,319
1,450,494
2,078,936
294,978
422,780
49,856
71,894
5,651,221
316,231
159,629
1,741,901
11,615
472,878
1,813,442
(37,766)
1,135,348
50,660
(12,717)
(216,609)
5,556,362
26,620
4,873
(3,659)
5,584,196
1,571,867
729,855
11,417,362
50,768
146,776
7,540,694
635,090
250,736
1,705,635
22,933
788,256
2,701,531
(5,271)
1,388,722
77,398
(24,336)
(223,904)
7,514,334
26,620
4,873
(3,659)
7,542,168
1,963,573
792,577
12,763,642
91,806
391,343
9,544,383
1,031,178
229,629
1,868,330
55,346
1,199,211
3,551,203
(1,723)
1,538,527
87,837
(15,155)
(273,101)
9,754,431
18,238
3,510
(3,660)
9,772,519
1,677,614
1,024,111
16,003,674
18,670
79,585
1,940,980
209,704
46,698
379,950
11,255
243,876
722,186
(350)
312,880
17,863
(3,082)
(55,539)
1,983,697
3,709
714
(744)
1,987,375
341,166
208,267
3,254,565
1,900,857
12,341
2,924,966
73,354
362,596
2,405,033
14,056
44,754
25,173
4,838,164
2,956,878
587,615
8,382,657
2,378,275
11,540
3,061,948
58,744
505,781
2,407,108
40
65,526
24,749
5,451,763
3,205,324
816,049
9,473,136
2,990,892
8,563
5,011,674
595,564
741,892
3,355,131
160,035
101,650
57,402
8,011,129
3,539,730
928,796
12,479,655
608,239
1,741
1,019,192
121,116
150,874
682,312
32,545
20,672
11,673
1,629,172
719,852
188,883
2,537,908
60,472
78,131
68,034
13,836
Consolidated Balance Sheet
Cash and due from banks
Government and corporate securities(4)
Loans:
To the non-financial public sector
To the financial sector
To the non-financial private sector and residents abroad
Overdrafts
Promissory notes
Mortgage loans
Pledge loans
Personal loans
Credit cards
Non-applied collections
Other
Accrued interest and trading differences receivable
Documented interest
Provisions
Loan Sub-total
Loans pending securitization
Accrued interest receivable
Provisions
Total Loans
Other receivables from financial transactions
Other assets
Total Assets
Deposits:
Non-financial public sector
Financial sector
Non-financial private sector and residents abroad
Checking accounts
Savings accounts
Fixed-term deposits
Investment accounts
Other
Accrued interest and trading differences payable
Total deposits
Other liabilities from financial transactions(5)
Other liabilities
Total Liabilities
Third parties’ interests
23
Total Shareholders’ Equity
2,974,233
3,212,375
3,455,985
702,822
Year ended December 31,
2010
2011
2012
Selected Ratios
Profitability
Return on average assets
1.70%
2.20%
2.48%
Return on average shareholders’ equity
6.74%
8.12%
10.25%
5.18%
6.39%
7.53%
67.85%
72.35%
70.46%
26.1%
25.2%
21.6%
6.4%
6.2%
6.4%
73.0%
45.2%
44.1%
115.4%
138.3%
122.0%
1.6%
0.8%
0.6%
3.6%
3.0%
3.2%
3.0%
2.3%
2.3%
3.3%
2.5%
2.4%
112.6%
111.4%
102.6%
Net financial margin
(6)
Efficiency
Solvency
Shareholders’ Equity / Assets
Other Assets / Assets
Liquidity
Cash and due from banks plus government and corporate securities /
Deposits
Loans / Deposits
Portfolio Quality
Non-performing commercial loans as a % of Total Commercial Loans(7)
(7)
Non-performing consumer loans as a % of Total Consumer Loans
(7)
Non-performing loans as a % of Total Loans
(7)
Provisions as a % of Total Loans
(7)
Provisions as a percentage of Non-performing Loans
References
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Consists of insurance premiums minus insurance claims.
Consists of other income from services minus other expenditures on services.
Consists of miscellaneous income minus miscellaneous losses.
Includes Ps. 1,008.3 million, Ps. 1,049.6 million and Ps. 972.1 from instruments issued by the Argentine
Central Bank as of December 31, 2010, 2011 and 2012, respectively.
Includes Ps. 1,689.7 million, Ps. 1,748.5 million and Ps. 2,013.7 in unsubordinated notes as of December
31, 2010, 2011 and 2012, respectively.
Consists of net financial margin to average assets.
In the case of commercial loans, it includes “Problematic”, “High Risk of Insolvency”, “Uncollectible” and
“Uncollectible for Technical Reasons” as classified by the Central Bank. In the case of consumer and
mortgage loans it includes “Medium Risk”, “High Risk”, “Uncollectible” and “Uncollectible for Technical
Reasons” as classified by the Central Bank.
The exchange rate used for purposes of translation of balances as of December 31, 2012 was Ps. 4.9173 =
US$ 1.00.
24
Capitalization and Indebtedness
The following table sets forth the Bank’s capitalization and indebtedness as of December 31,
2012 and as of December 31, 2011, in thousands of Pesos and U.S. Dollars:
As of December 31, 2011
(in thousands)
(in thousands)
Ps.
US$(4)
Ps.
Short-term debt (1)
Deposits
Notes
Financial Institutions
Interest payable
Total short-term debt
5,426,243
7,949,332
1,616,605
126,309
827,991
168,383
154,016
261,983
53,278
51,603
98,726
20,077
5,758,171
9,138,032
1,858,343
Long-term debt (1)
Deposits
Notes
771
4,395
894
1,622,166
1,185,687
241,126
Total long-term debt
1,622,937
1,190,082
242,020
1,500,000
1,500,000
305,045
Capital
Capital stock(2)
Non-capitalized contributions
Adjustments to shareholders’ equity
Earnings reserve(3)
General Reserve
Accumulated profit
Total shareholders’ equity
Total capitalization
(1)
(2)
(3)
(4)
834
834
170
717,115
717,115
145,835
476,524
526,828
107,138
0
367,601
74,757
517,902
343,607
69,877
3,212,375
3,455,985
702,822
10,593,483
13,784,099
2,803,185
Short-term debt is indebtedness the residual maturity of which is within one year of the balance sheet date. Longterm debt is any debt the maturity of which exceeds such period.
Includes subscribed and paid-in capital in the amount of 1.5 billion common shares the par value of which is Ps. 1
per share.
Consists primarily of non-distributable legal reserves established pursuant to Central Bank regulations in an annual
amount equal to 20.0% of net income plus any adjustments in prior years. The earnings reserves may only be used
during periods when the Bank has net losses and has depleted its reserves. Consequently, no dividends shall be
distributed if the legal reserve has been affected.
The exchange rate used for purposes of translation of balances as of December 31, 2012 was Ps. 4.9173 = US$ 1.00.
Source: Central Bank
Use of Proceeds
The Bank will use any net proceeds from the issuance of notes under this Program in compliance
with the requirements of Article 36 of the Negotiable Obligations Law (Ley de Obligaciones
Negociables), the Central Bank Communication “A” 3046, as amended and supplemented, and other
applicable regulations, as specified in the relevant pricing supplement.
Article 36 of the Negotiable Obligations Law and the Central Bank Communication referred to
above require that the Bank use such proceeds for:
25
•
•
•
•
•
working capital in Argentina;
investments in tangible assets located in Argentina;
refinancing of outstanding debt;
contributions to capital of a controlled or related corporation, provided that the proceeds
are used as specified above, or
loan origination in accordance with Central Bank regulations, provided that such loans
are used for any of the above purposes.
Pending their application as specified above, the Bank may also invest the proceeds from notes in
government securities and short-term investments as permitted.
Risk Factors
Prospective purchasers of the Bank’s notes should carefully consider the risks described below,
as well as the other information in this Offering Memorandum and in each Pricing Supplement before
deciding to purchase any notes. The Bank’s business, results of operations, financial condition or
prospects could be materially and adversely affected if any of these risks occurs, and as a result, the
market price of the Bank’s notes could decline and you could lose all or a substantial part of your
investment. In general, investors take more risk when they invest in the securities of issuers in emerging
markets such as Argentina than when they invest in the securities of issuers in the United States and other
developed markets.
Risks Relating To Argentina
All of the Bank’s operations, property and customers are located in Argentina. As a result, the
quality of the Bank’s loan portfolio, its financial condition and the results of its operations are dependent
upon the macroeconomic, regulatory and political conditions prevailing in Argentina from time to time.
These conditions include growth rates, inflation rates, exchange rates, changes to interest rates,
changes to Government policies, social instability and other political, economic or international
developments either taking place in, or otherwise affecting, Argentina.
Growth in Argentina might not be sustainable and any significant alteration could adversely
affect the Bank’s financial condition.
Although in recent years and in the aftermath of the 2001 crisis Argentina’s general economic
conditions improved significantly, there is no certainty of growth being sustainable mainly because the
upturn was initially tied to the significant devaluation of the Peso, the excess production capacity
resulting from a lengthy and deep recession and the high prices of commodities.
The global economic crisis of 2008 led to a sudden downturn in the economy, which came hand
in hand with social and political unrest, inflationary pressures, a depreciation in the Peso and absence of
confidence in consumers and investors. In 2010, Argentina’s Gross Domestic Product (“GDP”) increased
by 9.16% and 8.87% in 2011, according to the Argentine Institute of Statistics and Censuses (“INDEC”).
As of December 31, 2012, the Monthly Estimate of Economic Activity (Estimador Mensual de Actividad
Económica) reported by INDEC and known as “EMAE” increased by 1.86% in 2012 compared to the
same period in 2011, thus anticipating a commensurate increase in the GDP.
The recent economic crisis in Europe, triggered by the financial crises of Greece, Spain, Italy
and Portugal, their contagion to other markets, the international demand for Argentine products, the
stability and competitiveness of the Argentine Peso vis-à-vis other currencies, confidence amongst local
and international consumers and investors, a stable and relatively low inflation rate and uncertainties
about the future political scenario, to name but a few factors, could affect the Argentine economy’s
development, which could substantially and adversely affect the Bank’s financial condition and the
results of its operations and thus substantially and adversely affect the Bank’s ability to repay its
obligations.
26
The Bank cannot assure you that a decrease in economic growth or rising economic instability,
which are occurrences outside its control, will not adversely affect its business, financial condition, the
results of its operations and its ability to repay the notes.
Inflation could rise, which would adversely affect the Argentine economy in general and the
Argentine long-term credit markets.
There is a discrepancy between the statistical data published by INDEC in connection with the
Consumer Price Index (“CPI”) for the Greater Buenos Aires area and for the different Argentine regions
and provinces and this index as estimated by private consultants. According to INDEC, the inflation rates
for 2010, 2011 and 2012 were 9.7%, 11.26% and 9.21%, respectively. Uncertainty regarding future
inflation rates may affect the pace of growth in investment. On average, private sources’ estimates point
to inflation rates that are higher than those published by INDEC.
In the event of high inflation rates, Argentine exports could lose competitiveness in international
markets and private consumption could decline, causing a negative effect on economic activity and
employment. Moreover, a high inflation rate could undermine confidence in the Argentine financial
system in general, negatively affecting the business volume of banks, including the Bank’s, and could
potentially hinder loan activities, especially those at long-term and fixed interest rates.
Argentina’s limited ability to obtain funding in international markets could adversely affect
the country’s ability to implement reforms and boost the economy.
In 2005, Argentina restructured a portion of its defaulted sovereign debt that had remained
unpaid since 2001. As a result of such restructuring, the Argentine Government announced that the gross
government debt amounted to approximately US$ 129,200 million as of December 31, 2005. Certain
bondholders who had refused to take part in such restructuring process ("holdouts"), mainly located in
United States, Italy and Germany, filed legal actions against Argentina to collect payments under such
defaulted bonds. Some of such proceedings are still pending and bondholders could make new claims in
the future.
On January 3, 2006, Argentina paid all amounts due to the International Monetary Fund in the
amount of US$ 9,800 million approximately.
In September 2008, Argentina announced its intention to pay its debt to the Paris Club creditors
out of the Central Bank reserves in an amount of US$ 6,500 million approximately; late in 2010, the
Argentine Government announced new negotiations with the Paris Club to discharge such debt which
later totaled about US$ 8,000 million, without the IMF's intervention. Notwithstanding the foregoing, as
of the date of this Offering Memorandum such intentions have not been fulfilled yet.
In addition, foreign shareholders of several Argentine companies have filed claims with the
International Centre for Settlement of Investment Disputes (ICSID) alleging that certain government
measures adopted during the 2001 crisis were inconsistent with fair and equitable treatment rules
established in different bilateral investment treaties to which Argentina is a party. Since May 2005 the
ICSID courts have entered several awards against Argentina. Only the cases "CMS v. Argentina",
"Azurix v. Argentina" and "Vivendi v. Argentina" have been concluded. These decisions compel the
Argentine Government to pay US$ 133.2 million, US$ 165.2 million and US$ 105 million, respectively.
As of the date of this Offering Memorandum, the abovementioned amounts have not been paid.
On April 30, 2010, Argentina offered a new debt swap to the holdouts. As a result of swap offers
in 2005 and 2010, Argentina restructured over 91% of its defaulted debt. The holdouts in 2005 or 2010
could continue to pursue legal actions against Argentina for the amounts due, which could adversely
affect Argentina’s access to international capital markets.
Late in December 2012, Argentina made an appearance before the US Courts and asserted its
intention to reopen the debt swap so that some of the holdouts could collect payments under unpaid bonds
due since 2001. The offer is included in a motion filed with the New York Court of Appeals for it to
review a stayed judgment entered by federal judge Griesa which ordered Argentina to pay 1,330 million
dollars to risk funds for defaulted bonds. In such motion (with an offer containing terms similar to those
27
offered to participants in the 2010 swap offer) Argentina further made it clear that the judgment referred
to above violated the equity principle with respect to such creditors who had accepted the previous swap
offers. However, in order to put an end to the legal dispute it made this new offer to “holdout” creditors.
Argentina’s default and its inability to restructure its outstanding sovereign debt in the entirety
and to fully negotiate with the foreign creditors could restrict Argentina’s ability to re-access the
international capital markets. The legal actions commenced by the creditors and the claims filed with the
ICSID could result in judgments against the Argentine Government which –if not paid- could prevent
Argentina from obtaining loans from multilateral entities. In addition, certain foreign creditors have filed
requests for attachments and other precautionary measures on Argentine assets located abroad, which
could continue to be pursued in the future. Furthermore, several creditors have joined together and formed
associations to make claims in connection with Argentina's defaulted debt. Throughout the years these
groups have unsuccessfully called for the enactment of federal laws in the United States and New York
State related to Argentina's defaulted debt in order to restrict Argentina’s access the capital markets in
United States. Although neither the US Congress nor the New York State Legislature have taken
significant steps towards the passage of such laws, we cannot guarantee that the enactment of new laws or
other political actions intended to restrict Argentina’s access to the capital markets will not become
effective.
Therefore, the Government might not have the financial resources necessary to implement
reforms and boost growth, which could have a significant adverse effect on the country’s economy and,
therefore, on the Bank’s financial condition.
A significant variation of the value of the Peso against the U.S. dollar may adversely affect the
Argentine economy as well as the Bank’s financial performance.
Following a major devaluation in the first half of 2002, the Peso stabilized in early 2003 at
approximately Ps.3.0 per U.S. dollar. Despite the positive effects of the real depreciation of the Peso in
2002 on the competitiveness of certain sectors of the Argentine economy, it has also had a far-reaching
negative impact on the Argentine economy and on the financial condition of businesses and individuals.
The devaluation of the Peso has had a negative impact on the ability of Argentine businesses to honor
their foreign currency-denominated debt, has led to very high inflation initially, significantly reduced real
wages, has had a negative impact on businesses whose success is dependent on domestic market demand
(such as utilities and the financial industry), and has adversely affected the government’s ability to honor
its foreign debt obligations.
The Bank may not assure that there will be no future sharp movements in the exchange rates
against the Peso caused by a number of local and international circumstances. In particular, in the future,
the Peso could undergo a major devaluation such as that of 2002. If the Peso devalues significantly, the
negative effects on the Argentine economy related to such devaluation could recur, with adverse
consequences to the Bank’s businesses.
Similarly, a substantial increase in the value of the Peso against the U.S. dollar also presents
risks for the Argentine economy. The appreciation of the Peso against the U.S. dollar negatively impacts
the financial condition of entities whose foreign currency-denominated assets exceed their foreign
currency-denominated liabilities. In addition, in the short term, a significant real appreciation of the Peso
would adversely affect exports. This could have a negative effect on GDP growth and employment, as
well as reduce the Argentine public sector’s revenues by reducing tax collection in real terms, given its
current partial reliance on taxes on exports.
Exchange controls and restrictions on transfers abroad and capital inflows have limited, and
may continue to limit, the availability of international credit.
In June 2005, the Argentine Government issued Decree No. 616/2005 to establish new controls
on capital inflows which could reduce availability of international credit. Decree No. 616/2005 provides
that, with very few exceptions, 30% of all amounts remitted to Argentina must be placed in a non-interest
bearing deposit in an account opened at a financial institution of the Argentine financial system for a year.
Failure to abide by any of the controls mentioned above could be punished by the Argentine Criminal
Law on Foreign Exchange Matters. Besides, the breaches detected by the institutions authorized to deal in
28
foreign currency must be reported to the Central Bank’s Non-Financial Institutions Control Department in
order for it to commence the relevant proceedings.
Should such additional controls be imposed in an economic environment with limited access to
local capital, the Bank’s economy and its businesses could be adversely affected.
In October 2011, the Government implemented new measures in the field of foreign exchange that
restrict capital inflows and outflows. As a part of these measures, the repatriation by non-residents of their
direct investments (acquisition of equity in local companies and real estate) is now subject to the
production of evidence that the foreign currency has entered Argentina and that such inflow has been
settled through the Argentine single, free-floating foreign exchange market. These measures increase the
costs of obtaining funds abroad and restrict access to such funding.
The Argentine Government may impose, in the future, additional controls on the foreign exchange
market, on inflows of capital into Argentina and on outflows of capital from Argentina, for instance as a
response to capital flights or a depreciation in the Peso. If imposed in a scenario of constrained access to
the local capital markets, these restrictions could adversely affect the economy and the Bank’s business.
See “Exchange Controls”.
The Argentine economy could be adversely affected by economic developments in other global
markets.
Financial and securities markets in Argentina are influenced, to varying degrees, by economic
and market conditions in other global markets. Although economic conditions vary from country to
country, investors’ perception of the events occurring in one country may substantially affect capital
flows into other countries, including Argentina, and the availability of funds for issuers in such countries.
Lower capital inflows and declining securities prices negatively affect the real economy of a country
through higher interest rates or currency volatility.
The Argentine economy was adversely impacted by the political and economic events that
occurred in several emerging economies in the 1990s, including those in Mexico in 1994, the collapse of
several Asian economies between 1997 and 1998, the economic crisis in Russia in 1998 and the Brazilian
devaluation in January 1999.
The sub-prime crisis that affected the United States in mid-2007 and the economic difficulties
caused by the recession and the budget deficits in the Euro zone countries have contributed to a slowdown in the world’s largest economies whose spillover effects could be felt in Latin America.
International discussions about the global economy seem to revolve around whether the Argentine
economy will stagnate again or whether it will exhibit anemic growth for several years to come.
The world’s economic crisis and the ensuing instability in the international financial system have
had and could continue to have a negative impact on Argentina’s economic growth. Additionally, events
such as the political and economic crises that afflicted Africa and the Middle East and natural catastrophes
such as the earthquake and tsunami that have struck Japan could cause instability in local markets and
adversely affect economic activity in Argentina.
The global economic downturn and related instability in the international financial system have
had, and may continue to have, a negative effect on economic growth in Argentina. The major losses
recently posted by the world’s stock exchanges, including Argentina’s, could lead to an extended global
downturn or even to a depression. A lengthy downturn in Argentina’s economy could adversely affect the
Bank’s results of operations.
Government measures, as well as claims filed by individual workers or by trade unions may
exert pressure for salary increases or added benefits, all of which could increase companies’ operating
costs.
In the past, the Argentine Government has passed laws and regulations forcing privately owned
companies to maintain certain wage levels and provide added benefits for their employees. Additionally,
both public and private employers have been subject to strong pressure from their workforce or the trade
unions representing them to grant salary increases and certain worker benefits. The Bank may not assure
29
you that in the future the Argentine Government will not adopt new measures imposing salary raises or
additional worker benefits. Neither may the Bank assure you that employees or their trade unions will not
exert pressure demanding such measures. Any salary raise as well as any additional fringe benefit could
lead to increased costs and decreased results of operations in Argentine companies, including the Bank.
Risks Relating to the Argentine Financial System
The Argentine financial system’s growth and profits are partially dependent upon changes in
long-term funding.
As a consequence of the global economic recession, Argentina’s banking industry underwent a
significant slow-down. This trend was reversed in late 2009. Although the extension of credit to the
private section rose by late 2009, year-end results exhibited a smaller expansion. Loans to the private
sector rose by 9.9% in 2009, 38.0% in 2010, 46.87% in 2011 and 30.74% in 2012. Despite the recovery in
credit extension, the recovery of the long-term credit market (i.e., mortgage and pledge loans) makes
progress at a slower pace.
If longer-term financial intermediation did not grow, the ability of financial institutions to
generate more profits could be adversely affected. Although deposits with the financial system have risen
since 2002, most placements are sight deposits or very short term deposits, which exposes the banks
engaged in long-term credit extension to liquidity risk and intensifies their need to depend on the Central
Bank as a potential liquidity guarantor.
The stability of the financial system depends upon the ability of financial institutions,
including the Bank, to retain the confidence of depositors.
The measures implemented by the Argentine Government in late 2001 and early 2002, in
particular the restrictions imposed on depositors’ ability to withdraw money freely from banks and the
pesification and restructuring of their deposits, resulted in losses for many depositors and undermined
their confidence in the Argentine financial system. Although the financial system has seen a recovery in
the amount of deposits since 2002 (measured in Pesos), the Bank may not assure that this trend will
continue and that the deposit base of the Argentine financial system, including the Bank’s, will not be
negatively affected in the future by adverse economic, social and political events.
If, in the future, depositor confidence weakens and the deposit base contracts, such loss of
confidence and contraction of deposits will have a substantial negative impact on the ability of financial
institutions, including the Bank, to operate as financial intermediaries. If the Bank is not able to act as a
financial intermediary and otherwise conduct its business as usual, its ability to honor its debts, including
the notes, might be adversely affected or limited.
Financial institutions’ asset quality is exposed to the non-financial public sector’s
indebtedness.
Financial institutions carry significant portfolios of bonds issued by the Argentine Government
and provincial governments as well as loans granted to these governments. The exposure of the financial
system to the non-financial public sector’s indebtedness had been shrinking steadily, from a 48.9% in
2002 to 12.8% in 2008. Although in the second half of 2009 this exposure had risen slightly, to 14.5% at
December 31, 2009, it resumed a downward trend to slightly over 10% of assets as per the latest available
information. To an extent, the value of the assets in the hands of Argentine banks, as well as their
capacity to generate income is dependent on the creditworthiness of the non-financial public sector, which
is in turn tied to the Argentine Government’s ability to foster sustainable long-term growth, generate
fiscal revenues and cut back on public expenditure.
As of December 31, 2012, the Bank’s total exposure to the public sector indebtedness was Ps.
781.9 million, that is, 4.9% of the Bank’s assets at that date.
30
Summary actions for collection as a means of enforcing creditors’ rights in Argentina may be
limited.
In order to protect the debtors affected by the 2001 economic crisis, starting in 2002 the
Argentine Government adopted measures that suspended proceedings to enforce creditors’ rights
(mortgage foreclosures and bankruptcy petitions) in the event of defaults by debtors.
Although at the date of this Offering Memorandum those measures were no longer in force, the
Bank may not assure you that they will not be reinstated in the future, or that the government will not take
other measures that limit creditors’ rights. Any such measures could have a material adverse effect on the
enforceability of creditor’s rights.
Consumer protection laws may limit the enforceability of certain of the Bank’s rights.
Argentine Consumer Protection Law No. 24,240, as supplemented or amended (the “Consumer
Protection Law”) establishes a number of rules and principles for the defense of consumers’ interests.
The Consumer Protection Law does not contain specific provisions for its enforcement in relation to
financial activities, but it does contain general provisions that might be used as grounds to uphold such
enforcement, as it has been previously interpreted in various legal precedents.
The Bank may not assure you that the judgments passed by the courts and/or the resolutions
handed down by administrative authorities in connection with the measures adopted by Argentina’s
Secretary of Home Trade and other competent authorities will not increase in the future the degree of
protection afforded their debtors and other clients or that they will not favor the claims filed by groups or
associations of consumers. This could affect the ability of financial institutions, including the Bank’s, to
freely collect charges, commissions or fees for their services and/or products as well as their amounts, and
consequently affect their business and the results of their operations.
Class actions against financial institutions for unliquidated amounts may adversely affect the
financial system’s profitability.
Certain public and private organizations have initiated class actions against financial institutions
in Argentina. The Argentine National Constitution and the Consumer Protection Law contain certain
provisions regarding class actions. However, their guidance with respect to procedural rules for
instituting and trying class action cases is limited. Nonetheless, through an ad hoc doctrine, Argentine
courts have admitted class actions in some cases, including various lawsuits against financial entities
related to “collective interests” such as alleged overcharging on products, interest rates and advice in the
sale of public securities, etc. If class action plaintiffs were to prevail against financial institutions, their
success could have an adverse effect on the financial industry in general and indirectly on the Bank’s
business.
The Bank operates in a highly regulated environment, and its operations are subject to
regulations adopted, and measures taken, by several regulatory agencies.
Financial institutions are subject to a major number of regulations concerning functions
historically determined by the Central Bank and other regulatory authorities. The Central Bank may
penalize the Bank in the event that it breaches any applicable regulation. Similarly, the CNV, which
authorizes securities offerings and regulates the public markets in Argentina, has the authority to impose
sanctions on the Bank and its board of directors for breaches of corporate governance. The Financial
Information Unit (Unidad de Información Financiera or “UIF”) regulates matters relating to the
prevention of asset laundering and has the ability to monitor compliance with any such regulations by
financial institutions and, eventually, impose sanctions.
The Bank may not assure you that none of such regulatory authorities will commence
proceedings against the Bank, its shareholders or directors nor penalize the Bank. This notwithstanding,
in addition to “Know Your Client”, the Bank has implemented other policies and procedures to comply
with its duties under currently applicable rules and regulations. For further information on this subject,
please see “Asset Laundering and Terrorism Financing” in this Offering Memorandum.
31
In addition to regulations specific to its industry, the Bank is subject to a wide range of federal,
provincial and municipal regulations and supervision generally applicable to businesses operating in
Argentina, including laws and regulations pertaining to labor, social security, public health, consumer
protection, the environment, competition and price controls. The Bank may not assure that existing or
future legislation and regulation will not require material expenditures by the Bank or otherwise have a
material adverse effect on the Bank’s consolidated operations.
Future governmental measures may adversely affect the economy and the operations of
financial institutions.
The Argentine Government has historically exercised significant influence over the economy,
and financial institutions, in particular, have operated in a highly regulated environment. The Bank may
not assure that the laws and regulations currently governing the economy or the banking sector will
remain unaltered in the future. Neither may the Bank assure you that changes will not adversely affect its
business, financial condition or results of operations and the Bank’s ability to honor its debt obligations in
foreign currency, including the notes.
As of the date of this Offering Memorandum, there are three legislative bills to amend the
Financial Institutions Law which have been sent to the Argentine Congress by representatives Heller,
Pinedo and Milman, respectively, seeking to modify different aspects of the Financial Institutions Law. If
the law currently in force were to be comprehensively modified, the financial system as a whole could be
substantially and adversely affected. If any of these legislative bills were to be enacted or if the Financial
Institutions Law were amended in any other way, there is no predicting the impact of the subsequent
amendments to the regulations on the financial institutions in general, the Bank’s businesses, its financial
condition and the results of its operations.
Accordingly, Law No. 26,739 has been recently enacted to amend the Central Bank Charter, the
principal aspects of which are: (i) to broaden the scope of the Central Bank's mission (by establishing that
such institution shall be responsible for financial stability and economic development while pursuing
social equity); (ii) to change the obligation to maintain an equivalent ratio between the monetary base and
the amount of international reserves; (iii) to establish that the board of directors of the institution will be
the authority responsible for determining the level of reserves required to guarantee normal operation of
the foreign exchange market based on changes in external accounts; (iv) to empower the monetary
authority to regulate and provide guidance on credit through the financial system institutions, so as to
"promote long-term production investment”.
The Bank is not able to ensure that any current or future laws and regulations (including, in
particular, the amendment to the Financial Institutions Law and the amendment to the Central Bank
Charter) will not result in significant costs to the Bank, or will otherwise have an adverse effect on its
operations.
A highly volatile regulatory framework could affect the country's economy in general, the
financial institutions and the Bank.
The Argentine Government has historically exercised significant influence over the Argentine
economy and financial institutions in particular have operated in a highly regulated environment
throughout different periods. Since December 2001, the Argentine Government has promulgated
numerous, far-reaching regulations affecting the economy in general and financial institutions in
particular. The laws and regulations that currently govern the economy and the financial sector may
change in the future. We cannot assure that any changes in the regulations and the policies of the
Argentine Government will not adversely affect financial institutions in Argentina, including the Bank, its
business, financial condition, the results of its operations or its ability to service foreign debt denominated
in foreign currency. A non-stable regulatory framework would impose significant limitations on the
activities of the financial system, including the Bank, and it would give rise to uncertainty as regards its
future financial condition and the result of its operations.
32
Risks Relating to the Bank’s Business
The quality of the Bank’s loan portfolio could be impaired if the Argentine private sector
continues to be adversely affected by the global economic downturn.
The Bank’s loan portfolio is concentrated on recession-sensitive segments and it is to a large
extent dependent upon local and international economic conditions. This in turn might affect the
creditworthiness of the Bank's loan portfolio and its results of operations.
Increased competition and M&A activities in the banking industry may adversely affect the
Bank.
The Bank foresees increased competition in the banking sector. Additionally, if the trend
towards decreasing spreads is not offset by the increase in lending volumes, the ensuing losses could lead
to mergers in the industry. These mergers could lead to the establishment of larger, stronger banks with
more resources than the Bank. Therefore, although the demand for financial products and services in
these markets continues to grow, competition may adversely affect the Bank’s results of operations,
shrinking spreads and commissions.
Reduced spreads without corresponding increases in lending volumes could adversely affect
the Bank’s profitability.
In recent years, the Argentine financial system has seen a reduction in the spreads between the
interest rates accrued on assets and liabilities as a result of increased competition in the banking sector
and the Argentine Government’s tightening of the monetary policy in response to inflation concerns,
which may continue in the near future. Although there has been a reversal in this trend, the Bank may not
assure you that the interest rate spreads will continue to rise. However, if spreads continue to decrease,
the Bank’s profitability may be adversely affected. We cannot assure that any changes in the regulations
and the policies will not adversely affect financial institutions in Argentina, including the Bank, its
business, financial condition, and the results of its operations.
Differences in the accounting standards between Argentina and certain countries with
developed capital markets, such as the United States, may make it difficult to compare the Bank’s
financial statements and those prepared by companies from these other countries.
Publicly available information about the Bank in Argentina is presented differently from the
information available for registered public companies in certain countries with highly developed capital
markets, such as the United States. Except as otherwise described herein, the Bank prepares its financial
statements in accordance with Argentine Banking GAAP, which differ in certain significant respects from
Argentine GAAP and from US GAAP.
The effects of the legislation that restricts the Bank’s ability to pursue mortgage foreclosure
proceedings could adversely affect the Bank.
As is also the case with other mortgagees, the ability to pursue foreclosure proceedings through
completion in order to recover on its defaulted mortgage loans has an impact on the Bank’s activities. On
December 13, 2006 and pursuant to Law No. 26,177, the “Restructuring Unit Law” was created to allow
all the mortgage loans to be restructured between debtors and former Banco Hipotecario Nacional in so
far as they had been granted previous to the entry into force of Law No. 23,928 (the “Convertibility
Law”).
Law No. 26,313, the “Pre-convertibility Mortgage Loans Restructuring Law” was enacted by the
Argentine Congress on November 21, 2007 and partially signed into law on December 6, 2007 to lay
down the procedure to be followed in restructuring the mortgage loans within the scope of Section 23 of
the Mortgage Refinancing System Law in accordance with the guidelines established by the Restructuring
Unit Law. To this end, a new recalculation was established for certain mortgage loans originated by the
former Banco Hipotecario Nacional before April 1, 1991.
33
Decree 2107/08 issued on December 19, 2008 regulated the Pre-convertibility Mortgage Loans
Restructuring Law and established that the recalculation of the debt applies to the individual mortgage
loans from global operations in force at December 31, 2008 and agreed upon previous to April 1, 1991,
and in arrears at least since November 2007 and remaining in arrears at December 31, 2008. In turn,
Decree 1366/10, published on September 21, 2010, expanded the universe of Pre-convertibility loans
subject to restructuring to include the individual mortgage loans not originating in global operations in so
far as they met the other requirements imposed by Decree 2107/08. In addition, Law No. 26,313 and its
regulatory decrees also condoned the debts on mortgage loans granted before the Convertibility Law in so
far as they had been granted to deal with emergency situations and in so far as they met the arrears
requirement imposed on the loans subject to recalculation.
Subject to the Central Bank’s supervision, the Bank has implemented the recalculation of
mortgage loans within the scope of the above-discussed rules by adjusting the value of the new
installments to a maximum amount not in excess of 20% of the household income. In this respect, the
Bank estimates that it has sufficient loan loss provisions to face any adverse economic impact on the
portfolio involved.
However, the Bank may not assure you that the Argentine Government will not enact new
additional laws restricting the Bank’s ability to enforce its rights as a creditor and/or imposing a
condonation or a reduction of principal on the amounts unpaid in the Bank’s mortgage loan portfolio. Any
such circumstance might have a significant adverse effect on the Bank’s financial condition and on the
results of operations. See “Certain Legal Aspects of Mortgages in Argentina-Regulatory Framework” for
further information on Argentina’s mortgage legislation.
Given the mismatch between assets and liabilities in terms of foreign currency, the Bank has
significant exposure.
As of December 31, 2012, the Bank’s foreign-denominated liabilities exceed its foreigndenominated assets by approximately US$ 169.1 million, excluding foreign currency futures agreed upon
in the local market. Were these locally traded foreign currency futures included, the Bank’s net position
in foreign currency as of December 31, 2012 is US$ 305.8 million. Such mismatch leaves the Bank
exposed to the risk of volatility in foreign exchange which could adversely affect its financial results in
the event of a Peso depreciation.
The Argentine Government might prevail at the Bank’s General Shareholders’ Meetings.
By virtue of Law No. 23,696 (the “Privatization Law”) there are no restrictions on the Argentine
Government’s ability to dispose of its Class A shares and all those shares minus one could be sold to third
parties through public offering. The Bank’s By-laws set forth that if at any time Class A shares were to
represent less than 42% of the Bank’s shares with right to vote, Class D shares automatically lose their
triple vote right, which could result in the Main Shareholders losing control. Should any such situation
materialize and should the Argentine Government retain a sufficient number of Class A shares, the
Argentine Government could prevail in Shareholders’ Meetings (except for some decisions that call for
qualified majorities) and could thus exert actual control on the decisions that must be submitted to
consideration by the Shareholders’ Meeting.
The Bank might in the future consider new business opportunities which could turn out to be
unsuccessful.
In recent years the Bank has considered some business acquisitions or combinations and it plans
to continue considering acquisitions that offer appealing opportunities and that are in line with the Bank’s
commercial strategy. However, the Bank may not assure you that such businesses could deliver
sustainable outcomes or that the Bank will be able to consummate the acquisition of financial institutions
in favorable conditions. Additionally, the Bank’s ability to obtain the desired outcome as a result of said
acquisitions will be partly dependent upon the Bank’s ability to follow through with the successful
integration of the businesses. To integrate any acquired business entails major risks, including:
• Unforeseen difficulties in integrating operations and systems;
• Problems inherent in assimilating or retaining the target’s employees;
34
• Challenges associated to keeping the target’s customers;
• Unforeseen liabilities or contingencies associated to the targets; and
• The likelihood of management having to take time and attention out of the business’s day-to-day
to focus on the integration activities and the resolution of associated problems.
Risks Relating to the Notes
In the event of the Bank’s bankruptcy, the notes will rank junior to claims from depositors
and other privileged creditors.
The Financial Institutions Law, as amended, provides that in the event of the Bank’s bankruptcy
or liquidation, all depositors, whether individuals or legal entities, and whichever the type, amount or
currency of their deposits, will have general and absolute priority over any other of the Bank’s creditors,
including the holders of the notes, except for labor creditors, creditors secured by a pledge or mortgage,
or facilities granted by the Central Bank or by the Argentine bank liquidity fund and secured by a pledge
or mortgage collateral, to be paid with 100% of the proceeds of the liquidation of our assets.
Also, the owners of any kind of deposits will have special priority rights with respect to the
Bank’s remaining creditors, except with respect to labor claims and claims secured by a pledge or
mortgage, to be paid out of (i) our funds in possession of the Central Bank as reserves; (ii) other funds
existing at the date when the Bank’s authorization is revoked; or (iii) the proceeds of the mandatory
transfer of the Bank’s assets as determined by the Central Bank, in the following order of priority: (a)
deposits of up to Ps.120,000 per person or corporation (considering all amount of such person/corporation
deposited in one financial institution) or its equivalent amount in foreign currency, with priority right
granted to one person per deposit (in the case of more than one account holder, the amount is pro rated
among such account holders); (b) any deposits greater than Ps.50,000 or its equivalent in foreign
currency, for the amounts exceeding such sum; and (c) liabilities derived from credit facilities granted to
the bank, which directly affect international trade. Also, under Section 53 of the Financial Institutions
Law, any claims of the Central Bank will have priority over any other creditors, except for creditors
secured by a pledge or mortgage, certain labor creditors and depositors (in the terms set forth above),
facilities granted pursuant to the Central Bank Charter (rediscounts granted to financial entities in the
event of a temporary lack of liquidity, advances to financial entities under a bond, bond assignment,
pledge or special assignment of certain assets), and facilities granted by the Argentine bank liquidity fund
and secured by a pledge or mortgage collateral.
Any insolvency of the bank would trigger an administrative proceeding, which may delay
noteholder recoveries in respect of their claims.
If the Bank becomes insolvent, it would not automatically be subject to bankruptcy
proceedings under Law No. 24,522 (the “Argentine Bankruptcy Law”). Instead, the Bank would be
subject to a prior administrative proceeding in accordance with the Financial Institutions Law, pursuant to
which the Central Bank would intervene by appointing a reviewer, requesting the Bank to file a
reorganization plan, transferring certain of the Bank’s assets and suspending or revoking the Bank’s
banking license. Only upon the revocation of the Bank’s banking license may the Bank be subject to
bankruptcy proceeding and/or judicial liquidation pursuant to the Argentine Bankruptcy Law.
Consequently, noteholders could receive the amounts of their claims after more delays than they would
otherwise have received in a normal bankruptcy proceeding in Argentina (other than a financial
institution’s bankruptcy proceeding), the United States or any other country.
An active trading market for the notes may not develop.
Each series of notes issued under the Program and in connection with the applicable Pricing
Supplement shall constitute a new issue of notes for which there may not be an established trading
market. The Bank may apply to have notes in a series listed on different stock exchanges or markets, but
the Bank cannot assure you that any such applications, if made, would be approved. Additionally, the
Bank may not list notes in a series on any securities exchange or quotation system. Moreover, even if a
listing or quotation may be obtained in respect of an issue of notes, the Bank cannot assure you as to the
liquidity of, or the development or continuation of trading markets for, the notes. If an active trading
market for the notes does not develop or continue, the market price and liquidity of the notes may be
35
adversely affected. If the notes are traded, they may trade at a discount from their initial offering price,
depending on prevailing interest rates, the market for similar securities, the Bank’s operating performance
and financial condition, general economic conditions and other factors.
Holders of notes may find it difficult to enforce civil liabilities against the Bank or its
directors, officers and controlling persons.
The Bank is organized under the laws of Argentina and its principal place of business (domicilio
social) is in the City of Buenos Aires. The Bank’s directors, officers and controlling persons reside
outside the United States. In addition, a substantial portion of the Bank’s assets and the assets of the
Bank’s directors, officers and controlling persons is located outside the United States. As a result, it may
be difficult for holders of notes to effect service of process within the United States on such persons or to
enforce judgments against them, including in any action based on civil liabilities under the U.S. federal
securities laws. In addition, under Argentine law, enforcement of foreign judgments would be recognized,
provided that the requirements of Articles 517 through 519 of the National Code of Civil and Commercial
Procedure are complied with, including the requirement that the judgment does not violate principles of
public policy of Argentine law, as determined by the Argentine court. The Bank cannot assure you that an
Argentine court would not deem the enforcement of foreign judgments, requiring the Bank to make a
payment under the notes in foreign currency outside of Argentina, to be contrary to Argentine public
policy, if at that time there are legal restrictions prohibiting Argentine debtors from transferring foreign
currency outside of Argentina to cancel indebtedness. Based on the opinion of the Bank’s Argentine
counsel, there is doubt as to the enforceability against the Bank’s directors, officers and controlling
persons in Argentina, whether in original actions or in actions to enforce judgments of U.S. courts, of
liabilities based solely on the U.S. federal securities laws.
The Bank may redeem the notes prior to maturity.
Unless otherwise specified in the applicable pricing supplement, the notes are redeemable at the
Bank’s option in the event of certain changes in Argentine laws or the occurrence of certain events, as set
forth in this Offering memorandum. See “Description of the Notes – Redemption and Repurchase.” In
addition, if the applicable pricing supplement so specifies, the notes may also be redeemable at the
Bank’s option under certain conditions, upon the occurrence of events in addition to those set forth in the
Program and on certain specified dates. If any such redemption were to occur, an investor may not be able
to reinvest the redemption proceeds in a comparable security at an effective interest rate similar to the one
expected under the notes.
The Bank might be unable to make payments in US Dollars and/or to make payments outside
Argentina due to controls in the foreign exchange market.
Decree 1570/01, which came into force on December 3, 2001 imposed certain restrictions on the
ability to send foreign currency abroad and prohibited the most habitual remittances ordered from
Argentina. Decree 1606/01 maintained the same restrictions and included certain additional exceptions
related to remittances to be received in Argentina after December 3, 2001.
Additionally, pursuant to Decree No. 616/05, as subsequently amended and supplemented, the
Argentine Government regulated inflows and outflows of capital. Broadly speaking, Decree No. 616/05
mandates that, save for certain exceptions, certain funds transferred to Argentina by residents or nonresidents are subject to the establishment of a mandatory reserve (or an amount required to be deposited)
equivalent to 30% of the amount of foreign currency received in Argentina, which must be deposited in
US Dollars for a term of one year in an non-transferable, non-interest bearing account at a local financial
institution. This regulation sets forth that, save for certain exceptions, transfers of currency from
Argentina to foreign accounts are subject to the Central Bank’s prior approval and it also lays down
certain maximum amounts that individuals may acquire in the foreign exchange market.
There are no assurances that the regulations discussed above will not be amended or that no new
regulations will be imposed in the future to limit even further the foreign currency inflows and outflows
into and out of Argentina. Furthermore, new restrictions might be imposed by regulatory agencies devoid
of all legal support. Any such measure, as well as any other additional control and/or restriction could
substantially and adversely affect the Bank’s ability to access the international capital markets and to
actually invest the proceeds, make principal and/or interest payments on its foreign-denominated notes,
remit funds abroad (in whole or in part) to honor payment commitments on its notes (which could
36
materially and substantially affect the Bank’s financial condition and the results of its operations), and/or
from time to time and if applicable in line with the terms and conditions of the notes, remit abroad the
funds received in Argentina by the noteholders as payment on the notes. The Bank could be unable to
make payments in US Dollars and/or to make payments outside Argentina due to restrictions in force at
that time on the foreign exchange market and/or due to the restricted ability of companies to remit funds
abroad. See “Exchange Controls”.
37
INFORMATION ABOUT THE ISSUER
History and Description of the Bank’s Businesses
Introduction
The Bank was created in 1886 by the Argentine Government and privatized in 1999.
Historically, the Bank has led the Argentine mortgage loan market and has been ranked as the largest
supplier of insurance products and services in the field of mortgages and mortgage loans in Argentina. All
of the Bank’s transactions and customers are located in Argentina, where the Bank runs a national
network spanning 54 branches throughout the Argentine territory and an additional 16 points of sales.
The Bank is a commercial bank that provides universal banking services and offers a broad range
of banking activities and related financial services to individuals, small and medium enterprises and large
companies. The Bank seeks differentiation through its focus on home mortgages and consumer loans as it
considers that these products offer attractive continued growth opportunities. The Bank considers that it
tops the ranking of mortgage lenders in Argentina and it also offers its customers a wide array of personal
and corporate loans, deposits, credit and debit cards and additional financial services.
As of December 31, 2012, the Bank ranked tenth amongst Argentine banks in terms of net
shareholders’ equity, with net shareholders’ equity of Ps. 3,456.0 million and thirteenth in terms of total
assets, with assets for Ps. 16,003.7 million. The Bank’s net income for the fiscal years ended December
31, 2010, 2011 and 2012 was Ps. 195.3 million, Ps. 251.5 million and Ps. 343.6 million, respectively,
which stands for an average return on equity of 6.7%, 8.1% and 10.2%, respectively and a return on
average assets of 1.7%, 2.2% and 2.5%, respectively.
In line with its strategy to diversify its loan portfolio, the Bank has posted an increase in its nonmortgage loans, from Ps. 3,909.1 million as of December 31, 2010 to Ps. 7,605.1 million as of December
31, 2012, representative of an increase in non-mortgage loans over the Bank’s total portfolio of loans
from 69.2% to 80.3%, respectively.
Additionally, the Bank has improved the quality of these assets. Non-performing loans over
Total portfolio stood at 3.0% as of December 31, 2010 and dropped to 2.3% as of December 31, 2012.
The Bank has also diversified its funding sources: it reduced in relative terms its financial
borrowings and increased its deposit base. In response to the volatility prevailing in the markets over the
past two years, the Bank increased its liquidity and mitigated its re-financing risks. The financial
indebtedness reduced its share in the total funding from 27.6% as of December 31, 2010 to 22.2% as of
December 31, 2012.
The Bank’s shares have been listed on the Buenos Aires Stock Exchange since 1999. Since 2006
the Bank carries a Level I ADR Program.
Brief Description of the Loan Portfolio
As of December 31, 2012, the Bank’s loan portfolio totaled Ps. 9,772.5 million. The following is
a detail of the Bank’s loan portfolio as of the dates indicated:
38
As of December 31,
2010
2011
2012
2012
in thousands of:
Ps.
Ps.
Ps.
US$(1)
Loan Portfolio
49,856
50,768
91,806
18,670
71,894
146,776
391,343
79,585
5,651,221
7,540,694
9,544,383
1,940,980
Advances
316,231
635,090
1,031,178
209,704
Promissory notes
159,629
250,736
229,629
46,698
1,741,901
1,705,635
1,868,330
379,950
11,615
22,933
55,346
11,255
472,878
788,256
1,199,211
243,876
1,813,442
2,701,531
3,551,203
722,186
(37,766)
(5,271)
(1,723)
(350)
1,135,348
1,388,722
1,538,527
312,880
50,660
77,398
87,837
17,863
(12,717)
(24,336)
(15,155)
(3,082)
Provisions
(216,609)
(223,904)
(273,101)
(55,539)
Total loans
5,556,362
7,514,334
9,754,431
1,983,697
26,620
26,620
18,238
3,709
4,873
4,873
3,510
714
(3,659)
(3,659)
(3,660)
(744)
5,584,196
7,542,168
9,772,519
1,987,375
To the non-financial private sector and residents abroad
Mortgage loans
Pledge loans
Personal loans
Credit cards
Unapplied cash
Other
Accrued interest and foreign exchange gains/(losses)
receivable
Unaccrued interest
Loans pending securitization
Accrued interest receivable
Loan loss provision
Total Loan portfolio
(1)
Source: BCRA.
Strategy
In the last years the Bank has materialized a change in its universal banking-based business
structure. Such change implied the release of various products, making necessary changes in the systems,
processes and strengthening its market positioning. Therefore, the Bank has changed from a financial
intermediary focused on trading mortgage loans to a commercial Bank offering a wide range of products
and services. Banco Hipotecario adopted a new vision as a contemporaneous, straightforward and
inclusive Bank. In particular, actions were taken to reduce costs, make changes in the volumes of loan
origination so that they can fit in the new context of lower liquidity, give priority to deposit attraction
efforts, design programs together with governmental agencies and diversified growth.
For 2013, the main actions will be focused on:
•
Universal banking related to housing solutions: To bring into the consumers’ mind the slogan
“Everything for your home (Todo para tu casa)” basing the Bank products on such concept;
39
•
Making changes in the levels of Liquidity: Aim at maintaining an adequate level of liquid resources
to ensure a proper development of the Bank's business cycles and to enable placement of liquid
resources surplus in more profitable transactions;
•
Improving diversity of short-term funding and maximizing long-term funding: To obtain a more
balanced structure in line with the guidelines laid down by the financial system and take advantage of
capital market opportunities. Accordingly, special emphasis will be placed on attracting demand
deposits while continuing to work on the scope of the loan securitization program by issuing new
series of Argentine mortgage-backed securities (Cédulas Hipotecarias), and evaluating the
possibility of issuing debt securities as long as it is possible under market conditions;
•
Improved focus on the interaction between the Bank and customers, employees and suppliers:
Achievement of synergies in the interaction between the Bank and its domestic and foreign clients
and suppliers;
•
Laying down the foundations for greater operating efficiency and transaction automation: Continued
search for improvements in quality and productivity through the systematization of processes and
systems. Continuous technology innovation. Strong change in process engineering paving the way
towards minimization of waste and process-associated costs. The “industrial metaphor” has a leading
role in the Institution's operating organization system;
•
Maintaining portfolio quality: To maintain the credit quality of new loans; to perform segmented
actions on the retail banking portfolio; to encourage the atomization of the corporate banking
portfolio;
•
Seeking greater profitability per client: Continuous search for portfolio loyalty generation, taking
actions on key variables in order to increase income from commissions, contributing multiproduct
offers and giving priority to cross-selling. Therefore, there will be an increase in operating income
and the share in the Bank's total income;
•
Continuing to boost the Corporate Banking business: To maintain a balance between individual and
commercial loans. The Bank will seek to identify entrepreneurs with a high potential to support them
in developing their projects, for which purpose greater support will be given to small and mediumsized companies (PyME) banking. The Bank's contribution in relation to corporate funding will not
only be limited to loan granting but it will also continue to play an active role so that the companies
may obtain access to the capital markets;
•
Improving risk management: To set out the process for continued improvement in global risk
management towards implementing the best practices; Program intended to further develop the
cultural insertion on risk management in the organization;
•
Implementing a model of leadership and assessment of potential at all management levels: To
encourage management of knowledge and intellectual capital of all collaborators to increase their
strengths in critical aspects through greater involvement and motivation;
•
Branding reinforcing: Continuous actions intended to further promote the concept of a
contemporaneous, straightforward and inclusive bank. Establishing a comprehensive communication
plan through the Internet to lead the Internet 2.0 channel (Facebook, Twitter, Google+, and other
social networks).
•
Maintaining the dynamism displayed in the previous year in relation loan granting, paying
continuous attention to changes in the local market conditions in a global scenario of crisis;
•
Furthering the use of tools enabling better management and business development control. For such
purpose, a comprehensive management scheme consisting of five strategic environments (Business,
Employees, Clients, Sustainability and Organizational Intelligence) will continue to be used.
Together with the analysis of profitability by Business Unit, it will be aimed at monitoring and
controlling the organizational strategy by measuring strategic goals, which enables to make the
corporate vision more clear and align business units with resources under a consistent strategy;
40
•
Furthering the comprehensive program for quality and process reengineering in order to identify the
“client’s opinion”, aligning their expectations with those of the Bank, and further increasing
profitability and reducing costs from waste or “no quality”;
•
Encouraging leadership and communication, mainly in relation to middle management and further
improving coordination between different areas upon planning and executing different projects.
Business Lines
Mortgage Loans
Without prejudice to its expansion and growth in different financial products, the Bank strives to
maintain its leading position in the mortgage loan market and looks to offer a wide array of products to
meet home financing needs.
At present, the Bank grants Peso-denominated mortgage loans at a fixed interest rate for up to a
maximum term of 20 years. The Bank finances up to 70% of the real property value when the property is
to be used as a family home. When properties are acquired for construction purposes, the Bank finances
75% and when the loan proceeds are to be applied to home expansions and completion, the Bank finances
100%. For the segment “Salary Plan” (clients who are employed by companies that signed agreements to
deposit the employees' salaries with Banco Hipotecario) a credit facility is offered "at a fixed rate with
step-up repayment installments" subject to a single 10-year term for House Construction, Expansion or
completion and in the above three cases up to 100% of the work project is financed.
The maximum loan amount for purchases and construction is Ps. 500,000 and for expansions
and/or construction, this upper limit is Ps. 250,000. The mortgage payment installment shall never exceed
30% of household income, with household understood as comprising both marriage and cohabitation
arrangements.
The Bank relies on a pre-qualification system to inform applicants as early as in their initial
enquiries of the maximum amount that they can borrow if they meet all requirements in terms of personal
conditions, credit history and the property to be used as collateral.
The origination of mortgage loans at the Bank decreased in the year 2008 due to the volatility
exhibited by international financial markets in late 2007 and the ensuing long-term credit crunch. By mid2009 and together with the Argentine Government, the Bank launched a line by the name of “Credit for
Your Home” to the market, which was very well received by the public and helped the Bank grant
approximately 7,000 mortgage loans in 10 months and thus demonstrate major management and
administrative capabilities to grant such number of loans.
In this respect, origination at the Bank in the years 2010 and 2011 amounted to Ps. 738.0 million
and Ps. 189.9 million, respectively. And, in the year ended on December 31, 2012, originations amounted
to Ps. 264.7 million.
Procrear Bicentenario
In 2012 the Argentine Government launched the Program known as PROCREAR Bicentenario,
an Argentine Loan Program celebrating the Bicentenary for a single family house, together with the
Ministry of Economy, ANSES, the Ministry of Federal Planning and the Government Property
Management Agency (Agencia de Administración de Bienes del Estado). In this program the Bank acts as
trustee of the PROCREAR trust and its main role is the implementation and execution of the program.
PROCREAR Bicentenario is expected to grant 400,000 loans for construction of houses within 4
years and to grant the first 100,000 loans for the benefit of about 400,000 people during 2012-2013. For
such purpose, as of December 31, 2012, the settlor contributed P.s 3,500 million in cash.
The program provides for two types of credit facilities:
41
•
For owners of a piece of land: This is for those persons who have a piece of land of their
own or owned by an immediate relative (parent or son/daughter of the applicant or his/her spouse) where
a new independent house can be built.
•
For non-owners: This is intended for construction of houses over 1700 hectares of
government-owned lands made available by the Argentine Government, including the lands assigned by
the provinces and/or municipal governments.
Such lands are used for urban construction projects so that the space is intelligently used,
contemplating different family characteristics and the possibility of a future expansion.
In 2012 four drawings were held and one new drawing was held as a second chance among those
registered as “owners of a piece of land” giving rise to 59,186 beneficiaries, out of which 14,130 made
the filings to obtain their mortgage loans as of December 31, 2012.
In turn, with respect to the non-owners line, there were two calls for bids in 2012 for a total
number of 15,000 houses. The projects to be submitted by the selected companies will be developed and
awarded to the beneficiaries in 2013.
New drawings are expected to be held under the program for 2013 addressed to beneficiaries
who "own a piece of land" and awards to beneficiaries registered as “Non-owners”. In addition, there will
be new calls for bids for urban developments related to such project.
The Bank's participation in this origination of mortgage loans reaffirms its historic mission of
making owners.
Consumer Loans (Personal Loans and Credit Cards)
In recent years, the Bank has exerted major effort in deploying a new business strategy geared
towards universal banking. The Bank has made major headway in its goal to reconvert into a retail
business launching products, re-sizing systems and processes and strengthening its market positioning.
As regards its positioning, the Bank aspires to segment not only by socioeconomic status but
also by classifications based on consumption habits or affinity groups in order to constantly embed in its
product offerings the features that clients appreciate.
In addition, the Bank will focus its efforts on channeling the highest number of clients to the
automatic customer service tools striving for continuous improvement in its interaction with clients and
increased efficiency at lower costs.
As a part of its multi-product strategy, the Bank offers Personal Loans through its branches and
alternative sales channels, at a fixed rate, for up to 60 months and for a maximum amount not in excess of
the lower of (i) the equivalent to the applicant’s eight months’ income and (ii) Ps. 200,000. Whilst in
2010 and in 2011, the Bank had originated Ps. 314.8 million and Ps. 585.5 million, respectively, in the
fiscal year ended on December 31, 2012, the Bank originated Ps. 751.5 million.
As regards credit card marketing efforts, the Bank has entered into a contract with Visa
Argentina S.A. to issue Visa credit cards. This credit card provides financing at competitive interest rates
and its inherent characteristics foster consumption. In this respect, the Bank has implemented a number of
promotional actions for certain time periods and certain lines of business and products, alliances with
different sought-after retailers as well as co-branding arrangements.
The Bank undertook these actions to increase client loyalty and retention which leads to
increased revenues from fees.
As a result of the actions described above, plus the acquisition of an 80% stake in Tarshop (see
“Tarshop” in this section), the Bank’s Credit card balances grew from Ps. 1,813.4 million at December
42
31, 2010, to Ps. 2,701.5 million at December 31, 2011. In turn, as of December 31, 2012, the Bank’s
credit card balance was Ps. 3,551.2 million.
Corporate Banking
The Bank’s objective for 2012 is to consolidate its presence as a major player within the
corporate banking segment. Additionally, the Bank plans to continue with its strategy of active
involvement in syndicated loan structuring transactions and the organization and placement of capital
market transactions. At the same time, the Bank plans to further the development of transactional
products, extending credit under the “Communities” concept and rendering comprehensive financial
advice to Argentine entrepreneurs.
To attain its objectives, the Bank plans to tailor its structure to the new businesses through the
creation of a team that specializes in different industries and sectors, deepening segmentation by
industries with a view to improving penetration in each industry and better understanding the needs and
risks inherent in each particular industry.
The Bank will further the strategy deployed until now that consisted in granting financial loans
to companies for short and medium terms, including syndications with other banks. Besides, in order to
improve profitability and to maintain balanced credit exposure, the Bank will seek to expand its longer
term deals, where collaterals and payments will be basically tied to clients’ cash flows. Thus, the Bank
aims at consolidating an atomized portfolio made up by short-, medium-, and long-term transactions to
enable the Bank to make adjustments fast in the event of changes in market conditions.
In turn, and as a continuation of what started in the year 2010, a new challenge for the year
ahead will be to enter the SMEs market looking to address the funding needs of those companies with
annual turnover ranging from Ps 6.0 million to Ps. 60 million and with appealing growth prospects.
In order to enhance its comprehensive offering, the Bank will continue to develop products to
help companies optimize cash flow management thus contributing to the objective consisting in
increasing the deposit base and improving transactionality by client in this business unit. Along these
lines, the Bank launched a new Check Collection and Custody System and in the last quarter of the year
the Bank will start to offer Leasing products.
In 2013 the Bank will continue to generate “structured”-type financing together with other banks
by organizing and placing syndicated loans. The proceeds from these deals are to be applied to capital
expenditures and to the restoration of working capital above all in those companies that have sufficient
capacity for the generation of liquid funds and excellent growth prospects.
The Bank will continue to target the most appealing sectors that have good growth prospects and
require major investments, focusing mainly on sectors such as Exports, Energy, Agribusiness, Real Estate
and Consumption.
In addition, to accompany the 2013 commercial strategy for capturing liabilities, the Bank will
continue to attract deposits from companies, both in sight accounts and in the form of time deposits to the
extent this mechanism is in harmony with the Bank’s funding needs.
In order to leverage the synergies between its Corporate, SMEs and Individual Banking areas,
the Bank will endorse its “Communities” credit extension concept, i.e., extending credit not only to its
clients but also to its clients’ suppliers and clients thus encompassing the whole value chain.
Having undertaken actions to boost its corporate business, the Bank has seen its balances for
these loans rise from Ps. 1,622.8 million at December 31, 2010 to Ps. 2,854.7 million as of December 31,
2012.
Deposits
In order to diversify its sources of funding, the Bank has been focusing on attracting deposits
from both the public and private sectors in recent years and has succeeded in ranking amongst the leading
43
15 banks in the financial system. At present, the Bank’s main source of deposits consists in Pesodenominated term deposits, though it also carries term deposits in US Dollars and deposits in savings
accounts and in checking accounts.
As of the year ended
December 31,
2010
2011
2012
2012
in thousands of:
Ps.
Ps.
Ps.
US$(1)
Deposits
1,900,857
2,378,275
2,990,892
608,239
12,341
11,540
8,563
1,741
2,924,966
3,061,948
5,011,674
1,019,192
73,354
58,744
595,564
121,116
362,596
505,781
741,892
150,874
2,405,033
2,407,108
3,355,131
682,312
Investment accounts
14,056
40
160,035
32,545
Other
44,754
65,526
101,650
20,672
25,173
24,749
57,402
11,673
4,838,164
5,451,763
8,011,129
1,629,172
Financial sector
Checking accounts
Savings accounts
Term deposits
Interest and foreign exchange gains/(losses) payable
Total deposits
(1)
Source: BCRA.
44
Distribution channels
The Bank’s branch network is presently made up by 54 branches and 16 sales offices, which, in
the aggregate, represent 70 points of sales within Argentina.
The Bank’s product distribution policy revolves around four axes:
•
Branches,
•
Points of sales,
•
Telemarketing, and
•
The Bank’s own sales force.
The Bank deploys a direct marketing strategy to reach its existing clients and prospects with
cross-selling offerings. This strategy is basically supported by the use of technological tools specifically
designed for processes to incorporate more intelligence, segmenting databases for improved
communication efficiency and product acceptance. Responsibility for selling Bank products to new
clients lies mainly with the sales force teams at the head office and at the branches.
The Bank looks to steer its distribution and sales channels to succeed in reaching a larger
universe of prospective customers with a larger product offering. In addition to the traditional sales
platform at the branches, the Bank has forged business alliances seeking to supplement its functions with
strategic partners who add value to the distribution chain with the overarching objective being a decrease
in the costs incurred in client acquisition and new product placement.
Insurance Products
The Bank offers insurance coverage for the financial products originated by the Bank (loans,
checking accounts and Credit Cards). Therefore, the insurance business’s contribution to the Bank’s
results is linked to the origination of these financial products. The Bank also offers additional
homeowners’ insurance and life insurance to its clients. In all these cases, it is the Bank that takes on the
risk, collects the premiums and pays the claims. These types of coverage are offered only to the Bank’s
current clients or to clients whose homes have been financed by the Bank. At present, the Bank operates
in two modalities: (i) as policy-owner; and (ii) as insurance broker.
The following is a description of the insurance provided in these two modalities:
Insurance related to financial products: The aim of this coverage is to minimize the risk of
uncollectibility in the event of the debtor’s death and to preserve the value of collateral. In this
respect, the risks for which policies are purchased are:
•
Life insurance: applicable to Personal Loans, Mortgage Loans, Credit Cards and
Accounts for the repayment of debit balances in the event of the insured debt passing
away.
Type of contract: group life insurance policy whereby the Bank is both Policyowner and Beneficiary for the amount established according to each financial
product.
•
Fire insurance: applicable to Mortgage loans and accounts (or any other product)
secured by mortgages.
Type of contract: insurance policy against fire and other damages to property, in
which the Bank is the Policy-owner.
It is important to note that for all the products acquired until July 23, 2007, the insurer was
the Bank. From that date onwards, the insurance carriers have been BHN Vida S.A. in
coverage against death and BHN Seguros Generales for fire insurance. These companies are
Bank affiliates and they have both been duly formed and authorized by the Argentine
Superintendence of Insurance.
45
Coverage offered to clients in which the Bank acts as a part of the distribution channel: These
are insurance products that supplement the clients’ loan insurance coverage or meet their
different insurance needs and are voluntarily acquired by clients. The Bank earns fees in
proportion to the portfolio of insurance products it generates.
These are insurance products designed together with the insurance companies in accordance
with the definitions established by the Bank based on the price-benefit ratios that best fit
each client segment. In this modality, the Bank acts as an insurance broker pursuant to
agreements made with various insurance companies.
The risks are taken on and managed by the insurance companies based on rates, coverage,
requirements, standards and procedures regulated by the Argentine Superintendence of
Insurance.
The insurance products comprised in the Bank’s Insurance Broker agreements with
insurance carriers include: life, personal accidents, homeowners, health, motor vehicle,
protected purchase for products and/or services acquired with credit cards and ATM
robbery.
Argentine mortgage-backed securities (CHAs)
The Cédulas Hipotecarias Argentinas (CHAs) issued by the Bank represent an important
instrument in the Argentine capital markets. CHAs are securities backed by the Bank’s mortgage loans
and structured through a financial trust. They are frequently listed on the Buenos Aires Stock Exchange.
The Bank issued a total of 14 series for approximately Ps. 1,785 million.
Tarshop
In order to further its strategy towards consumer finance, on September 29, 2009, the Bank
acquired 107,037,152 ordinary shares, representative of 80% of Tarshop’s capital stock. Tarshop’s
business is based on selling consumer finance products, including its own credit card which does business
as “Tarjeta Shopping”, and on extending cash advances. At present, its portfolio amounts to over Ps.
1,000 million and over 600,000 customers. It should be mentioned that the Argentine Antitrust Authority
(Comisión Nacional de Defensa de la Competencia) has authorized the acquisition of 80% of Tarshop’s
capital stock by Banco Hipotecario. See “Transactions with Related Parties” for further information.
Competition
The Bank considers that its main competitors are Banco Macro S.A., Banco Patagonia S.A.,
Banco Santander Río S.A., Banco de Galicia y Buenos Aires S.A., BBVA Banco Francés S.A. and Banco
de la Ciudad de Buenos Aires.
Litigation
Introduction
As of December 31, 2010, 2011 and 2012, the Bank had raised provisions for lawsuits for
approximately Ps. 106.4 million, Ps. 115.2 million and Ps. 81.8 million, respectively.
These provisions are determined on the basis of the amounts claimed and the likelihood of being
the losing party in the various legal actions. The Bank understands that these legal actions and claims are
habitual in the conduct of business and does not consider that any of these claims, taken either
individually or in the aggregate, might be likely to adversely affect its business activities, operations or
financial condition.
Out-of-Court Workout
On June 9, 2004, the Bank filed an Out-of-Court Workout proposal with the court of original
jurisdiction over commercial matters No. 14, Clerk of Court’s Office No. 28 for confirmation.
46
On October 29, 2004, this court dismissed the Bank’s petition on grounds that the institutions
within the scope of the Financial Institutions Law are enjoined from resorting to Out-of-Court Workouts.
In response, the Bank lodged an appeal against this ruling, which was denied by the resolution handed
down by Panel D of the Commercial Appellate Court notified to the Bank on May 31, 2006.
The Bank then lodged an extraordinary appeal with the Argentine Supreme Court of Justice,
which was conceded on October 31, 2006: the Supreme Court of Justice accepted to adjudge on the
merits of the case. On March 22, 2011, the Bank was notified that the Argentine Supreme Court of Justice
had confirmed the ruling passed by the court of original jurisdiction that had refused to confirm the Outof-Court Workout.
Additionally, pursuant to Resolution No. 282 dated August 16, 2006, the Argentine Central
Bank’s Superintendence of Financial and Foreign Exchange Institutions instituted proceedings against the
Bank, its Directors and members of the Supervisory Committee and Finance Manager in office at that
time on grounds of a violation of the provisions under Paragraph 1.3 of Resolution No. 301 passed by the
Central Bank’s Board of Trustees on July 24, 2003 in as much as Resolution 301 prescribed that the Bank
had to eliminate all references to the potential petition for an Out-of-Court Workout from the terms of the
proposal to restructure amounts owed to foreign creditors filed with the Central Bank in the framework of
Communication “A” 3940. The CNV was informed of this situation on September 29, 2006. Both the
Bank and its Directors, the members of the Supervisory Committee and the Finance Manager filed their
defenses in due time requesting to be exempted from penalties on the understanding that no punishable
actions had been undertaken. As of the date of this Offering Memorandum, no resolution has been handed
down in these proceedings.
Proceedings instituted
The Bank has been notified of Resolution No. 286 dated July 2, 2010, passed by the
Superintendent of Financial and Foreign Exchange Institutions, whereby it was ordered that proceedings
be instituted against this institution and its directors based on the provisions under Section 8 of the
Argentine Criminal Law on Foreign Exchange Matters (text as unified by Decree 480/95).
Such proceedings allege reputed breaches of Communications “A” 4087 and 4177 due to early
repayments of restructured foreign debt for US$ 91,420,135 and Euro 2,803,965 conducted between
February 2004 and June 2005. Defenses and answers were filed in due time in favor of the Bank’s rights,
and the proceedings are pending at the administrative instance.
In the opinion of the Bank and of its legal advisors, these proceedings are not likely to be
successful, therefore no contingency has been provided for in the current financial statements.
As a result of the transaction “CER Swap Linked to PG08s and External Debt” entered into on
February 23, 2007 and terminated on January 29, 2009, the Bank was notified on May 5, 2011 of the
commencement of proceedings No. 1320 (File No. 100.299/10). Such proceedings raise the issue of
alleged violations of the rules on support to the Non-Financial Public Sector, excesses over the
fractioning limits applicable to credit risk in the exposure to the non-financial public sector, excesses over
allocation of collateral and the insufficiency of minimum capital requirements. Another objection was the
transaction accounting treatment afforded.
In such proceedings, the defenses and answers were filed in due time in favor of the Bank’s
rights, which are to be reviewed by the Central Bank’ Office of Disputes (Gerencia de Asuntos
Contenciosos).
On May 4, 2012, the Bank was notified of Resolution No. 186 dated April 25, 2012 passed by
the Superintendent of Financial and Foreign Exchange Institutions, whereby it was ordered that
proceedings be instituted against this institution and its directors based on the provisions under Section 8
of the Argentine Criminal Law on Foreign Exchange Matters (text as unified by Decree 480/95).
47
Such proceedings allege reputed breaches of the provisions of Communications “A” 3640, 3645,
4347 as supplemented, due to acquisition of good delivery silver bars out of funds resulting from its
General Exchange Position.
The Bank is in the course of analyzing the proceedings to file the proper defenses and answers.
On September 14, 2012 the Bank was notified of Resolution No. 383 passed on August 30, 2012
by the Superintendent of Financial and Foreign Exchange Institutions whereby it was ordered that
proceedings be instituted against the institution and its president pursuant to Section 41 of the Financial
Institutions Law.
Such proceedings raise the issue of untimely filing of documents related to the appointment of
directors. The defenses and answers in favor of the Bank’s rights were filed and they are to be reviewed
by the Central Bank's Office of Disputes.
On December 20, 2012 the Bank was notified of Resolution No. 492 passed on November 21,
2012 by the Superintendent of Financial and Foreign Exchange Institutions whereby it was ordered that
proceedings be instituted against the institution and its directors pursuant to Section 41 of the Financial
Institutions Law.
Such proceedings allege reputed breaches of minimum rules on internal controls contained in
Communication “A” 2525.
The Bank is in the course of analyzing the proceedings to file the proper defenses and answers.
Risk Management Policy
The Bank has a Comprehensive Risk Management Policy that set out basic guidelines to be
followed in order to ensure proper management of all significant risks that may interfere with the
achievement of its strategic goals. Such policy established the relevant concepts, classified different risks
to be managed, set out specific responsibilities, including those of the Board of Directors and the Bank’s
Top Management, which laid down the grounds to promote the implementation of the best practices in the
field.
The Comprehensive Risk Management Policy was defined as a process carried out by the Board
of Directors, the Top Management and all the Bank’s personnel aimed at identifying potential events that
may have an impact thereon and manage such risks based on the established tolerance level, so as to
provide reasonable assurance concerning achievement of the Organization's objectives.
This Policy further established a comprehensive risk management framework that includes the
determination of policies, organizational structures and specific procedures (including
implementation of control testing, stress tests, risk tolerance indicators, risk maps, product program,
etc.) with respect to each of the identified individual risks.
On the other hand, the Bank has risk management strategies, approved by the Board of
Directors, which include setting limits or tolerance levels for each one of the main risks to which the
Bank is exposed. It was established that these limits must be reviewed at least on an annual basis as part
of Bank’s Business Plan preparation process.
In determining this entire set of rules, the provisions contained in the "Guidelines on risk
management at financial institutions" disclosed by the Argentine Central Bank in Communication “A”
5203 were taken into account.
In 2012, the following specific actions were taken in connection with the policy described above:
48
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Transparence: a document was prepared to describe the comprehensive risk management process
for disclosure.
Stress Testing Policy and Contingency Plan: a policy was designed to provide for a regulatory
framework governing the comprehensive stress testing program developed by the Bank, as well
as the relevant contingency plans. Such policy was approved by the Risk Management
Committee and the Board of the Directors.
Contingency Plan: an action plan was designed with the actions that could be taken by the Bank
in the event of occurrence of or an increased likelihood of stress events in the economic and/or
financial situation that are preliminarily judged as seriously adverse in relation to solvency,
liquidity and/or profitability of the Institution.
Stress Testing: Two comprehensive tests were run in the year, including treatment afforded to
subsidiaries, and the outcomes were submitted to the Risk Management Committee and the
Board of Directors.
Risk Dashboard: the scope of the Bank’s dashboard was broadened by adding the main risk
indicators of its subsidiaries. The indicators and their thresholds were redefined considering the
2012 risk strategy.
Comprehensive Risk Management Policy: a new policy version was prepared by broadening its
scope so as to describe the frame and risk management tools, both at a comprehensive
management level and at the specific management level for each of the main risks. Such policy
was approved by the Risk Management Committee and the Board of Directors.
Corporate Banking Credit Risk: a policy was designed on risk mitigation; the methodology for
analysis of syndicated loans was formalized; and other minor issues related to Communication
“A” 5203 were dealt with.
“Pricing” adjusted by Risk: a methodology was defined for loan and deposit pricing to consider
costs and liquidity risks, interest rate and credit; a policy was prepared to include the
responsibilities of different areas in the process of determination of the relevant interest rates.
Reputational Risk Management: the framework for management of the reputational risk was
determined with the main objective of identifying potential impacts on the Bank’s reputation and
taking advantage of management thereof; the main stakeholders and their expectations were
identified; processes were surveyed in order to identify the main sources of risk; a first control
dashboard was prepared.
Argentine Regulatory Capital Management: a “calculator” was developed to anticipate capital
requirements.
Economic Capital: for each type of risk a methodology was developed to compute the required
capital in accordance with internal models, resulting from the sum of stressed values at risk for
each type of risk; it was set forth in a technical document.
Risk Strategy: a Risk Strategy was prepared to include it in the Bank’s 2013 Business Plan; the
actions intended to continue to implement best risk management practices were specified
therein; furthermore, an estimate was included about the Bank’s potential exposure if its risk
profile is defined by the tolerance levels. The subsidiaries were included in this process.
Risk Culture: different actions set out in the comprehensive risk management program were
taken; in particular, various communication and training actions were taken.
Corporate Governance: Monitoring of risk management at subsidiaries was implemented.
Organizational Structure: Management of credit, liquidity, market, interest rate and operational
risks is mainly the responsibility of the following organizational units within the scope described
below:
•
•
Risk Management Committee: The Risk Management Committee is composed of at least 3
Directors, and the General Manager and the Risk and Controlling Manager can speak but
have no voting rights. The main objective of this Committee is to monitor the risks to which
the Institution is exposed, and its responsibilities include, without limitation, monitoring
management of credit, market, liquidity, interest rate and operational risks taking into
account the best practices in the field of risk management and assisting the Board of
Directors in determining risk policies and strategies.
Finance Committee: The Finance Committee is composed of 3 Directors, and the General
Manager and the top executive officers of the Financial and Market Risk Management
Departments can speak but have no voting rights. The Committee’s responsibilities include
controlling the Institution's liquidity and solvency levels, defining the levels of tolerance to
49
liquidity risk and of limits and/or areas for early alerts of financial risks and determination,
assessment and control of financial risks of different investment portfolios.
•
Risk and Controlling Management Office: The Risk and Controlling Management Office, reporting
to the General Management Office, has management units specialized in managing each of the main
risks defined as follows: (i) Retail credit risk: Management of Retail Banking Credit Risk, (ii)
Corporate Credit Risk: Management of Corporate Banking Credit Risk, (iii) Market risks (price,
exchange rate and interest rate): Management of Market Risk and (iv) Operational Risk:
Management of Operational Risk.
The Risk and Controlling Management Office prepares a comprehensive report known as “Risk
Dashboard”, which is submitted to the Board of Directors on a quarterly basis. This report reflects the
institutions' risk profile and enables the Board of Directors and the Top Management to monitor the main
risks of the business.
In addition, this Management Office conducts the stress testing process and analysis of outcomes
that is later referred to the Risk Management Committee and the Institution's Board of Directors. It is
important to mention that the Bank has a proven methodology for running comprehensive stress tests to
obtain prospective risk assessments, support the capital and liquidity planning procedures, permit the
establishment of risk tolerance levels and facilitate contingency plans in the event of stress situations.
The main resources (policies, processes, tools, etc.) implemented by the Bank to manage each of
the main risks are described below.
•
Retail Banking Credit Risk:
•
•
•
•
•
•
Corporate Banking Credit Risk:
•
•
•
Corporate Banking Credit Risk Management Policy: it defines the management framework and
the main resources used for an adequate management of credit risk.
Corporate Banking Credit Policy: it lays down the general guidelines based on which the credit
risk related to the granting of credit support to companies will be assessed.
Credit Rating Model: a model based on qualitative and quantitative aspects. It generates a Rating
associated with a Company's default likelihood.
•
•
Retail Banking Credit Risk Management Policy: it defines the framework and the main
resources used for an adequate management of credit risk.
Credit Manuals: they govern in connection with each Retail Banking product or business
the granting of loans, subsequent follow-up and recovery of unpaid amounts.
Score Models: models by means of which decisions related to the credit cycle are
automated based on statistics.
Management Information System: it enables an adequate and timely monitoring of
performance of different segments in the credit portfolio and of decisions related to risk
management.
Decision Engine: This decision scheme determines rules, algorithms and models that are
used to govern the granting of loans and/or previous approval in the case of selling
campaigns.
Credit Limits: the Credit Committee is responsible for approval thereof; significant
financings are in turn referred to the Executive Committee or the Board of Directors, as
applicable.
Market Risks (prices, interest rate and exchange rate):
•
Market Risk Management Policy: it lays down the guidelines and methodologies in place
for screening and controlling the Bank’s risks associated to prices, interest rates and foreign
exchange rates. It also contains a detail of the mechanisms to report the risks incurred,
50
•
•
•
existing limits and early alerts to keep the Finance Committee, the Risk Management
Committee and the Top Management abreast of the risk profile and the roles and
responsibilities of the different parties concerned.
Daily follow-up on the securities portfolio: the risk is quantified through global
methodologies and practices (mainly the “value at risk”) the limits of which are fixed by
the Finance Committee. The strength of the used models is verified from time to time by
“backtesting” and stress tests are run on the portfolio subject to pricing risks.
Exchange rate risk: a weekly report on exchange exposure and the associated risks is
prepared. Such report details the different products and instruments included therein.
Interest Rate Risk Management: both the amounts and contractual conditions of the new
origination and the current portfolio (loans, deposits, swaps, hedges, securities and other)
are followed up so as to remain within preset risk appetite levels. On a supplementary
basis, an ongoing analysis is performed on different hedging activities so as to reduce rate
mismatching.
Interest rate risk is quantified on the basis of two statistical methodological approaches: “Net
financial income to risk” and “Economic value to risk”. Through the former an evaluation is performed
on potential deviations in interest income(loss) as a result of changes in interest rates, while the latter
enables an analysis of a potential impairment in the present value of the portfolio as a result of potential
variations in the temporary structure of interest rates. Both approaches further include the “base risk”,
which arises from an imperfect correlation in the adjustment of lending and borrowing rates applicable to
instruments with similar revaluation characteristics.
As a supplement to the approaches above mentioned, an analysis is also performed on the
mismatch both in Pesos and Dollars in order to quantify the interest rate risk exposure on different future
dates and various sensitivity analyses.
•
Liquidity Risk:
•
•
•
•
Liquidity Risk Policy: it is intended for the Bank to have sufficient liquidity levels to fund
increases in assets and honor payment commitments without incurring significant losses.
Finance Committee Policy: it defines a voluntary Minimum Liquidity Level that surpasses the
Minimum Cash Requirement-mandated liquidity. The Minimum Liquidity Level is made up by a
High Liquidity indicator in turn made up by assets that are weighted in accordance with their
volatility, liquidity and realization potential and by short liabilities in order to mitigate the
liquidity risk and be able to efficiently comply with expected and unexpected current and future
flows and with the guarantees without impacting the Bank’s daily operations or its financial
condition. In order to monitor compliance with the Minimum Liquidity Level, the Policy
establishes a mechanism of early alerts in a manner such that if the levels of High Liquidity
forecast for the next six months, or the current ones, are less than the pre-determined levels, the
Finance Management should deal with such matter at the next meeting of the Committee and/or
convene a special meeting for such purpose.
Reports intended to monitor liquidity risks: (i) report on cash flows, broken down by different
terms, as well as changes in High Liquidity and in the Minimum Liquidity Level; (ii) report on
the Bank’s deposit structure; (iii) report on net requirements of funds under different normal and
stress scenarios and their implications in terms of High Liquidity and Minimum Liquidity Level;
(iv) report on the possibilities of accessing the markets and (v) report on the situation and
prospects of the financial system when it comes to asset origination, deposit placement and
interest rates.
Operational Risk:
•
•
•
Operational Risk Policy: it defines the framework and the main resources used for an
adequate management of the operational risk.
Resources under the Operational Risk Policy: (i) self-assessments, (ii) operational risk
indicators, (iii) mitigation plans, (iv) event recording and (v) mitigating factor testing.
Awareness Campaigns.
51
•
•
Operational risk management: it was integrated with the risk assessment process
concerning risks created by assets of the information identifying the processes impacted by
such risks.
Report on management results.
Argentine Banking Regulation
Overview
Founded in 1935, the Central Bank is the principal monetary and financial authority in
Argentina. Its primary mission is to maintain stability in the value of the domestic currency, establish and
implement monetary policy and regulate the financial sector. It operates pursuant to its charter and the
provisions of the FIL. Under the terms of its charter, the Central Bank must operate independently from
the Argentine Government.
Since 1977, banking activities in Argentina have been regulated primarily by the FIL, which
empowers the Central Bank to regulate the financial sector. The Central Bank regulates and supervises
the Argentine banking system through the Superintendencia de Entidades Financieras y Cambiarias
(Superintendency of Financial and Exchange Institutions, hereinafter referred to as the “Financial
Superintendency”). The Superintendency is responsible for enforcing Argentina’s banking laws,
establishing accounting and financial reporting requirements for the banking sector, monitoring and
regulating the lending practices of financial institutions and establishing rules for participation of
financial institutions in the foreign exchange market and the issuance of bonds and other securities,
among other functions.
The powers of the Central Bank include the authority to fix minimum capital, liquidity and
solvency requirements, approve bank mergers, approve certain capital increases and transfers of stock,
grant and revoke banking licenses, authorize the establishment of branches of foreign financial
institutions in Argentina and the extension of financial assistance to financial institutions in cases of
temporary illiquidity or solvency problems.
The Central Bank establishes certain “technical ratios” that must be observed by financial
entities, such as ratios related to levels of solvency, liquidity, the maximum credits that may be granted
per customer and foreign exchange assets and liability positions.
In addition, financial entities need the authorization of the Central Bank for the disposition of
their assets, such as opening branches or ATMs, acquiring share interests in other financial or nonfinancial corporations and establishing liens over their assets, among others.
As supervisor of the financial system, the Central Bank requires financial institutions to submit
information on a daily, monthly, quarterly, semiannual and annual basis. These reports, which include
balance sheets and income statements, information relating to reserve funds, use of deposits,
classifications of portfolio quality (including details on principal debtors and any allowances for loan
losses), compliance with capital requirements and any other relevant information, allow the Central Bank
to monitor the business practices of financial entities. In order to confirm the accuracy of the information
provided, the Central Bank is authorized to carry out inspections.
If the Argentine Banking GAAP are not complied with, various sanctions may be imposed by the
Superintendency, depending on the level of infringement. These sanctions range from a notice of
noncompliance to the imposition of fines or, in extreme cases, the revocation of the financial entity’s
operating license. Additionally, noncompliance with certain rules may result in the compulsory filing of
specific adequacy or restructuring plans with the Central Bank. These plans must be approved by the
Central Bank in order to permit the financial institution to remain in business.
The Central Bank fulfills the function of lender of last resort, and is allowed to provide financial
assistance to financial institutions with liquidity and/or solvency problems.
Banking Regulation and Supervision
52
Central Bank Supervision
Since September 1994, the Central Bank has supervised the Argentine financial entities on a
consolidated basis. Such entities must file periodic consolidated financial statements that reflect the
operations of head offices or headquarters as well as those of their branches in Argentina and abroad, and
of their significant subsidiaries, whether domestic or foreign. Accordingly, requirements in relation to
liquidity and solvency, minimum capital, risk concentration and loan loss provisions, among others,
should be calculated on a consolidated basis.
Permitted Activities and Investments
The FIL governs any individuals and entities that perform habitual financial intermediation and,
as such, are part of the financial system, including commercial banks, investment banks, mortgage banks,
financial companies, savings and loan companies for residential purposes and credit unions. Except for
commercial banks, which are authorized to conduct all financial activities and services that are
specifically established by law or by the Argentine Banking GAAP, the activities that may be carried out
by other Argentine financial entities are set forth in the FIL and related Argentine Banking GAAP.
Commercial banks are allowed to perform any and all financial activities inasmuch as such activities are
not forbidden by law. Some of the activities permitted for commercial banks include the ability to (i)
receive deposits from the public in both local and foreign currency; (ii) underwrite, acquire, place or
negotiate debt securities, including government securities, in both exchange and over-the-counter markets
(subject to prior approval by the CNV, if applicable); (iii) grant and receive loans; (iv) guarantee
customers’ debts; (v) conduct foreign currency exchange transactions; (vi) issue credit cards; (vii) act,
subject to certain conditions, as brokers in real estate transactions; (viii) carry out commercial financing
transactions; (ix) act as registrars of mortgage bonds; (x) carry out transactions in foreign currencies; and
(xi) act as fiduciary in financial trusts. In addition, pursuant to the FIL and Central Bank Communication
“A” 3086, commercial banks are authorized to operate commercial, industrial, agricultural and other
types of companies that do not provide supplemental services to the banking services (as defined by
applicable Argentine Banking GAAP) to the extent that the commercial bank’s interest in such companies
does not exceed 12.5% of its voting stock or 12.5% of its capital stock. Nevertheless, if the abovementioned limits are exceeded, the bank shall: (i) apply for authorization from the Central Bank or (ii)
communicate such situation to the referenced authority, as applicable. However, even when commercial
banks’ interests do not reach such percentages, they are not allowed to operate such companies if (i) such
interest allows them to control a majority of votes at a shareholders’ or board of directors’ meeting, or (ii)
the Central Bank does not authorize the acquisition.
Under Argentine Banking GAAP, the total amount of the investments of a commercial bank in
the capital stock of third parties, including interests in Argentine mutual funds, may not exceed 50% of
such bank’s regulatory capital (Responsabilidad Patrimonial Computable, or “RPC”). In addition, the
total amount of a commercial bank’s investments in the following: (i) unlisted stock, excluding interests
in companies that provide services that are supplementary to the finance business and interests in stateowned companies that provide public services, (ii) listed stock and interests in mutual funds that do not
give rise to minimum capital requirements on the basis of market risk, and (iii) listed stock that does not
have a “largely publicly available market price,” taken as a whole, is limited to 15% of such bank’s RPC.
To this effect, a given stock’s market price is considered to be “largely publicly available” when daily
quotations of significant transactions are available, and the sale of such stock held by the bank would not
significantly affect the stock’s quotation.
Operations and Activities that Banks Are Not Permitted to Perform
The FIL prohibits commercial banks from: (a) creating liens on their assets without prior
approval from the Central Bank, (b) accepting their own shares as security, (c) conducting transactions
with their own directors or managers and with companies or persons related thereto under terms that are
more favorable than those regularly offered in transactions with non-related parties, and (d) carrying out
commercial, industrial, agricultural or other activities without prior approval of the Central Bank, except
those considered financially related activities under Central Bank regulations. Notwithstanding the
foregoing, banks may own shares in other financial institutions with the prior approval of the Central
Bank.
Liquidity and Solvency Requirements
53
Legal Reserve
According to the FIL and Argentine Banking GAAP, financial institutions are required to
maintain a legal reserve of 20% of their yearly income plus or minus prior-year adjustments and minus
the accumulated loss at the previous year’s closing period. This legal reserve can only be used during
periods in which a financial institution has incurred losses and has exhausted all other reserves. For
further information, please see “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
Non-liquid Assets
Since February 2004, non-liquid assets (computed on the basis of their closing balance at the end
of each month, and net of those assets that are deducted to compute the regulatory capital, such as equity
investments in financial institutions and goodwill) plus the financings granted to a financial institution’s
related persons (computed on the basis of the highest balance during each month for each customer)
cannot exceed 100% of the Argentine regulatory capital of the financial institution, except for certain
particular cases in which it may exceed up to 150%.
Non-liquid assets consist of miscellaneous receivables, bank property and equipment,
miscellaneous assets, assets securing obligations, except for swap, futures and derivative transactions,
certain intangible assets and equity investments in unlisted companies or listed shares, if the holding
exceeds 2.5% of the issuing company’s equity.
Minimum Capital Requirements
The Central Bank requires that financial institutions maintain minimum capital amounts
measured as of each month’s closing, which are defined as a ratio of: (i) the counterparty risk, (ii) the
market risk, and (iii) the operational risk of the financial institution. Such requirement should be
compared to the basic requirement, which is explained below, taking into account the one with the highest
value. The basic requirement varies depending on the type of financial institution and the jurisdiction in
which the relevant institution is registered, from Ps. 12 million to Ps. 26 million for banks, and from Ps. 8
million to Ps. 15 million for other institutions. Financial institutions must comply with minimum capital
requirements both on an individual and a consolidated basis.
Basic Minimum Capital
Pursuant to Central Bank Communication “A” 5355 dated September 20, 2012 the Central Bank
classified by type and category the minimum capital requirements for financial entities. The categories
were established in accordance with the jurisdiction in which the respective financial entity is located and
were established on the basis of information obtained from the "National Census on Population and
Houses 2001: Database,” prepared by the Argentine National Statistics and Censuses Institute.
Category
Banks
I and II
III to VI
26
15
Other Entities (except
Credit Entities)
-In Million Pesos12
8
Description of Argentine Tier 1 and Tier 2 Capital Regulations
Argentine financial institutions must comply with guidelines similar to those adopted by the
Basel Committee on Banking Regulations and Supervisory Practices, as amended in 1995 (the “Basel
Rules”).
The Central Bank takes into consideration a financial institution’s regulatory capital (RPC) in
order to determine compliance with capital requirements. RPC consists of Tier 1 capital (Basic Net
Worth) and Tier 2 capital (Complementary Net Worth) minus the items to be deducted from each Tier.
54
Tier 1 capital consists of (i) capital stock as defined by the Argentine Corporate Law, (ii)
irrevocable contributions on account of future capital increases, (iii) adjustments to shareholders’ equity,
(iv) savings reserves, (v) retained earnings and (vi) subordinated debt securities provided that they meet
certain conditions and requirements and (vii) in the case of consolidation, minority interests shall also be
included.
Tier 2 capital consists of (i) liabilities contractually subordinated to all other liabilities not
computable as Tier 1 capital, issued under certain conditions and requirements, including that the original
term must not be shorter than 5 years, (ii) the results at prior fiscal years, 100% of net earnings or losses
recorded through the most recent audited quarterly financial statements in the event the yearly financials
are not audited, (iii) 100% of net earnings or losses for the current year as of the date of the most recent
audited quarterly financial statement, (iv) 50% of profits or 100% of losses, from the most recent audited
quarterly or annual financial statements, and (v) 100% of losses not shown in the financial statements,
arising from quantification of any facts and circumstances reported by the auditor or the Superindendency
of Financial and Foreign Exchange Institutions.
Items to be deducted include, among others: (a) credit balances from application of the presumed
income tax, (b) demand deposits maintained with foreign financial institutions that are not rated as
“investment grade”; (c) securities not held by the relevant financial institutions, except where the Central
Bank (CRYL), Caja de Valores S.A., Clearstream, Euroclear, Depositary Trust Company (DTC) or Deutsche
Bank, New York, are in charge of their registration or custody; (d) securities issued by foreign governments
whose risk rating is lower than that assigned to Argentine government securities; (e) subordinated debt
instruments issued by other financial institutions; (f) equity interests in other Argentine or foreign financial
institutions; (g) equity interests relating to the application of tax deferrals until February 19, 1999, or after
such date provided they relate to irrevocable capital contributions made until such date, as from the month
following expiration of the legal term of unavailability or loss of the tax benefits, as set forth in applicable
regulations; (h) shareholders; (i) real property added to the assets of the financial entity and with respect to
which the title deed is not duly recorded with the pertinent Argentine real property registry, except where
such assets shall have been acquired in a court-ordered auction sale; (j) goodwill; (k) organization and
development costs and other intangible property; (l) bridge accounts pending allocation with debit balance
(m) any deficiency relating to the minimum loan loss provisions required by the Superintendency of Financial
and Exchange Institutions; (n) equity interests in companies that have (i) financial assistance through leasing
or factoring agreements or (ii) transitory equity acquisitions in other companies in order to further their
development to the extent the ultimate purpose is selling such interest after development is accomplished; (o)
excess in the granting of asset-backed guaranties, according to Argentine Banking GAAP; (p) the highest
balance of that month’s financial assistance, when certain conditions are met; (q) gains from sales related to
securitization transactions and selling transactions or portfolio assignment with assignor’s liability; and (r)
liabilities from derivatives accounted for at reasonable value.
Requirements for Subordinated Debt to Be Computed as Tier 1 Capital
In order for debt securities to be considered as Tier 1 capital, they must be approved by: (i) the
shareholders; (ii) the Superintendency of Financial and Foreign Exchange Institutions; and when applicable,
(iii) the Argentine Securities Commission and (iv) a stock exchange, if debt securities are to be admitted for
listing; (iv) they must be fully subscribed for and paid in; and (v) subordinated to depositors, unsecured
creditors and subordinated indebtedness of the financial institution. In such case it must be set forth that in the
event of bankruptcy of the institution and upon payment of all debts to the other creditors –including
contractually subordinated debt-, the holders of debt securities computable as Tier 1 capital will have priority
in the distribution of funds only with respect to the shareholders – irrespective of the class of shares-,
expressly waiving any general or special privilege.
In addition, for such classification the debt must not: (i) be guaranteed or covered by any guarantee
from the issuer or an affiliate, or be the subject-matter of any other agreement providing for a legal or
economic improvement in the order of priority for collection in the event of the institution’s bankruptcy; (ii)
provide for any kind of payment of principal, except in the event of the entity’s liquidation, if applicable; and
(iii) have any clauses providing for step-up payments or other incentives for early repayment.
The financial institution may redeem such securities -following a minimum term of five years
from issuance, provided that (i) the authorization of the Superintendency of Financial and Foreign
Exchange Institutions has been obtained prior to exercising the purchase option; (ii) it refrains from
55
creating expectations that it will exercise the purchase option; and (iii) replaces the instrument with
regulatory capital that is equivalent or better in terms of quality and under conditions that are sustainable
considering its income generating capacity or shows that following exercise of the purchase option, its
RPC largely exceeds -at least by 20%- the minimum capital requirements.
The financial institution may at all times and at its sole discretion discharge payments of
dividends or interests. The foregoing shall not be deemed as a breach or impose restrictions on the
financial institution, except in relation to distributions of dividends to the holders of common shares.
Payment of dividends must be made against distributable accounts, and the agreement shall not provide
for a dividend that is adjusted from time to time based -in whole or in part- on the financial institution’s
credit risk.
The instruments that are a part of liabilities must absorb losses upon occurrence of a
predetermined triggering event by: (i) conversion thereof into common shares; or (ii) a method to allocate
losses to the instrument.
Argentine financial institutions cannot acquire Tier 1 capital debt instruments issued by other
Argentine financial institutions, nor can they purchase for subsequent resale their own Tier 1 capital debt
instruments.
Requirements for Subordinated Debt to Be Computed as Tier 2 Capital
In order for debt securities to be computed as Tier 2 capital, the issuance of Tier 2 capital debt
securities must be approved by: (i) the shareholders, (ii) the Superintendency of Financial and Exchange
Institutions, and when applicable, (iii) the Comisión Nacional de Valores and (iv) a stock exchange, if the
debt securities are to be admitted for listing.
Argentine Banking GAAP require Tier 2 capital debt securities to be fully subscribed for and
paid in, have a life of no less than 5 years. If the securities allow optional redemption by the issuer, such
redemption is only effective (i) with the prior authorization of the Superintendency of Financial and
Exchange Institutions, (ii) after at least 5 years have elapsed from the date of issuance and (iii) if the
instrument is replaced with regulatory capital that is equivalent or better in terms of quality and under
conditions that are sustainable considering its income generating capacity or shows that following
exercise of the purchase option, its RPC largely exceeds -at least by 20%- the minimum capital
requirements.
Tier 2 capital debt securities: (i) cannot have acceleration or cross-acceleration provisions,
except upon the bankruptcy or liquidation of the issuer. They must be subordinated to depositors and
unsecured creditors; and (ii) cannot be guaranteed or covered by any guarantee from the issuer or an
affiliate, or be the subject-matter of any other agreement providing for a legal or economic improvement in
the order of priority for collection in the event of the institution’s bankruptcy or liquidation.
Argentine financial institutions cannot acquire Tier 2 capital debt securities issued by other
Argentine financial institutions, nor can they purchase for subsequent resale their own Tier 2 capital debt
securities.
New Requirements Applicable to Dividend Distribution
The Central Bank has imposed restrictions on the payment of dividends, substantially limiting
the ability of financial institutions to distribute such dividends without its prior consent.
By means of Communication “A” 5180 (as amended and supplemented), the Central Bank
amended and restated its regulations regarding dividend distribution by financial institutions. According
to such regulation, the Superintendency of Financial and Exchange Institutions will review the ability of a
bank to distribute dividends upon the bank’s request for its approval. The request must be filed within 30
business days prior to the shareholders’ meeting that will approve the institution’s annual financial
statements. The Superintendency may authorize the distribution of dividends when each of the following
circumstances are applicable during the month preceding the request:
56
(i) the financial institution is not subject to a liquidation procedure or the mandatory transfer of
assets at the request of the Central Bank in accordance with section 34 or 35 bis of the FIL;
(ii) the institution is not receiving financial assistance from the Central Bank;
(iii) the institution is in compliance with its reporting obligations to the Central Bank; and
(iv) the institution is in compliance with minimum capital requirements (both on an individual
and consolidated basis) and with minimum cash reserves (on average);
(v) must not affect the solvency of the institution (it shall deduct the tax on presumed minimum
income from its RPC, value its securities at market value and there shall be an additional 75% margin
between the requirement and payment of minimum capital).
(vi) the distributable amount shall not affect the liquidity of the institution.
Below is a summary describing the main risks ascertained under the regulations in force:
Counterparty Risk
The capital requirement for counterparty risk is defined as:
Cer = k* [a* Ais + c* Fsp + r* (Vrf + Vrani)] + INC + IP.
The required capital to assets-at-risk ratio is 10% (“a”) for fixed assets (“Ais”) and 8% (“r”) for
loans (“Vrf”), other claims from financial intermediation and other financing (“Vrani”). The same ratio
(“c”) is applied to claims on the public-sector loans (“Fsp”). The “INC” variable refers to increases in
minimum capital requirements that arise when certain mandated technical ratios are exceeded (fixed
assets, counterparty risk diversification and rating and limitations on transactions with related clients).
The variable “IP” refers to increases that arise by virtue of the extension of the general limit on negative
foreign currency net global position.
Each type of asset is weighted according to the level of risk assumed to be associated with it. In
broad terms, the weights assigned to the different types of assets are:
Type of Asset
Weighting
Cash and cash equivalents
Government Bonds
With market risk capital requirements and Central Bank monetary
control instruments including those registered as “available of sale” and
“investment accounts”
Other domestic bonds (without Government collateral)
OECD Central Government bonds—rated AA or higher
Loans
To the non-financial private sector
With preferred collateral under the form of:
Cash, term deposit certificates issued by the creditor entity
and given as security
A guarantee by Reciprocal Guarantee Companies authorized
by the Central Bank, export credit insurance, documentary
credits
0-20%
Mortgages
Pledges
0%
100%
20%
0%
50%
50%- 100%
50%-100%
100%
57
Public financial institutions with the collection of federal
taxes as collateral
To foreign financial institutions or to financial institutions
backed by them (rated AA or higher)
Other credits from financial intermediation
Assets subject to financial leasing
Other assets
Guarantees, securities and other contingent liabilities
50%
0% - 20%
0%- 100%
50%- 100%
0%- 100%
0%- 100%
Minimum capital requirements also depend on the CAMELBIG rating (1 strongest, 5 weakest)
assigned by the Superintendency, which also determines the “k” value. This rating system complies with
international standards and provides a broad definition of the performance, risks and perspectives of
financial entities. Financial entities have to adjust their capital requirements according to the following
“k” factors:
CAMELBIG Rating
1
2
3
4
5
K Factor
0.97
1.00
1.05
1.10
1.15
Financing granted by branches or local subsidiaries of foreign financial entities by order and on
account of their headquarters is not subject to minimum capital requirements, to the extent the foreign
entity has an investment grade rating, is subject to regulations that entail consolidated fiscalization and
such transactions are expressly guaranteed by the headquarters.
Interest Rate Risk
Financial entities must comply with minimum capital requirements regarding interest rate risk.
These minimum capital requirements capture the risk arising from the different sensitivity of assets and
liabilities adversely affected by adverse and unexpected changes in interest rates (“duration approach”).
This effect is immediately evident in the case of secondary market, as a change in the interest rate leads to
a change in the price of such assets, and therefore in the entity’s balance sheet. This regulation governs
all the assets and liabilities derived from financial intermediation not subject to the minimum capital
requirements covering market risk (including securities held at investment accounts).
Minimum capital requirements measure the value risk (“VaR”) or maximum potential loss due to
interest rate risk increases, considering a 3-month horizon and with a confidence level of 99%.
When calculating the requirements, the cash flows of the financial entity’s transactions are
assigned to different time bands taking into account their maturity. Financial entities with 1-3
CAMELBIG ratings may treat 50% of sight deposits as long-term maturities (in the case of financial
entities with a 3 CAMELBIG rating, the assigned maturity cannot exceed 3 years).
Transactions with variable interest rates related to a foreign index are treated as if they had fixed
interest rates. The risk arising from liabilities with variable rates related to a domestic index is considered
up to the first rate adjustment date. 40% of the assets related to a domestic index (except where the
Government is the borrower) are considered as fixed interest rate credits in order to reflect the fact that
impacts on interest rate do not have negative effects exclusively for borrowers.
Market Risk
Minimum capital requirements for market risks are added to previous requirements. Minimum
capital requirements are computed as a function of the market risk of financial entities’ portfolios,
measured as their VaR. The regulation includes those assets traded on a regular basis in open markets
and excludes those assets held at investment accounts, which must meet counterparty and interest rate risk
minimum capital requirements.
58
There are five categories of assets. Domestic assets are divided into equity and public
bonds/Central Bank’s debt instruments, the latter being classified in two categories according to whether
their average duration is less than or more than 2.5 years. Foreign equity and foreign bonds make up
another two categories, are classified according to their duration as well, the latter also comprising two
separate categories, defined as for domestic assets. The fifth category is comprised of foreign exchange
positions, differentiated according to currency involved.
Overall capital requirements in relation to market risk are the sum of the five amounts of capital
necessary to cover the risks arising from each category.
Market risk minimum capital requirements must be met daily. Information must be reported to
the Central Bank on a monthly basis. As from May 2003, the U.S. dollar has been included as a foreign
currency risk factor for the calculation of the market risk requirement, considering all assets and liabilities
in that currency.
Consequences of a Failure to Meet Minimum Capital Requirements
In the event of noncompliance with minimum capital requirements by an existing financial
institution, Central Bank Communication “A” 3171 provides the following:
(i)
(ii)
noncompliance reported by the institutions: the institution must meet the required
capital no later than in the second month after noncompliance was incurred or submit a
restructuring plan within 30 calendar days following the last day of the month in which
such noncompliance occurred.
noncompliance detected by the Superintendency: the institution must file its defense
within 30 calendar days after being served notice by the Superintendency. If no defense
is filed, or if the defense is disallowed, the noncompliance will be deemed to be final,
and the procedure described in item (i) above will apply.
In addition, noncompliance with minimum capital requirements will entail a number of
consequences for the financial institution, including prohibition from opening branches in Argentina or in
other countries, establishing representative offices abroad, or owning equity in foreign financial
institutions, as well as a prohibition from paying cash dividends and increase the volume of deposits. In
addition, the Superintendency may appoint a delegate, who shall have the powers set forth by the FIL.
Operational Risk
The regulation on operational risk (“OR”) recognizes the management of OR as a
comprehensive practice, separated from that of other risks given its importance. OR is defined as the risk
of loss resulting from inadequate and/or failed internal processes, people and systems and/or from
external events. The definition includes legal risk but excludes strategic and reputational risk.
Financial institutions must establish a system for the management of OR that includes policies,
processes, procedures and the structure for their adequate management.
Seven OR event types are defined, according to internationally accepted criteria:
Internal fraud,
External fraud,
Employment practices and workplace security,
clients, products and business practices;
damage to physical assets,
Business disruption and system failures, and
59
execution, delivery and process management.
A solid system for risk management must have a clear assignment of responsibilities within the
organization of financial entities. Thus, the regulation describes the roles of each level of the
organization for the management of OR (such as the roles of the board of directors, senior management
and the business units of the financial institution).
An “OR unit” is required, adjusted to the financial institutions’ size and sophistication and the
nature and complexity of its products and processes, and the extent of the transactions. For small
institutions, this unit may even consist of a single person. This unit may functionally respond to the
senior management (or similar) or a functional level with risk management decision capacity that reports
to that senior management.
An effective risk management will contribute to prevent future losses derived from operational
events. Consequently, financial entities must manage the inherent OR in their products, activities,
processes and systems. The OR management process comprises:
a)
Identification and assessment: the identification process should consider both internal
and external factors that could adversely affect the development of the processes and projections done
according to the business strategies defined by the financial institution. Financial entities should use
internal data, establishing a process to register frequency, severity, categories and other relevant aspects
of the OR loss events. This should be complemented with other tools, such as self-risk assessments, risk
mapping and key risk indicators.
b)
Monitoring: an effective monitoring process is required, for quickly detecting and
correcting deficiencies in the policies, processes and procedures for managing OR. In addition to
monitoring operational loss events, banks should identify forward-looking indicators that enable them to
act upon these risks appropriately.
c)
Control and mitigation: financial entities must have an appropriate control system for
ensuring compliance with a documented set of internal policies, which involves periodic reviews (at least
annually) of control strategies and risk mitigation, and should adjust them if necessary.
The Schedule for the full implementation of the OR Management system concluded in
December 2009.
Pursuant to Communication “A” 5272 issued by the Central Bank, the minimum capital
requirements in relation to OR amount to 15% of the average for the last 3 years of:
i) financial/services income minus financial/services expenses, and
ii) other profits minus other losses.
The following items –comprised in the above-mentioned accounting items are excluded from the
(i) and (ii) above, as applicable:
- expenses arising out of the creation of reserves, elimination of reserves created during previous
financial years and recovered credits in the financial year which were written off in previous financial
years;
- profits or losses arising out of equity in other financial institutions or companies, if these are
deductible from RPC;
- extraordinary or irregular sums –those arising from unusual and exceptional events which
resulted in sums, events which have unlikely occurred in the past and are unlikely to occur in the future,
including income from insurance recovery; and
- sums arising out of the sales referred to in Section 2 of the rules on assessment of debt
instruments of public non-financial sector and monetary regulations of the Central Bank ("Valuación de
60
instrumentos de deuda del sector público no financiero y de regulación monetaria del Banco Central de
la República Argentina").
Minimum Cash Reserve Requirements
The minimum cash reserve requirement requires that a financial institution keep a portion of its
deposits or obligations readily available and not allocated to lending transactions.
On March 1, 2002 the Argentine Central Bank established that minimum cash requirements are
applicable to demand, time deposits and other liabilities arising from financial intermediation
denominated in Pesos, foreign currency, or government and corporate securities, and any unused balances
of advances in checking accounts under formal agreements not containing any clauses that permit the
bank to discretionally and unilaterally revoke the possibility of using such balances.
Minimum cash reserve obligations exclude (i) amounts owed to the Central Bank, to domestic
financial institutions, to foreign banks and (ii) amounts owed in connection loans intended to finance
foreign trade transactions, cash purchases pending settlement, forward purchases (whether or not related
to reverse repos) and demand obligations for money orders and transfers from abroad pending settlement
and correspondent transactions abroad.
The liabilities subject to these requirements are computed on the basis of the effective principal
amount of the transactions, excluding interest accrued, past due, or to become due on the aforementioned
liabilities, provided they were not credited to the account of, or made available to, third parties, and,
where available, the amount accruing upon the adjustment rate (CER) is applied.
The basis on which the minimum cash reserve requirement is computed is the monthly average
of the daily balances of the liabilities at the end of each day during each calendar month, except for the
period ranging from December of a year to February of the next, period in which it shall be applied on a
quarterly average. Such requirement shall be complied with on a separate basis for each currency in
which the liabilities are denominated.
In addition, such requirement will take into account: (i) the region of the country where the
transaction takes place, for which purpose the country has been divided into categories, (ii) the share in
the total financing to the non-financial private sector in Pesos at the institution with respect to loans to
Micro, Small and Medium-sized Companies (MiPyMES), which will result in a reduction in the
minimum cash reserve obligation.
The table below shows the percentage rates that should be applied to determine the required
minimum cash reserve requirement:
Rates (%)
Category I
Item
Categories
II to VI
1.3.1. Deposits in checking accounts and demand deposits
opened in cooperative credit accounts.
17
15
1.3.2.1. In Pesos.
17
15
1.3.2.2. In foreign currency.
1.3.3. Deposits under legal custody (Usuras pupilares),
special accounts for savings clubs, employment
20
20
1.3.2. Deposits in savings accounts, basic accounts and
universal accounts for no charge (cuenta gratuita
universal).
61
termination fund for construction workers, social security
wages, special checking accounts for legal entities and
savings accounts for payment of welfare plans or
programs.
1.3.3.1. In Pesos.
17
15
1.3.4. Other demand deposits and liabilities, pension and
social security benefits credited by ANSES (government
Social Security Agency) pending collection and
immobilized balances for liabilities covered by these
regulations.
20
20
1.3.4.1. In Pesos.
17
15
20
20
1.3.5. Unused balances of advances in checking accounts.
1.3.6. Deposits in checking accounts of non-bank financial
institutions, computed for purposes of meeting their required
minimum cash reserve.
1.3.7. Time deposits, liabilities under “acceptances” –including
responsibilities for sale or assignment of credits to subjects
other than financial institutions-, passive repos, cautions and
stock exchange passive repos, constant-term investments,
with an option for early termination or for renewal for a
specified term and variable income, and other fixed-term
liabilities, except for deposits included in items 1.3.11 to
1.3.14, based on the residual term thereof:
1.3.7.1. In Pesos.
i) Up to 29 days.
ii) From 30 to 59 days.
iii) From 60 to 89 days.
iv) From 90 to 179 days.
v) From 180 days or over.
This item includes deposits subject to a “CER” adjustment
clause.
i) Up to 29 days.
vi) More than 365 days.
1.3.8. Liabilities owed due to foreign facilities (not executed by
means of time deposits or debt securities) which should
meet the requirements set forth under items 1.3.7. and
1.3.9., respectively).
1.3.9. Debt securities (including Negotiable Obligations), based on
the residual term thereof:
62
17
15
100
100
13
10
6
1
0
12
9
5
0
0
20
15
10
5
2
20
15
10
5
2
0
0
0
0
a) In Pesos.
i) Up to 29 days.
b) In foreign currency
i) Up to 29 days.
v) From 180 to 365 days.
vi) More than 365 days.
1.3.10. Liabilities owing to the Trust Fund for Assistance to
Financial and Insurance Institutions.
14
11
14
11
7
2
7
2
0
0
20
15
20
15
10
5
10
5
2
2
0
0
0
0
10
10
10
10
19
20
19
20
100
100
15
14
1.3.11. Demand and time deposits made upon a court order with
funds arising from cases pending before the court, and the
related immobilized balances.
1.3.11.1. In Pesos.
1.3.12. Deposits –irrespective of the type- as assets of mutual funds.
1.3.12.1. In Pesos.
1.3.13. Special deposits related to inflows of funds from foreign
countries- Decree 616/05.
1.3.14. Time deposits in nominative, non-transferable Pesodenominated certificates, belonging to public sector holders,
with the right to exercise an option of early withdrawal in
less than 30 days from its setting up.
Reduction in the average requirement in Pesos.
The demand will be reduced based on the share in total financings to the non-financial private
sector at the institution with respect to financings to Micro, Small and Medium-sized Companies
(MiPyMES) in the same currency –as defined in the rules on “Determination of the condition of a Micro,
Small or Medium-sized Company”- considering such classification at the time of the granting, in
accordance with the following table, without exceeding the amount of the demand as previously
determined:
Share, of financings to
MiPyMES with respect to total financings to the non-financial private
sector, at the institution.
(%)
Less than 4
more than 4 and less than 6
63
Deduction
(on the aggregate of included items
in Pesos).
(%)
0.00
0.25
0.50
0.75
30 and over
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.65
2.80
2.90
3.00
In addition to the abovementioned requirements, the following conditions shall be satisfied: a
100% reserve for any defect in the application of resources in foreign currency for a certain month in
respect of which the minimum cash amount is assessed.
The minimum cash reserve must be set up in the same currency to which the requirement applies,
and eligible items include the following:
(i)
Accounts maintained by financial institutions with the Central Bank in Pesos;
(ii)
Accounts of minimum cash maintained by financial institutions with the Central Bank
in U.S. dollars, or other foreign currency;
(iv)
Special guarantee accounts for the benefit of electronic clearing houses and to cover
settlement of credit card and ATM transactions;
(v)
Checking accounts maintained by non-bank financial institutions with commercial
banks for the purpose of meeting the minimum reserve requirement;
(vi)
Special guarantee accounts with the Central Bank for transactions involving banker´s
checks (a check similar to the teller´s check that may be purchased from a bank to make
payments to third parties); and
(vii)
Special accounts maintained with the Central Bank for transactions involving social
security payments by the ANSES.
(viii)
Special accounts maintained by financial institutions with the Central Bank in public
bonds and other securities issued by the Central Bank.
These eligible items are subject to review by the Central Bank and may be changed in the future.
Compliance on public bonds and time deposits must be done with holdings marked to market
and of the same type, only in terms of monthly status. Holdings must be deposited on special accounts at
the Central Bank.
Compliance with the minimum cash reserve requirement will be measured on the basis of the
monthly average of the daily balances of eligible items maintained during the month to which the
minimum cash reserve refers by dividing the aggregate of such balances by the total number of days in
the relevant period.
Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve in
foreign currency are subject to a penalty equal to twice the private banks’ BADLAR rate for deposits in U.S.
dollars or twice the 30-day U.S. dollar LIBO rate for the last business day of the month (whichever is
higher).
Internal Liquidity Policies of Financial Institutions
64
The regulations designed to limit liquidity risk provide that financial institutions should adopt
management and control policies that ensure the maintenance of reasonable liquidity levels to efficiently
manage their deposits and other financial commitments. Such policies should establish procedures for
evaluating the liquidity of the institutions in the framework of prevailing market conditions to allow them
to revise projections, take steps to eliminate liquidity constraints and obtain sufficient funds, at market
terms, to maintain a reasonable level of assets over the long term. Such policies should also address (i)
the concentration of assets and liabilities in specific customers, (ii) the overall economic situation, likely
trends and the impact on credit availability, and (iii) the ability to obtain funds by selling government debt
securities and/or assets.
Credit Risk Regulations
The regulations on Credit Risk prescribe standards in order to reduce such risk without
significantly eroding average profitability. There are three types of ratios that limit a lender’s risk
exposure, namely: risk concentration limits, limits on transactions with customers on the basis of the
institution’s capital and credit limits on the basis of the customer’s net worth.
“Risk concentration” means the aggregate amount of relevant transactions executed with
companies, individuals or groups of companies—whether affiliated or not—where such transactions,
measured for each one of such customers, are at any time equal to or higher than 10% of the institution’s
RPC on the last day of the month prior to the relevant month. Total operations may not exceed, at any
time:
-
three times the institution’s RPC for the previous month, without considering the operations
involving local financial institutions (domestic or foreign headquarters or branches);
-
five times the institution’s RPC for the previous month if operations involving local financial
institutions are considered; or
-
ten times the institution’s RPC, in the case of second tier financial institutions (considering the loans
to other domestic financial institutions). See “Description of Argentine Tier 1 and Tier 2 Capital
Regulations” in this Section.
Diversification of risk: limitations are established for operations with clients, which may not
exceed certain percentages applied on top of the institution’s RPC for the previous month. These
percentages vary depending upon the type of client, the type of operation and the collateral involved. The
regulation sets forth a number of transactions that are excluded from the credit risk diversification rules.
Degree of risk: In the case of credit limits based on the customers’ net worth, as a general rule
the financial assistance cannot exceed 100% of the customer’s net worth. The basic margin may be
increased by an additional 200% provided such additional margin does not exceed 2.5% of the financial
institution’s RPC and the increase is approved by the board of directors of the relevant financial
institution.
Limits for non affiliated individuals. The aggregate amount of relevant transactions with
affiliated companies or individuals may not exceed at any time the limits of the financial institution’s net
worth as of the last day of the month prior to the month of calculation, according to the following general
rules:
•
in the case of local financial institutions which have transactions that are subject to
consolidation by the lender or borrower, when the entity receiving financial assistance (i)
has received a grade 1 rating by the Superintendency of Financial and Exchange Institutions,
the financial institution can provide assistance for an amount up to 100% of its computable
net worth; or (ii) has received a grade 2 rating by the Superintendency of Financial and
Exchange Institutions, general financial assistance can be provided for an amount up to 10%
of the financial institution’s computable net worth; and additional assistance for an amount
up to 90% of said computable net worth as long as loans and other credit facilities mature
within 180 days;
65
•
in the case of local financial institutions not included in (i) above, the financial institution
can provide assistance for an amount up to 10% of its computable net worth; and
•
in the case of other related local companies that exclusively provide complementary services
to the activity performed by the financial institution, as well as related foreign banks rated
“investment grade”, such companies may receive assistance for an amount up to 10% of the
computable net worth of the financial institution which grants assistance.
If the financial institution has a rating of 4 or 5, financial assistance to a related person or
company cannot be granted, except in certain situations.
Finally, the total, non-excluded amount of financial assistance provided to, and the shareholder
participation in the related persons and companies by a financial institution cannot exceed 20.0% of the
institution’s Argentine regulatory capital, except when the applicable limit is 100.0%.
Under Central Bank regulations, a person is “related” to a financial institution (and thus part of
the same “economic group”):
•
if the financial institution directly or indirectly controls, is controlled by, or is under
common control with, such person;
•
if the financial institution or the person that controls the financial institution and such person
have common directors to the extent such directors, voting together, will constitute a simple
majority of each board; or
•
in certain exceptional cases, if such person has a relationship with the financial institution,
or with the person controlling such financial institution, that might result in economic
damage to such financial institution, as determined by the board of directors of the Central
Bank.
In turn, control by one person of another is defined under such regulations as:
•
holding or controlling, directly or indirectly, 25.0% or more of the voting stock of the other
person;
•
holding 50% or more of the voting stock of the other person at the time of the last election
of directors;
•
holding, directly or indirectly, any other kind of participation in the other person so as to be
able to have a controlling vote in its shareholders’ or board of directors meetings; or
•
when the board of directors of the Central Bank determines that a person is exercising a
controlling influence, directly or indirectly, in the direction or policies of another person.
The regulations contain several non-exclusive factors to be used in determining the existence of
such controlling influence, including, among others:
•
the holding of a sufficient amount of the other person’s capital stock as to exercise influence
over the approval of such person’s financial statements and payment of dividends;
•
representation on the other person’s board of directors;
•
significant transactions between both persons;
•
transfers of directors or senior officers between both persons;
•
technical and administrative subordination by one person to the other; and
•
participation in the creation of policies of the financial institution.
66
Foreign Exchange System
During the first quarter of 2002, the Argentine Government established certain foreign exchange
controls and restrictions.
On February 8, 2002, Decree No. 260 was issued, establishing as of February 11, 2002 a Local
Foreign Exchange Market (“Mercado Único y Libre de Cambios”) system through which all transactions
involving the exchange of foreign currency are to be traded at exchange rates to be freely agreed upon.
On such date, the Central Bank issued Communications “A” 3471 and “A” 3473, which stated
that the sale and purchase of foreign currency can only be performed with entities authorized by the
Central Bank to operate in foreign exchange. Item 4 of Central Bank Communication “A” 3471 stated
that the sale of foreign currency in the local exchange market shall in all cases be against Peso bills.
Since January 2, 2003, there have been further modifications to the restrictions imposed by the
Central Bank. For further information, see “Exchange Controls”.
Foreign Currency Lending Capacity
The Regulations on the allocation of deposits in foreign currencies establish that the lending
capacity from foreign currency deposits, including U.S. dollar-denominated deposits to be settled in
Pesos, must fall under one of the following categories: (a) pre-financing and financing of exports to be
made directly or through agents, trustees or other brokers, acting on behalf of the owner of the
merchandise; (b) financing for manufacturers, processors or collectors of goods, provided they refer to
non-revocable sales agreements with exporters for foreign currency-denominated prices (irrespective of
the currency in which such transaction is settled), and they refer to exchangeable foreign-currency
denominated goods listed in local or foreign markets, broadly advertised and easily available to the
general public; (c) financing for manufacturers of goods to be exported, as final products or as part of
other goods, by third-party purchasers, provided that such transactions are secured or collateralized in
foreign currency by third-party purchasers; (d) financing of investment projects, working capital or
purchase of any kind of goods –including temporary imports of commodities- that increase or are related
to the production of goods to be exported; (e) financing for commercial clients or commercial loans
considered as consumer loans, with the purpose of importing capital goods, whenever they help to
increase goods production for the domestic market; (f) debt securities or financial trust participation
certificates whose underlying assets are loans made by the financial entities in the manners set forth in (a)
to (d) above; (g) foreign currency debt securities or financial trust participation certificates, publicly listed
under an authorization by the CNV, whose underlying assets are securities bought by the fiduciary and
guaranteed by reciprocal guarantee companies, in order to finance export transactions; (h) financings for
purposes other than those mentioned in (a) to (d) above, included under the IDB credit program
(“Préstamos BID N° 119/OC-AR”), not exceeding 10% of the lending capacity; and (i) inter-financing
loans (any inter-financing loans granted with such resources must be identified).
The lending capacity shall be determined for each foreign currency raised, such determination
being made on the basis of the monthly average of daily balances recorded during each calendar month.
Any defect in the application shall give rise to an increase in the minimum cash requirement in the
relevant foreign currency.
General Exchange Position
The General Exchange Position includes all the liquid external assets of the institution, such as
gold, currency and bills in Argentina and abroad, deposits and investments for any term in foreign banks,
investments in securities issued by foreign governments (OECD member governments with a sovereign
debt rating not below “AA”), certificates of time deposits in foreign institutions (rated not less than
“AA”), and correspondents’ debit and credit balances. It also includes purchases and sales of these assets
already arranged and pending settlement involving foreign exchange purchases and sales performed with
customers within a term not exceeding two business days. It does not include, however, correspondent
account balances for third-party transfers pending settlement, term sales and purchases of foreign
currency or securities nor direct investments abroad.
67
The GEP ceiling is calculated every month and, therefore, updated the first business day of the
month. Pursuant to the relevant reporting system regulations, this ceiling is set at 15% of the amount
equivalent in U.S. dollars to the computable equity at the end of the month immediately preceding the last
month when filing with the Central Bank has already expired. It will be increased by an amount
equivalent in U.S. dollars to 5% of the total amount traded by the institution on account of the purchases
and sales of foreign currency in the calendar month prior to the immediately preceding month, and by 2%
of the total demand and time deposits locally held and payable in foreign bills, excluding deposits held in
custody, recorded by the institution at the end of the calendar month prior to the immediately preceding
month. If the ceiling does not exceed US$8.0 million, this figure will be considered its floor.
Institutions authorized to trade in foreign currency failing to comply with the GEP ceilings or the
exchange reporting regulations should refrain from trading in foreign currency until they are in
compliance with the above.
Although certain exceptions are admitted, institutions authorized to trade in foreign currency
require the Central Bank’s prior consent to perform their own purchases when payment is made against
delivery of foreign currency or other foreign assets comprising the GEP.
Foreign Currency Net Global Position
All assets and liabilities from financial intermediation in foreign currency and securities in
foreign currency (deriving from cash and term transactions) are included in the Net Global Position (for
ongoing and completed operations).
In addition, forward transactions under master agreements entered within domestic self-regulated
markets paid by settlement of the net amount without delivery of the underlying asset are also included.
Deductible assets for determining RPC are excluded from the ratio.
Two ratios are considered in the Foreign Currency Net Global Position:
- Negative Foreign Currency Net Global Position (liabilities exceeding assets): as from January
1, 2007 (Communications “A” 4577 and 4598) the limit is 15%, but it can be extended up to 15 p.p.
provided the entity records at the same time: a) medium and long-term financing in Pesos to non-financial
private sector (mid and long-term financings are those exceeding 4 years, weighting capital maturity
without considering CER) under certain conditions for an amount equivalent to the increase of said limit;
and b) an increase in the minimum capital requirement equivalent to the increase of the general limit of
the negative foreign currency net global position.
- Positive Net Global Position (assets exceeding liabilities): this limit cannot exceed the lesser
of:
1.
30% of the RPC.
2.
Own liquid funds (which refer to the RPC minus “fixed assets” and loans to related
clients).
By Communication “A” 4350, the Central Bank suspended as of May 1, 2005 the limits for the
positive net global position.
The excesses of these ratios are subject to a charge equal to the greater of twice the nominal
interest rate of the U.S. dollar denominated LEBAC (Central Bank bill) or twice the 30-day U.S. dollar
LIBO rate for the last business day of the month. Charges not paid when due are subject, during the
default term, to interest at a rate established for excesses, increased by 50%.
Fixed Assets and Other Items
The Central Bank determines that the fixed assets and other items maintained by the financial
entities must not exceed 100% of the entity’s RPC.
Such fixed assets and other items include the following:
68
(vii)
Shares of local companies
(viii)
Miscellaneous receivables
(ix)
Property for own use
(x)
Other assets,
(xi)
Organization and development expenses
(xii)
Goodwill,
(xiii)
Financing granted to related clients.
The calculation of such assets will be effected according to the month-end balances, net of
depreciations, accumulated amortizations and allowances for loan losses.
Non-compliance with the ratio produces an increase in the minimum capital requirements equal
to 100% of the excess on the ratio.
Differences arising from the enforcement of legal orders within the framework of Amparos
(proceedings intended for the protection of constitutional guarantees) ordering the repayment of deposits
in their original foreign currency shall not computed be for this ratio up to December 3, 2008.
Debt Classification and Loan Loss Provisions
Credit Portfolio
The regulations on debt classification are designed to establish clear guidelines for identifying
and classifying the quality of assets, as well as evaluating the actual or potential risk of a lender sustaining
losses on principal and/or interest, in order to determine, taking into account any loan security, whether
the provisions against such contingencies are adequate. Banks must classify their loan portfolios into two
different categories: (i) consumer or housing loans and (ii) commercial loans. Consumer and housing
loans include housing loans, consumer loans, credit-card financings and other types of installment credits
to individuals. All other loans are considered commercial loans. Consumer or housing loans in excess of
AR$ 750,000, the repayment of which is linked to their projected cash flows, are classified as commercial
loans. Argentine Banking GAAP allow financial institutions to apply the consumer and housing loan
classification criteria to commercial loans of up to AR$ 750,000, given with or without guarantees. If a
customer has both kinds of loans (commercial and consumer and housing loans), the consumer or housing
loans will be added to the commercial portfolio to determine under which portfolio they should be
classified based on the amount indicated. In these cases, the loans secured by preferred guarantees shall
be considered to be at 50% of its face value.
Under the current debt classification system, each customer, as well as the customer’s
outstanding debts, are included within one of seven sub-categories. The debt classification criteria
applied to the consumer loan portfolio are primarily based on objective factors related to customers’
performance on their obligations or their legal standing, while the key criterion for classifying the
commercial loan portfolio is each borrower’s paying ability based on its future cash flow.
Commercial Loans Classification
The principal criterion to evaluate a loan pertaining to the commercial portfolio is its borrower’s
ability to repay it, whose ability is mainly measured by such borrower’s future cash flow. Pursuant to
Argentine Banking GAAP, commercial loans are classified as follows:
Classification
Criteria
Normal situation
Borrowers for whom there is no doubt as to their ability to comply with their
payment obligations.
Borrowers that, among other criteria, are up to 90 days past due and, although
considered to be able to meet all their financial obligations, are sensitive to changes
Subject to special
Monitoring/Under
69
Classification
Criteria
observation ................................
that could compromise their ability to honor debts absent timely corrective
measures.
Subject to special
Borrowers who are unable to comply with their obligations as agreed with the bank
Monitoring /
and, therefore, formally state, within 60 calendar days after the maturity date, their
Under negotiation or
intention to refinance such debts. The borrower must enter into a refinancing
subject to
agreement with the bank within 90 calendar days (if up to two lenders are
refinancing agreements
involved) or 180 calendar days (if more than two lenders are involved) after the
payment default date. If no agreement has been reached within the established
deadline, the borrower must be reclassified to the next category according to the
indicators established for each level.
With problems
Borrowers with difficulties honoring their financial obligations under the loan on a
regular basis, which, if uncorrected, may result in losses to the bank.
With high risk of
Borrowers who are highly unlikely to honor their financial obligations under the
insolvency
loan.
Uncollectible
Loans classified as irrecoverable at the time they are reviewed (although the
possibility might exist that such loans might be collected in the future). The
borrower will not meet its financial obligations with the financial institution
Uncollectible according to (a) Borrower has defaulted on its payment obligations under a loan for more than
Central Bank rules ................................
180 calendar days according to the corresponding report provided by the Central
Bank, which report includes (1) financial institutions liquidated by the Central
Bank, (2) residual entities created as a result of the privatization of public financial
institutions, or in the privatization or dissolution process, (3) financial institutions
whose licenses have been revoked by the Central Bank and find themselves subject
to judicial liquidation or bankruptcy proceedings and (4) trusts in which Seguro de
Depósitos S.A. (SEDESA) is a beneficiary, or (b) certain kinds of foreign
borrowers (including banks or other financial institutions that are not subject to the
supervision of the Central Bank or similar authority of the country in which they
are incorporated) that are not classified as “investment grade” by any of the rating
agencies approved by the Central Bank.
Consumer and Housing Loans Classification
The principal criterion applied to loans in the consumer and housing portfolio is the length of the
duration of the default of such loans. Under the Argentine Banking GAAP, consumer and housing
borrowers are classified as follows:
Classification
Criteria
Performing
If all payments on loans are current or less than 31 calendar days overdue and, in
the case of checking account overdrafts, less than 61 calendar days overdue.
Loans upon which payment obligations are overdue for a period of more than 31
and up to 90 calendar days.
Loans upon which payment obligations are overdue for a period of more than 90
and up to 180 calendar days.
Loans in respect of which a legal action seeking collection has been filed or loans
having payment obligations overdue for more than 180 calendar days, but less
than 365 calendar days.
Borrowers who are highly unlikely to honor their financial obligations under the
loan.
Loans in which payment obligations are more than one year overdue or the debtor
is insolvent or in bankruptcy or liquidation.
Same criteria as for commercial loans in Irrecoverable status according to
Argentine Banking GAAP.
Low Risk
Medium Risk
High Risk
Uncollectible
Non-recoverable loans
Uncollectible according to
Central Bank rules
Minimum Credit Provisions
The following minimum credit provisions are required to be made by Argentine banks in relation
to the credit portfolio category:
With Preferred
Guarantees
Category
70
Without
Preferred
Guarantees
“Normal”
“Under Observation” and “Low Risk”
“Under negotiation or subject to refinancing agreements”
“With Problems” and “Medium Risk”
“With high risk of insolvency” and “High Risk”
“Uncollectible”
“Uncollectible according to Central Bank rules”
1%
3%
6%
12%
25%
50%
100%
1%
5%
12%
25%
50%
100%
100%
The Superintendency may require additional provisioning if it determines that the current level is
inadequate.
Financial institutions are entitled to record allowances for loan losses in amounts larger than
those required by the Argentine Banking GAAP. In such cases and despite the existence of certain
exceptions, recording a larger allowance for a commercial loan, to the extent the recorded allowance
amount falls into the next credit portfolio category set forth by the Argentine Banking GAAP, shall
automatically result in the corresponding debtor being recategorized accordingly.
Minimum Frequency for Classification Review
Financial institutions are required to classify loans at least once a year in accordance with the
Argentine Banking GAAP. Nevertheless, a quarterly review is required for credits that amount to 5% or
more of the Bank´s RPC and mid-year review for credits that amount to the lower of: (i) AR$ 1 million or
(ii) the range between 1% and 5% of the Bank´s RPC. In addition, financial institutions have to review
the rating assigned to a debtor in certain instances, such as when another financial institution reduces the
debtor classification in the “Credit Information Database” and grants 10% or more of the debtor’s total
financing in the financial system. Only one-level discrepancy is allowed in relation to the information
submitted by financial institutions to the “Credit Information Database” and the lower classification
awarded by at least two other banks and total lending from such banks account for 40% or more of the
total informed; if there is a greater discrepancy, the financial institution will be required to reclassify the
debtor.
Allowances for Loan Losses
The allowance for loan losses is maintained in accordance with applicable regulatory
requirements of the Central Bank. Increases in the allowance are based on the level of growth of the loan
portfolio, as well as on the deterioration of the quality of existing loans, while decreases in the allowance
are based on regulations requiring the write-off of non-performing loans classified as irrecoverable after a
certain period of time and on decisions of the management to write off non-performing loans evidencing a
very low probability of recovery.
Priority Rights of Depositors
Under Section 49 of the FIL, in the event of judicial liquidation or bankruptcy of a bank,
depositors have a general and absolute priority right to collect their claims over all other creditors, except
claims secured by pledges or mortgages and certain employee liens. Additionally, the holders of any type
of deposit have a special priority right over all other creditors of the bank, except certain employee
creditors, to be paid out of (i) any funds of the branch that may be in the possession of the Central Bank
as Statutory Reserve, (ii) any other funds of the bank existing as of the date on which the bank’s license is
revoked, or (iii) any proceeds resulting from the mandatory transfer of certain assets of the financial
institution to another as determined by the Central Bank pursuant to Section 35 of the FIL, according to
the following order of priority: (a) deposits of up to AR$ 50,000 per person (including all amounts such
person deposited in one financial entity), or its equivalent in foreign currency, (b) all deposits of an
amount higher than AR$ 50,000, or its equivalent in foreign currency for the amount exceeding AR$
50,000, and (c) the liabilities originated in commercial lines granted to the financial institution and which
directly affect international commerce.
Deposits held by parties related to a financial institutions do not benefit from the priority rights
set forth in paragraphs (i) and (ii) above, in view of the relevant regulations issued by the Central Bank of
Argentina.
71
Mandatory Deposit Insurance System
Law No. 24,485 passed on April 12, 1995, as amended by Law No. 25,089 and Decrees No.
538/95 and No. 540/95, created a Deposit Insurance System, or “SSGD”, which is mandatory for bank
deposits, and delegated the responsibility for organizing and implementing the system to the Central
Bank. The SSGD is a supplemental protection to the privilege granted to depositors by means of Section
49 of the FIL, as mentioned above.
The SSGD has been implemented through the establishment of a Deposit Guarantee Fund, or
“FGD”, managed by a private-sector corporation called Seguro de Depósitos Sociedad Anónima, (Deposit
Insurance Corporation, or “SEDESA”). According to Decree No. 1292/96, the shareholders of SEDESA
are the government through the Central Bank and a trust set up by the participating financial institutions.
These institutions must pay into the FGD a monthly contribution determined by Argentine Banking
GAAP. The SSGD is financed through regular and additional contributions made by financial institutions,
as provided for in Central Bank Communication “A” 4271, dated December 30, 2004.
The SSGD covers deposits made by individuals and legal entities in Argentine or foreign
currency and maintained in accounts with the participating financial institutions, including checking
accounts, savings accounts, and time deposits up to the amount of AR$ 120,000.
Effective payment on this guarantee will be made within 30 business days after revocation of the
license of the financial institution in which the funds are held; such payment is subject to the exercise of
the depositor’s priority rights described above.
In view of the circumstances affecting the financial system, Decree No. 214/2002 provided that
SEDESA may issue registered securities for the purpose of offering them to depositors in payment of the
guarantee in the event it should not have sufficient funds available.
The SSGD does not cover: (i) deposits maintained by financial institutions in other financial
institutions, including certificates of deposit bought in the secondary market, (ii) deposits made by
persons directly or indirectly affiliated with the institution, (iii) time deposits of securities, acceptances or
guarantees, (iv) any transferable time deposits that have been transferred by endorsement, (v) any
deposits benefiting from some incentive (e.g., car raffles) in addition to the agreed upon interest rate, and
(vi) any deposits in which the agreed-upon interest rate is higher than the reference interest rates
periodically released by the Central Bank for time deposits and demand deposit account balances and
available amounts from overdue deposits or closed accounts.
Pursuant to Communication “A” 4271, every financial institution is required to contribute to the
FGD a monthly amount of between 0.015% and 0.06% of the monthly average of daily balances of
deposits in local and foreign currency, as determined by the Central Bank. Prompt contribution of such
amounts is a condition precedent to the continuing operation of the financial institution. The first
contribution was made on May 24, 1995. The Central Bank may require financial institutions to advance
the payment of up to the equivalent of two years of monthly contributions and debit the past due
contributions from funds of the financial institutions deposited with the Central Bank. The Central Bank
may require additional contributions by certain institutions, depending on its evaluation of the financial
condition of those institutions.
When the contributions to the FGD reach the greater of AR$ 2 billion or 5.0% of the total
deposits of the system, the Central Bank may suspend or reduce the monthly contributions, and reinstate
them when the contributions subsequently fall below that level.
Other Restrictions
Pursuant to FIL, financial institutions cannot create any kind of rights over their assets without
the Central Bank’s authorization, nor enter into transactions with their directors, officers or affiliates in
terms more favorable than those offered to their clients.
Capital Markets
72
Commercial banks are authorized to subscribe for and sell shares and debt securities. At present,
there are no statutory limitations as to the amount of securities for which a bank may undertake to
subscribe. However, under Argentine Banking GAAP, underwriting of debt securities by a bank would
be treated as “financial assistance” and, accordingly, until the securities are sold to third parties, such
underwriting would be subject to limitations.
In 1990, the Buenos Aires securities market authorized firms organized as brokerage houses, or
sociedades de bolsa, to operate as brokers on the Buenos Aires Stock Exchange in addition to individual
stockbrokers. There are currently no restrictions on ownership of a sociedad de bolsa by a commercial
bank, and, in fact, most of the main commercial banks operating in Argentina have established their own
sociedad de bolsa. All brokers, whether individuals or firms, are required to own at least one share of
Mercado de Valores S.A. to be allowed to operate as brokers on the Buenos Aires Stock Exchange.
The MAE started doing business in 1989, it being at present a self-regulated institution under the
supervision of the CNV governed by the legal provisions of General Resolution No. 9934 dated February
26, 1993 that made self-regulation effective as from March 1993. It is the major electronic open market
for securities and trading of foreign currency in Argentina. It is based on a modular electronic platform
with specific information technology support where both public and private fixed-income securities are
traded, as well as currencies, swap transactions and futures transactions with currencies and interest rate.
Supplementarily, this technological support is used in bids of bills and bonds of the BCRA and the
primary placement of Government securities.
An agreement between the Buenos Aires Stock Exchange and representatives of the MAE
dealers provides that trading in shares and other equity securities will be conducted exclusively on the
Buenos Aires Stock Exchange and that all debt securities listed on the Buenos Aires Stock Exchange may
also be traded on the MAE. Trading in Argentine Government securities, which are not covered by the
agreement, is conducted mainly on the MAE. The agreement does not extend to other Argentine
exchanges.
Commercial banks may operate as both managers and custodians of Argentine fondos comunes
de inversión, or mutual funds; provided, however, that a bank may not act simultaneously as manager and
custodian for the same fund.
Financial Institutions undergoing Economic Difficulties
The FIL provides that any financial institution, including a commercial bank, operating at less
than certain required technical ratios and minimum net worth levels, in the judgment of the Central Bank
adopted by members representing the majority of the board of directors, with impaired solvency or
liquidity or in any of the other circumstances listed in Section 44 of the FIL, must (upon request from the
Central Bank and in order to avoid the revocation of its license) prepare a plan de regularización y
saneamiento, or a restructuring plan. The plan must be submitted to the Central Bank on a specified date,
not later than 30 calendar days from the date on which a request to that effect is made by the Central
Bank. Upon the institution’s failure to submit, secure regulatory approval of, or comply with, a
restructuring plan, the Central Bank will be empowered to revoke the institution’s license to operate as
such.
Furthermore, the Central Bank Charter authorizes the Superintendency to fully or partially
suspend, exclusively subject to the approval of the President of the Central Bank, the operations of a
financial institution for a term of 30 days if the liquidity or solvency thereof are adversely affected. Such
term could be renewed for up to 90 additional days, with the approval of the Central Bank’s board of
directors. During such suspension term an automatic stay of claims, enforcement actions and
precautionary measures is triggered, any commitment increasing the financial institution’s obligations
shall be null and void, and debt acceleration and interest accrual shall be suspended.
If per the Central Bank’s criteria a financial institution is undergoing a situation which, under the
FIL, would authorize the Central Bank to revoke its license to operate as such, the Central Bank may,
before considering such revocation, order a plan of restructuring that may consist of a series of measures,
including, among others:
73
•
•
•
•
•
adoption of measures to capitalize or increase the capital of the financial institution;
revoke the approval granted to the shareholders of the financial institution to hold interests
therein;
restructure and/or transfer assets and liabilities;
grant temporary exemptions to comply with technical regulations and/or payment of charges
and penalties arising from such flawed compliance; or
appoint a delegate or auditor (“interventor”) that may prospectively replace the board of
directors of the financial institution.
Revocation of the License to Operate as a Financial Institution
The Central Bank may revoke the license to operate as a financial institution in case a
restructuring plan has failed or is not deemed feasible, or violations of local laws and regulations have
been incurred, or solvency or liquidity of the financial institution has been affected, or significant changes
have occurred in the institution’s condition since the original authorization was granted, or if any decision
by the financial institution’s legal or corporate authorities concerning its dissolution has been adopted,
among other circumstances set forth in the FIL.
Once the license to operate as a financial institution has been revoked, the financial institution
shall be liquidated.
Liquidation of Financial Institutions
As provided in the FIL, the Central Bank must notify the revocation decision to a competent
court, which will then determine who will liquidate the entity: the corporate authorities (extrajudicial
liquidation) or an independent liquidator appointed by the court for that purpose (judicial liquidation).
The court’s decision will be based on whether or not there is sufficient assurance that the corporate
authorities are capable of carrying out such liquidation properly.
Bankruptcy of Financial Institutions
According to the FIL, financial institutions are not allowed to file their own bankruptcy petitions.
In addition, the bankruptcy shall not be adjudged until the license to operate as financial institution has
been revoked.
Once the license to operate as a financial institution has been revoked, a court of competent
jurisdiction may adjudge the former financial institution in bankruptcy, or a petition in bankruptcy may be
filed by the Central Bank or by any creditor of the bank, in this case after a period of 60 calendar days has
elapsed since the license was revoked.
Once the bankruptcy of a financial institution has been adjudged, provisions of the Bankruptcy Law (as
defined below) and the FIL shall be applicable; provided however that in certain cases, specific
provisions of the FIL shall supersede the provisions of the Argentine Bankruptcy Law (i.e. priority rights
of depositors).
Merger, Consolidation and Transfer of Goodwill
Merger, consolidation and transfer of goodwill may be arranged between entities of the same or
different type and will be subject to the prior approval of the Central Bank. The new entity must submit a
financial-economic structure profile supporting the project in order to obtain authorization from the
Central Bank.
Money laundering and financing of terrorism
Law No. 25,246 (as subsequently amended by Laws No. 26,087; 26,119; 26,268 and 26,683, the
“Anti-Money Laundering Law”), defines money laundering as a type of crime. Money laundering is
defined as a type of crime committed whenever a person converts, transfers, manages, sells, encumbers,
or otherwise uses money, or any other assets originating in a crime, with the possible result that the
original or substituted assets may appear to be of a legitimate origin, provided the value of the assets
74
exceeds AR$ 300,000 (Pesos Three hundred thousand), regardless of whether such amount results from
one act or several interrelated transactions. Additionally, Law No. 26,683 introduces money laundering as
a specific criminal offense against the economic and financial order and separates it from the crime of
concealment, that is a crime against public administration, thus permitting to punish the autonomous
offense of money laundering regardless of the participation in the crime that originated the funds that are
the subject of money laundering.
In order to prevent and avoid money laundering from the commission of criminal acts and
terrorism financing, Law No. 25,246 created the Financial Information Unit (“UFI” as per its acronym in
Spanish), subordinate to the National Ministry of Justice, Security and Human Rights.
Pursuant to Decree 1936/10 the UIF, as enforcement authority under Law No. 25,246, as
amended, and insofar as concerns all matters under its scope, was vested with coordination and
controlling powers at a national, provincial and municipal level and it was also vested with controlling
powers in respect of governmental agencies mentioned in Section 12 of Law No. 25,246; it was also
granted national representation authority before several international agencies such as GAFI, GAFISUD
and OEA, among others.
The UIF is authorized to carry out the following activities, among others: request information,
documentation, supporting documents and any such items as it may deem advisable for the discharge of
its duties, from any governmental agency, either national, provincial or municipal, as well as from natural
or corporate persons, be they public or private, which shall be under the obligation to provide such
information and items within the term to be established, impose the penalties set forth in Chapter IV of
Law No. 25,246 and request the Attorney General´s Office (Ministerio Público) to file a petition before
the court having competent jurisdiction for it to issue search warrants in respect of public or private
facilities, order personal searches and the seizure of documentation or items that may prove useful for the
investigation. Within the framework of the review of a report on a suspicious transaction, the individuals
mentioned in Section 20 of Law No 25,246 cannot refrain from disclosing to the UIF any information
required from them by claiming that such information is subject to bank, stock market or professional
secret, or legal or contractual confidentiality agreements.
Pursuant to Resolution 121/11 issued by the UIF, as amended, financial institutions subject to
the provisions of Law No 21,526, entities subject to the system of Law No 18,924 and individuals or legal
entities authorized by the Central Bank to operate in the purchase and sale of foreign currency in the form
of cash or checks drawn in foreign currency or in the transfer of funds within Argentina or abroad are
under the obligation to take further rational steps intended to identify the beneficiaries and/or clients,
ensure that the information they receive is complete and accurate and carry out a more stringent follow up
on the transactions in which they are involved, among other activities. Emphasis is placed on the
application of “Know-your-client” policies whereby, before engaging in a commercial or contractual
relationship with clients, they shall identify such clients, comply with the provisions of Resolution (UIF)
No 11/11 on Politically Exposed Persons, verify that they are not included in the lists of terrorists and/or
terrorist organizations (Res UIF 28/12) and request that they provide information on products to be used
and the reasons for their selection. Insofar as concerns the detection of unusual or suspicious transactions,
when a liable party detects a transaction that it considers unusual, it shall reinforce the review of such
transaction for the purposes of obtaining additional information, recording and maintaining supporting
documentation and filing the relevant report within a maximum term of 150 calendar days, which term is
reduced to 48 hours in the event such transaction is related to terrorism financing.
Pursuant to Resolution No 229/11 issued by the UIF, that repealed Resolution 33/11, measures
and procedures were implemented that should be complied with in the capital market in connection with
the commission of crimes consisting in money laundering and financing of terrorism in the capital
market; the applicable regulations were subject to clarifications and amendments. The resolution in force
mainly reiterates some provisions related to the information to be requested and steps to be taken for
identification of clients by the liable parties, such as the duty to report, the preservation of the
documentation, the formalities to be carried out and the term to report on suspicious transactions, policies
and procedures to prevent money laundering and financing of terrorism. A description is also given of
transactions or conducts that, even by themselves or merely upon being perfected or attempted cannot be
regarded as suspicious transactions, represent an example of transactions that may be used for the
laundering of assets originating from crimes and the financing of terrorism, for which reason, the
existence of one or various factors described above should be considered as a guideline to reinforce the
review of the transaction. The main change introduced in connection with the repealed resolution is the
75
classification of clients, based on the type and amount of the transactions, that is: (i) Habitual: clients
carrying out transactions for annual amounts equivalent to or higher than AR$ 60,000 or the equivalent
thereof in other currencies, (ii) Occasional: those clients whose annual transactions do not exceed the
amount of AR$ 60,000 or the equivalent thereof in other currencies, (iii) Inactive: those whose accounts
have shown no movements for more than one calendar year, the valuation of assets pertaining to such
accounts being lower than AR$ 60,000.
Furthermore, Chapter XXII of the CNV Rules refers to the guidelines set forth by the UIF, in
particular as concerns knowledge of the client, to take a decision about the opening or maintenance of
accounts by intermediaries such as, among others, natural or corporate persons acting as placement agents
in any primary issue of notes. Finally, such guidelines for client identification should be reinforced when
politically exposed persons are involved.
Additionally, Section 1, Chapter XXII “Prevention of Money Laundering and Financing of
Terrorism” of the CNV Rules provides that broker-dealers, brokerage firms, investment funds managers,
over-the-counter market agents and all intermediaries engaged in the purchase, lease, or borrowing of
securities, acting under the scope of Stock Exchanges with or without adhered markets, intermediary
agents registered in futures and options markets, regardless of the purpose thereof, and individuals or
legal entities acting as trustees by virtue of trust agreements and individuals or legal entities that directly
or indirectly hold or are related to trust accounts, trustors and trustees by virtue of trust agreements, must
comply with the provisions of Law No. 25,246, the regulations issued by the UIF and ancillary rules,
including Decrees of the Argentine Executive Branch, in connection with the decisions adopted by the
Security Council of the United Nations, to fight against terrorism and comply with the Resolutions issued
by the Ministry of Foreign Affairs, International Trade and Worship.
Such regulations should also be observed by: Depositaries of Mutual Funds, placement agents or
any other intermediaries, be they individuals or legal entities that may exist in the future, of Mutual
Funds, individuals or legal entities acting as placement agents in respect of any primary issue of securities
and issuing companies in respect of capital contributions, irrevocable capital contributions on account of
future issues of shares or significant loans received, regardless of whether those who make such
contributions are shareholders or not at the time of making same, in particular as regards the identification
of such persons and the origin and lawfulness of funds contributed or loaned.
One or more parties involved in the placement and issue of notes, such as the placement agents,
may be under the obligation to gather information regarding the subscribers of notes and provide
information to the authorities about transactions that may be deemed suspicious or unusual or that lack
economic or legal justification or that are unnecessarily complex, regardless of whether same are made on
an occasional or repeated basis.
The CNV, pursuant to Resolution No 602/12, established that the parties falling within its scope,
listed in Section 1, Chapter XXII of the CNV Rules, may only perform transactions in connection with
the public offering of securities, forward, futures or options contracts of any nature and other financial
instruments and products, when they are made or ordered by persons incorporated, domiciled or residing
in jurisdictions, territories or associated states, that are not included in the list set forth in Decree No.
1037/00 (regulating Income Tax Law No. 20,628, as amended). In case such parties are not included in
such list and are considered in their jurisdiction of origin as intermediaries registered with or in a selfregulated market subject to the control of an authority similar to the Argentine CNV, such transaction
may only be performed in case evidence is furnished that the CNV has entered into a memorandum of
understanding, cooperation and exchange of information with such foreign regulatory authority.
Investors that intend to subscribe notes shall provide all such information and documentation as
may be required by the Bank and/or the placement agents in compliance with, among others, the
regulations on prevention on laundering of money originating in crimes, issued by the UIF, CNV or
BCRA.
For a more detailed analysis of the anti-money laundering system in force as of even date,
investors are suggested to seek advice from their legal counsel and thoroughly read Chapter XII, Title XI,
Book Two of the Argentine Criminal Code and the regulations issued by the UIF, for which purposes
those interested may visit the website of the Ministry of Economy and Public Finance, namely, the
76
legislative section www.infoleg.gov.ar and/or the website of the www.uif.gov.ar and/or the website of the
CNV www.cnv.gob.ar.
Certain Legal Aspects of Mortgages in Argentina
The following is a summary of certain legal aspects of mortgages in Argentina, including
provisions of Argentine law and regulations related to mortgages in Argentina. We do not intend this
summary to constitute a complete analysis of all laws and regulations concerning mortgages in
Argentina. We advise you to consult your legal advisors for a more detailed analysis.
Regulatory Framework
The Argentine Civil Code (the “Civil Code”), Trust Law No. 24,441 (the “Trust Law”), the
Argentine Civil and Commercial Procedure Code and Law No. 17,801 (the “Real Estate Registry Law”),
as amended and supplemented, contain most of the legal guidelines applicable to almost all aspects of
mortgages on real property in Argentina. Furthermore, on November 6, 2003, the Argentine Congress
enacted Law No. 25,798, pursuant to which a Mortgage Refinancing System has been implemented to
restructure delinquent mortgage loans and avoid foreclosure when the real property represents debtor´s
sole dwelling.
In connection with this matter, see “Risk Factors – Risks related to the Bank- Legislation
limiting the Banks´ ability to foreclose on mortgaged collateral may have an adverse effect on the Bank ”, for further information.
Creation, Perfection and Registration of Mortgages under Argentine Law
Under Argentine law, a mortgage secures repayment of a debt by creating an interest in the
property or properties in favor of the mortgagee, although the property remains in the possession of the
mortgagor. Mortgages may only be created on individually identified real property, by a specified sum of
money.
Likewise a mortgage may secure a debt, which is conditional, future or indeterminate or
otherwise uncertain in amount – in which case, an estimate shall be made when creating the mortgage –
and need not be secured by real property owned by the principal debtor. The mortgage secures the
principal amount of the debt as well as all costs and expenses, such as damages and interest, for which the
debtor may become liable if the debtor fails to comply with the terms of the underlying credit agreement.
Mortgages are indivisible; each real property mortgaged secures a debt as well as each part of
the real property secures the payment of all and each part of the debt. Nevertheless in the foreclosure of
mortgaged real property, if the division in lots is possible, or if the guarantee comprehends separated real
property, the court may order the foreclosure on lots, and partial cancellation of the mortgage, provided
that this does not detrimentally affects the mortgagee.
Mortgages can be created only by public deed. Typically, credit agreements and mortgages
securing such credit are documented in the same public deed, although it is possible to do so in separate
documents. Public deeds are prepared by public notaries, who certify and witness certain matters of law
and certain matters of fact as to which their participation creates a presumption of truth.
The registration of a mortgage involves submitting a petition for its registration to the public real
estate registry in the jurisdiction where the property is situated. To register a mortgage, a public notary
must have received the public deed evidencing ownership of the property from the owner of the property,
and a report from the real estate registry in the jurisdiction where the property is located named
“certificado de dominio” (the “Real Estate Report”). The Real Estate Report is valid for, respectively, 15,
25 or 30 calendar days from its issuance, depending on where the public notary is domiciled in relation to
the property. At the time a Real Estate Report is issued, the real estate registry makes provisional
registration of the mortgage, which lasts for 60, 70 or 75 calendar days, depending on how long the Real
Estate Report remains valid. If the mortgage is registered within a limited time period from its creation
(currently 45 days), the provisional registration becomes final and effective as of the date of execution of
77
the relevant public deed; if not, the provisional registration automatically expires and if the mortgage is
thereafter registered, such registration will be effective from the date it is actually filed.
Once registered, the mortgage is enforceable against third parties since the day of the granting of
the mortgage if the registration was requested within 45 days from its creation, or from the day of its
registration if the registration was requested after such period. Prior thereto, it is legally binding only
between the contracting parties, their heirs and the persons who have intervened in the act, such as the
notary and witnesses, who are not able to invoke defects of registration, and in relation to them the
mortgage created by public deed is deemed duly registered. Thus, the proper registration of a mortgage by
a subsequent creditor with respect to certain property would give that subsequent mortgagee preference
over any prior, unregistered mortgage created on that same property.
The registration of a mortgage expires 20 years after the date on which it was registered,
although it may be renewed without the consent of the mortgagor.
Pursuant to Argentine Banking GAAP, in order for mortgage loans to be considered secured
loans for purposes of calculating minimum capital requirements, diversification of the credit risk
(fraccionamiento del riesgo crediticio) and loan loss provisions (previsiones por riesgo de
incobrabilidad), financial entities are required to document mortgage loans in the form of book-entry
negotiable mortgage instruments or letras hipotecarias escritulares. In order to have said effects, the
Mortgage Instruments shall be executed substantially in the same form as provided by the Central Bank
Communication “A” 3055, as amended and supplemented. The Trust Law has created the Mortgage
Instruments, as a new type of negotiable instruments secured by a Mortgage. Mortgage Instruments were
created to expedite and reduce the cost of transferring mortgages, to facilitate securitization activities and
to simplify administrative procedures related to the transfer of mortgage loans. This expedited and less
costly transfer results from the fact that the assignment of a Mortgage Instrument does not require the
registration of the assignment in any real estate registry or the involvement of a notary public or the
instrumentation of the assignment in a public deed. Mortgage Instruments are registered in the real estate
registry and deposited with Caja de Valores S.A. or with Argentine banks or companies acting as
registrars established by Argentine Banks. Caja de Valores is in charge of handling transfers in bookentry form and issuing receipts allowing the holder of the Mortgage Instrument to exercise its rights as
mortgagee. The Bank has been voluntarily using the Mortgage Instruments since June 1998, the last issue
of Series XIV being completed in March 2011.
Assignment of Mortgages
In general, Argentine law requires that every debtor be given notice of a credit assignment or
acceptance thereof by the debtor for the assignment to be enforceable against the debtor. To enforce an
assignment agreement against third parties, however, notarized notice of the assignment must be given.
The failure to provide such notice by public means would allow the assignor’s creditors to argue
successfully that the assignor and not the assignee owns the assigned credits. However, under the Trust
Law, parties may agree that it is not necessary to serve notice of the assignment of the mortgage loan on
the debtor, in connection with certain transactions, including securitization transactions, provided that
such securitizations result in a public offer of securities. In addition, the assignment must be registered
with the relevant real estate registry, except with respect to Mortgage Instruments, in which case the
assignment is noted in book-entry form by Caja de Valores, or the corresponding Argentine banks or
special purpose companies established by Argentine banks acting as registrar thereof, and a notice is not
required to be given to the debtor by public means nor is his consent required to perfect such assignment.
Foreclosure of Mortgage Loans
Since January 1995 there have been two systems governing real property foreclosure procedures
under Argentine law. Therefore, the Bank’s mortgage loans are subject to foreclosure procedures under
the Civil and Commercial Procedure Code and to the foreclosure procedures under the Trust Law. See
“Risk Factors – Risks related to the Bank- Legislation limiting the Banks´ ability to foreclose on
mortgaged collateral may have an adverse effect on the Bank -”, for further information.
78
Procedures Under the Civil and Commercial Procedure Code
General
The procedures applicable in a judicial foreclosure proceeding differ depending on the Argentine
court in which the action is commenced. However, a uniform set of rules set forth in the Civil and
Commercial Procedure Code, described in the following paragraphs, applies to all judicial foreclosure
proceedings instituted in the federal courts of Argentina and courts sitting in the City of Buenos Aires.
Moreover, the rules and procedures applicable within other jurisdictions are, to a large extent, consistent
with those applicable to the courts sitting in the City of Buenos Aires. Although filing times and other
statutory periods vary significantly depending on the jurisdiction and the defenses raised by a particular
debtor, based on the Bank´s experience, foreclosure proceedings under the Civil and Commercial
Procedure Code generally take one to four years to complete.
A judicial foreclosure proceeding commences with the filing of a complaint in the competent
court. The mortgagor is given five days from the date on which he is served with the summons in which
to file a brief setting forth any admissible defenses he may have to the proceeding. The court will issue a
judgment either immediately thereafter or following review of any evidence the court may have ordered
to be produced to evaluate the validity of the mortgagor’s defenses.
If the mortgagor does not file an appeal or the court’s judgment is affirmed on appeal, the court’s
judgment becomes final and the actual foreclosure on the property takes place. The sale of the underlying
real property is accomplished through a public auction, for which purpose the court appoints an
auctioneer. Prior to holding the auction, a Real Estate Report as to any liens that may have been perfected
on the property and reports as to the existence of unpaid real estate taxes, water and sewage charges and
condominium indebtedness (if applicable) must be obtained. Additionally, notice of the auction must be
published in the Official Gazette for two days and in another publication circulated in the area where the
property is located. The notice must contain, among other things, the date and time of the auction, the
main characteristics of the property, the upset price, an indication of whether the property is presently
occupied and the amount of any outstanding condominium expenses.
A minimum sale price for the property is established, which must be met or exceeded at the
auction. In the absence of such an agreement between the mortgagor and mortgagee, the minimum sale
price will equal two-thirds of the property’s value as assessed for purposes of levying real estate taxes by
the Argentine taxing authorities. If the property has not been assessed for real estate tax purposes, the
court will appoint an expert to do so. The failure of the auctioneer to obtain the minimum price will result
in a new auction at which the minimum sale price will be 25.0% less than the minimum price previously
established. If the second auction fails, a third will be held at which no minimum sale price is established.
The bidder submitting the highest bid is awarded the property. Within three days following the
award, the auctioneer must deposit all amounts received from the bidder toward the purchase price of the
property into an account with the court and supply the court with all relevant information regarding the
auction. The court must thereafter approve the sale and, if approved, the purchaser must deposit the
balance of the purchase price with the court within five days.
Failure by the purchaser to comply with that requirement will result in a new auction and the
purchaser will be required to pay for any decline in the value of the property, additional accrued interest
and other costs resulting therefrom.
The mortgagee will have priority in relation to the proceeds of the auction price for cancellation
of the secured debt.
The mortgagee is not prevented from participating in the auction as a bidder and subsequently
purchasing the property if his bid is the highest. The mortgagee/purchaser may offset amounts owed him
by the mortgagor against the amount of his bid upon informing the court of his intention to do so and
avoid the requirement that the purchase price be deposited with the court. If the purchase price is
insufficient to cancel the credit, the mortgagee may pursue a deficiency judgment for the outstanding
balance.
79
Redemption Rights
In a judicial foreclosure proceeding, the debtor has a redemption right, the exercise of which will
prevent the sale of the property subject to the mortgage in a public auction. That right may be exercised at
any time prior to the auction. To exercise this right, the mortgagor must deposit with the court an amount
equal to the sum of the following: the principal amount of the secured debt, awarded fees, court fees paid
to initiate the foreclosure proceeding and a prudent amount for interest and other costs payable by the
debtor. The court will determine whether the amount so deposited is sufficient such that the sale of the
property is no longer necessary and, provided such a determination is made, the court will order that the
auction not take place. This decision cannot be appealed by the creditor and cannot be objected to by third
parties (e.g., interested or potential purchasers of the property).
If a purchaser at a judicial foreclosure deposits the purchase price for the property within five
days from court approval of the auction, the debtor cannot exercise further rights of redemption. If such
deposit is not made, Argentine law grants the debtor a second opportunity to recover the property, by
depositing an amount sufficient: (i) to pay the mortgagee the principal and interest owed and to reimburse
the mortgagee for its costs and (ii) to pay to the third party one and one-half times the earnest money to be
applied towards the purchase price of the property actually paid by such third party and any auctioneer’s
fees.
Procedures Under Trust Law
The Trust Law sets forth an out-of-court foreclosure procedure applicable if the parties have
specifically agreed to apply such foreclosure procedure in the relevant public deed. Since enactment of
the Trust Law in 1995, most mortgages granted in Argentina, and most mortgages granted by the Bank,
have incorporated this procedure. Although times vary significantly depending on the jurisdiction and the
defenses raised by a particular debtor, the Bank believes, based on its limited experience with this
procedure, that foreclosure proceedings under the Trust Law generally take eight months to two years to
complete.
For creditors to take advantage of this expedited procedure, the debtor must be at least sixty days
in arrears on the payment of principal or interest. The creditor must then serve a written demand on the
debtor for payment in full of all delinquent sums within a certain period that cannot, in any event, be less
than fifteen days and for the disclosure of the names of all privileged creditors and occupants of the
mortgaged property. If the debtor fails to pay within the specified time period, the creditor becomes
entitled to appear before a competent judge who, in turn, will serve notice on the debtor of the foreclosure
proceedings and of the debtor’s ability to raise, within five days thereafter, any permissible defenses to
the action. The defenses which a debtor may present to preclude foreclosure, including presentation of
persuasive evidence in support thereof, consist of the following:
•
•
•
•
that the debtor is not in default;
that the creditor did not make a demand for payment as required by the Trust Law;
that the summary foreclosure proceeding was not agreed upon by the parties; and
that serious inadequacies existed with respect to the publication requirements prior to
the auction of the property.
Upon expiration of the five day time period in which the debtor may raise defenses, the creditor
may hold a public auction for the sale of the property upon meeting certain publication requirements
involving the appointment of the auctioneer by the creditor and notice of the auction. The notices must be
published for three days in the Official Gazette and in two widely circulated newspapers, at least one of
which must be in the area where the property is located. The final publication date cannot be more than
two days prior to the date of the public auction. If the property in question is occupied and the debtor has
failed to raise any permissible defense, the judge will order that the property be vacated within a ten-day
period. The Trust Law specifically grants police the right to evict occupants prior to the actual foreclosure
in the event the premises are not voluntarily vacated.
The minimum sale price for the auction shall be equivalent to the outstanding debt as of the date
of the auction. The failure of the auctioneer to obtain the minimum price will result in the holding of a
80
new auction at which the minimum sale price is 25.0% less than the price previously established. If the
second auction also fails, a third auction will be held with no established minimum price.
If the mortgagee purchases the property in the auction, then that creditor may offset all amounts
due it under the mortgage loan, including expenses attributable to the foreclosure proceedings, and
deposit the balance, if any, with the court. Otherwise, all amounts obtained at the auction must be
deposited with the judge, who thereafter will distribute amounts due to creditors and any remaining
amounts to the debtor.
To prevent foreclosure proceedings, the debtor must either pay all amounts due within the initial
fifteen-day demand period or raise a valid defense to the proceedings. If neither means is available, the
debtor is precluded from challenging the proceedings until after the creditor’s debt is settled.
Nevertheless, regardless of the fact that a creditor may have successfully foreclosed on a debtor’s
property, the creditor will remain liable to the debtor for any wrongful action taken or omitted in
connection with the foreclosure proceeding. Further, notwithstanding that the property was sold at the
auction, within 30 days thereafter the debtor may recover possession of the property by payment to the
purchaser of a sum equal to the price paid for the property at the auction, plus all expenses incurred in
connection therewith up to an amount equivalent to three percent of the relevant mortgage loan.
Priorities
Under Argentine law, priorities with respect to both real and personal property arise exclusively
by operation of law. The holder of a mortgage is granted a priority on the underlying real property as
from the date on which the mortgage is formally created by instrument, to the extent a request for
registration thereof has been submitted to the real estate registry, a Real Estate Report has been obtained
and registration is made within the validity period by such report. The scope of this priority includes all
unpaid principal and interest thereon, including interest accrued throughout any judicial proceeding
brought to foreclose on the mortgage, until all amounts are paid in full.
The credit extended by the holder of a duly registered first mortgage on real property has priority
over all other credits subsequently secured by a mortgage on such real property. Thus, the priority among
consecutively created mortgages, a concept specifically contemplated by Argentine law, is identical to the
chronological order in which each mortgage is created and registered. Expenses incurred in connection
with enforcement proceedings to which the property may be subject are given higher priority than the
credit secured by a first mortgage. However, some other credits may take priority over the mortgagee´s,
provided they arose prior to the creation of the mortgage, namely:
•
•
•
credits for real estate taxes;
credits for common expenses of a building; and
certain cases (such as mechanic’s liens) in which creditors retain possession of the
mortgaged property as guarantee for what is due to them in connection with such
property (derecho de retención), so long as such retention existed at the time the
mortgage was created.
Nevertheless, regarding credits for real estate taxes, a conflict between the mortgagee and the
state regarding real estate taxes is quite rare, since a notary public will not issue a mortgage deed without
having obtained a certification as to the absence of indebtedness for real estate taxes on the mortgaged
property.
However, and as provided by the Privatization Law, the Bank believes that when foreclosing on
a property secured by a first mortgage, its priority is senior to all other creditors.
Structure and Organization of the Bank and its Economic Group
The following table provides information concerning ownership interest in the Bank and the
percentage of votes in subsidiaries as of December 31, 2012:
81
Subsidiary
Business
Country of
Incorporation
BACS Banco de
Crédito y
Securitización S.A.
Banking
transactions
Argentina
Ownership
interest
(%)
87.50
Percentage of
voting rights
(%)
87.50
BHN Sociedad de
Inversión S.A.
Investments
Argentina
99.99
99.99
BH Valores SA Soc.
de Bolsa
Brokerage
firm
Argentina
95.00
95.00
Tarshop S.A.
Consumer
Financing
Argentina
80.00
80.00
Subsidiaries of the Bank:
Below is a list of the subsidiaries of the Bank and their ownership structure.
A) BACS Banco de Crédito y Securitización S.A. (formerly Banco Corporación Financiera
Hipotecaria S.A.)
Shareholder
Shares
Class
Par value
(Ps.)
Votes
%
Banco Hipotecario
S.A
54,687,500
-
54,687,500
54,687,500
87.50
IRSA Inversiones
y representaciones
Sociedad
Anónima
3,984,375
-
3,984,375
3,984,375
6.375
Quantum
Industrial Partners
LDC
3,828,125
-
3,828,125
3,828,125
6.125
62,500,000
-
62,500,000
62,500,000
100
Class
Votes
TOTAL
B)
BHN Sociedad de Inversión S.A.
Shareholder
Shares
39,131,682
BACS – Banco de Crédito y Securitización S.A.
80
39,131,762
TOTAL
C)
0
0
0
Par Value
(Ps.)
39,131,682
80
39,131,762
%
39,131,682
80
39,131,762
99.999
0.001
100
BHN Vida S.A.
Shareholder
Shares
Class
120
BHN Sociedad de Inversión S.A. 16,201,085
16.201.205
TOTAL
-
Par Value
Votes
%
(Ps.)
120
120
0.002
16,201,085 16,201,085 99.998
16,201,205 16,201,205 100
D) BHN Seguros Generales S.A.
Shareholders
Shares
Class
120
BHN Sociedad de Inversión S.A. 10,111,282
10,111,402
TOTAL
-
82
Par Value
(Ps.)
120
10,111,282
10,111,402
Votes
120
10,111,282
10,111,402
%
0.002
99.998
100
E)
BH Valores S.A Sociedad de Bolsa.
Shareholders
Shares
Banco Hipotecario S.A. 1,425,000
Others1
75,000
1,500,000
TOTAL
F)
Class
-
Par Value
(Ps.)
1,425,000
75,000
1,500,000
Votes
1,425,000
75,000
1,500,000
%
95.00
5.00
100.00
Tarshop S.A.
Shareholders
Shares
Class
107,037,152 Alto Palermo (APSA) S.A. 26,759,288 TOTAL
133,786,440 -
Par Value
Votes
%
(Ps.)
107,037,152 107,037,152 80.00
26,759,288 26,759,288 20.00
133,786,440 133,786,440 100.00
Fixed Assets
The Bank is the owner of 19 of its offices. To replace the building where its headquarters were
located in the City of Buenos Aires, that was transferred to the Argentine Government under the
Privatization Law, the Bank purchased and refurbished a building in an adjoining area for a total cost of
approximately US$ 32.0 million.
1
Bank's internal information
83
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion should be read in conjunction with the Bank’s audited and unaudited financial
statements which are included in this Offering Memorandum. The Bank's audited and unaudited financial
statements are prepared in accordance with Central Bank accounting rules which differ in certain
significant respects from Argentine GAAP and from U.S. GAAP. The Bank’s audited financial statements
do not contain a reconciliation to Argentine GAAP or to U.S. GAAP of our shareholders’ equity at
December 31, 2010, 2011 and 2012 or of the Bank’s net income for the fiscal years then ended. Potential
investors should consult with their professional advisors for an understanding of the differences between
the accounting policies used by the Bank and Argentine GAAP and U.S. GAAP and how those differences
affect the financial information herein contained.
Presentation of Information
Effective January 1, 1995, pursuant to resolution No. 388 of the Superintendency of Financial
and Exchange Institutions, the Bank discontinued the practice of adjusting its financial statements for
inflation. Effective January 1, 2002, however, as a result of application of Communication “A” 3702
which established the repeal of any regime that did not allow companies to restate their accounting
balances at period-end currency values, the Bank resumed the application of the adjustment for inflation.
On March 25, 2003, Decree No. 664/03 ceased to require that financial statements be prepared in constant
currency, effective for financial periods on or after March 1, 2003 and on April 8, 2003, the Central Bank
issued Communication “A” 3921 discontinuing inflation accounting effective as of March 1, 2003. As a
result, the Bank’s audited financial statements as of December 31, 2012, 2011 and 2010 do not include
the effects of inflation. In addition, financial information included in this section includes certain
reclassifications, compared to the Financial Statements mentioned in the first paragraph.
Factors Affecting Comparability of Financial Data
On September 14, 2010 the Bank acquired 80% of the capital stock of Tarshop S.A. (“Tarshop”).
Therefore, the accounting and financial information included in this Offering Memorandum reflects the
consolidated financial position and results of the Bank, BACS Banco de Crédito y Securitización S.A.,
BHN Sociedad de Inversión S.A., BH Valores S.A. Sociedad de Bolsa and of Tarshop for the fiscal years
ended December 31, 2012, 2011 and 2010 and of Tarshop for the fiscal year ended December 31, 2012,
December 31, 2011 and the interim fiscal period ended December 31, 2010.
Critical Accounting Policies
The Bank believes that the following are the critical accounting policies. They are important to
the portrayal of its financial condition and results of operations and require a subjective and complex
judgment and the need to make estimates.
Reserve for Loan Losses
The reserve for loan losses is maintained in accordance with the regulations established by the
Argentine Central Bank. Under such regulations, a minimum reserve for loan losses is calculated
primarily based upon the classification of loan borrowers. Such classification is based on commercial or
consumer origin, taking into account, among other variables, their past due status and payment ability.
Such regulations require minimum reserves and the Bank is authorized to make additional provisions.
Other Receivables from Financial Transactions and Miscellaneous Receivables
The Bank carries other receivables from financial transactions and miscellaneous receivables net
of allowances for uncollectible amounts. The Bank’s judgment regarding the ultimate collectivity is
performed on an account-by-account basis and considers our assessment of the borrower’s ability to pay
based on factors such as the borrower’s financial condition, past payment history and guarantees.
Income Tax
84
Pursuant to Law No. 24,855 (the “Law on Regional Development and Employment Creation”) and
regulatory decree 924/97, the Bank’s income from financing transactions formalized, agreed upon,
undertaken and/or registered as of the date of registration of its By-laws are exempt from payment of
income tax, while income from financing transactions after such date is subject to income tax.
As a general rule, the Income Tax Law allows the deduction of such expenses required to obtain,
maintain or preserve the taxable income. In the case of expenses incurred to obtain both taxable and nontaxable income, the portion of the expense incurred to obtain taxable income shall be identified and
deducted for tax purposes.
The tax rule gives preference to the direct allocation method of accounting over the apportionment
method in determining deductible expenses (related to obtaining taxable income), providing that the
apportionment method shall only be used in circumstances where it is not possible to make direct
allocation of expenses to taxable and non-taxable income, respectively.
Until December 31, 1998, the Bank determined income tax liability based on the expense
apportionment method, treating as deductible the portion of expenses arising from applying to the total
expenses incurred the ratio of taxable income to total income.
Since December 31, 1999, the Bank has calculated income tax taking account of the direct
relationship between expenses and taxable and non-taxable income to which those expenses relate. The
apportionment method has only been used for those expenses that are not directly allocable to the income
producing sources.
The Bank has filed income tax returns for each of fiscal years 2000 to 2012 which were prepared
in compliance with the aforementioned methodologies.
Minimum Presumed Income Tax
The Bank has recognized as a tax credit as of December 31, 2012 the minimum presumed
income tax paid from 2002 to 2012, based on forecasts and the probability of recovery. The Bank’s
estimate about the likelihood to use such assets is subjective and involves assumptions about matters that
are inherently uncertain. Following prudent criteria and considering that as of the end of fiscal year 2012
the relevant Tax Returns for Income Tax and Minimum Presumed Income Tax had not been filed, the
Bank has made provision for the position for fiscal year 2002.
Underlying estimates and assumptions can change over time, influencing the Bank’s overall tax
positions, as a result of unanticipated events or circumstances.
Years ended December 31, 2011 and 2012
General
The following table sets forth the principal components of the Bank’s net income for the years
ended December 31, 2011 and 2012:
85
Net Income
Financial income
Year ended
2011
2012
(in Million Pesos)
1,562.8
2,180.7
Financial expenses
% Change
2012/2011
39.5%
(832.6)
(1,138.6)
36.7%
730.1
(119.3)
248.4
542.8
(1,105.0)
(8.8)
4.5
1,042.1
(200.9)
314.0
666.8
(1,440.4)
(9.6)
26.7
42.7%
68.4%
26.4%
22.8%
30.4%
8.8%
N/A
Income tax
(41.3)
(55.1)
33.3%
Net income
251.5
343.6
36.6%
Net contribution from insurance
Other net income from services
Minority interest
Miscellaneous income, net
The net income for the year ended December 31, 2012 increased by 36.6%, compared to the
income for the year ended December 31, 2011, mainly due to higher financial income and other net
income from services as a result of an increased diversity of products offered to clients. Such increases
were partially offset by increased administration expenses related to higher salaries.
Financial Income
The following table sets forth the principal components of financial income for the years ended
December 31, 2011 and 2012:
Year ended
2011
2012
(in Million Pesos)
1,016.3
1,559.4
Interest from loans to the private sector
Income from Government and corporate
securities
Interest from loans to the public sector
Exchange forwards
Hedging transactions
Total financial income
% Change
2012 / 2011
53.4%
466.8
17.6
11.0
51.1
548.8
18.7
17.0
36.8
17.6%
6.1%
55.3%
-27.9%
1,562.8
2,180.7
39.5%
Financial income for the year ended December 31, 2012 increased by 39.5% from the previous
period due to higher interest income from loans to the private sector which increased from Ps. 1,016.3
million in 2011 to Ps. 1,559.4 million in December 2012.
Financial Expenses
The following table sets forth the principal components of financial expenses for the years ended
Year ended
2011
2012
(in Million Pesos)
% Change
2012 / 2011
Interest on financial liabilities
182.8
225.8
23.5%
Interest on deposits
466.6
585.4
25.4%
Interest on other liabilities
64.2
78.6
22.5%
Foreign exchange differences
47.8
137.6
188.1%
86
Other expenses
Taxes
Total financial expenses
5.7
-
15.5
-
174.4%
#¡DIV/0!
65.6
95.7
45.8%
832.6
1,138.6
36.7%
Financial expenses increased from Ps. 851.0 million in 2011 to Ps. 1,150.6 million in 2012,
primarily as a result of increased interest on deposits due to an increase in deposits and higher foreign
exchange differences.
Provision for Losses on Loans
The following table sets forth the provision for loan losses for the years ended December 31,
2011 and 2012:
Year ended
2011
2012
(in Millions Pesos)
119.3
200.9
Provisions for loan losses
% Change
2012 / 2011
68.4%
Provisions for loan losses increased by Ps. 81.6 million mainly due to an increase in the bank’s
loan portfolio.
Net Contribution from Insurance
The following table sets forth the principal components of net contribution from insurance for
the years ended December 31, 2011 and 2012:
Year ended
2011
2012
(in Million Pesos)
% Change
2012 / 2011
Insurance premiums earned:
Life
Property damage
Unemployment
Other
Subsidiaries
16.7
52.0
0.6
26.0
204.2
15.2
52.8
0.4
33.3
280.9
(8.8)%
1.5%
(26.8)%
28.2%
37.6%
Total insurance premiums earned
299.6
382.7
27.8%
Claims paid:
Life
Property damage
Unemployment
Other
Subsidiaries
0.4
5.1
0.0
1.0
44.6
0.6
5.4
0.0
1.2
61.5
67.0%
5.8%
(17.1)%
18.0%
37.7%
Total claims paid
51.2
68.7
34.3%
248.4
314.0
26.4%
Total net contribution from insurance
Net contribution from insurance increased from Ps. 248.4 million in 2011 to Ps. 314.0 million in
2012 as a result of an increase in products and services offered to the Bank's clients and in the volume of
business in the last year.
Other income from services, net
87
The following table includes the principal components of other income from services, net for the
years ended December 31, 2011 and 2012:
Year ended
2011
2012
(in Million Pesos)
% Change
2012 / 2011
Other income from services
Loan commissions
FONAVI commissions
Deposits commissions
Credit card commissions
Other commissions
78.1
14.3
35.7
390.6
155.8
99.8
20.5
46.8
500.6
121.7
27.7%
43.9%
31.0%
28.2%
(21.9)%
Total other income from services
674.5
789.4
17.0%
Other expenses on services
Loan commissions
Placement commissions
Taxes
Other commissions
23.9
4.9
20.6
10.2
84.2
(12.1)
30.1
8.2
29.4
13.8
106.5
(65.4)
26.2%
67.6%
42.9%
35.3%
26.4%
N/A
Total other expenses on services
131.7
122.6
(6.9)%
Total other income from services, net
542.8
666.8
22.8%
Other income from services, net increased by Ps. 124.0 million, compared to the previous year,
due to an increase in the volume of credit card business.
Administrative Expenses
The following table sets forth the principal components of administrative expenses for the years
Year ended
2011
2012
(in Million Pesos)
587.4
773.5
115.3
149.1
16.5
35.3
72.2
85.9
63.4
91.8
37.6
32.8
122.5
145.2
90.2
126.9
Salaries and social security contributions
Other fees
Fees to directors and statutory auditors
Advertising and publicity
Taxes
Amortizations
Operating expenses
Other
Total administrative expenses
1105.0
1440.4
% Change
2012 / 2011
31.7%
29.2%
114.2%
19.0%
44.9%
(12.8)%
18.5%
40.7%
30.4%
Administrative expenses increased by 30.4%, compared to year 2011. This increase is mainly
due to:
•
•
increases in remunerations as a result of salary increases, and
increased operating costs resulting from an increase in the Bank’s business activity.
Miscellaneous Income, net
The following table sets forth the main components of miscellaneous income, net for the years
88
Year ended
2011
2012
(in Million Pesos)
% Change
2012 / 2011
Miscellaneous income
Penalty interest
Reversal of provisions
Loan recoveries
Other
42.0
4.4
166.4
64.1
52.0
10.6
98.6
48.3
23.7%
141.0%
(40.7)%
(24.7)%
Total miscellaneous income
276.9
209.4
(24.4)%
Miscellaneous losses
Lawsuits
Other provisions charges
Provisions for taxes
Taxes
Loan rebates
Other
29.0
60.1
11.6
13.1
14.5
144.1
1.6
65.1
(3.9)
20.6
19.6
79.7
(94.4)%
8.3%
(133.7)%
58.1%
35.4%
(44.7)%
Total miscellaneous losses
272.4
182.8
(32.9)%
4.5
26.7
N/A
Total miscellaneous income, net
Miscellaneous income, net increased by Ps. 22.1 million, compared to the previous year mainly
due to lower miscellaneous losses, partially offset by lower miscellaneous income.
Years ended December 31, 2010 and 2011
General
The following table sets forth the principal components of the Bank’s net income for the years
89
Net Income
Year ended
2010
2011
(in millions of Pesos)
% Change
2011/2010
1*321.9
1*562.8
18.2%
(728.9)
(832.6)
14.2%
593.0
730.2
23.1%
(96.8)
(119.3)
23.2%
180.2
248.4
37.8%
Other net income from services
266.8
542.8
103.4%
(709.0)
(1*105.0)
55.9%
(5.7)
(8.8)
54.4%
Miscellaneous income, net
(11.2)
4.5
-140.2%
Income tax
(22.1)
(41.3)
86.9%
Net income
195.3
251.5
28.8%
Financial income
Financial expenses
Minority interest
The net income for the year ended December 31, 2011 increased by 28.8%, compared to the
income for the year ended December 31, 2010, mainly due to higher financial income and other net
income from services as a result of an increased diversity of products offered to clients. Such increases
were partially offset by increased administration expenses related to higher salaries.
Financial Income
The following table sets forth the principal components of financial income for the years ended
Year ended
2010
2011
(in Million Pesos)
% Change
2011 / 2010
Interest from loans to the private sector
699.5
1,016.3
45.3%
Interest from loans to the public sector
13.5
17.6
30.7%
528.4
466.8
-11.7%
80.5
62.0
-23.0%
1,321.9
1,562.8
18.2%
Government and corporate securities
Total financial income
Financial income for the year ended December 31, 2011 increased from the previous period due
to higher interest income from loans to the private sector which increased from Ps. 699.5 million in 2010
to Ps. 1,016.3 million in December 2011.
Financial Expenses
90
The following table sets forth the principal components of financial expenses for the years ended
Years ended
2010
2011
211.8
374.4
18.7
22.0
36.8
51.6
13.5
728.9
Interest on financial liabilities
Interest on deposits
Interest on other liabilities
Exchange differences
Taxes
Other
Total financial expenses
182.8
466.6
64.2
5.7
47.8
65.6
0.0
832.6
% Change
2011/2010
-14%
25%
243%
-74%
30%
27%
-100%
14%
Financial expenses increased from Ps. 728.9 million in 2010 to Ps. 832.6 million in 2011,
primarily as a result of increased interest on deposits due to an increase in deposits, partially offset by a
decrease in interest on financial liabilities resulting from payment of foreign debt.
Provision for Losses on Loans
The following table sets forth the provision for loan losses for the years ended December 31,
2010 and 2011:
Year ended
2010
2011
96.8
119.3
Provisions for loan losses
% Change
2011 / 2010
23.3%
Provisions for loan losses increased by Ps. 22.5 million due to an increase in the bank’s loan
portfolio.
Net Contribution from Insurance
The following table sets forth the principal components of net contribution from insurance for
the years ended December 31, 2010 and 2011:
Year ended
2010
2011
Insurance premiums earned:
Life
Property damage
Unemployment
Other
Subsidiaries
Total insurance premiums earned
Claims paid:
Life
Property damage
Unemployment
Other
Subsidiaries
Total claims paid
91
% Change
2011/2010
17.7
54.2
0.7
39.3
109.7
221.7
16.7
52.0
0.6
26.0
204.2
299.6
(5.6)%
(4.2)%
(17.2)%
(33.9)%
86.2%
35.1%
0.5
5.9
0.1
6.1
28.8
41.5
0.4
5.1
0.0
1.0
44.6
51.2
(28.2)%
(14.1)%
(38.8)%
(83.7)%
54.7%
23.4%
Total net contribution from insurance
180.2
248.4
37.8%
Net contribution from insurance increased from Ps. 180.2 million in 2010 to Ps. 248.4 million in
2011 as a result of an increase in products and services offered to the Bank's clients and in the volume of
business in the last year.
Other income from services, net
The following table includes the principal components of other income from services, net for the
years ended December 31, 2010 and 2011:
Year ended
2010
2011
% Change
2011 /
2010
Other income from services
Loan commissions
FONAVI commissions
Other commissions
Total other income from services
60.5
11.5
24.3
242.0
49.8
388.2
78.1
14.3
35.7
390.6
155.8
674.5
29.2%
23.8%
46.8%
61.4%
213.0%
73.8%
Other expenses on services
Loan commissions
Placement commissions
Taxes
Other commissions
Total other expenses on services
23.1
7.3
14.8
8.2
60.0
7.9
121.4
23.9
4.9
20.6
10.2
84.2
(12.1)
131.7
1.7%
(39.4)%
47.7%
(14.5)%
48.1%
(66.7)%
7.4%
Total other income from services, net
266.8
542.8
195.9%
Other income from services, net increased by Ps. 276.0 million, compared to the previous year,
due to an increase in the volume of credit card business.
Administrative Expenses
The following table sets forth the principal components of administrative expenses for the years
Year ended
2010
2011
369.4
587.4
63.3
115.3
13.1
16.5
55.5
72.2
31.2
63.4
29.6
37.6
105.6
122.5
41.3
90.2
709.0
1,105.0
Salaries and social security contributions
Other fees
Fees to directors and statutory auditors
Advertising and publicity
Taxes
Amortizations
Operating expenses
Other
Total administrative expenses
% Change
2011 / 2010
59.0%
82.1%
26.1%
30.1%
103.1%
26.8%
16.1%
118.0%
55.8%
Administrative expenses increased by 55.8%, compared to year 2010. This increase is mainly
due to:
•
•
increases in remunerations as a result of salary increases, and
increased operating costs resulting from an increase in the Bank’s business activity.
92
Miscellaneous Income, net
The following table sets forth the main components of miscellaneous income, net for the years
Year ended
2010
2011
% Change
2011 / 2010
Miscellaneous income
Penalty interest
Reversal of provisions
Loan recoveries
Other
15.5
115.5
20.5
42.0
4.4
166.4
64.1
170.6%
NA
44.1%
213.5%
Total miscellaneous income
151.5
276.9
82.8%
Miscellaneous losses
Lawsuits
Other provisions charges
Provisions for taxes
Taxes
Loan rebates
Other
Total miscellaneous losses
12.4
17.9
12.9
12.6
55.9
51.0
162.6
60.5
16.3
23.9
13.1
58.0
100.6
272.4
NA
(8.8)%
84.6%
3.9%
3.7%
97.4%
67.5%
Total miscellaneous income, net
(11.2)
4.5
(140.7)%
Miscellaneous income, net increased by Ps. 15.7 million, compared to the previous year mainly
due to loan recoveries and higher penalty interest, partially offset by the creation of higher provisions.
Liquidity
The Bank’s general policy has been to maintain liquidity adequate to meet its operational needs
and financial obligations. At December 31, 2012, the Bank’s liquid assets consisted of:
•
•
•
•
Ps. 527.0 million of cash and due from banks, (net of regulatory minimum reserve [encaje]),
Ps. 212.4 million of government securities classified under investment accounts,
Ps. 894.4 million of government and corporate securities classified as held for trading, and
Ps. 972.1 million of Argentine Central Bank instruments.
As of December 31, 2011, the Bank’s liquid assets consisted of:
•
•
•
•
Ps. 365.0 million of cash and due from banks, (net of regulatory minimum reserve),
Ps. 207.5 million of government securities classified under investment accounts,
Ps. 1,049.6 million of Argentine Central Bank instruments.
As of December 31, 2010, the Bank’s liquid assets consisted of:
•
•
•
•
Ps. 438.8 million of cash and due from banks, (net regulatory minimum reserves),
Ps. 1,192.7 million of government securities classified under investment accounts,
Ps. 1,008.3 million of Argentine Central Bank instruments.
93
Funding
The Bank finances its lending operations mainly through:
•
•
•
•
•
deposits,
the issuance of notes in international and domestic capital markets,
Repo transactions,
securitizations of loans, and
cash flow from existing loans.
The following table shows a summary of principal funding sources as of the dates indicated:
As of December 31
2010
(1)
Notes
REPO
Borrowings from Central Bank
Borrowings from banks and other international
entities(1)
Deposits
Total
(1)
2011
2012
1.689,7
12,0
1.748,5
86,1
6,6
2.013,7
0,0
0,0
159,1
4.838,2
151,3
5.451,8
267,2
8.011,1
6.699,0
7.444,3
10.292,1
Excludes accrued interest
Notes
The following table shows the Bank’s series of notes outstanding as of December 31, 2012:
December 31,
2012
(in Million Pesos)
BHSA Program US$ 1,200 million
Series 5 (US$ 250,000,000)
1,037.9
Series 1 (U$S 449.880.000)
103.3
Series 2 (Eur 278,367,000)
187.4
BHSA Program US$ 500 million
Series 1 (Ps. 90,143,000)
Series 2 (Ps. 120,101,000)
Series 3 (US$ 10,541,000)
Series 4 (Ps. 65,475,000)
Series 5 (Ps. 85,264,000)
Series 6 (Ps. 55,693,000)
Series 7 (Ps. 77,055,000)
Tarshop Program US$ 100 million
Notes class III
(Ps.100,000,000)
Notes class IV (Ps.
74,822,916)
Notes class V (US$ 1,236,835)
Notes class VI (Ps.
70,147,864)
Date of
Issue
Maturity
Date
27-Apr-06
27-Apr-16
9.75%
15-Sep-03
1-Dec-13
3% - 6%
15-Sep-03
1-Dec-13
3% - 6%
Interest Rate
90.1
17-Oct-11
17-Apr-13
Badlar + 3.50%
120.1
11-May-12
11-Nov-13
Badlar + 1.95%
51.8
11-May-12
11-Nov-13
4.5%
65.5
17-Aug-12
14-May-13
17.8%
85.3
17-Aug-12
17-Feb-14
Badlar + 3.75%
53.7
8-Nov-12
8-Aug-13
18.75%
77.1
8-Nov-12
8-May-14
Badlar + 4%
33.3
20-Sep-11
20-Mar-13
Badlar + 4%
74.8
2-Mar-12
2-Sep-13
Badlar + 2.98%
5.4
2-Mar-12
2-Sep-13
6.0%
70.1
27-Jul-12
27-Mar-14
Badlar + 2.98%
94
Deposits
The following table shows the Bank’s deposits as of the dates indicated:
As of December 31,
2010
2011
2012
2012
in thousands of:
Ps.
Ps.
US$(1)
Ps.
Deposits
1,900,857
2,378,275
2,990,892
608,239
12,341
11,540
8,563
1,741
2,924,966
3,061,948
5,011,674
1,019,192
73,354
58,744
595,564
121,116
362,596
505,781
741,892
150,874
Fixed-term deposits
2,405,033
2,407,108
3,355,131
682,312
Investment accounts
14,056
40
160,035
32,545
Other
44,754
65,526
101,650
20,672
25,173
24,749
57,402
11,673
4,838,164
5,451,763
8,011,129
1,629,172
Financial sector
Checking accounts
Savings accounts
Accrued interest and exchange differences payable
Total deposits
(1) The exchange rate used for purposes of translation of balances as of December 31, 2012 was Ps. 4.9173 = US$ 1.00. Source:
Central Bank
Securitizations
The Bank has entered into various financial trust agreements as trustor whereby it transfers in trust
mortgage-backed and personal loans of its loan portfolio to different financial institutions, as trustees.
Upon transfer of mortgage-backed loans to the trustee, the trustee issues the relevant bonds and
certificates of participation and pays the amounts outstanding under the claims assigned by the Bank out
of the proceeds derived from placement. The trust property is held separate from the trustee’s and the
trustor’s assets.
The trustee is responsible for managing the trust funds in accordance with the provisions of the
trust agreement.
The following table shows the balances outstanding under financial trusts executed by the Bank as
trustor*:
Issued
Bonds
Bonds
Bonds
Class A1/AV
Class A2/AF
Class B
Certificates of
participation
BHN II
05/09/1997
445.5
513.6
11,780.0
39,184.2
BHN III
10/29/1997
8.3
14.9
20,455.0
21,766.7
BHN IV
03/15/2000
120.3
36.6
168,650.9
(44,347.5)
Bacs I
02/15/2001
1,465.2
72.8
80,275.3
(56,739.1)
95
CHA II
11/19/2004
-
-
-
4,560.2
CHA III
04/07/2005
-
-
-
15,021.2
CHA IV
06/22/2005
-
-
957.4
13,238.1
CHA V
10/20/2005
-
-
-
18,115.7
CHA VI
04/07/2006
18,152.8
-
-
14,256.2
CHA VII
09/27/2006
28,028.6
-
-
8,098.8
CHA VIII
03/26/2007
32,539.1
-
-
7,224.4
CHA IX
08/28/2009
157,744.4
-
-
42,557.4
CHA X
08/28/2009
-
US$ 71,810.4
-
141,437.4
CHA XI
12/21/2009
165,923.0
-
-
27,892.4
CHA XII
07/21/2010
219,619.9
-
-
48,269.0
CHA XIII
02/02/2010
101,896.2
-
-
39,073.2
CHA XIV
03/18/2011
110,783.3
-
-
37,426.4
* Prepared using Bank’s internal information, in thousands of Pesos, except as otherwise indicated.
96
The following table shows the balances outstanding under the financial trust agreements executed by
Tarshop, as trustor*:
Commencement
Date
Bonds
Bonds
Bonds
Class A1/AV
Class A2/AF
Class B
Certificates of
Participation
Series 68
03/30/2011
-
-
-
14,531.0
Series 69
08/26/2011
9,471.7
-
-
12,541.9
Series 70
02/08/2012
35,528.7
3,351.5
-
9,731.5
Series 71
07/05/2012
85,505.2
-
-
23,187.6
Series 72
NA
89,029.3
-
-
13,303.2
Series 73
NA
66,879.0
-
-
9,993.4
* Prepared using Bank’s internal information, in thousands of Pesos.
The following table shows the balances outstanding under the financial trust agreements executed by
BACS Banco de Crédito y Securitización, as trustor*:
Commencement
Date
Bonds
Bonds
Bonds
Class A1/AV
Class A2/AF
Class B
Certificates of
Participation
BACS
Personales I
02/18/2011
-
-
596.7
7,127.5
BACS
Personales II
06/13/2011
-
-
3,700.0
6,437.5
BACS
Personales III
08/17/2011
3,526.7
-
6,871.7
6,513.6
* Prepared using Bank’s internal information, in thousands of Pesos.
97
DIRECTORS, SENIOR MANAGEMENT AND MEMBERS OF THE SUPERVISORY
COMMITTEE
Board of Directors
The Bank is managed by a board of directors, which is currently composed of thirteen directors
and eight alternate directors. The members of the board of directors are elected to hold office for two-year
terms by the Bank's shareholders at their annual general meeting, and may be reelected indefinitely. The
directors are in charge of the administration of the Bank. The Executive Committee conducts the ordinary
business of the Bank and is supervised by the board of directors. The board of directors is composed of:
two members representing Class A shares;
one member representing Class B shares;
one member representing Class C shares; and
nine members representing Class D shares;
and their respective alternates.
Duties and Liabilities of Directors
Under Argentine law, the board of directors is in charge of the Bank’s administration and of
making all the decisions related to such purpose, as well as those decisions expressly established by the
Argentine Corporations Law, the Bank's bylaws and other applicable regulations. Thus, the board of
directors is responsible for carrying out the decisions made by the shareholders’ meetings and the tasks
specifically delegated by the shareholders.
Under the Argentine Corporations Law, directors have the obligation to perform their duties with
the loyalty and the diligence of a prudent business person. Directors are jointly and severally liable to the
company in which they perform such duties, to the shareholders and third parties for the improper
performance of their duties, for violating the law, the bylaws or rules issued by the Bank, if any, and for
any damage caused by fraud, abuse of authority or gross negligence. The following are considered
integral to a director’s duty of loyalty: (i) the prohibition from using corporate assets and confidential
information for private objectives; (ii) the prohibition to take advantage, or to allow another one to take
advantage, by action or omission, of the business opportunities of the company; (iii) the obligation to
exercise board powers only for the purposes for which the law, the bylaws or the meeting or the board of
directors have intended; and (iv) the obligation to take strict care so that board acts never go, directly or
indirectly, against the company’s interests. A director must inform the board of directors and the
supervisory committee of any conflicting interest he may have in a proposed transaction and must abstain
from voting thereon.
A director will not be liable if, notwithstanding his presence at the meeting at which a resolution
was adopted or his knowledge of such resolution, a written record exists of his opposition thereto and he
reports his opposition to the Supervisory Committee before any complaint against him is brought to the
board of directors, the Supervisory Committee, a shareholders’ meeting, a competent governmental
agency or the courts. Except in the event of our mandatory liquidation or bankruptcy, the shareholders’
approval of a director’s performance terminates any liability of a director with respect to us, provided that
shareholders holding at least 5.0% of our capital stock do not object and provided further that such
liability does not result from a violation of the law or the bylaws.
The Bank may initiate causes of action against directors upon a majority vote of the
shareholders. If the Bank has not initiated a cause of action within three months of a shareholders’
resolution approving its initiation, any shareholder may start the action on the Bank’s behalf and for its
account.
Pursuant to the bylaws, the Bank will indemnify all current and former directors, members of the
Supervisory Committee, and executive and senior management against any liabilities incurred by any
such person in connection with the defense of any issue, lawsuit or procedure in which they may be
involved as a result of the public offering, placement and trading of the shares of the Bank. This
indemnification shall include payment of amounts mandated in court judgments covered by insurance
98
policies currently in effect, except where the Director, member of the supervisory committee, manager,
former director, former syndic or former manager has been judged by final judgment to have acted with
fraud or gross negligence in performing their duties.
The Bank has contracted with Zurich S.A. to provide a US$18 million directors’ and managers’
liability policy which expires on March 31, 2013. The premium paid amounted to US$217,073, including
VAT.
Members of the Board of Directors
The following table shows the current members of the Bank's board of directors:
Last and first name
Date of Birth
Position
Beginning of
current term
Expiration of current
term
Class
01-26-60
Chairman
03-27-12
12-31-13
D
Blejer, Mario
06-11-48
Vice Chairman
03-14-11
12-31-12
D
Bossio, Diego Luis
Cufre, Marcelo Gustavo
Daniel
Reznik, Gabriel Adolfo
Gregorio
Zang, Saúl
Viñes, Ernesto Manuel
Dreizzen, Jacobo Julio
Wior, Mauricio Elías
Písula, Carlos Bernardo
Fornero, Edgardo Luis
José
Maza, Ada Mercedes (1)
09-09-79
06-26-58
10-03-65
Director
Director
Director
03-14-11
03-14-11
12-31-12
12-31-12
A
A
27-03-12
12-31-13
D
11-18-58
Director
03-14-11
12-31-12
D
12-30-45
02-05-44
10-13-55
10-23-56
12-16-48
10-14-51
Director
Director
Director
Director
Director
Director
03-27-12
03-14-11
03-14-11
03-27-12
03-27-12
12-31-13
12-31-12
12-31-12
12-31-13
12-31-13
04-30-10
12-31-11
D
D
D
D
D
B
09-17-58
Director
03-27-12
12-31-13
C
Elsztain, Daniel Ricardo
Efkhanian, Gustavo
Daniel
Elsztain, Alejandro
Gustavo
Ocampo, Andrés Fabián
12-22-72
Alternate Director
03-27-12
12-31-13
D
10-28-64
Alternate Director
03-27-12
12-31-13
D
03-31-66
11-09-56
Alternate Director
Alternate Director
03-14-11
03-14-11
12-31-12
12-31-12
D
D
04-11-59
11-22-60
01-11-60
01-17-33
Alternate Director
Alternate Director
Alternate Director
Alternate Director
03-27-12
03-27-12
04-30-10
03-27-12
12-31-13
12-31-13
12-31-11
12-31-13
D
D
B
D
Parrado, Mario César
Blasi, Gabriel Pablo
Alvarez Jorge Augusto
Bensadón, Federico León
(1)
Class C Regular Director took office on an interim basis until the BCRA issues a formal authorization (pursuant to
Communication “A” 4490) .
99
Below is a summarized biography of the Bank’s directors and alternate directors:
Eduardo Sergio Elsztain. Mr. Elsztain studied Economics at Universidad de Buenos Aires. He
has been engaged in the real estate business for more than 20 years and has been Chairman of the Board
of Directors and CEO of IRSA Inversiones y Representaciones Sociedad Anónima since 1991. He
founded Consultores Assets Management S.A. and has served as its President since 1989. He is also
Chairman of the Board of Cresud S.A.C.I.F. y A., Alto Palermo S.A. (APSA) and BrasilAgro Companhia
Brasilera de Propiedades Agricolas, among other companies. Eduardo Sergio Elsztain is the brother of
Alternate Directors Daniel R. Elsztain and Alejandro G. Elsztain.
Mario Blejer. Mr. Blejer obtained a PhD in Economics from the University of Chicago. From
1980 to 2001, he served as a senior consultant to the IMF in its European and Asia Departments. He was
Vice Chairman and subsequently Chairman of the Central Bank from 2001 to 2002. He served as Director
of the Center for Central Banking Studies of the Bank of England from 2003 to 2008 and as Advisor to
the Governor of the Bank of England during the same period. He is Director of IRSA Inversiones y
Representaciones Sociedad Anónima, Gems Investments and MAG Macroeconomic Advisory Group. He
is also an external advisor to the Monetary Policy Board of the Central Bank of Mauritius and professor
of post-graduate courses at Universidad Torcuato Di Tella.
Diego L. Bossio. Mr. Bossio joined the Bank in January 2009. He obtained a degree in
Economics from Universidad de Buenos Aires and a Master’s degree in Economics from Universidad de
San Andrés. Before joining the Bank, Mr. Bossio served as Undersecretary of Public Administration
under the jurisdiction of the General Secretariat of the Government of Mendoza, and as a coordinator of
the International Financing Unit (UFI) under the Treasury Department. Prior to that, he served as Head of
advisors to national senator Celso Alejandro Jaque. He also provided advice and coordinated the senator’s
work in the Federal Revenue Sharing Committee and the Budget and Treasury and Infrastructure,
Housing and Transportation Committees. He also served as junior economist at Exante Consultora
Económica’s International Economy division. In July 2009, President Cristina Fernández de Kirchner
appointed Mr. Bossio as Executive Director of ANSES (Federal Social Security Agency).
Marcelo Gustavo Cufre. Mr. Cufre joined the Bank in April 2009. He has a degree in
Architecture from Universidad de La Plata (UNLP). Mr. Cufre served as National Director of the
Architecture Division of the Ministry of Federal Planning, Public Investment and Services. Formerly, Mr.
Cufre served as Chairman of the Institute for Urban Development and Housing and as general Director of
the Housing Program in the Province of Santa Cruz. He also served as advisor in the Ministry of Federal
Planning, Public Investment and Services and as executive coordinator in the Ministry of Economy and
Public Works.
Pablo Daniel Vergara del Carril. Mr. Vergara del Carril obtained a degree in Law from
Universidad Católica de Argentina, where he teaches Commercial Law and Contract Law. He also
teaches Corporate Law, Contracts and Capital Markets in post-graduate courses. Mr. Vergara del Carril is
a member of the Legal Advisory Committee of the Argentine Chamber of Corporations (Cámara de
Sociedades Anónimas) as well as Vice President of the Competition Law Committee of the Colegio de
Abogados de la Ciudad de Buenos Aires. He is a member of the board of directors of Emprendimiento
Recoleta S.A. and Nuevas Fronteras S.A. and alternate director of Alto Palermo S.A. (APSA). He is one
of the partners at Zang, Bergel & Viñes Abogados law firm.
Gabriel Adolfo Gregorio Reznik. Mr. Reznik has been a Director of Banco Hipotecario since
June 2002. He has served as Director and Manager of the Technical Department of IRSA Inversiones y
Representaciones Sociedad Anónima. He currently serves as Director of Cresud S.A.C.I.F. y A.,
Emprendimiento Recoleta S.A. and IRSA Inversiones y Representaciones Sociedad Anónima. Mr. Reznik
has been responsible for the control over the execution of engineering works for IRSA Inversiones y
Representaciones Sociedad Anónima and Alto Palermo S.A. (APSA), and for the Office Building
Operation and Maintenance areas. He has a degree in Civil Engineering from Universidad de Buenos
Aires and a Master’s degree in Administration of Real Estate and Construction Businesses from Escuela
Politécnica de Madrid, Spain.
Saúl Zang. Mr. Zang obtained a Law degree from Universidad de Buenos Aires. He is a member
of the International Bar Association and the Interamerican Federation of Lawyers. He is a founding
partner of the law firm Zang, Bergel & Viñes Abogados. He is also Vice Chairman of IRSA Inversiones y
100
Representaciones Sociedad Anónima and Alto Palermo S.A. (APSA), Puerto Retiro and Fibesa. He is
first Vice Chairman of Cresud S.A.C.I.F. y A. and member of the board of directors of Nuevas Fronteras
S.A., Tarshop, Palermo Invest S.A. and BrasilAgro Companhia Brasilera de Propiedades Agricolas,
among other companies.
Zang, Bergel & Viñes Abogados.
Jacobo Julio Dreizzen. Mr. Dreizzen holds a degree in Economics from Universidad de Buenos
Aires and a Master’s degree in Economics from the Catholic University of Río de Janeiro. In 1986, he
was Deputy Executive Director of the IMF. In 1987, Mr. Dreizzen acted as advisor to the Presidency of
the Central Bank and in the period from 1987 to 1989, he was Director of that institution. From 1990 to
1999 he served as executive Director of the Investment Banking Division of Banco Galicia. Also, he
served as alternate Director at Banco de Inversión y Comercio Exterior S.A. (BICE). From 2000 to 2001,
he was Undersecretary of Finance for the Ministry of Economy. He served as a consultant to the IADB
(2002), UNDP (2005) and CAF (2005). From 2002 to 2005 he was President of Constellation, an
investment trust. He is currently IMPSA S.A.’s CFO and Director of Banco Hipotecario. Mr. Dreizzen
has been professor of Corporate Finance at the Universidad de Buenos Aires Capital Markets Graduate
Program since 1993.
Mauricio Elías Wior. Mr. Wior obtained a bachelor’s degree in Economics and Accounting from
Tel Aviv University in Israel and a Master’s degree in Business Administration from the same university.
Mr. Wior served as President of Radio Comunicaciones Móviles (Movicom) and as regional Vice
President for the Southern Cone for Bell until 2004.
Carlos Bernardo Písula. Mr. Písula obtained a degree in Accounting from Universidad de
Buenos Aires in 1973, where he subsequently completed various professional development and
specialization courses. Mr. Písula is a Class D Director of the Bank. During the period from 1996 through
1999 he acted as advisor to the Bank’s vice-presidency. Mr. Písula is the President of the Finance
Commission and Vice President of the Housing Commission of the Cámara Argentina de la
Construcción (CAC). He is also a board member of various private construction and real estate
companies.
Edgardo Luis José Fornero. Mr. Fornero has studied Law at Universidad de Lomas de Zamora.
He has been a Class B Director of the Bank since September 1997. Mr. Fornero currently serves as
Housing Secretary for La Bancaria banking association and as representative of the Bank's employee
union.
Ada Mercedes Maza. Mrs. Maza completed the Technical Degree in Legislative Administration
at the Legislative Power of the Province of La Rioja. She worked for 3 years at Compañía Financiera
Condecor and subsequently took office as Municipal Councilor in the Province of La Rioja for four years.
She later served as Private Secretary of the Vice Governor. In 1995 she took office as Operating Manager
of the Governor of La Rioja and later served as National Senator of such province for 10 years. She also
participated as member of the Latin Parliament.
Daniel R. Elsztain. Mr. Elsztain graduated with a major in Economic Sciences from Universidad
Torcuato Di Tella and has a Master’s degree in Business Administration from the same university. He
currently serves as Chief Operating Officer of IRSA Inversiones y Representaciones Sociedad Anónima,
and as Director at Alto Palermo S.A. (APSA) and Supertel Hospitality Inc., among other companies. Mr.
Daniel R. Elsztain is the brother of the Bank President Eduardo S. Elsztain and of the Alternate Director
Alejandro G. Elsztain.
101
(IEERAL). Mr. Efkhanian obtained a degree in Economics from Universidad de Córdoba. He currently
serves as alternate Director and Manager of the Bank’s Risk and Controlling division.
Alejandro G. Elsztain. Mr. Elsztain obtained a degree in Agricultural Engineering from
Universidad de Buenos Aires. He currently serves as General Manager and Second Vice Chairman of
Cresud S.A.C.I.F. y A. He also serves as Second Vice Chairman of IRSA Inversiones y Representaciones
Sociedad Anónima, Executive Vice Chairman of Alto Palermo S.A. (APSA), Vice Chairman of Nuevas
Fronteras and Hoteles Argentinos and Regular Director of Inversora Bolivar S.A. Mr. Alejandro G.
Elsztain is the brother of the Bank President Eduardo S. Elsztain and of the Alternate Director Daniel R.
Elsztain.
Andrés Fabián Ocampo. Mr. Ocampo obtained a law degree from the School of Law and
Political Sciences of Universidad Católica Argentina. He completed post-graduate studies at the Instituto
de Altos Estudios Empresariales of Universidad Austral under the Senior Management Program and in
Operating Finance, and in Banking Law at Universidad Argentina de la Empresa.
Mario César Parrado. Mr. Parrado obtained a degree in Business Administration from
Universidad Argentina de la Empresa (UADE). He has more than twenty years of experience in finance,
having served as President of The Boston Investment Group, Director of BankBoston Argentina and
Director of Fleet International Advisors S.A.
Jorge Augusto Álvarez. Mr. Álvarez studied Systems Programming at Universidad de
Champagnat in Mendoza. He has been Head of Division at Banco Hipotecario S.A. since 1979.
Federico León Bensadón. Mr. Bensadon graduated as civil engineering from Universidad de
Buenos Aires in 1957. He has been Class C Director of the Bank since September 2002. He is a member
of the board of directors of Telemetrix S.A. (Costa Salguero), Emaco S.A., Edilcenter S.A., Rafoy S.A.,
and DR S.A., among other companies. He is also Treasurer of the Cámara Argentina de la Construcción
and Secretary of the Unión Argentina de la Construcción.
Employment Contracts with Directors
The Bank has entered into employment contracts with some of its Directors. Ernesto Manuel
Viñes and Edgardo Fornero perform executive and/or administrative functions at the Bank and, therefore,
they are considered as Bank’s employees.
Election and Meetings of Directors
The Bank’s directors are elected for staggered two-year terms, unless they are elected to replace
a previously appointed director. Following implementation of the Programa de Propiedad Participada
(“PPP”), holders of Class B Shares are entitled to elect one director and one alternate director, provided
that such shares represent more than 2.0% of the Bank’s outstanding capital stock at the time the
shareholders’ meeting is convened. At the date of this Offering Memorandum, the PPP has not yet been
implemented. Upon the transfer of Class C Shares to certain companies engaged in housing construction
or real estate activities, holders of Class C Shares will be entitled to elect one director and one alternate
director for so long as such shares represent more than 3.0% of the Bank’s outstanding capital at the time
the shareholders’ meeting is convened. Until the foregoing conditions are met, such directors will be
elected by the Argentine Government. If the percentage of the Bank’s capital represented by Class B or
Class C Shares falls to 2.0% or 3.0% or lower, respectively, holders of such classes will be entitled to
vote jointly with Class D shareholders. Holders of Class D Shares are entitled to elect nine directors and
102
respective alternates. For so long as at least one Class A Share is outstanding, holders of Class A Shares
will be entitled to elect two directors and two alternates.
Pursuant to Article 11 (c) of the Bank’s bylaws, directors are appointed by the vote of the
majority of votes within each class of shares. The determination of the percentage of the Bank’s capital
represented by each class of stock is made in each case with respect to the capital outstanding as of the
date of the shareholders’ meeting at which the election in question will be held. In the event that no shares
of a determined class are represented at the second call of a shareholders’ meeting called for the purpose
of electing directors, the directors and alternates that the class is entitled to appoint will be elected by the
holders of the other classes of shares, voting as a single class, except in the event that no shareholders
attend a Class A shareholders’ meeting, in which case the members of the Supervisory Committee elected
by the Class A shareholders will appoint the directors and alternates that the holders of the Class A Shares
are entitled to appoint.
Pursuant to Article 11 (i) of the Bank’s bylaws, any or all directors elected by holders of a
particular class of shares may be removed without cause by a simple majority of shares of such class of
shares present at an ordinary shareholders’ meeting, provided that such removal was proposed in the
agenda for such meeting. Any directors so removed will be replaced by alternates of the same class, in the
order in which such alternates were elected, until an election for their replacement has been held (which
election may take place at the same meeting as the removal).
Any shareholder or group of shareholders holding more than 3.0% of the Class D Shares may
require that the Bank send a slate of candidates for election as directors of such class proposed by such
shareholder or group to each holder of Class D Shares. In addition, the board of directors may propose a
slate of candidates for election as directors by each class of shares, and such slate will be sent to each
holder of shares together with any slates proposed by shareholders as described in the preceding sentence.
Any shareholder present at a meeting may propose candidates for election as directors. If any shareholder
opposes the election of directors by slate, all directors will be elected individually, and each nominee on a
slate will be deemed to have been nominated individually. If no slate or individual, as the case may be,
obtains the majority of Class D votes present at the meeting, Class D shareholders shall elect one of the
two slates or individuals, as the case may be, which obtained more votes in the previous election.
Argentine law requires the majority of the Bank’s directors to be residents of Argentina. All
directors must establish a legal domicile in Argentina for service of notices in connection with their
duties. In addition, a director must satisfy certain suitability and experience requirements of the Central
Bank before obtaining regulatory approval to begin his term.
The bylaws of the Bank require the board of directors and the Executive Committee to meet at
least once per month. The Chairman of the board of directors may call a meeting of directors at any time
and must call such a meeting upon the request of any director. The quorum requirement for meetings of
the board of directors is a majority of the members, and if a quorum is not available one hour after the
time set for a regularly called meeting, the Chairman or the person serving in his place at such meeting
may invite the alternates of the same class as the absent directors to join the meeting in order to reach the
minimum quorum. Resolutions must be adopted by a majority of the directors present (except for the
cases when the director has an interest conflicting with those of the company); however, the Chairman or
the person serving in his place at a particular meeting is entitled to cast the deciding vote in the case of a
tie. By reason of the election of directors by classes of shares, as long as there exist several classes of shares,
the appointment of Directors by cumulative voting shall not apply.
Independence of Directors and Supervisory Committee
Pursuant to the terms of General Resolution 400 of the CNV (“Resolution 400”), members of the
board of directors or the Supervisory Committee of a public company such as the Bank shall inform the
CNV within 10 days from the date of their appointment, whether such members of the board of directors
or the Supervisory Committee are “independent.” For purposes of Resolution 400, a director shall not be
considered independent in certain situations, including where a director (i) owns a 35% equity interest in
a company, or a lesser interest if such director has the right to appoint one or more directors of a company
(hereinafter “significant participation”) or has a significant participation in a corporation having a
significant participation in the company or a significant influence on the company; (ii) depends on
shareholders, or is otherwise related to shareholders, having a significant participation in the company or
103
of other corporations in which these shareholders have directly or indirectly a significant participation or
significant influence; (iii) is or has been in the previous three years an employee of the company; (iv) has
a professional relationship or is a member of a corporation that maintains professional relationships with,
or receives remuneration (other than the one received in consideration of his performance as a director)
from, a company or its shareholders having a direct or indirect significant participation or significant
influence on the same, or with corporations in which these also have a direct or indirect significant
participation or a significance influence; (v) directly or indirectly sells or provides goods or services to
the company or to the shareholders of the same who have a direct or indirect significant participation or
significant influence, for higher amounts than his remuneration as a member of the administrative body;
or (vi) is the spouse or parent (up to second grade of affinity or up to fourth grade of consanguinity) of
persons who, if they were members of the administrative body, would not be independent, according to
the above listed rules.
Directors Carlos Bernardo Písula, Jacobo Julio Dreizzen, Federico León Bensadón, Diego Luis
Bossio, Ada Mercedes Maza and Mario César Parrado are independent members of the board of directors
pursuant to the terms of Resolution 400 of the CNV.
Directors Eduardo Sergio Elsztain, Saúl Zang, Ernesto Manuel Viñes, Gabriel Gregorio Reznik,
Pablo Vergara del Carril, Mauricio Elias Wior, Mario Blejer, Marcelo Gustavo Cufre, Edgardo Luis José
Fornero and alternate directors Ricardo Daniel Elsztain, Jorge Augusto Alvarez, Alejandro Gustavo
Elsztain, Gustavo Daniel Efkhanian, Andrés Ocampo and Gabriel Pablo Blasi are non-independent
members of the board of directors pursuant to the terms of Resolution 400 of the CNV.
Syndics appointed by the Sindicatura General de la Nación (SIGEN) are non-independent
members.
Syndics José Daniel Abelovich, Marcelo Héctor Fuxman and Ricardo Flammini, and alternate
syndics Roberto Murmis, Noemí Cohn and Silvia Cecilia De Feo are independent members of the
Supervisory Committee pursuant to Resolution 400 of the CNV.
Executive Committee
At the General Extraordinary Shareholders’ Meeting held on March 15, 1999, article 19 of the
Bank’s bylaws was amended to create an Executive Committee. The Executive Committee, whose
general purpose is to oversee the Bank’s ordinary business, is comprised of five to nine Directors elected
by Class D shareholders and an equal or lesser number of Alternate Directors of the same class of shares
as the board of directors shall determine. The Executive Committee is required to meet at least once per
month or whenever called by the Chairman.
Pursuant to the Bank’s bylaws, the powers and duties of the Executive Committee include (i)
conducting the ordinary business of the Bank as well as any matters delegated to it by the board of
directors; (ii) developing commercial, credit-related and financial policies subject to approval by the
board of directors; (iii) creating, maintaining and restructuring the Bank’s administration; (iv) creating
Special Committees, approving their structures or functional levels and determining the scope of their
duties; (v) naming general managers, the Executive Vice President and other members of the senior
management; (vi) proposing to the board of directors the creation of branches, agencies or representative
offices inside or outside Argentina; (vii) supervising management of the Bank’s subsidiaries; (viii)
submitting contracting guidelines, annual budgets, cost and investment estimates, necessary debt levels
and plans of action for consideration of the board of directors; (ix) approving novations, refinancings,
debt write-offs and similar matters when necessary in the ordinary course of business of the Bank; and (x)
setting forth its own internal regulations.
The current members of the Executive Committee are:
•
•
•
•
•
Eduardo Sergio Elsztain (Chairman);
Saúl Zang (member);
Mario Blejer (member);
Ernesto Manuel Viñes (member);
Pablo Daniel Vergara del Carril (member);
104
•
•
Gabriel Adolfo Gregorio Reznik (member); and
Mauricio Elías Wior (alternate member).
Senior Management
As of December 31, 2012, the Bank’s senior management consists of the following officers:
Name
Position
Fernando Rubín
Gerardo Rovner
Manuel Herrera
Esteban Guillermo Vainer
Roland Costa Picazo
Favio Gabriel Podjarny
Gabriel Pablo Blasi
Javier Varani
General Manager
Auditing Manager
Legal Department Manager
Corporate Banking Manager
Organizational and Quality Development Manager
Finance Manager
Institutional Relations Manager
Below is a summarized biography of the Bank’s senior managers:
Fernando Rubín. Mr. Rubín joined the Bank as Organization Development manager in July
2001. He obtained a degree in Psychology from Universidad de Buenos Aires and a post-graduate degree
in Human Resources and Organizational Analysis in E.P.S.O. (Organizations Social Psychology School).
Prior to joining the Bank, he served as Human Resources Corporate Manager for IRSA Group. He
worked as Human Resources Director of LVMH (Louis Vuitton Moet Hennessy) and Chandon Wineries
in Argentina and Brazil. He also served as Human Resources Manager for Roland Berger & PartnerInternational Management Consultant.
Gerardo Rovner. Mr. Rovner holds a degree in Economics from Universidad de Buenos Aires.
He has been working at Banco Hipotecario for sixteen years, acting as Manager of the Risk Policy,
Collections Management and Operating Risks divisions. In February 2012, he was appointed Internal
Audit Manager. He has specialized in statistics and has been teaching that subject at the School of
Economic Sciences since 1994.
Zang, Bergel & Viñes.
(IEERAL). Mr. Efkhanian obtained a degree in Economics from Universidad de Córdoba.
Manuel Herrera. Mr. Herrera joined the Bank in 2009. He holds a degree in Business
Administration from Universidad Católica de Argentina. He carried out post-graduate studies at Harvard
University. Mr. Herrera has sixteen years of experience in the Argentine and US financial systems. Prior
to joining the Bank, he headed various areas within the Corporate Banking and Investment Banking units
at BankBoston Argentina, subsequently acquired by StandardBank South Africa and US.
Esteban Guillermo Vainer. Mr. Vainer joined the Bank on August 17, 2004. He obtained a
degree in Business Administration from Universidad Argentina de la Empresa and a Master’s degree in
105
Business Administration from the IAE. He was Head of Banco Galicia’s Insurance Banking Division for
nine years.
Roland Costa Picazo. Mr. Costa Picazo holds a degree in Employment Relationships from
Universidad de Buenos Aires. He has taken different updating courses and programs both in Argentina
and abroad. He gained professional experience at IRSA Inversiones y Representaciones Sociedad
Anónima, CRESUD S.A.C.I.F. y A. and Alto Palermo S.A. (APSA) as Human Resources Manager and at
Bodegas Chandon and LVMH Argentina as Head of Recruitment and Development.
Favio Gabriel Podjarny. Mr. Podjarny joined the Bank in December 2005. He is the Manager of
the Administration, Logistics and Collections division. He served as representative of the Board of
Directors of IRSA Inversiones y Representaciones S.A., being in charge of the Abril Club de Campo
Project. Formerly, he had been Director of the Centro de Empleo y Emprendimientos Ariel Job Center,
being in charge of the overall administration and management of the organization. He was also in charge
of the overall management of Sociedad Hebraica Argentina in the capacity as the entity’s Executive
Director.
Javier Varani. Mr. Varani joined the Bank in June 2005 as Institutional Relations Manager. He
had formerly worked in the Media and Institutional Affairs divisions of Telecom Argentina and Telecom
Personal. From 1995 to 1999, Mr. Varani was city councilor for Vicente López (Province of Buenos
Aires). He is a university professor specialized in municipal matters.
Supervisory Committee
Article 20 of the Bank’s bylaws provide for a Supervisory Committee consisting of five
members (“Syndics”) and five alternate members. Article 20 (b) establishes that the members of the
Supervisory Committee shall be elected as follows: three members of the Supervisory Committee and
three alternates shall be elected jointly by the Class C and Class D Shares, one member and one alternate
shall be elected by the Class B Shares (to the extent such shares represent more than 2.0% of the Bank’s
outstanding capital stock) and one member and one alternate shall be elected by the Class A Shares.
Syndics and alternate syndics shall be appointed for a two-year period. Pursuant to Argentine law, only
lawyers and accountants admitted to practice in Argentina may serve as syndics of an Argentine sociedad
anónima.
If Class B Shares do not represent 2.0% of the Bank’s capital stock and the Class C Shares do
not represent 3.0% of the Bank’s capital stock, the Supervisory Committee will be reduced to three
members and three alternates. Two members and two alternate members will be elected jointly by the
Class B, C and D Shares and one member and one alternate member will be elected by the Class A
Shares.
Meetings may be called by any of the syndics and shall be held with the presence of the absolute
majority of its members, and resolutions shall be adopted by a majority of votes. Pursuant to article 294
of the Corporate Law 19.550, as amended, the primary duties and powers of the Supervisory Committee
are to: (i) supervise and inspect the corporate books and records whenever necessary, but at least
quarterly; (ii) attend meetings of the directors, executive committee and shareholders; (iii) prepare an
annual report concerning the Bank’s financial condition and submit it to the shareholders at the ordinary
meeting; (iv) provide certain information concerning the Bank upon written request of any shareholder
holding at least 2.0% of the Bank’s outstanding capital; (v) call an extraordinary shareholders’ meeting
when necessary, on its own initiative or at the request of the shareholders, or an ordinary one when the
board of directors fails to do so; (vi) include matters for the agendas of any meeting the Supervisory
Committee must attend; (vii) supervise and monitor Bank’s compliance with laws and regulations, the
106
bylaws and the shareholders’ decisions; (viii) investigate written complaints submitted by holders of at
least 2.0% of the Bank’s capital; (ix) request judicial dissolution of the Bank and supervise the process;
(x) designate directors when there are none remaining on the board of directors and the shareholders have
failed to appoint replacements; and (xi) request judicial intervention in extraordinary circumstances, such
as executive officer malfeasance threatening the Bank’s condition. In performing these duties, the
Supervisory Committee does not control the operation of the Bank.
On April 29, 2009, each of the shareholders of Class A, B, C and D shares held extraordinary
shareholders’ meetings. At those meetings: a) Class D and C shareholders appointed José Daniel
Abelovich, Marcelo Héctor Fuxman and Ricardo Flammini as syndics to hold office for two-year terms
and Roberto Murmis, Noemí Cohn and Silvana Cecilia De Feo as alternate syndics; b) Class A
shareholders appointed Alfredo Groppo as syndic, and Silvana Gentile as alternate syndic; and c) Class B
shareholders appointed Martín Scotto as syndic and Nora Tibis as alternate syndic.
Currently, the Supervisory Committee is composed of five syndics and five alternate syndics:
Name
Martin Scotto
Alfredo Groppo
José Daniel Abelovich
Marcelo Héctor Fuxman
Ricardo Flammini
Nora Tibis
Silvana Gentile
Roberto Murmis
Noemí Cohn
Silvia Cecilia De Feo
Position
Class
Expiration of Term
Syndic
Syndic
Syndic
Syndic
Syndic
Alternate Syndic
Alternate Syndic
Alternate Syndic
Alternate Syndic
Alternate Syndic
B
A
C and D
C and D
C and D
B
A
C and D
C and D
C and D
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
Below is a summarized biography of the members of the Bank’s Supervisory Committee:
Martín Esteban Scotto. Mr. Scotto holds a degree in Law from Universidad de Buenos Aires
(1996) and works for the Sindicatura General de la Nación. Mr. Scotto has been Syndic of Banco de
Inversión y Comercio Exterior S.A. (BICE) and Nación Seguros de Vida S.A since 2001. Since 2002, Mr.
Scotto is a member of the supervisory committee of Nuevo Banco Bisel S.A., Nuevo Banco Suquía S.A.
and Bisel Servicios S.A.
Alfredo Héctor Groppo. Mr. Groppo holds a degree in Accounting from Universidad de Buenos
Aires (1977) and works of the Sindicatura General de la Nación (SIGEN). He has been Syndic of Nación
Factoring S.A., Nación Bursátil S.A., Nación Servicios S.A. and Polo Tecnológico Constituyentes S.A.
since 2006.
José D. Abelovich. Mr. Abelovich obtained a degree in Accounting from Universidad de Buenos
Aires. He is a founding member and partner of Abelovich, Polano & Asociados S.R.L., a member firm of
Nexia International, an accounting firm in Argentina. Formerly, he had been Manager of Harteneck,
López y Cía/Coopers & Lybrand, and served as a senior advisor in Argentina for the United Nations and
the World Bank. He is a member of the Supervisory Committees of Cresud S.A.C.I.F. y A., IRSA
Inversiones y Representaciones Sociedad Anónima, Alto Palermo S.A. (APSA), Hoteles Argentinos e
Inversora Bolívar S.A., among other companies.
Marcelo H. Fuxman. Mr. Fuxman obtained a degree in Accounting from Universidad de Buenos
Aires. He is a partner of Abelovich, Polano & Asociados S.R.L., a member firm of Nexia International,
an accounting firm in Argentina. He is also a member of the Supervisory Committee of Cresud S.A.C.I.F.
y A., IRSA Inversiones y Representaciones Sociedad Anónima and Alto Palermo S.A. (APSA), among
other companies.
Ricardo Flammini. Mr. Flammini holds a degree in Accounting from Universidad Nacional de
La Plata. Mr. Flammini acted as syndic of the Bank from September 1997 until August 2001 and on May
30, 2003 he was elected for a two-year term. Mr. Flammini worked as auditor for the Tribunal de Cuentas
de la Nación from 1957 to 1976 and was a member of the former Corporación de Empresas Nacionales
(ex SIGEP and SIGEN) from 1976 until August 2001. Formerly, he had acted as syndic of Segba S.A.,
107
Hidronor S.A., YPF S.A., YCF S.E., Encotesa, Intercargo S.A., Banco Caja de Ahorro S.A., Pellegrini
S.A. Gerente de Fondos Comunes de Inversión, Nación Bursátil Sociedad de Bolsa S.A., Garantizar
S.G.R. and Nación AFJP. He currently serves as syndic of BACS Banco de Crédito y Securitización S.A.,
BHN Sociedad de Inversión S.A., BHN Vida S.A., BHN Seguros Generales S.A. and ACH S.A.
Nora Lía Tibis. Ms. Tibis holds a Law degree from Universidad de Buenos Aires and works for
the Sindicatura General de la Nación (SIGEN). She is a Syndic in Banco de Inversión y Comercio
Exterior S.A. (BICE), AFJP Nación, Nación Leasing S.A., Nación Factoring S.A. and Dioxitek S.A.
Silvana María Gentile. Ms. Gentile has been a member of the Supervisory Committee of the
Bank since 1997. She has served as a member of Sindicatura General de la Nación (SIGEN) since 1979
and currently serves as a Syndic of Pellegrini S.A. and Nación AFJP S.A. Ms. Gentile holds degrees in
Accounting and Business Administration from Universidad de Lomas de Zamora.
Roberto Murmis. Mr. Murmis holds a degree in Accounting from Universidad de Buenos Aires.
Mr. Murmis is a partner at Abelovich, Polano y Asociados S.R.L., a member firm of Nexia International.
Mr. Murmis worked as an advisor to the Secretariat of Federal Revenue under the Ministry of Economy.
Furthermore, he is a member of the supervisory committee of Cresud S.A.C.I.F. y A., IRSA Inversiones y
Representaciones Sociedad Anónima, Futuros y Opciones S.A. and Llao Llao Resorts S.A.
Noemí Cohn. Ms. Cohn graduated as an Accountant from Universidad de Buenos Aires. She is a
partner of Abelovich, Polano & Asociados S.R.L./Nexia International, an accounting firm in Argentina,
and serves in the Auditing division. She worked at the auditing firm Harteneck, López and Company,
Coopers & Lybrand in Argentina and in Los Angeles, California. Mrs. Cohn is a member of the
Supervisory Committees of Cresud S.A.C.I.F. y A., IRSA Inversiones y Representaciones Sociedad
Anónima and Alto Palermo S.A. (APSA), among other companies.
Silvia De Feo. Ms. De Feo holds a degree in Accounting from Universidad de Belgrano. She is a
manager at Abelovich, Polano & Asociados S.R.L, a member firm of Nexia International, an accounting
firm in Argentina, and acted as manager at Harteneck, López & Cía/Coopers & Lybrand.
Auditors
The Bank’s audited financial statements included in this offering memorandum have been
audited by Price Waterhouse & Co. S.R.L., member firm of PricewaterhouseCoopers, an accounting firm
of certified independent public accountants, as stated in their reports appearing herein, registered with the
Professional Council in Economic Sciences (CPCE) of the Autonomous City of Buenos Aires, Volume 1,
Folio 17, and domiciled at Bouchard 557 7th floor (C1106ABG), in the Autonomous City of Buenos
Aires, Argentina. Certified public accountants Norberto F. Montero (CPCE Autonomous City of Buenos
Aires Volume 167 – Folio 179) and Carlos Horacio Rivarola (CPCE Autonomous City of Buenos Aires
Volume 124 – Folio 225) were designated as external auditor and alternate external auditor, respectively,
by the Shareholders' Meetings held on May 23, 2008, April 29, 2009 and April 30, 2010. At the General
Ordinary Shareholders' Meeting dated March 27, 2012 Accountant Marcelo Alejandro Trama (CPCE
108
Other information related to the administrative, supervisory and special committee bodies:
Committees reporting to the Board of Directors:
(i)
Audit Committee
The Bank has an audit committee as required by the laws of the National Securities Commission
and the Central Bank.
Composition:
Carlos B. Pisula
Ada Mercedes Maza
Gabriel A. Reznik
Gerardo Rovner
Director
Director
Director
Audit Manager
Duties:
Members of the audit committee shall hold their positions for a term of at least two years,
provided their mandate as director does not expire before, and for a maximum period of three years. The
Audit Committee shall act in accordance with the provisions set forth in Communication “A” 5042, and
related provisions issued by the Central Bank. The Audit Committee shall meet regularly and at least once
a month.
Pursuant to Communication “A” 5042, the Audit Committee shall have the following duties, among
others:
•
•
•
•
•
•
•
•
To supervise the Bank’s internal control systems through periodic evaluation.
To contribute to the improvement of internal controls and be aware of the planning of the
independent auditors.
To review and approve the internal audit function and process.
To consider the comments made by the Bank’s independent auditors with respect to internal control.
To review the results obtained by the Supervisory Committee.
To maintain constant communication with the Superintendency of Financial and Exchange
Institutions.
To review the Bank’s annual and quarterly financial statements and the corresponding reports
delivered by the independent auditors; and
To periodically review compliance with rules regarding the independence of the external auditors.
109
(ii)
Social and Institutional Matters Committee:
Composition:
Eduardo Sergio Elsztain
Edgardo Fornero
Ada Mercedes Maza
Fernando Rubin
Javier Varani
Chairman
Director
Director
General Manager
Manager of Institutional Affairs
Duties:
•
To define the policies governing donations and subsidies for their approval by the Board of
Directors;
• To approve cash donations for amounts up to Ps.100,000;
• To approve the donation of unused real property on the Bank’s balance sheet;
•
To grant subsidies for social and/or cultural purposes other than such set forth in Section 13
of the Mortgage Bank Law;
•
To propose the approval of donations and/or subsidies exceeding Ps.100,000 to the Board of
Directors, and
•
To take part in any matter relating to the Bank’s image or insertion in society.
(iii)
Information Technology and Systems Committee
Composition:
Edgardo Fornero
Ada Mercedes Maza
Gabriel A. Reznik (alternate)
Carlos D. Berruezo
Ricardo Gaston
Director
Director
Director
Manager of Operations and Systems
Manager of Individual Security and Logistics
Duties:
The Information Technology and Systems Committee performs its duties in accordance with the
provisions of Communication “A” 4609 and related provisions and shall meet regularly and at least once
every three months.
This Committee is responsible for ensuring that related information and technology systems
meet the needs of the Bank’s business and are in line with the Bank’s strategic plans. Accordingly, this
Committee is responsible, among other things, for the following activities: (i) to define a technology and
systems plan which shall be prepared and approved by the Bank’s Board of Directors in accordance with
the guidelines laid down by it and the Argentine Central Bank rules in furtherance of the Bank’s strategic
goals, which shall contain a project schedule; to follow up on implementation thereof and progress of
such projects, allocation of priorities, the resources and sectors concerned; (ii) to oversee adequate
performance of the information technology area and efficiency; (iii) to regularly review such plan and
compliance therewith; (iv) to review reports on information technology, and (v) to maintain adequate
contact with the division of independent auditors of the Superintendency of Financial and Exchange
Institutions.
(iv)
Money Laundering Prevention Committee
Composition:
Director
110
Mauricio Elias Wior
Jorge Gimeno
Director
Manager of Risk and Controlling Division
Manager of Money Laundering Prevention Unit
Duties:
•
•
To act in accordance with the provisions contained in the Central Bank's rules and regulations as
stated in Communication ¨A¨ 4835 and its supplementary sections and amendments.
To follow the rules and regulations of Resolution No. 33/2011 of the Unit of Finance
Information of Law No. 25,246 and its regulatory decrees, and other supplementary rules and
amendments.
(v)
Executive Committee
Composition:
Mario Blejer
Pablo D. Vergara del Carril
Saúl Zang
Gabriel A. Reznik
Mauricio Elias Wior (alternate)
Chairman
Director
Director
Director
Director
Director
Director
At the General Extraordinary Shareholders’ Meeting held on March 15, 1999, Section 19 of the
Bank’s by-laws were amended to create an Executive Committee. The Executive Committee’s general
purpose is to oversee the Bank’s ordinary course of business and it is comprised of five to nine Directors
selected by Class D shareholders and an a number of alternate directors of the same class of shares as the
board of directors shall determine. The Executive Committee is required to meet at least once a month or
whenever called by the Chairman.
Committees Reporting to the Executive Committee:
(i) Finance Committee:
Composition:
Mauricio Elias Wior
Jacobo Julio Dreizzen
Carlos Bernardo Pisula
Mario Blejer
Fernando Rubin
Gabriel Pablo Blasi
Alejandro Sokol
Maximiliano Weber
Hernán Finkelstein
Director
Director
Director
Director
General Manager
Finance Manager
Market Risk Manager
Budget and Management Control Manager
Assets and Liabilities Administration Manager
Duties:
•
To control the liquidity and creditworthiness of the company;
•
To define the policies for investments in liquid assets and take part in the management of
financial assets and liabilities;
•
To approve debt issuance and placement transactions within the framework and pursuant to
the methods determined by the corporate shareholders’ meetings;
111
•
To recommend the credit limits per product to domestic and international banks to be
approved by the Credit Committee;
•
To approve the purchase and sale of government and corporate securities and futures,
derivatives and arbitration transactions with fixed and floating rate securities;
•
To take part in the evaluation and approval of financial products; to fix, evaluate and control
the financial risks of the different investment portfolios;
•
To recommend lending and borrowing interest rates, to assign fund transfer costs;
•
To fix, from time to time, the global quotas for the different credit lines, in accordance with
the evolution of the financial planning;
•
To approve the engagement of banks, rating agencies, law firms and auditors or due
diligence services in respect of the issuance and placement of debt securities; and
•
To take part in the purchase of treasury shares (pursuant to the guidelines set forth by the
Board of Directors) and the Bank’s debt securities.
(ii) Credit Committee:
Composition:
Mauricio Elias Wior
Jacobo Julio Dreizzen
Saúl Zang
Carlos Bernardo Pisula
Fernando Rubin
Manuel Herrera
Marcelo Portas
Director
Director
Director
Director
Director
General Manager
Corporate Loan Manager
Credit Risk Manager
Duties:
•
To define the Risk policies of the different Individual, PyME and Corporate Credit lines
pursuant to the different rules and regulations in force;
•
To approve Corporate Credit lines financings for amounts up to Ps.2,500,000;
•
To approve PyME Credit lines financing;
•
To approve Individual Credit lines financings (*) for amounts exceeding Ps.200,000 and up
to Ps.1,000,000;
•
To issue decisions in respect of Corporate Credit Lines financings for their consideration by
the Executive Committee when their amounts exceed those indicated in paragraph 2;
•
To approve resolutions on refinancing, grace periods, foreclosure on trusts, etc. upon
proposal of the Corporate Business Area;
•
To define provisioning policies;
•
To delegate duties, with the approval level being determined at its discretion; and
•
To define the policies to handle Delinquency and auctions.
(*) Includes all the financings provided to the customer or economic group, if the financing
exceeds the basic margin provided for by the Central Bank rules on credit classification, or
exceeds 2.5% of the Bank’s Computable Net Worth, regardless of the amount of the financing,
the prior authorization of the Board of Directors shall be obtained (which decision shall be
adopted by simple majority).
(iii) Employee Incentive Committee:
112
Composition:
Saúl Zang
Gabriel A Reznik
Chairman
Director
Director
Duties:
•
•
•
To evaluate and issue a decision in respect of the nominations of candidates to the board to be
elected by the Company’s class “D” shareholders’ meetings and to prepare a list thereof;
To propose directors to serve in subsidiaries; and
To propose the compensation of the members of the Board of Directors and of the Bank’s and its
subsidiaries’ committees.
(iv) Housing Committee:
Composition:
Saúl Zang
Gabriel A Reznik
Marcelo Gustavo Cufré
Edgardo Fornero
Ada Mercedes Maza
Fernando Rubin
Esteban Vainer
Chairman
Director
Director
Director
Director
Director
Director
General Manager
Duties:
•
•
•
•
To investigate and detect methods of facilitating access to credit
To evaluate and judge proposals of plans for the financing of housing on a large scale
To delegate responsibility to persons for the representation of the Bank before official entities or
before International Organizations of Credit that align with the fulfillment of this Committee's
objectives
To propose special house financing programs under the Board’s Policies
(v) Risk Management Committee:
Composition:
Mario Blejer
Julio Dreizzen
Mauricio Wior
Fernando Rubin
Favio Podjarny
Director
Director
Director
General Manager
(vi) Corporate Governance Committee:
Composition:
Carlos Pisula
Saúl Zang
Ernesto M. Viñes
Fernando Rubin
Director
Director
Director
General Manager
113
(vii) Ethics Committee:
Composition:
Ada Mercedes Maza
Carlos Pisula
Gabriel Reznik
Director
Director
Director
Compensation
Argentine law provides that the compensation paid to all directors and statutory auditors in a
fiscal year shall not exceed 5.0% of net income for such year, if the company is not paying dividends in
respect of such net income. Argentine law increases the annual limitation on director compensation to up
to 25.0% of net income based on the amount of such dividends, if any are paid. The board of directors
determines the compensation of directors who are also senior managers, with the affected directors
abstaining. In the case of directors that perform duties at special committees or perform administrative or
technical tasks, the aforesaid limits may be exceeded if a shareholders’ meeting so approves and such
issue is included in the agenda, and regulations of the CNV are complied with. In any case, the
compensation of all directors and members of the Supervisory Committee requires shareholder
ratification at an ordinary meeting.
The Bank’s Board of Directors held a meeting on August 14, 1998 and established an incentive
compensation plan for executive officers and managers, which was amended to include Directors who are
members of the Executive Committee at a Shareholders’ Meeting held on April 28, 1999 and became
effective following the consummation of the privatization (the “Management Plant”). The purpose of the
plan was to provide incentives and rewards to those individuals largely responsible for our success and
growth, to help us attract and retain such employees and to associate their interests with those of the
Bank’s shareholders. Under the Management Plan, participants were entitled to receive a payment based
on the appreciation in the value of the Bank’s Class D Shares pursuant to a formula set forth in the
Management Plan. Participation in the Management Plan was subject to various terms and conditions
including eligibility and vesting requirements. Payments pursuant to the Management Plan were made
through a related charge to income.
At the General Ordinary Shareholders’ Meeting No. 47 held on May 31, 2004, the Bank’s
shareholders renewed the compensation plan approved by the General Ordinary Shareholders’ Meeting
No. 13 under the same terms and conditions for a new period of five (5) years. Upon expiration of such
period, the Management Plan was not renewed.
In addition, the Shareholders’ Meeting held on April 28, 1999 established a profit-sharing plan
pursuant to which participants received specific variable shares in the profits of the Bank based on the
Bank's achievement of certain goals related to return on equity. Such plan is currently in force and
applicable only to the Bank's senior managers.
On July 21, 2006, the Bank’s shareholders approved an amendment to Article 14 of the Bank’s
by-laws in relation to the compensation of the Executive Committee. Pursuant to such amendment the
members of the Executive Committee will receive fees not in excess of 5% of the income after taxes for
the year if no dividends are distributed. If a dividend is distributed, the fees may amount up to 15% of
computable income. The above indicated compensation percentages shall be previously reduced by the
amounts paid to the other members of the Bank’s Board of Directors.
The aggregate amount of compensation paid by the Bank for the years ended December 31, 2011
and 2012 to directors was Ps. 8.0 million and Ps. 9.5 million, respectively, while aggregate amounts paid
to statutory auditors were Ps. 1.7 million and Ps. 2,225 million, respectively.
Employees
The following table sets forth the number of the Bank’s employees as of December 31, 2010,
2011 and 2012:
114
Main Office
Branches
Total
12/31/2010
1,156
610
1,766
12/31/2011
1,255
637
1,892
12/31/2012
1,319
661
1,980
The Bank’s employees are represented by a federal union and union membership is optional. As
of December 31, 2012, a certain number of the Bank’s employees were members of the union. The Bank
has not experienced significant conflicts with the union and believes that relationships with its employees
are highly satisfactory. The employees holding managerial positions are not members of any union.
Share Ownership:
The following table sets forth the number of Bank’s shares held by Bank’s Directors as of
December 31, 2012.
Director
Number of SharesClass
7,800 D
Elsztain, Alejandro Gustavo
140,000 D
30,000 D
Ocampo, Andrés
100 D
115
PRINCIPAL SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Principal Shareholders
The following table sets forth information regarding ownership of the Bank’s capital stock in
Argentina and abroad as of December 31, 2012.
Shareholder
Class
Argentine Government/ Banco de la
Nación Argentina as trustee of
Fideicomiso de Asistencia al Fondo
Federal de Infraestructura Regional.1
A
Banco de la Nación Argentina, as
trustee of the PPP
B
Banco de la Nación Argentina, as
trustee of Fideicomiso de Asistencia
al Fondo Federal de Infraestructura
Regional.
C
THE BANK OF NEW YORK ADRs1
D
Principal Shareholders2
D
D
Directors3
D
Other
D
ANSES
D
TOTAL
Number of
Shares
658,530,880
75,000,000
75,000,000
90,905,000
446,515,208
36,634,733
177,900
43,199,014
74,037,265
1,500,000,000
Percentage
of Shares
43.90%
5.00%
5.00%
6.06%
29.77%
2.44%
0.01%
2.88%
4.94%
100.00%
Number of
Votes
658,530,880
75,000,000
75,000,000
272,715,000
1,317,028,740
533,700
129,597,042
222,111,795
2,750,517,157
Percentage
of Votes
23.94%
2.73%
2.73%
9.92%
47.88%
0.00%
0.02%
4.71%
8.08%
100.00%
(1)
Comprises 9,090,500 ADRS (10 shares = 1ADR) the voting powers of which are exercised by the Argentine
Government.
(2)
As of December 31, 2012 Principal Shareholders include: (i) 5% held by Tyrus S.A., a company organized under
the laws of the Republic of Uruguay, in which IRSA Inversiones y Representaciones Sociedad Anónima holds 100% of
its capital stock; (ii) 5% held by Ritelco S.A., a company organized under the laws of the Republic of Uruguay, in which
IRSA Inversiones y Representaciones Sociedad Anónima holds 100% of its capital stock; (iii) 5% held by IRSA
Inversiones y Representaciones Sociedad Anónima; (iv) 5% held by Inversora Bolívar S.A., a company organized under
laws of Argentina, in which IRSA Inversiones y Representaciones Sociedad Anónima holds 95.13% of its capital stock;
(v) 4.99% held by E-Commerce Latina S.A., a company organized under laws of Argentina, in which IRSA Inversiones
y Representaciones Sociedad Anónima holds 99.999999% of its capital stock; and (vi) 4.78% held by Palermo Invest
S.A., a company organized under the laws of Argentina, in which IRSA Inversiones y Representaciones Sociedad
Anónima holds 99.9999993% of its capital stock. In addition, IRSA Inversiones y Representaciones Sociedad Anónima
is controlled by (i) Cresud, which holds 64.5% of its capital stock (373,267,973 shares), (ii) 7,248,030 shares held by
IFISA (iii) 628,070 shares held by Consultores Assets Management S.A.; and (iv) 1,218,250 shares directly held by Mr.
Eduardo Sergio Elsztain. Lastly, Mr. Eduardo Sergio Elsztain can be regarded as beneficiary holder of 38.79% (on an
entirely diluted basis) of the aggregate number of shares of Cresud, which includes (i) 189,051,574 shares beneficially
owned by IFISA, of which Mr. Eduardo Sergio Elsztain can be regarded as beneficial owner; (ii) 870 common shares
beneficially owned by Consultores Venture Capital Uruguay S.A.; and (iii) 25,553 common shares directly owned by
Eduardo Sergio Elsztain. Furthermore, Mr. Eduardo Sergio Elsztain can be regarded as beneficial owner of 84,591,744
warrants of Cresud under which he is entitled to acquire 29,692,208 new common shares upon exercising such warrants.
(3)
As of December 31, 2012, the Directors Alejandro Gustavo Elsztain, Eduardo Sergio Elsztain, Pablo Vergara del
Carril and Andrés F. Ocampo held 140,000; 7,800; 30,000 and 100 Class D shares, respectively.
116
Voting Rights of Principal Shareholders
Holders of a majority of Class D shares are entitled to elect nine members of the Board. See
“Additional Information– Capital Stock – Voting Rights”. Under the Privatization Law and pursuant to
Article 6 of the Bank’s Bylaws, so long as it holds at least one Class A share, the Argentine Government
will have the right to elect at least two regular directors and two alternate directors to the board. See
“Directors, Senior Managers and Members of the Supervisory Committee”. Principal Shareholders do
not have different voting rights within the same Class. Article 6 of the Bank’s By-laws requires, subject to
certain exceptions, the prior approval of the Argentine Government as holder of Class A shares of any
person’s (including its affiliates’) direct or indirect acquisition, by stock purchase, merger or otherwise, of
Class D Shares or securities convertible into Class D Shares which, together with prior Class D Shares
held by the acquirer, represent 30.0% or more of the Bank’s capital stock. The approval of the holders of
Class A Shares is also required to approve certain changes in the Bank, including among others, spin-offs,
the transfer of a substantial part of its loan portfolio to a third party and a change in the Bank’s corporate
purpose.
So long as the Principal Shareholders vote their Class D Shares together, they have sufficient
voting power to elect a majority of the Bank’s board of directors and to prevail in all matters to be
decided by a class vote of holders of Class D Shares.
The Argentine Government has no limitation with respect to the disposition of any of the Class A
Shares, except for one Class A Share, which must always be kept by the Argentine Government pursuant
to Section 20 of the Law on Regional Development and Employment Creation. In addition, pursuant to
the Bank’s By-laws, if as a result of a sale of Class A Shares by the Argentine Government, Class A
Shares represent less than 42% of the Bank’s capital stock, the Class D Shares will lose the triple vote. In
this event, the Class D Shares will lose its current majority at the General Shareholders’ Meetings, and
depending on the number of shares held by the Argentine Government it may have sufficient voting
power to prevail at general shareholders’ meetings except for certain decisions that require qualified
majorities.
Percentage of shares recorded in Argentina and percentage of shares recorded abroad
The following table shows information on the portion of each class of shares held in Argentina and
abroad and the number of holders registered in Argentina and abroad as of December 31, 2012.
Number of
Shares
Class
Percentage of
Shares
Percentage of
Shares
Percentage of
Shares held in
Argentina
Percentage of
Shares held
outside
Argentina
A
B
C
D
658,530,880
75,000,000
75,000,000
691,469,120
43.9%
5.0%
5.0%
23.4%
22.7%
43.9%
5.0%
5.0%
23.4%
22.7%
Total
1,500,000,000
77.3%
22.7%
77.3%
22.7%
Except as indicated above, the Bank is not aware of the existence of other shareholders holding
more than 5% of the Bank’s capital stock. However, the Principal Shareholders have the power to elect a
majority of members of the Board of Directors as done so far.
The Bank is not aware of any agreement which in event of becoming effective may cause a change
of control.
On March 27, 2006 the US Securities and Exchange Commission (SEC) has made effective the
Level I American Depositary Receipts, “ADR” program.
117
This program allows foreign investors to buy the Bank’s stock through the secondary market
where ADRs are traded freely within the United States. The Bank of New York has been appointed as
depositary institution.
On February 14, 2007, the change in par value of the Bank’s shares of stock became effective.
This change in par value, which did not involve a change in the Bank’s capital stock, was voted upon at
the General Ordinary and Extraordinary Shareholders’ Meetings held on July 21, 2006. It was decided
that the Bank would maintain its fully-subscribed and paid-in capital of Ps. 1.5 billion, represented by one
and a half billion (1,500,000,000) common book-entry shares of one peso (Ps.1) par value each and
carrying one vote per share, except for the multiple voting right conferred upon Class D shares.
On January 29, 2009, upon expiration of the Total Return Swap agreement entered into on
January 29, 2004 with Deutsche Bank A.G., the latter transferred to the Bank 71,100,000 Class “D”
common shares of one Peso (Ps.1) par value each issued by the Bank. Such shares have been kept as
Bank's treasury shares pursuant to the terms and conditions set forth in Section 221 of the Argentine
Corporate Law.
On January 12, 2010, the Bank’s Board of Directors resolved as follows: (a) to discuss at the
General Ordinary Shareholders’ Meeting delivery of such Class D treasury shares in payment to the
holders of Stock Appreciation Rights (“StAR”) in proportion to their shareholdings and based on the
share price at such time, and (b) to discuss possible alternatives for the General Ordinary Shareholders’
Meeting to decide on the application of any remaining shares.
The General Ordinary Shareholders’ Meeting held on April 30, 2010 resolved to extend for one
year from January 31, 2010, the period to realize the Bank’s treasury shares.
In addition, such meeting held on April 30, 2010 resolved to delegate to the Board the decision
to pay StAR coupons -out of treasury shares- resulting from the debt restructuring as deemed fit based on
calculations related to contract and real market value thereof, conferring on the shareholders preemptive
rights on the same terms.
On June 16, 2010, the Board of Directors resolved to make an offer for sale subject to
preemptive rights of treasury shares held at such time. Accordingly, on July 26, 2010, pursuant to such
offer, approximately 26,9 million of such shares were disposed of and the proceeds from such offer and
the remaining shares were made available to the holders of StAR coupons on August 3, 2010.
Related Party Transactions
For purposes of this Section, “Related Parties" means Directors, principal officers, statutory
auditors and controlling shareholders of the Bank, as well as any person related to them and any entity
that is directly or indirectly related to any of them and which are not required to be consolidated pursuant
to applicable laws.
The Bank is not engaged in any transaction with its directors, senior managers or other related
persons, nor has it granted to them any loan and there is no proposed transaction with such persons,
except for those permitted under applicable laws. In particular, some directors and senior managers have
engaged in certain credit transactions with the Bank. Pursuant to the Argentine Corporate Law and the
Central Bank rules directors of a company are permitted to engage in transactions with such company if
the transaction is consistent with market practices. In addition, granting of loans to persons or entities
related to the Bank is subject to the Central Bank rules. Such rules establish limits on the amount of the
loan permitted to be granted to related parties based, among other things, on a percentage of the Bank's
adjusted shareholders' equity.
The Central Bank requires monthly reporting of the amount of outstanding loans of directors,
controlling shareholders, officers and other related entities transcribed in the board’s book of minutes.
The Central Bank rules set forth that loans to directors, controlling shareholders, officers and other related
entities shall be granted on equal terms in relation to rates, terms and guarantees of loans granted to the
public at large.
118
The following table shows the most significant financial assistance to legal entities related to
Directors, Statutory Auditors and Senior Personnel as of December 31, 20122:
Gascón Emprendimientos
IRSA Group IRSA, Inversiones y Representaciones S.A.
Total
In thousands of Pesos
6,000.0
145,837.5
151,837.5
The following table shows the most significant financial assistance to related companies as of
December 31, 20121:
In thousands of Pesos
262,751.0
10,000.0
10,000.0
BACS Banco de Crédito y Securitización S.A.
BH Valores Sociedad de Bolsa
Tarshop SA
Total
2
262,771.0
This information has been submitted by the Bank to the Argentine Central Bank pursuant to Communication A
49.
119
OFFERING AND LISTING
a) Description of the Notes
The following is a description of the general terms and conditions of the notes that may be issued
by the Bank under the Program, which may be supplemented and/or modified by the specific terms and
conditions of each series and/or tranche specified in the applicable pricing supplement relating to the
series and/or tranche in question. The pricing supplement will detail, with respect to the relevant series
and/or tranche, the specific terms and conditions of such series and/or tranche which, if so specified in
the applicable pricing supplement or to the extent they are inconsistent with the general terms and
conditions described below, will supplement and/or modify these general terms and conditions only with
respect to such series and/or tranche.
General
The notes may be issued or not under indentures and/or agency agreements executed from time
to time by the Bank with entities acting as trustees and/or agents. Such trustees and/or agents will act only
with respect to the series specified in the applicable pricing supplements and will have such rights and
obligations as therein set forth. The appointment of trustees and agents will be set out in the applicable
pricing supplements.
The creation of the Program was approved by resolution of the Bank’s General Ordinary and
Extraordinary Shareholders’ Meeting dated May 23, 2008 and resolution of the Bank’s board of directors
dated February 9, 2011. In addition, the above mentioned Board resolution approved the reduction of the
Program amount originally approved resolution of the General Ordinary and Extraordinary Shareholders’
Meeting of the Bank dated May 23, 2008 for an amount of up to US$ 2,000,000,000 (or its equivalent in
pesos) to an amount of up to US$ 500,000,000 (or its equivalent in pesos).
The notes may be issued from time to time in one or more series. The notes of all series
outstanding at any one time under this Program are limited to an aggregate principal amount of
US$ 500,000,000 (or its equivalent in pesos). The particular terms of each issue of notes, including,
without limitation, the date of issue, issue price, currency of denomination and payment, maturity, interest
rate or interest rate formula, if any, and, if applicable, redemption, repayment and index provisions, will
be set forth for each such issue in the notes and described in the pricing supplement applicable to such
tranche and/or series. With respect to any particular note, the description of the notes herein is qualified
in its entirety by reference to, and to the extent inconsistent therewith is superseded by, such note and the
applicable pricing supplement.
The notes issued under this program will qualify as “obligaciones negociables simples no
convertibles” under Argentine law and will be issued pursuant to, and in compliance with, all of the
requirements of, the Negotiable Obligations Law and any other applicable Argentine laws and
regulations. Unless otherwise specified in the applicable pricing supplement, the notes will constitute the
Bank’s simple, unconditional, unsecured and unsubordinated obligations and will rank at least pari passu
in right of payment with all its other existing and future unsecured and unsubordinated indebtedness
(other than obligations preferred by statute or by operation of law). If so specified in the applicable
pricing supplement, the Bank may issue subordinated notes in accordance with the Central Bank rules
then applicable, that will rank junior in right of payment to the Bank’s secured indebtedness and, to the
extent set forth therein, certain of its unsecured and unsubordinated indebtedness (as well as obligations
preferred by statute or by operation of law). For further information see “Ranking.”
Unless previously redeemed, a note will mature on the date (the “Stated Maturity”) no less than
30 days from its date of issue as specified on the face thereof and in the applicable pricing supplement.
Each note may be denominated in any currency (a “Specified Currency”) as shall be specified on
the face thereof and in the applicable pricing supplement. Unless otherwise specified in the applicable
pricing supplement, payments on each note will be made in the applicable Specified Currency; provided
that in certain circumstances, as may be described in the applicable pricing supplement, payments on any
such note denominated in a currency other than U.S. dollars may, to the extent permitted by Argentine
law, be made in U.S. dollars or in other currencies. See “Payment of Principal and Interest.”
120
Each note will bear interest, if any, at the interest rate or interest rate formula set forth in the
applicable pricing supplement. Unless otherwise indicated in the applicable pricing supplement, each
note may bear interest at a fixed rate (a “Fixed Rate Note”) or at a rate determined by reference to an
interest rate basis or other interest rate formula (a “Floating Rate Note”) or may bear no interest (a “Zero
Coupon Note”). See “Interest Rate.”
The notes may also be issued with principal and/or interest payable, to the extent permitted by
Argentine law, in one or more currencies different from the currency in which such notes are
denominated (“Dual Currency Notes”) or linked to an index and/or a formula (“Indexed Notes”). Dual
Currency Notes and Indexed Notes may be issued to bear interest on a fixed or floating rate basis or on a
non-interest bearing basis or a combination of such bases, in which case provisions relating to Fixed Rate
Notes, Floating Rate Notes, Zero Coupon Notes or a combination thereof, respectively, shall, where the
context so admits, apply to such Dual Currency or Indexed Notes. References herein to notes
denominated in a Specified Currency shall, unless the context otherwise requires, include Dual Currency
Notes payable in such Specified Currency.
The notes may be issued as Original Issue Discount Notes. An “Original Issue Discount Note,”
including any Zero Coupon Note, is a note which is issued at a price lower than the principal amount
thereof, and which provides that upon redemption or acceleration of the Stated Maturity thereof, the
amount payable to the holder of such note will be determined in accordance with the terms of such note,
and will be an amount that is less than the amount payable on the Stated Maturity of such note. for
further information see “Taxation.”
Unless otherwise specified in the applicable pricing supplement, the notes will not be subject to
any sinking fund (“Sinking Fund”) and will not be redeemable prior to their Stated Maturity, except in the
event of certain changes involving Argentine taxes. See “Redemption and Repurchase.”
The applicable Pricing Supplement may provide for the creation of a Sinking Fund for a Tranche
or Series, which may be created to secure payment of such notes. The Sinking Fund’s composition and
raising method, as applicable, will be specified in the applicable Pricing Supplement.
If specified in the applicable pricing supplement with respect to a series of notes, the Bank may
from time to time, without the consent of holders of notes outstanding, create and issue additional notes of
such series provided that such additional notes have the same terms and conditions as the notes of that
series in all respects (except for the date of issue, the issue price, the applicable legends and, if applicable,
the first payment of interest) and the additional notes will ultimately form a single series with the
previously outstanding notes of the relevant series.
Program Duration
The Program’s duration will be five years as from its approval by the Argentine Securities
Commission.
Form and Denomination
The notes will be issued in the minimum denominations and other denominations specified in
the pricing supplement applicable to each tranche or series.
Pursuant to the Law on Corporate Notes’ Mandatory Registered Form, Argentine companies are
not authorized to issue certificated securities in bearer form unless they are authorized by the Argentine
Securities Commission to be placed by means of a public offering in Argentina and are represented by
global or individual securities, registered or deposited with common depositary systems authorized by the
Argentine Securities Commission. Therefore, for as long as the provisions of the Law on Corporate
Notes’ Mandatory Registered Form are in effect, the Bank will only issue registered, non-endorsable
notes or notes deposited with a custodian or clearing system, not exchangeable for bearer certificated
notes, as set forth in the applicable pricing supplement.
In the event that the Notes are offered in the United States to qualified institutional buyers in
reliance on Rule 144A under the Securities Act, they will be represented by one or more Rule 144A
global notes. In the event that the notes are offered in reliance on Regulation S, they will be represented
121
by one or more Regulation S global notes. In the event that the notes are offered in other markets, they
will be represented in compliance with the applicable laws of such markets.
Replacement of Notes
Notes that become mutilated, destroyed, stolen or lost will be replaced upon delivery to the Bank
and the Trustee (if appointed by the Bank) of evidence of the loss, theft or destruction thereof satisfactory
to the Bank. In the case of a lost, stolen or destroyed note, an indemnity and/or security satisfactory to the
Bank may be required at the expense of the holder of such note before a replacement note will be issued.
Upon the issuance of any new note, the Bank may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any other expenses
(including the fees and the expenses of its counsel and its agents) connected therewith.
Definitive and Temporary Notes
Temporary notes may be exchanged for definitive notes, in the denominations set forth in each
opportunity, as specified in the applicable pricing supplement. All temporary notes will be identified as
such and will make reference to the Noteholder’s right to exchange them for definitive notes, as well as
the manner in which such exchange will be made.
Ranking
The notes will qualify as “obligaciones negociables” under the Negotiable Obligations Law and
Resolution 597/2011, and will be entitled to the benefits set forth therein and subject to the procedural
requirements established therein. In particular, pursuant to Section 29 of the Negotiable Obligations Law,
in case of default by the Bank in the payment of any amounts outstanding under the notes of any series,
the holder of such notes will be entitled to file a summary action (“acción ejecutiva”) in Argentina for
collection of such amount.
The notes will constitute simple, unconditional, unsecured and unsubordinated obligations of the
Bank and will rank at least pari passu in right of payment with all its other existing and future unsecured
and unsubordinated indebtedness (other than obligations preferred by statute or by operation of law,
including, inter alia, tax and labor claims and obligations of the Bank vis-à-vis its depositors). These
general conditions may be superseded, enlarged and/or supplemented in the applicable pricing
supplement relating to each tranche and/or series, always safeguarding the investors’ interests.
Specifically, pursuant to the FIL, all existing and future depositors of the Bank will have a
general priority over the holders of notes issued under this Program. The FIL provides that, in the event of
judicial liquidation or bankruptcy, all depositors, whether individuals or legal entities, and whichever the
type, amount or currency of their deposits, would have general and absolute priority over any other of the
Bank’s creditors (including the holders of the notes), except for certain labor and secured creditors. In
addition, the depositors would have priority over all the other creditors, save for certain labor creditors,
over the funds in possession of the Central Bank as reserves, other funds existing at the date when the
Bank’s authorization is revoked and the proceeds of the mandatory transfer of the Bank’s assets as
determined by the Central Bank.
If so specified in the applicable pricing supplement, the Bank may issue subordinated notes that
will rank junior in right of payment to its unsubordinated indebtedness, in accordance with the applicable
laws.
In addition, the owners of any kind of deposits will have special priority rights with respect to
the Banks remaining creditors, except with respect to labor claims and claims secured by a pledge or
mortgage, to be paid out of (i) the Bank’s funds in possession of the Central Bank as reserves; (ii) other
funds existing at the date when the Bank’s authorization is revoked; or (iii) the proceeds of the mandatory
transfer of the Bank’s assets as determined by the Central Bank, in the following order of priority: (a)
deposits of up to Ps.50,000 per person or corporation (considering all amounts of such person/corporation
deposited in one financial institution) or its equivalent amount in foreign currency, with priority right
granted to one person per deposit (in the case of more than one account holder, the amount is pro rated
among such account holders); (b) any deposits greater than Ps.50,000 or its equivalent in foreign
currency, for the amounts exceeding such sum; and (c) liabilities derived from credit facilities granted to
122
the bank, which directly affect international trade. Also, under Section 53 of the FIL, any claims of the
Central Bank will have priority over any other creditors, except for creditors secured by a pledge or
mortgage, certain labor creditors and depositors (in the terms set forth above), facilities granted pursuant
to the Central Bank Charter (rediscounts granted to financial entities in the event of a temporary lack of
liquidity, advances to financial entities under a bond, bond assignment, pledge or special assignment of
certain assets), and facilities granted by the Argentine Bank Liquidity Fund and secured by a pledge or
mortgage collateral.
Interest Rate
General
Each Fixed Rate Note or Floating Rate Note will bear interest from (and including) the issue
date or such other date (the “Interest Commencement Date”) specified in the applicable pricing
supplement or from the most recent Interest Payment Date (or, if such note is a Floating Rate Note and
the Interest Reset Period is daily or weekly, from the day following the most recent Interest Reset Date)
(as each such term is defined below) to which interest on such note has been paid or duly provided for at
the fixed rate per annum, or at the rate per annum determined pursuant to the interest rate formula, stated
in the applicable pricing supplement, until the principal thereof is paid or made available for payment.
Interest will be payable on the date or dates specified in the applicable pricing supplement (an “Interest
Payment Date”) and at Stated Maturity or upon redemption or acceleration, as specified under “Payment
of Principal and Interest” below.
Each note bearing interest will bear interest at either (a) a fixed rate or (b) a variable rate
determined by reference to an interest rate basis (including LIBOR (a “LIBOR Note”), the Treasury Rate
(a “Treasury Rate Note”) or such other interest rate basis as is set forth in the applicable pricing
supplement, including but not limited to BADLAR rate and/or CER rate, and in compliance with the
applicable Argentine laws and regulations, which may be adjusted by adding or subtracting the Spread
and/or multiplying by the Spread Multiplier. The “Spread” is the number of basis points specified in the
applicable pricing supplement as being applicable to the interest rate for such note, and the “Spread
Multiplier” is the percentage specified in the applicable pricing supplement as being applicable to the
interest rate for such note. A Floating Rate Note may also have either or both of the following as
specified in the applicable pricing supplement: (a) a maximum numerical interest rate limitation, or
ceiling, on the rate of interest which may accrue during any interest period (a “Maximum Rate”) and (b) a
minimum numerical interest rate limitation, or floor, on the rate of interest which may accrue during any
interest period (a “Minimum Rate”).
The referred general conditions on Interest Rate may be superseded, enlarged and/or
supplemented in the applicable pricing supplement relating to each tranche and/or series, always
safeguarding the investors’ interests.
The Bank uses the following general definitions throughout this section:
“BADLAR” means the average of the interest rates offered for fixed term operations over a
million Pesos by private banking entities for a term of between 30 and 35 days. This rate is published by
the Central Bank in its web site.
“Business Day” means, unless otherwise defined in the applicable pricing supplement, any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close in New York City or Buenos Aires
City; provided, however, that, with respect to notes denominated in a Specified Currency other than U.S.
dollars, it is also not a day on which commercial banks are authorized or required by law, regulation or
executive order to close in the principal financial center of the country issuing the Specified Currency (or,
if the Specified Currency is the Euro, such day is also a day on which the Trans-European Automated
Real Time Gross Settlement Express Transfer (TARGET) System is open, (a “TARGET Settlement
Date”); provided further that, with respect to a LIBOR Note, it is also a London Banking Day.
“CER” means a daily adjustment index issued by the Central Bank which reflects the rate of
inflation. This calculation is based on the registered fluctuation of the Consumer Prices Index which is
issued by the National Institute of Statistics and Census.
123
“London Banking Day” means any day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market.
“Index Maturity” means, with respect to a Floating Rate Note, the period to maturity of the
instrument or obligation on which the interest rate formula is based, as specified in the applicable pricing
supplement.
The trustee and the calculation agent for the Global Notes (the “Calculation Agent”) with respect
to the Floating Rate Notes will be specified in the applicable pricing supplement.
Fixed Rate Notes
Fixed Rate Notes will bear interest from (and including) the Interest Commencement Date
specified in the applicable pricing supplement at the rate or rates per annum so specified (the “Fixed
Rate(s) of Interest”) payable in arrears on the Interest Payment Date(s) in each year and on the Stated
Maturity or upon redemption or acceleration. The first payment of interest will be made on the Interest
Payment Date next following the Interest Commencement Date and, if the period from the Interest
Commencement Date to the Interest Payment Date differs from the period between subsequent Interest
Payment Dates, will equal the “Initial Broken Amount” specified in the applicable pricing supplement. If
the Stated Maturity is not an Interest Payment Date, interest from and including the preceding Interest
Payment Date (or the Interest Commencement Date, as the case may be) to (but excluding) the Stated
Maturity will equal the “Final Broken Amount” specified in the applicable pricing supplement.
Floating Rate Notes
General
The applicable pricing supplement relating to a Floating Rate Note will designate an interest rate
basis (the “Interest Rate Basis”) for such Floating Rate Note. The Interest Rate Basis for each Floating
Rate Note will be: (a) LIBOR, in which case such note will be a LIBOR Note; (b) the Treasury Rate, in
which case such note will be a Treasury Rate Note; or (c) such other interest rate basis as is set forth in
such pricing supplement including but not limited to BADLAR rate and/or CER rate. The pricing
supplement for a Floating Rate Note will also specify, if applicable, the Calculation Agent, the Index
Maturity, the Spread and/or Spread Multiplier, the Maximum Rate, the Minimum Rate, the Regular
Record Dates and the Initial Interest Rate, the Interest Payment Dates, the Calculation Dates, the Interest
Determination Dates, the Interest Reset Period and the Interest Reset Dates (each as defined below) with
respect to such note.
The rate of interest on each Floating Rate Note will be reset and become effective daily, weekly,
monthly, quarterly, semiannually or annually or otherwise, as specified in the applicable pricing
supplement (each an “Interest Reset Period”); provided, however, that (a) the interest rate in effect from
the date of issue to the first Interest Reset Date with respect to a Floating Rate Note will be the initial
interest rate as set forth in the applicable pricing supplement (the “Initial Interest Rate”) and (b) unless
otherwise specified in the applicable pricing supplement, the interest rate in effect for the ten days
immediately prior to Stated Maturity of a note will be that in effect on the tenth day preceding such Stated
Maturity. The dates on which the rate of interest will be reset (each an “Interest Reset Date”) will be
specified in the applicable pricing supplement. If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Business Day with respect to such Floating Rate Note, the Interest
Reset Date for such Floating Rate Note will be postponed to the next day that is a Business Day with
respect to such Floating Rate Note, except that, in the case of a LIBOR Note, if such Business Day is in
the next succeeding calendar month, such Interest Reset Date will be the next preceding Business Day.
The “Interest Determination Dates” will be as set forth below, unless otherwise specified in the
applicable pricing supplement, always safeguarding the investors’ interests The Interest Determination
Date pertaining to an Interest Reset Date for a LIBOR Note (the “LIBOR Interest Determination Date”)
will be the second Business Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note (the “Treasury Interest Determination
Date”) will be the day of the week in which such Interest Reset Date falls and on which Treasury bills
would normally be auctioned. Treasury bills are usually sold at auction on the Monday of each week,
unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday,
124
except that such auction may be on the preceding Friday. If, as the result of a legal holiday, an auction is
so held on the preceding Friday, such Friday will be the Treasury Interest Determination Date pertaining
to the Interest Reset Date occurring in the next succeeding week. If an auction date falls on any Interest
Reset Date for a Treasury Rate Note, then such Interest Reset Date will instead be the first Business Day
immediately following such auction date.
All percentages resulting from any calculations referred to in this offering memorandum will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five onemillionths of a percentage point rounded upward (e.g., 9.876545% (or 0.09876545) being rounded to
9.87655% (or 0.0987655)), and all Specified Currency amounts used in or resulting from such
calculations will be rounded to the nearest cent (with one-half cent rounded upward) or nearest equivalent
in Specified Currencies other than U.S. dollars.
In addition to any Maximum Rate which may be applicable to any Floating Rate Note pursuant
to the above provisions, the interest rate on Floating Rate Notes will in no event be higher than the
maximum interest rate permitted by applicable law.
Upon the request of the holder of any Floating Rate Note, the relevant Calculation Agent will
provide the interest rate then in effect, and, if determined, the interest rate which will become effective on
the next Interest Reset Date with respect to such Floating Rate Note. The relevant Calculation Agent’s
determination of any interest rate will be final and binding in the absence of manifest error.
Upon request of the Bank, the relevant Calculation Agent will cause notice of the rate of interest
and the amount of interest for each interest period and the relevant Interest Payment Date to be given to
the Bank (and, as applicable, to the trustee, if so determined in the applicable pricing supplement) as soon
as possible after their determination but in no event later than the fourth Business Day thereafter and, in
the case of notes listed on the Luxembourg Stock Exchange for trading on the EuroMTF, no later than the
first day of the relevant Interest Reset Period, and otherwise within 30 days of the relevant Payment Date.
Such notice will be in accordance with the provisions of the notes relating to notices to holders of notes.
See “Notices”. The amount of interest and the Interest Payment Date may subsequently be amended (or
appropriate alternative arrangements may be made by way of adjustment) without notice in the event of
an extension or shortening of the Interest Reset Period.
The manner in which the interest rate for any Floating Rate Note that is not a LIBOR Note or a
Treasury Rate Note will be determined as set forth in the applicable pricing supplement.
LIBOR Notes
LIBOR Notes will bear interest at the interest rates (calculated with reference to LIBOR and the
Spread and/or Spread Multiplier, if any, subject to the Maximum Rate or the Minimum Rate, if any), and
will be payable on the dates, specified on the face of the LIBOR Note and in the applicable pricing
supplement.
LIBOR with respect to any Interest Reset Date will be determined by the Calculation Agent in
accordance with the following provisions. On the relevant LIBOR Interest Determination Date, LIBOR
will be determined on the basis of either of the following, as specified in the applicable pricing
supplement:
(a)
the offered rates for deposits in the Specified Currency having the
specified Index Maturity, commencing on the next succeeding Interest Reset Date, which appear
on the display designated as page “LIBOR01” or “LIBOR02” as applicable, on the Reuters
Monitor Money Rates Service (or such other page as may replace such pages on that service for
the purpose of displaying London interbank offered rates of major banks for deposits in the
Specified Currency) (each a “Reuters Screen LIBOR Page”) as of 11:00 A.M., London time, on
such LIBOR Interest Determination Date. If at least two such offered rates appear on the
Reuters Screen LIBOR Page, LIBOR with respect to such Interest Reset Date will be the
arithmetic mean of such offered rates as determined by the Calculation Agent. If fewer than two
offered rates appear, LIBOR with respect to such Interest Reset Date will be determined as
described in (c) below; or
125
(b)
the offered rates for deposits in the Specified Currency having the specified
Index Maturity, commencing on the next succeeding Interest Reset Date, which appear on the display
designated as page “BBAM1” on the Bloomberg Service (or such other page as may replace such page on
that service for the purpose of displaying London interbank offered rates of major banks for deposits in
the Specified Currency) (each, a “Bloomberg Page”) as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If no such offered rate appears, LIBOR with respect to such Interest Reset
Date will be determined as described in (c) below.
If neither a Reuters Screen LIBOR Page nor Bloomberg is specified in the applicable pricing
supplement, LIBOR will be determined as if a Reuters Screen LIBOR Page had been so specified.
(c)
With respect to a LIBOR Interest Determination Date on which fewer than two
offered rates for the applicable Index Maturity appear on a Reuters Screen LIBOR Page as described in
(a) above, or on which no rate appears on the Bloomberg page as described in (b) above, as applicable,
LIBOR will be determined on the basis of the rates at approximately 11:00 A.M., London time, on such
LIBOR Interest Determination Date at which deposits in the Specified Currency having the specified
Index Maturity are offered to prime banks in the London interbank market by four major banks in the
London interbank market selected by the Bank commencing on the second Business Day immediately
following such LIBOR Interest Determination Date and in a principal amount equal to an amount of not
less than US$1 million (or its approximate equivalent in a Specified Currency other than U.S. dollars) that
in the Bank’s judgment is representative for a single transaction in such market at such time (a
“Representative Amount”). The Calculation Agent will request the principal London office of each of
such banks to provide a quotation of its rate. If at least two such quotations are provided, LIBOR with
respect to such Interest Reset Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR with respect to such Interest Reset Date will be the arithmetic mean of
the rates quoted at approximately 11:00 A.M., New York City time, on such LIBOR Interest
Determination Date by three major banks in New York City, selected by the Bank, for loans in the
Specified Currency to leading European banks having the specified Index Maturity commencing on the
Interest Reset Date and in a Representative Amount; provided, however, that if fewer than three banks
selected as aforesaid by the Bank are quoting as mentioned in this sentence, LIBOR with respect to such
Interest Reset Date will be LIBOR in effect on such LIBOR Interest Determination Date.
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rates (calculated with reference to the
Treasury Rate and the Spread and/or Spread Multiplier, if any, subject to the Maximum Rate or Minimum
Rate, if any) and will be payable on the dates specified in the applicable pricing supplement. The
“Calculation Date” with respect to a Treasury Interest Determination Date will be the tenth day after such
Treasury Interest Determination Date or, if any such day is not a Business Day, the next succeeding
Business Day, unless the applicable pricing supplement establishes any change that provides increased
protection of the investors’ interests.
Unless otherwise indicated in the applicable pricing supplement and in such case to the extent
that the investors’ interests are safeguarded, “Treasury Rate” means, with respect to any Interest Reset
Date, the rate for the auction on the relevant Treasury Interest Determination Date of direct obligations of
the United States (“Treasury Bills”) having the Index Maturity specified in the applicable pricing
supplement, as such rate appears on the display of (i) Reuters Monitor Money Rates Service (or any
successor service) on page “RTRTSY1” or “RTRTSY2,” as applicable (or any other pages as may replace
such pages), or (ii) Bloomberg Services (or any successor service) on page “BTMM” or “PX1,” as
applicable (or any other pages as may replace such pages). In the event that such rate does not appear on
any such page by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Treasury
Interest Determination Date, then the Treasury Rate for such Interest Reset Date shall be the rate on such
date as published in H.15 Daily Update under the heading “U.S. government securities—Treasury bills—
Auction high.” In the event that the foregoing rates do not so appear or are not so published by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such Treasury Interest Determination Date,
then the Treasury Rate for such Interest Reset Date shall be the “Investment Rate” (expressed as a bond
equivalent yield, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) as
announced by the United States Department of the Treasury for the auction held on such Treasury Interest
Determination
Date,
currently
available
on
the
worldwide
web
at:
http://www.publicdebt.treas.gov/AI/OFBills or such website as may replace it in the future. In the event
126
that the results of the auction of Treasury Bills having the Index Maturity specified on the face of the note
and in the applicable pricing supplement are not published or reported as provided above by 3:00 p.m.,
New York City time, on such Calculation Date or if no such auction is held on such Treasury Interest
Determination Date, then the Treasury Rate shall be calculated by the Calculation Agent and shall be the
rate for such Treasury Interest Determination Date for the issue of Treasury Bills with a remaining
maturity closest to the specified Index Maturity (expressed as a bond equivalent yield, on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as published in H.15(519) under the
heading “U.S. government securities—Treasury bills (secondary market).” In the event that the foregoing
rates do not so appear or are not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Treasury Interest Determination Date, then the Treasury Rate for such Interest Reset
Date shall be the rate for such Treasury Interest Determination Date for the issue of Treasury Bills with a
remaining maturity closest to the specified Index Maturity, as published in H.15 Daily Update or another
recognized electronic source used for the purpose of displaying such rate under the heading “U.S.
government securities—Treasury bills (secondary market).” In the event that the foregoing rates do not
so appear or are not so published by 3:00 p.m., New York City time, on the Calculation Date pertaining to
such Treasury Interest Determination Date, then the Treasury Rate shall be calculated by the Calculation
Agent and shall be a yield to maturity (expressed as a bond equivalent yield, on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market
bid rates, at approximately 3:30 p.m., New York City time, on such Treasury Interest Determination Date,
quoted by three leading United States government securities dealers selected by the Bank for the issue of
Treasury Bills with a remaining maturity closest to the specified Index Maturity; provided that if the
dealers selected are not quoting as mentioned in this sentence, the Treasury Rate for such Interest Reset
Date shall be the Treasury Rate in effect on such Treasury Interest Determination Date.
Payment of Principal and Interest
General
Interest (and principal, if any, payable other than at Stated Maturity or upon acceleration or
redemption) will be payable in immediately available funds to the person in whose name a note is
registered at the close of business on the Regular Record Date next preceding each Interest Payment Date
notwithstanding the cancellation of such notes upon any transfer or exchange thereof subsequent to such
Record Date and prior to such Interest Payment Date; provided, however, that interest payable at Stated
Maturity or upon acceleration or redemption will be payable to the person to whom principal will be
payable; provided further that if and to the extent the Bank defaults in the payment of the interest
(including Additional Amounts) due on such Interest Payment Date, such defaulted interest (including
Additional Amounts) will be paid to the person in whose names such notes are registered at the end of a
subsequent record date established by the Bank by notice given by mail by or on behalf of the Bank to the
holders of the notes not less than 15 days preceding such subsequent record date, such record date to be
not less than 15 days preceding the date of payment in respect of such defaulted interest. Unless
otherwise specified in the note or the applicable pricing supplement, the first payment of interest on any
note originally issued between a Regular Record Date and an Interest Payment Date will be made on the
Interest Payment Date following the next succeeding Regular Record Date to the registered owner at the
close of business on such next succeeding Regular Record Date. Unless otherwise indicated in the
applicable pricing supplement and in such case to the extent that the investors’ interests are safeguarded,
the “Regular Record Date” with respect to any note will be the date 15 calendar days prior to each Interest
Payment Date, whether or not such date will be a Business Day.
Payment of the principal of and any premium, interest, Additional Amounts and other amounts
on or in respect of any Registered Note at Stated Maturity or upon early redemption or acceleration will
be made in immediately available funds to the person in whose name such note is registered upon
surrender of such note at the specified office of any other Paying Agent or, as applicable, the offices of
the trustee specified in the applicable pricing supplement, provided that the Registered Note is presented
to the Paying Agent in time for the Paying Agent to make such payments in such funds in accordance
with its normal procedures. Payments of the principal of and any premium, interest, Additional Amounts
and other amounts on or in respect of Registered Notes to be made other than at Stated Maturity or upon
redemption will be made by check mailed on the due date for such payments to the address of the person
entitled thereto as it appears in the Register; provided that (a) the applicable Depositary, as holder of the
Global Notes, shall be entitled to receive payments of interest by wire transfer of immediately available
funds, (b) a holder of US$1 million (or the approximate equivalent thereof in a Specified Currency other
127
than U.S. dollars) in aggregate principal or face amount of notes of the same series shall be entitled to
receive payments of interest by wire transfer of immediately available funds to an account maintained by
such holder at a bank located in the United States as may have been appropriately designated by such
person to the Bank in writing no later than 15 days prior to the date such payment is due and (c) to the
extent that the holder of a Registered Note issued and denominated in a Specified Currency other than
U.S. dollars elects to receive payment of principal and interest at Stated Maturity or upon early
redemption in such Specified Currency, such payment, except in circumstances described in the
applicable pricing supplement, shall be made by wire transfer of immediately available funds to an
account specified in writing not less than 15 days prior to Stated Maturity by the holder to the Bank.
Payments of interest on any Fixed Rate Note or Floating Rate Note with respect to any Interest
Payment Date will include interest accrued to but excluding such Interest Payment Date; provided,
however, that, unless otherwise specified in the applicable pricing supplement, if the Interest Reset Dates
with respect to any Floating Rate note are daily or weekly, interest payable on such note on any Interest
Payment Date, other than interest payable on the date on which principal on any such note is payable, will
include interest accrued to but excluding the day following the next preceding Interest Reset Date.
With respect to a Floating Rate Note, accrued interest from the date of issue or from the last date
to which interest has been paid is calculated by multiplying the principal or face amount of such Floating
Rate Note by an accrued interest factor. Such accrued interest factor is computed by adding the interest
factor calculated for each day from the date of issue, or from the last date to which interest has been paid,
to but excluding the date for which accrued interest is being calculated. The interest factor (expressed as
a decimal) for each such day is computed by dividing the interest rate (expressed as a decimal) applicable
to such date by 360, in the case of LIBOR notes, or by the actual number of days in the year, in the case
of Treasury Rate Notes.
Interest on Fixed Rate Notes will be calculated on the basis of a 360-day year consisting of
twelve months of 30 days each and, in the case of an incomplete month, the number of days elapsed.
If any Interest Payment Date (other than the Stated Maturity) for any Floating Rate Note would
otherwise be a day that is not a Business Day in the relevant locations specified in the pricing supplement
and the place of payment, such Interest Payment Date will be the next Business Day succeeding such
Business Day (except that, in the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Payment Date will be the next Business Day preceding such Business Day).
If the Stated Maturity for any Fixed Rate Note or Floating Rate Note or the Interest Payment Date for any
Fixed Rate Note falls on a day which is not a Business Day in the relevant locations specified in the
pricing supplement and the place of payment, payment of principal (and premium, if any) and interest
with respect to such note will be made on the next succeeding Business Day in the place of payment with
the same force and effect as if made on the due date and no interest on such payment will accrue from and
after such due date.
Specified Currency Other than U.S. Dollars
If any note is to be denominated in a Specified Currency other than U.S. dollars, certain
provisions with respect thereto will be set forth in the applicable pricing supplement, which will specify
the foreign currency or currency unit in which the principal or any premium or interest with respect to
such note is to be paid, along with any other terms relating to the non-U.S. dollar denomination.
If the Bank offers Indexed Notes or Dual Currency Notes, the applicable pricing supplement and
such Indexed Notes or Dual Currency Notes will set forth the method by and the terms on which the
amount of principal (payable on or prior to Stated Maturity), interest and/or any premium will be
determined, any additional tax consequences to the holder of such note, a description of certain risks
associated with investment in such note and other information relating to such note.
Unless otherwise specified in the applicable pricing supplement and in such case to the extent
that the investors’ interests are safeguarded, notes denominated in a Specified Currency other than U.S.
dollars will provide that, in the event of an official redenomination of the Specified Currency, the Bank’s
obligations with respect to payments on such notes will, in all cases, be deemed immediately following
such redenomination to provide for payment of that amount of the redenominated Specified Currency
representing the amount of such obligations immediately before such redenomination.
128
If the principal of or any premium, interest, Additional Amounts or other amounts on any note
are payable in a Specified Currency other than U.S. dollars and such Specified Currency is not available
due to the imposition of exchange controls or other circumstances beyond the Bank’s control, or is no
longer used by the government of the country issuing such currency or for settlement of transactions by
public institutions of or within the international banking community, the Bank will be entitled, to the
extent permitted by Argentine law, to satisfy the Bank’s obligations to the holder of such notes by making
such payment in U.S. dollars on the basis of (i) in the case of interest payments, the Exchange Rate
Agent’s bid (U.S. dollar offer) quotation for such Specified Currency, and, in the case of principal
payments, the Exchange Rate Agent’s offer (U.S. dollar bid) quotation for such Specified Currency, in
each case at or prior to 11:00 a.m., New York City time, on the second Business Day next preceding the
applicable payment date or the date by which the U.S. Dollar Equivalent must be determined, or (ii) if no
such rate is quoted for any reason, the rate determined by the Exchange Rate Agent based on an average
of quotations given to the Exchange Rate Agent by commercial banks which conduct foreign exchange
operations, or based on such other method as the Exchange Rate Agent may reasonably determine to
calculate a market exchange rate, on the second Business Day next preceding the applicable payment date
or the date by which the U.S. Dollar Equivalent must be determined (such rate determined as set forth in
clauses (i) (ii) above, the “Exchange Rate”). In the event that the Exchange Rate is not available on the
second Business Day next preceding the applicable payment date, the rate at which the amount due shall
be converted into U.S. dollars shall be such rate as may be agreed to at such time by the Bank and the
Exchange Rate Agent. Unless otherwise specified, the exchange rate agent (the “Exchange Rate Agent”)
with respect to notes denominated in a Specified Currency other than U.S. dollars will be specified in the
applicable pricing supplement.
Payments of the principal and any premium, interest, Additional Amounts or other amounts to
holders of a note denominated in a Specified Currency other than U.S. dollars who hold the note through
DTC will, to the extent permitted by Argentine law, be made in U.S. dollars. However, any DTC holder
of a note denominated in a Specified Currency other than U.S. dollars may elect to receive payments by
wire transfer in such Specified Currency other than U.S. dollars by delivering a written notice to the DTC
participant through which it holds its beneficial interest, not later than the Regular Record Date, in the
case of an interest payment, or at least 15 calendar days before the Stated Maturity, specifying wire
transfer instructions to an account denominated in the Specified Currency. The DTC participant must
notify DTC of the election and wire transfer instructions on or before the twelfth Business Day before the
applicable payment of the principal.
If so specified in a note denominated in a Specified Currency other than U.S. dollars and the
applicable pricing supplement, and except as provided in the next following paragraph, payments of
principal and any premium, interest, Additional Amounts or other amounts with respect to such note will,
to the extent permitted by Argentine law, be made in U.S. dollars if the holder of such note on the
relevant Regular Record Date or at Stated Maturity, as the case may be, has transmitted a written request
for such payment in U.S. dollars to the Bank and the applicable Paying Agent on or prior to such Regular
Record Date or the date 15 days prior to Stated Maturity, as the case may be. Such request may be in
writing (mailed or hand delivered) or by facsimile transmission. Holders of notes denominated in a
Specified Currency other than U.S. dollars that are registered in the name of a broker or nominee should
contact such broker or nominee to determine whether and how an election to receive payments in U.S.
dollars may be made.
The U.S. dollar amount to be received by a holder of a note denominated in a Specified Currency
other than U.S. dollars who elects to receive payment in U.S. dollars will be based on the Exchange Rate
on the second Business Day next preceding the applicable payment date. If Exchange Rate quotations are
available on the second Business Day preceding the date of payment of principal or any premium,
interest, Additional Amounts or other amounts with respect to any note, such payment will be made in the
Specified Currency. All currency exchange costs associated with any payment in U.S. dollars on any
such note denominated in a Specified Currency other than U.S. dollars will be borne by the holder thereof
by deductions from such payment of such currency exchange being effected on behalf of the holder by the
Exchange Rate Agent.
Unless otherwise specified in the applicable pricing supplement, (i) a note denominated in Euro
may only be presented for payment on a day on which the TARGET system is operating and (ii) if
interest is required to be calculated for a period of less than one year, it will be calculated on the basis of
the actual number of days elapsed divided by 365 (or, if any of the days elapsed fall in a leap year, the
129
sum of (A) the number of those days falling in a leap year divided by 366 and (B) the number of those
days falling in a non-leap year divided by 365).
Redemption and Repurchase
Redemption for Taxation Reasons
The notes of any series may be redeemed at the Bank’s option in whole, but not in part, at any
time, on giving not less than 30 nor more than 60 days’ written notice (which will be irrevocable) to the
holders and, if applicable, the CNV, in writing, of the principal amount thereof (or, in the case of Original
Issue Discount Notes, at the Amortized Face Amount (as defined below) thereof), together with any
accrued but unpaid interest and any Additional Amounts to the date fixed for redemption (which date, in
the case of Floating Rate Notes, must be an Interest Payment Date), if, as a result of any change in, or
amendment to, the laws (or any regulations or rules issued thereunder) of Argentina or any political
subdivision of or any taxing authority in Argentina or any change in the application, administration or
official interpretation of such laws, regulations or rules, including, without limitation, the holding of a
court of competent jurisdiction, the Bank has or will become obligated to pay Additional Amounts and/or
Argentine Taxes on or in respect of such notes, which change or amendment becomes effective on or
after the date of issuance of the notes of such series, and the Bank determines in good faith that such
obligation is material and cannot be avoided by the Bank taking reasonable measures available to it. The
applicable pricing supplement will establish the specific procedures for redemption of the notes for tax
reasons, which shall supersede, supplement and/or modify the terms and conditions of the general
procedure herein described, always safeguarding the investors’ interests.
In addition, any notices by the Bank to the holders will be made to the CNV through the
Financial Information Highway (www.cnv.gob.ar) as a “Material Event”.
Redemption at the Option of the Bank
The Bank may, subject to compliance with all relevant laws and regulations, having given
(unless otherwise specified in the applicable pricing supplement) not more than 60 nor less than 30 days’
notice to the holders of the notes in accordance with the provisions governing the giving of notices set
forth below (which notice will be irrevocable) and to the Trustee (15 days prior to the delivery of such
notice to the holders) and, if applicable, the Argentine Securities Commission, redeem all or only some of
the notes then outstanding on the dates (the “Optional Redemption Date(s)”) and at the amounts (the
“Optional Redemption Amount(s)”) specified in, or determined in the manner specified in, the applicable
pricing supplement together with accrued interest (if any) to the date fixed for redemption (which date, in
the case of Floating Rate Notes, must be an Interest Payment Date). In the event of a redemption of only
some of a series of notes, such redemption must be of a principal amount being the “Minimum
Redemption Amount” or a “Higher Redemption Amount,” in each case if so indicated in the applicable
pricing supplement. In the case of a partial redemption of Certificated Notes, such notes to be redeemed
will be determined on a pro rata basis, by lot, or otherwise in accordance with the procedures of the
depositary, not more than 60 days prior to the date fixed for redemption. In the case of a partial
redemption of notes which are represented by a Global Note, the relevant notes will be selected in
accordance with the rules of the relevant clearing system or systems, as the case may be. If the notes are
listed on the Luxembourg Stock Exchange for trading on the EuroMTF or on any other securities
exchange and the rules of the Luxembourg Stock Exchange or such other securities exchange so require,
as applicable, the Bank will, once in each year in which there has been a partial redemption of the notes,
cause to be published in a leading newspaper of general circulation in Luxembourg or as specified by
such other securities exchange a notice specifying the aggregate principal amount of notes outstanding
and a list of the notes drawn for redemption but not surrendered. The applicable pricing supplement will
establish the specific detailed procedures for redemption of the notes at the option of the Bank, which
shall supersede, supplement and/or modify the terms and conditions of the general procedure herein
described, always safeguarding the investors’ interests.
130
Redemption at the Option of the Holder
Upon the holder of any note giving to the Bank (unless otherwise specified in the applicable
pricing supplement) not more than 60 nor less than 30 days’ notice in accordance with the provisions
governing the giving of notices set forth below, which notice will be irrevocable, the Bank will, subject to
compliance with all relevant laws and regulations, upon the expiry of such notice, redeem such note at
such price or prices as specified in the applicable pricing supplement on the Optional Redemption Date
and at the Optional Redemption Amount specified in or determined in the manner specified in the
applicable pricing supplement, in whole but not in part, together with accrued interest (if any) to the date
fixed for redemption.
Partial redemption will be made on a pro rata basis, by lot, or otherwise, provided that the
applicable pricing supplements will establish the specific procedures for redemption of the notes that may
be issued, which shall supersede, supplement and/or modify these general terms and conditions, always
safeguarding the investors’ interests. In addition, any notices by the Bank to the holders will be made
through the CNV’s Financial Information Highway (www.cnv.gob.ar) as a “Material Event”.
Only the registered holder of a Global Note can exercise a right to repayment in respect thereof.
In order to ensure that such entity will timely exercise a right to repayment with respect to a particular
note, the beneficial owners of such notes must instruct the broker or other direct or indirect participant
through which it holds an interest in such note to notify DTC, Euroclear or Clearstream, Luxembourg, as
the case may be, of its desire to exercise a right to repayment. Different firms have different deadlines for
accepting instructions from their customers and, accordingly, each beneficial owner should consult the
broker or other direct or indirect participant through which it holds an interest in a note in order to
ascertain the deadline by which such an instruction must be given in order for timely notice to be
delivered to DTC, Euroclear or Clearstream, Luxembourg, as the case may be. The applicable pricing
supplement will establish the specific detailed procedures for redemption of the notes at the option of the
holder, which shall supersede, supplement and/or modify the terms and conditions of the general
procedure herein described, always safeguarding the investors’ interests.
Redemption of Original Issue Discount Notes
In the event of acceleration of maturity or redemption prior to maturity of an Original Issue
Discount Note, the amount payable thereon in lieu of the principal amount due at the Stated Maturity will
be the amount (the “Amortized Face Amount”) equal to the sum of (i) the issue price (as defined in
“Taxation”) of such note and (ii) the product of the accrual yield specified in the applicable pricing
supplement (compounded annually) and the issue price from (and including) the issue date to (but
excluding) the Optional Redemption Date (or, in the case of an early redemption for taxation reasons, the
date fixed for redemption) and computed in accordance with generally accepted United States bond yield
computation principles, but in no event will the Amortized Face Amount exceed the principal amount of
such note due at Stated Maturity thereof. The applicable pricing supplement will establish the specific
detailed procedures for redemption of the Original Discount Notes, which shall supersede, supplement
and/or modify the terms and conditions of the general procedure herein described, always safeguarding
the investors’ interests.
Repurchase of Notes
The Bank and its Subsidiaries may at any time purchase or otherwise acquire any note in the
open market or otherwise at any price and may resell or otherwise dispose of such note at any time;
provided that in determining at any time whether the holders of the requisite principal amount of the notes
outstanding have given any request, demand, authorization, direction, notice, consent or waiver, notes
then owned by the Bank or any of its subsidiaries will be disregarded and deemed not outstanding.
131
Cancellation
Any notes redeemed in full by the Bank will be immediately canceled and may not be reissued
or resold.
If notice of redemption has been given in the manner set forth herein and in the applicable
pricing supplement, a series of notes to be redeemed will become due and payable on the redemption date
specified in such notice, and upon presentation and surrender of the notes at the place or places specified
in such notice, the notes will be paid and redeemed by the Bank at the places and in the manner and
currency therein specified and at the redemption price therein specified together with accrued interest and
Additional Amounts, if any, to the redemption date. From and after the redemption date, if monies for the
redemption of notes called for redemption will have been made available at the corporate trust office of
the Trustee for redemption on the redemption date, the notes called for redemption will cease to bear
interest (and, in the case of Original Issue Discount Notes, cease to increase the Amortized Face Amount
payable in respect thereof), and the only right of the holders of such notes will be to receive payment of
the redemption price together with accrued interest and Additional Amounts, if any, to the redemption
date as aforesaid.
Additional Amounts
Unless otherwise set forth in the applicable pricing supplement, all taxes, duties, rates,
contributions, withholdings, transfer expenses, charges and/or liens (“Taxes”) that may be levied on the
acts, contracts and transactions related to the issue, subscription, placement and enforcement of the notes
of each tranche and/or series will be fully and exclusively borne by the Bank. The Bank will pay interest
under the notes without any kind of deduction or withholding for or on account of Taxes in effect as of
the date of subscription or which may be imposed in future, whatever their origin or cause may be, except
to those persons who are subject to tax inflation adjustment in accordance with Title VI of the Income
Tax Law, who shall be subject to the withholdings set forth by law (the “Permitted Withholdings”). If the
Bank were compelled by law to pay or withhold any such amounts, it will pay (at its sole expense) such
additional amounts (“Additional Amounts”) as may be necessary to ensure payment of the deductions or
withholdings in question. Therefore, once such deductions or withholdings are made, the holders will
receive the payment of interest under the notes free and clear of Taxes, as if such deductions or
withholdings had not been made, except for the Permitted Withholdings. The additional amounts shall be
regarded to all effects as an amount payable under the notes, except that no additional amounts will be
paid on the amounts outstanding under any of the notes in the following cases: (i) when such Taxes would
not have been imposed but for the fact that the holder of the note has a connection with Argentina other
than the mere holding of such note and the receipt of any payments in respect thereof; or (ii) when such
Taxes would not have been imposed but for the failure to comply with any certification, identification,
information or reporting requirements regarding the nationality, residence or identity of the holder or
owner of an interest in the note, as required by the Bank at least thirty (30) days before the applicable
interest payment date or principal payment date, as applicable, if such compliance is required by the laws
or regulations of Argentina or any political subdivision or tax authority thereof as a precondition to
exemption from, or reduction in the rate of such Taxes; (iii) in respect of any estate, inheritance, gift,
sales, transfer, personal assets or similar tax, assessment or other governmental charge; (iv) to or on
behalf of a holder or beneficial owner of a note in respect of Argentine taxes payable other than by
withholding from payment of principal of, premium, if any, or interest on the notes; (v) in respect of
Taxes imposed by reason of the fact that the note was presented for payment more than thirty (30) days
after the later of the date on which such payment became due and the date on which payment thereof has
been duly provided for and notice of such payment is given to the holders, except to the extent that the
holder of such note would have been entitled to such additional amounts had the note been presented on
any day during such 30-day period; or (vi) any combination of items (i) to (v) above; nor will additional
amounts be paid with respect to any payment of the principal of, or any premium, if any, or interest on,
any notes to any holder or beneficial owner of a note who is a fiduciary or partnership or other passthrough entity or other than the sole beneficial owner of such payment to the extent such payment would
be required by the laws of Argentina to be included in the income for tax purposes of a beneficiary or
settlor with respect to such fiduciary or a member of such partnership or other pass-through entity or
beneficial owner who would not have been entitled to such Additional Amounts had it been the holder of
such notes.
132
Listing
The Bank may apply to have the notes of any series listed on Luxembourg stock exchange for
trading on the EuroMTF, on the BCBA or on any other securities exchange or self-regulated market of
Argentina or abroad. However, no assurance may be given that these applications will be accepted. In
addition, notes may be issued under this Program that are not listed on any stock exchange, and the
applicable pricing supplement relating to a series will specify whether the notes of such series will be
listed or not on the Luxembourg stock exchange for trading on the EuroMTF, on the BCBA or on any
other securities exchange.
Transfer Restrictions
The Bank has not registered the notes under the Securities Act; therefore, the notes may not be
transferred except in compliance with certain transfer restrictions.
Registration Rights
If so specified in the applicable pricing supplement, the Bank may grant registration rights to the
holders of any series of notes.
Meetings, Modification and Waiver
Noteholders’ meetings may be called and held at any time to deal with and resolve upon any
matters subject to the noteholders’ authority. Such meetings will be held in compliance with the
provisions of the Negotiable Obligations Law, the applicable rules of the Argentine Securities
Commission and other laws in force. The notice, quorum, majorities and further aspects of such meetings
will be governed by such laws.
Repayment of Monies; Prescription
All claims against the Bank for payment of principal of or interest on or in respect of any note
(including Additional Amounts) will prescribe unless made within 3 years of the due date for payment of
such principal or interest or the date payment thereof became enforceable, as applicable.
Covenants
The Bank may assume covenants in connection with each series and/or tranche of notes to be
issued under the Program, which will be specified in the applicable pricing supplement relating to each
series and/or tranche.
Events of Default
Below is a general description of some of the events of default, which may be replaced, modified
and/or supplemented in the applicable pricing supplement relating to each series and/or tranche to be
issued, always safeguarding the investors’ interests.
In case one or more of the following events (each an “Event of Default”) (whether voluntary or
involuntary) will have occurred and be continuing with respect to the notes of any tranche and/or series:
(i)
the Bank fails to pay any principal or interest (or Additional Amounts, if any)
on the notes on the date when it becomes due and payable in accordance with the terms thereof, and such
failure continues for a period of ten (10) days (in the case of principal) or fifteen (15) days (in the case of
interest or Additional Amounts, if any);
(ii)
the Bank fails to pay when due interest on or principal of any of the Bank’s
indebtedness in a past due amount of at least US$ 50,000,000 (or the equivalent thereof at the time of
determination) and such failure continues after the terms set forth in (i) above, or any other event of
default occurs under any agreement or instrument relating to any such indebtedness in an aggregate
principal amount of at least US$ 50,000,000 (or the equivalent thereof at the time of determination) which
results in the acceleration of the maturity thereof;
133
(iii)
(a) a court having jurisdiction enters a final decree or order for the appointment
of an administrator, receiver, trustee or intervenor for the Bank for all or substantially all of its property
and such final decree or order remains unstayed and in effect for a period of ninety (90) consecutive days;
(b) the Central Bank (x) initiates a proceeding under Section 34, 35 or 35(bis) of the FIL, requesting the
Bank to submit a plan under such Section, or (y) orders a temporary, total or partial suspension of the
activities of the Bank or a significant subsidiary pursuant to Article 49 of the Central Bank Charter;
(iv)
the Bank (a) submits a restructuring plan under the FIL, the Argentine
Bankruptcy Law or any other applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, (b) consents to the appointment of or taking possession by an administrator, receiver, trustee or
intervenor for it for all or substantially all of its properties, or (c) effects any general assignment for the
benefit of creditors;
(v)
it becomes unlawful for the Bank to perform or comply with its payment
obligations under the notes of each series and/or tranche.
then the holders of not less than 25% in aggregate principal amount of the notes of such series
and/or tranche, by written notice to the Bank, may declare all the notes of such series then outstanding to
be immediately due and payable; provided that in the case of any of the Events of Default described in
paragraphs (ii) y (iv) above with respect to the Bank, all notes will, without any notice to the Bank or any
other act by the Trustee (if one is appointed) or any holder of any notes, become immediately due and
payable, and provided further that none of the events or circumstances described above will constitute an
Event of Default if they arise from or are otherwise related to Indebtedness outstanding as of the date of
the indenture dated January 14, 2004. In the event an Event of Default set forth in clause (ii) above has
occurred and is continuing with respect to the notes of any series and/or tranche, such Event of Default
will be automatically rescinded and annulled once the event of default or payment default triggering such
Event of Default pursuant to clause (ii) is remedied or cured by the Bank or waived by the holders of the
relevant Indebtedness. No such rescission and annulment will affect any subsequent Event of Default or
impair any right consequent thereto.
Upon any such declaration of acceleration, the principal of the notes so accelerated and the
interest accrued thereon and all other amounts payable with respect to such notes will become and be
immediately due and payable. If the Event of Default or Events of Default giving rise to any such
declaration of acceleration are cured following such declaration, such declaration may be rescinded by the
holders of such notes.
Paying Agents; Transfer Agents; Registrars
The notes may or not be issued under indentures and/or agency agreements entered into from
time to time by the Bank with entities acting as trustees and/or agents. Such trustees and/or agents will
perform their duties only with respect to the series specified in the applicable pricing supplement and will
have such rights and obligations as therein specified. The appointment of trustees and agents will be set
out in the applicable pricing supplements, who shall be identified in the last page of the applicable pricing
supplement.
Notices
Notices to holders of notes will be deemed to be validly given if published for 1 day in the
BCBA’s Gazette and the CNV’s Financial Information Highway as a “Material Event” at
www.cnv.gob.ar, for as long as the notes of any tranche and/or series are listed on such exchange, or in
the applicable reporting body of the exchange or self-regulated market where they are listed, and to the
extent required by law, in the Official Gazette of the Republic of Argentina (“Official Gazette”). If the
notes of any tranche and/or series are not listed, notices may be sent to their holders, at the Bank’s option,
by publications made for 1 day in a wide circulation newspaper of the relevant jurisdiction or if the notice
should be sent to only some of the holders, individually at the domiciles recorded in the applicable
register relating to the tranche and/or series in question. Any such notices will be deemed given on the
day following the last date on which publication was made and/or received. The cost of any publication
and/or notice will be borne by the Bank.
134
Judgment Currency Indemnity
If a judgment or order given or made by any court for the payment of any amount in respect of
any note is expressed in a currency (the “judgment currency”) other than the currency (the “denomination
currency”) in which such notes are denominated or in which such amount is payable, the Bank will
indemnify the relevant holder against any deficiency arising or resulting from any variation in rates of
exchange between the date as of which the amount in the denomination currency is notionally converted
into the amount in the judgment currency for the purposes of such judgment or order and the date of
actual payment thereof. This indemnity will constitute a separate and independent obligation from the
other obligations contained in the terms and conditions of the notes, will give rise to a separate and
independent cause of action, will apply irrespective of any indulgence granted from time to time and will
continue in full force and effect notwithstanding any judgment or order for a liquidated sum or sums in
respect of amounts due in respect of the relevant note under any such judgment or order.
Summary Action
Pursuant to Section 29 of the Negotiable Obligations Law, the notes that qualify as obligaciones
negociables entitle their holders to file a summary action (“acción ejecutiva”); therefore, in accordance
with the Capital Markets Law, any depositary is entitled to issue certificates evidencing the notes
represented by global securities to any beneficial holder. These certificates entitle their beneficial holders
to file a legal action before any competent court of Argentina, including a summary action, to enforce
collection of any sums outstanding under the notes.
Governing Law
The Negotiable Obligations Law establishes the requirements for the notes to qualify as obligaciones
negociables thereunder, and such law, together with the Argentine Companies Law, as amended, and
other Argentine laws and regulations will govern the Bank’s capacity and corporate authorization to
execute and deliver the notes and the Argentine Securities Commission’s authorization for the creation of
the Program and the offer of the notes. All matters with respect to the notes will be exclusively governed
by, and construed in accordance with, the laws of Argentina. However, such matters with respect to the
notes may be governed by, and construed in accordance with, the laws of the State of New York or the
Argentine laws, or the laws of any other jurisdiction if so specified in the applicable pricing supplement.
b) Plan of Distribution
The Bank may offer notes in any of the following manners: (i) through dealers; (ii) directly to
one or more purchasers; or (iii) through agents. The applicable pricing supplement will set out the terms
of the offer of any notes, including the purchase price of such notes and the use of the proceeds of such
sale, any subscription discount or concession allowed or reallowed or paid to the dealers, any securities
market where such notes may be listed and any restriction on the sale and delivery of notes. The
placement methods to be used by the Bank will be determined upon placement of each tranche and/or
series in accordance with the applicable laws then in effect, and will be detailed in the applicable pricing
supplement.
The Bank reserves the right to withdraw, cancel or modify any offer of notes contemplated
herein or in any pricing supplement, by publishing a notice in the same media through which such
offering of notes has been announced and in one wide circulation newspaper of Argentina. The Bank may
reject offers to purchase notes in part, provided that such rejection is made ratably. In the event that
dealers are appointed, each dealer will be entitled to reject in part any offer to purchase notes received by
it in its capacity as agent, provided that it does so ratably.
No placement agreements have been entered into; therefore, there are no subscription
commitments in connection with the notes.
If to specified in the applicable pricing supplement, the Bank will authorize agents or dealers to
solicit bids by certain specific institutions for the purchase of notes at the public offering price set forth in
such pricing supplement. Such agreements will be subject only to the conditions set forth in the pricing
supplement, which will specify the commissions payable for requiring such agreements.
135
Any dealer and/or agent involved in the distribution of notes may be regarded as an underwriter,
and any discount or commission received by them for the sale or resale of notes may be regarded as
underwriting discounts and commissions in accordance with the Negotiable Obligations Law. Agents
and/or dealers may be clients, conduct business or provide services to the Bank or its affiliates in the
ordinary course of business.
Subscription and Sale
The following text may be supplemented by the information contained in the applicable pricing
supplements relating to each series and/or tranche, which will supersede, supplement and/or modify these
general terms and conditions, always safeguarding the investors’ interests.
In addition, any dealers that agree to purchase from the Bank notes of any series will be specified
in the applicable pricing supplement.
The Bank may from time to time sell notes directly, or through one or more dealers. If the Bank
resolves to appoint a dealer with respect to a series and/or tranche of notes issued under the Program, the
Bank will enter into a placement agreement with the dealer.
Republic of Argentina
The creation of the Program and the public offering have been authorized by the CNV pursuant
to Resolution No. 16,573, dated May 24, 2011, provided, however, that any updates of or amendments to
the information included in the Offering Memorandum, including the annual updating required by the
CNV, must be approved before any additional offer of notes is made using such updated or amended
Offering Memorandum.
Placement
The Bank may from time to time sell notes directly or through one or more dealers appointed by it
from time to time in the applicable pricing supplement. Placement may be made on a continuous basis,
through syndicated placements or to any other person or institution.
Each series and/or tranche of notes issued under the Program will be placed by auction or open
public call for bids, as determined in the applicable pricing supplement pursuant to the CNV Rules. The
above mentioned auction or open public call for bids shall be carried out through an IT system authorized
by the CNV in accordance with the provisions of General Resolution 597/11 of the CNV. Such system
will ensure equal treatment among investors and transparency, in accordance with the CNV Rules. As a
general rule, all bids will be firm and binding. Exceptionally, non-binding bids may be allowed up to a
certain preset time limit prior to the closing of the auction or public call for bids.
Placement Efforts
In connection with their placement in Argentina, each series and/or tranche of notes will be
offered and placed by such dealer as appointed in the applicable pricing supplement, to investors in
Argentina in accordance with the provisions of Chapter VI, Section 57 and related provisions of the CNV
Rules, by distributing this Offering Memorandum and/or the applicable pricing supplement to potential
investors.
Investors will be invited to subscribe notes by means of the publication of notices in public
communication media and/or by invitations made by telephone and/or postal service and/or electronic
mail, or other similar procedures as specified in each pricing supplement. The dealer will distribute
among potential investors, personally and/or by mail, copies of this Offering Memorandum and the
applicable pricing supplement. This notwithstanding, any investors interested in obtaining a copy of this
Offering Memorandum and/or the applicable pricing supplement relating to each issuance may withdraw
it at the offices of the Bank and/or the dealer, at such domicile and times as specified in the applicable
pricing supplement.
In addition, the dealer may carry out road shows to disclose the terms and conditions of any
series and/or tranche of notes to be issued under the Program, and may receive from such investors
136
expressions of interest in the purchase of notes during the subscription period set forth in each pricing
supplement.
Allocation
If investors submit bids for subscription of notes for identical prices and in an amount in excess
of such which is pending allocation, partial allocations will be made on a proportional or pro rata basis.
This notwithstanding, each pricing supplement may provide weighting formulas for the allocation of the
notes, always provided that no bids are excluded.
General Provisions
Purchasers of the notes may be required to pay, in addition to the purchase price, stamp taxes and
other charges pursuant to the laws and practices of the country where the purchase is made.
c) Markets
The Notes issued under the Program may be listed or not on one or more stock exchanges or
self-regulated entities of Argentina or abroad, as specified in the applicable pricing supplement.
d) Clearing and Settlement
It will be as specified in the applicable pricing supplement.
137
ADDITIONAL INFORMATION
a) Description of Capital Stock
Pursuant to the Bank’s Bylaws, the issued capital stock as of the date of this Offering
Memorandum amounts to Ps. 1,500,000,000, represented by 1,500,000,000 common, book-entry shares
of one peso (Ps. 1) par value per share. The capital stock issued for each Class of shares is:
Class A Shares: Ps.658,530,880
Class B Shares: Ps.75,000,000
Class C Shares: Ps.75,000,000
Class D Shares: Ps.691,469,120
On February 14, 2007, the change in par value of the Bank’s shares of stock became effective.
This change in par value, which did not involve a change in the Bank’s capital stock, was voted upon at
the General Ordinary and Extraordinary Shareholders’ Meeting held on July 21, 2006. The referred
Shareholders’ Meeting decided that the Bank would maintain its fully-subscribed and paid-in capital of
Ps. 1,500,000,000, represented by 1,500,000,000 common book-entry shares of one peso (Ps.1) par value
each and entitled to one vote per share, except for the multiple voting right conferred upon Class D
shares.
All the issued shares are fully paid in. No change has taken place in the last year, in relation to
the quantity of shares. In addition, the capital stock has been fully paid-in. The capital stock has remained
constant in the last 3 years and there has been a non-substantial variation in the number of shares that
compose the different classes.
Pursuant to the Privatization Law and the Bank’s Bylaws, the Bank’s capital stock is divided
among the following classes of shares:
1.
Class A Shares, which represent shares owned directly and indirectly by the Argentine
Government, and currently comprise 43.9% of the Bank’s outstanding shares;
2.
Class B Shares, which represent shares currently held by Banco Nación, as trustee for the PPP,
but will be offered to the Bank’s employees pursuant to the PPP, under the regime set forth by
Law No. 23,696, and which currently comprise 5% of the Bank’s outstanding shares. Any Class
B shares not acquired by the Bank’s employees under the PPP shall be automatically converted
into Class D shares.
3.
Class C Shares, currently held by the Assistance Trust Trustee, which represent shares to be
acquired by legal entities engaged in housing construction or real estate activities through a
special program yet to be implemented, and which currently comprise 5% of the Bank’s
outstanding shares. Any Class C shares not acquired by those legal entities under the relevant
acquisition program shall be automatically converted into Class D shares; and
4.
Class D Shares, which will represent any shares transferred under unlimited and unconditional
ownership to the private capital not included in the foregoing categories of owners. Any Class A
Shares sold will be converted into Class D shares. Class D shares will not change their class if
they are eventually subscribed or acquired by the National State, another public company or
personnel participating in the PPP, or by third parties under the Class C shares acquisition
program. A certain number of Class D shares is held in the form of ADSs. Class D Shares
currently comprise approximately 46.10% of the Bank’s capital stock. 6.06% of the total number
of Class D shares, equivalent to 90,095,000 Class D shares, is currently held in trust by First
Trust of New York, as Option Trustee, which are held in trust for purposes of disposing, from
time to time and throughout a period that ended on February 2, 2004, of the ADSs remaining
after the exercise of the Options, pursuant to the instructions received from the Selling
Shareholder.
138
Since the privatization, there has not occurred any increase of capital or issuance of new shares.
Voting Rights
General
As discussed below, holders of Class A and Class D Shares have special voting rights relating to
certain relevant corporate decisions. Whenever such special rights do not apply (with respect to Class A
Shares and Class D Shares) and in all cases (with respect to Class B Shares and Class C Shares), each
share of common stock entitles the holder to one vote. Pursuant to CNV Rules, the Bank will not be
allowed to issue multiple voting shares once it has been admitted to the public offering system.
Within the framework of the Privatization Law, any action that would prejudice the rights of
holders of a particular class of shares, but not the rights of holders of other classes of shares, or affect the
rights of holders of a particular class of shares in a different manner than the rights of holders of other
classes of shares, must be approved by the holders of such class of shares at an Extraordinary
Shareholders’ Meeting.
The Bank may issue voting or nonvoting preferred shares. Such preferred shares may be divided
into Classes A, B, C and D. In such case, holders of voting preferred shares will exercise voting rights and
be subject to the same ownership, conversion and transfer restrictions as holders of common shares of the
same class. The Bank currently has no preferred shares issued or outstanding.
Class A Shares
Holders of Class A Shares have the right to elect at least two regular Directors and two
alternates, notwithstanding the number of shares comprising the class at any given time. The holders of
Class A Shares also have the right, as described in the following paragraph, to approve certain
transactions involving the Bank and certain acquisitions of shares. Class A Shares sold by the Argentine
Government or the Assistance Trust Trustee are automatically converted to Class C or D Shares, as the
case may be.
Under the Privatization Law and the Bank’s Bylaws, the Argentine Government must always
hold at least one Class A Share. In addition, the referred Law also provides that the Argentine
Government will exercise the voting rights of Class A Shares held by the Assistance Trust trustee.
Under the Bank’s Bylaws, the affirmative vote of the holders of Class A Shares is required,
regardless of the percentage of those shares in the Bank’s capital stock, in order to:
•
approve mergers or spin-offs;
•
approve an acquisition of shares constituting a Control Acquisition (as defined below) and,
therefore, resulting in the Bank being subject to a control situation (as defined under the
Argentine Corporate Law, the Central Bank rules or the Bank’s Bylaws);
•
transfer to third parties a substantial part of the loan portfolio of the Bank which causes the
Bank to cease or substantially reduce its residential loan and mortgage activities;
•
change the Bank’s corporate purpose;
•
transfer the Bank’s corporate domicile outside of Argentina; and
•
voluntarily dissolve the Bank.
Class B Shares
Upon acquisition of Class B Shares by the Bank’s employees under the PPP, the holders of such
shares will have the right to elect one member to the board of directors and one alternate, as long as such
class represents more than 2% of the capital stock of the Bank issued at the time the respective
139
shareholders’ meeting is convened. Until such time, such director will be elected by Class A Shares. The
Privatization Law provides that the Argentine Government will exercise the voting rights of Class B
Shares prior to such shares being offered and sold.
Class B Shares acquired by the Bank’s employees and thereafter transferred outside the PPP will
be automatically converted to Class D Shares.
Any Class B Shares not acquired by the Bank’s employees pursuant to the PPP (at the time of its
implementation) will be converted into Class A Shares. Each Class B Share is entitled to one vote.
Class C Shares
Upon transfer of Class C Shares to companies engaged in housing construction or real estate
activities, the holders of such shares will have the right to elect one regular Director and one alternate, as
long as such class represents more than 3% of the capital stock of the Bank. Until such time, such
directors will be elected by Class A shareholders. The Privatization Law provides that the Argentine
Government will exercise the voting rights of Class C Shares held by the Assistance Trust Trustee prior to
such shares being offered and sold. Only companies which have been engaged in housing construction or
real estate activities for at least one year are eligible to purchase Class D Shares. Class C Shares
transferred to persons other than companies engaged in housing construction or real estate activities will
be converted automatically to Class D Shares. Each Class C Share is entitled to one vote.
Class D Shares
The holders of Class D Shares shall have the right to elect nine Directors and their respective
alternates. In addition, for so long as Class A Shares represent more than 42% of the Bank’s capital, Class
D Shares shall be entitled to three votes per share, except that holders of Class D Shares will be entitled to
one vote per share in the case of a vote on:
•
a fundamental change in the Bank’s corporate purpose;
•
a change of the Bank’s domicile outside of Argentina;
•
the Bank’s dissolution prior to the expiration of the Bank’s corporate existence provided in
the Bylaws;
•
a merger or spin-off in which the Bank is not the surviving corporation;
•
a total or partial recapitalization following a mandatory reduction of capital; and
•
approval of voluntary reserves other than legal reserves when their amount exceeds the
Bank’s capital stock and legal reserves.
In addition, irrespective of the percentage of the Bank’s outstanding capital stock represented by
Class A Shares, the affirmative vote of the holders of Class A Shares is required to adopt certain relevant
decisions. See “—Class A Shares” for further information. Pursuant to the regulations in force, once the
Bank has been authorized to make a public offering of any or all of its capital stock, it will not be allowed
to issue multiple voting shares.
Class D Shares underlying the ADSs held by the Option Trustee
The Class D Shares underlying the ADSs shares owned by the option trustee shall be voted by
the latter pursuant to the instructions received from the selling shareholder.
Registration Rights
Pursuant to a Registration Rights Agreement, holders or beneficial owners of ADSs or Class D
Shares representing at least 3% of the Bank’s outstanding stock (“Registrable Securities”) may require
that the Bank, at its own cost, file with the SEC a registration statement with respect to Class D Shares or
140
ADSs (a “Demand Registration Right”) and use its best efforts to cause the ADSs to be approved for
listing on the New York Stock Exchange (“NYSE”); except in the following cases when the ADSs or
Class D Shares have ceased to be Registrable Securities: (i) a registration statement with respect to the
offering of such securities by the holder thereof shall have been declared effective under the Securities
Act and such securities have been disposed of by such holder pursuant to such registration statement, (ii)
such securities have been sold to the public pursuant to, or are eligible for sale to the public without
volume or manner of sale restrictions under, Rule 144(k) (or any similar provision then in force, but not
Rule 144A) promulgated under the Securities Act, (iii) such securities shall have been otherwise
transferred and new certificates for such securities not bearing a legend restricting further transfer shall
have been delivered by the Bank or its transfer agent and subsequent disposition of such securities shall
not require registration or qualification under the Securities Act or any similar state law then in force or
(iv) such securities shall have ceased to be outstanding. The Demand Registration Rights are exercisable
up to four times at any time after the earlier of (i) May 2, 2000 and (ii) five months after the completion
of any public offering of the Bank’s capital stock in the United States. We will not be required to effect
more than one demand registration in any twelve-month period. In certain instances, the Argentine
Government acting through Banco Nación has the right to postpone the filing of any registration
statement requested to be filed pursuant to a Demand Registration Right. No Demand Registration Right
has been exercised as of the date of this offering memorandum.
Certain Provisions Relating to Acquisitions of Shares
Certain Provisions of the Privatization Law and the Bylaws
Pursuant to the Privatization Law and the Bank’s Bylaws, each individual or legal entity that
belongs to the same “economic group” may not own more than 5% of the Bank’s capital stock. Although
the Privatization Law does not define the term “economic group”, the Bank will apply the meaning given
to that term in the Central Bank rules.
Furthermore, pursuant to the Privatization Law, no individual or legal entity may be entitled to
more than 5% of the Bank’s capital stock. In accordance with the terms of the Privatization Law, the
Ministry of Economy and Public Finance may set forth the other terms and conditions for the offering of
shares.
Certain Provisions Relating to the Central Bank
The Privatization Law and the supplementary regulations applicable thereto require that
significant acquisitions be approved in advance by the Central Bank. Accordingly, under the Argentine
Banking GAAP, Significant Acquisition means any purchase of stock which entitles the purchaser to five
percent (5%) or more of the Bank’s votes.
In addition, any acquisition, other than a Significant Acquisition, of 2% or more of the capital
stock of a financial institution shall be reported by the Bank to the Central Bank.
Notice of Certain Acquisitions
Pursuant to the Bank’s Bylaws, any person who, directly or indirectly, through or together with
its affiliates and persons acting in concert with it, acquires Class D Shares or securities convertible into
Class D Shares that would result in such person controlling more than 3% of Class D Shares, shall be
required to notify the Bank within five days of such acquisition, in addition to complying with all the
requirements imposed by any regulatory authority in Argentina and/or other jurisdictions where the
Bank’s Class D Shares are listed and/or traded. Such notice shall include the name or names of the person
or persons, if any, acting in concert with it, the date of the acquisition, the number of shares acquired, the
price at which the acquisition was made and a statement as to whether it is the intention of the persons to
acquire a greater equity interest in, or control of, the Bank. Each subsequent acquisition by such person or
persons shall require a similar notice under the same terms.
Qualified tied Majority
Any actions taken at any Shareholders’ Meeting of the Bank, either Ordinary or Extraordinary,
General or Special, may be taken by an absolute majority of shareholders present therein, except that:
141
(i)
the affirmative vote of 75% of the shares entitled to vote both on first and second call
(without regard to multiple voting rights) is required for the approval of certain actions by
the Bank, namely (a) the delisting of the Bank’s shares from the Buenos Aires Stock
Exchange and/or the NYSE, (b) the transfer of the Bank’s domicile outside Argentina; (c)
a fundamental change in the Bank’s corporate purpose and (d) certain split-ups resulting
in the transfer of 25% or more of the Bank’s assets;
(ii)
the affirmative vote of 66% of the shares entitled to vote both on first and second call
(without regard to multiple voting rights) is required to approve certain amendments to
the Bank’s Bylaws, namely those which would (a) amend the Bank’s Bylaws to change
the percentage of the Bank’s capital stock ownership, or the percentage that determines
what constitutes a control acquisition; (b) amend the provisions of the Bank’s Bylaws
requiring that tender offers required under the Bank’s Bylaws be all-cash offers for all
outstanding shares and convertible securities at no less than a specific minimum price as
provided for by the Bank’s Bylaws; (c) amend the provisions regarding the number,
nomination, election and composition of the Board of Directors; (d) allow the granting of
certain guarantees in favor of shareholders; (e) approve the substantial reduction or total
cessation of the Bank’s housing loan operations; and (f) the provisions on number,
nomination, election and composition of the board of directors; and
(iii)
the approval of an absolute majority of the shares (without regard to multiple voting
rights) entitled to vote is required for (a) mergers or split-ups in which the Bank is not the
surviving entity, and (b) early dissolution or partial or total reassessment of capital.
b) Articles of Incorporation and Bylaws
Incorporation; Corporate Purpose
The Bank is a sociedad anónima incorporated under the Argentine laws and registered in the
Public Registry of Commerce as of October 23, 1997 under Number 12,296, Book 122, Volume A of
Corporations.
Under the Bank’s Bylaws, the duration of the Bank is one hundred years as from the date of
registration in the Public Registry of Commerce (until October 23, 2097). The Bank’s registered
corporate office is located at Reconquista 151 (C1003ABC), City of Buenos Aires.
Pursuant to Section 4 of the Bank’s Bylaws the purpose of the Bank is to carry on, either on its
own account or through third parties, or in association with third parties, within Argentina or abroad, the
following businesses: (a) banking activities contemplated in and permitted by the FIL and further
supplementary and accessory laws, regulations and provisions governing the banking business for all
commercial banks; and the servicing of the needs of housing mortgage loans; (b) insuring the risks
derived from the transactions performed or property financed by it, even if not given as collateral,
imposing insurance on the beneficiaries of its transactions and insuring the risks derived from the
transactions set forth in Section 10 of Law No. 21,581 (the “National Housing Fund Law”), and Law No.
24,626 (the “Mandatory Insurance System Law”); (c) performing all securities transactions contemplated
in the applicable laws and regulations that govern such business, within the guidelines set forth by the
CNV, acting as a stock company (sociedad de bolsa) in authorized stock markets or as a broker in any
other self-regulated market; (d) purchasing, selling, constructing, leasing and managing real estate and/or
entering into brokerage and agency transactions and any other transaction as may be necessary to perform
its banking activities; (e) acting as trustee in accordance with the provisions of the Trust Law. According
to the Bank’s Bylaws and Section 17 of the Privatization Law, the Bank must, for the term of ten years
from July 22, 1997, conduct at least the following activities: (i) finance the construction and purchase of
homes within the country, either per se or through third parties, ensuring a harmonic regional distribution
of credit, so that credit is accessible for several sectors of the community; (ii) maintain credit lines aimed
at financing the construction of homes in small municipalities, allocating annually to these activities not
less than 10% of all construction credits granted, being required to contemplate an equitable geographic
distribution; and (iii) preserve the creation of the special fund provided for in Section 13 of Law No.
24,143 (the “Repayment of Credits and Existing Debts among Banco Hipotecario Nacional, the Central
Bank and the Secretariat of Economy Law”), which provides that the Bank shall create a special fund
aimed at subsidizing the reimbursement services of borrowers affected by serious situations of economic
142
emergency and that cannot be resolved through the renegotiation of the credit. Such fund shall be
composed by 2% of the amounts received as interest on housing loans.
The Bank shall regulate this operation subject to the provisions of the Argentine Banking GAAP. It
shall also administrate minor accounts pursuant to the conditions established in Section 33 of Law No.
21,963 (“National Savings and Insurance Fund Law”), applying the unattachability of savings account
balances according to Section 34 of the referred Law.
Relations between the Directors and the Bank; Conflict of Interest
Section 14 of the Bank’s Bylaws provides that the Board of Directors shall determine the
compensation of the members that perform executive, technical and administrative duties or special
commissions of a level consistent with the one prevailing in the market, with interested Directors
abstaining and with the subsequent ratification of such decision through a shareholders’ meeting.
In addition, Section 6.8 of the Regulation of the Board of Directors establishes that a Director
with an interest contrary to or competing with the Bank shall inform the Bank of such a situation before
the matter is considered in order for the affected Director to leave the meeting until the directors finish
considering the matter that the referred Director shall abstain from considering. Failure to comply with
the aforesaid obligation shall imply calling a Shareholders’ Meeting to decide: (i) the eventual adoption of
punishments; (ii) removal or suspension of the Director’s office, or (iii) initiation of action against the
Director (Section 10 of the Board of Directors’ Regulations).
Pursuant to Section 10 of the Regulation of the board of directors, the breach of this obligation
shall be evaluated by the board of directors, which may apply penalties to the breaching director.
In this sense, Section 272 of Argentine Corporate Law establishes that “whenever a director has
a conflict of interests contrary to that of the company, they shall report it to the Board of Directors and the
statutory auditors and shall abstain from considering such matter under penalty of incurring in liability
under Section 59”, i.e., under penalty of being jointly and severally liable for the damages caused and/or
derived from their actions or omissions.
Shareholder rights and obligations
Participation in the Bank’s Liquidation
Upon liquidation of the Bank, one or more liquidators may be appointed to wind up its assets
and businesses. In such case, in the event of liquidation of the Bank’s assets, the proceeds will be applied
to satisfy the payment of the Bank’s debts and liabilities, whereas any remaining amounts will be
distributed among the shareholders pro rata to their shareholdings, subject to the preferential rights of any
preferred shares, should there be at that time any issued and outstanding preferred shares.
Reduction of Capital
Capital reductions may be voluntary or mandatory. Voluntary reductions of capital shall be
approved by an Extraordinary Shareholders’ Meeting, which shall take place only after notice thereof
shall have been given in accordance with the applicable rules at that time and after the shareholders’
notice is published and creditors are given an opportunity to obtain payment or collateralization of their
claims.
According to Section 206 of Argentine Corporate Law, reductions of capital are mandatory
when losses have exceeded reserves and 50% of the capital stock of a company.
The Bank’s shares are subject to redemption in connection with a reduction in the capital stock
that requires approval by majority vote of an Extraordinary Shareholders’ Meeting. Any shares so
redeemed must be cancelled by the Bank.
143
Acquisition of its own shares by the issuer
According to Section 221 of the Argentine Corporate Law and the CNV Rules, corporations may
acquire their own shares, as long as they are admitted to be listed by a self-regulated entity.
Once such shares have been fully paid for, shares may be acquired with net profits and free or
voluntary reserves resulting from the latest financial statements approved by the Board of Directors.
The decision of a company to acquire its own shares must be (i) adopted by the Board of
Directors, prior to a report of the Audit Committee or of the control body, (ii) relayed to the CNV and
other self-regulated entities, and (iii) published in the bulletin of such self-regulated entities or in a wide
circulation newspaper. The Board of Directors’ resolution must establish the purpose of the acquisition,
the maximum amount to be invested, the maximum number of shares or the maximum percentage of
capital that may be acquired and the maximum price to be paid for the shares. The Board of Directors
must prove to the CNV that it has sufficient liquidity to purchase the shares, and that the payment of
shares does not affect the company’s solvency. The total amount of shares acquired and already held by
the company must not exceed 10% of the company’s capital stock. The shares acquired by the company
exceeding said limits must be disposed of within ninety days from the date of the acquisition causing the
excess.
The shares acquired according to these provisions must be disposed of by the company within a
year from the date of their acquisition, unless an Ordinary Shareholders’ Meeting authorizes an extension.
At the moment of transferring them, the company shall carry out a preemptive right offering the shares to
the shareholders according to the terms established in Section 221 of Argentine Corporate Law and its
supplementary and accessory regulations. The rights of the shares acquired by the company shall be
suspended until the shares are sold to a third party and shall not be considered for the calculation of the
quorum and majorities.
Once the term is over, and there has not been a shareholders’ meeting resolution extending the
term, the company’s capital shall be decreased by law in an amount equal to the par value of the
repurchased shares remaining in the portfolio, which shall be cancelled.
Finally, the company cannot acquire its own shares: (i) if the company knew of the existence of
a public offering of its shares; (ii) before the end of the first day following the publication of the
company’s decision to acquire its own shares; or (iii) if the shares have not been fully paid in.
On January 29, 2009, due to the expiration of the hedge agreement (“Total Return Swap”)
entered into on January 29, 2004 with Deutsche Bank AG, the latter transferred to the Bank, 71,100,000
Class “D” common shares of one peso (Ps. 1) par value each issued by the Bank. As from such time, the
shares became treasury stock of the Bank under the terms and conditions provided in Section 221 of the
Argentine Corporate Law.
Accordingly, on January 12, 2010, the Board of Directors of the Bank resolved: (a) to submit to
the General Ordinary Shareholders’ Meeting the decision to deliver the treasury Class D shares as
payment to the DAAs’ holders, up to the amount of their credits and according to the share value then
prevailing, and (b) to analyze possible alternatives for the General Ordinary Shareholders’ Meeting to
decide on the allocation of the remaining shares.
The General Ordinary Shareholders’ Meeting held on April 30, 2010 resolved to postpone for a
year as from January 31, 2010 the term for the realization of the Bank’s treasury stock.
Furthermore, at the referred meeting, the shareholders resolved to delegate to the Board of
Directors the decision to pay with treasury stock the DAA coupons arising from the debt restructuring, as
appropriate, according to the contractual valuation calculations and their actual market value, with the
shareholders having a preemptive right thereon under the same conditions.
On June 16, 2010, the Board of Directors resolved to make a preemptive offer for sale of part of
the treasury stock held as of that time for 36.0 million class D shares, the balance of which was delivered
as payment to the holders of the referred DAA coupons, due on August 3, 2010.
144
On July 26, 2010. within the framework of such offer, approximately 26.9 million class D shares
were disposed of and the proceeds thereof and the remaining shares referred to in the preceding paragraph
were made available to the holders of the DAA coupons on August 3, 2010.
Shareholders’ Meetings
Notice of Shareholders’ Meetings
Pursuant to Sections 21 and 22 of the Bank’s Bylaws, Ordinary and Extraordinary Shareholders’
Meetings of the Bank shall be called to consider the matters established in Sections 234 and 235 of the
Argentine Corporate Law.
Ordinary shareholders’ meetings on first and second call may be called and held simultaneously.
Shareholders’ Meetings, either Ordinary or Extraordinary, General or Special, shall be called by means of
notices published in the Official Gazette, in one of the major newspapers of Argentina and in the
newsletters of the stock exchanges and securities markets of the country where the Banks’ shares are
listed for a five-day term.
According to the Capital Markets Law, the minimum term for calling a meeting is 20 days and
the maximum term is 45 days. The board of directors shall order the publications to be made abroad to
comply with the laws and practices in effect in the jurisdictions of the self-regulated markets and stock
exchanges on which the Bank’s shares are then listed. The Board of Directors may use the services of
companies specializing in communications with shareholders and use other dissemination media to let
them know its opinion on the subject matters to be dealt with at the relevant meeting. The cost of such
services and dissemination shall be borne by the Bank.
Quorum Requirements
The quorum for Ordinary Shareholders’ Meetings on first call shall be a majority of the
shareholders with the right to vote. The quorum for Extraordinary Shareholders’ Meetings on first call
shall be 60% of the shareholders with the right to vote. The quorum for Ordinary and Extraordinary
Shareholders’ Meetings on second call shall be the Bank’s shareholders present entitled to vote.
Resolutions in Ordinary and Extraordinary Shareholders’ Meetings shall be adopted by the
majority of the present votes, except for the cases where the Bank’s Bylaws establish special majorities or
require the approval of Class A Shares. See “Voting Rights – Class A Shares” and “Certain Provisions
Relating to Acquisitions of Shares – Qualified tied Majority.”
At any Ordinary or Extraordinary Shareholders’ Meetings, shareholders may be represented by
proxies by granting a private instrument of proxy (the signature of which must be attested by a court officer,
a notary public or a bank). In order to participate at Shareholders’ Meeting, shareholders shall request to
Caja de Valores a certificate of shares and deposit it in the Bank three days prior to the Shareholders’
Meeting or within such term as determined by the Bank in accordance with the then applicable regulations
in force.
Resolutions Affecting the Rights of a Class of Shares
Pursuant to Section 24(v) of the Bank’s Bylaws and Section 250 of the Argentine Corporate
Law, whenever a Shareholders’ Meeting is required to adopt resolutions affecting the rights of a class of
shares, the consent or ratification of such class shall be required, which consent or ratification shall be
submitted to a Special Meeting of Shareholders of such class.
Capital Increases; Issuance of Shares
The Bank’s Bylaws provide that the capital stock may be increased up to five times its current
amount by resolution at an Ordinary Shareholders’ Meeting as provided for by Section 188 of the
Argentine Corporate Law. In addition, companies under the public offering regime in Argentina, such as
the Bank, may increase their capital stock more than five times its current amount without amending their
Bylaws.
145
The shareholders’ meeting that approves a capital increase must set forth the terms of the shares
to be issued, and may delegate to the Board of Directors the authority to determine the time of such
issuance and the payment terms and conditions and any other delegation authorized by Argentine
Corporate Law.
Notwithstanding any changes that may arise from the exercise of preemptive rights and accretion
rights as provided in the Bylaws, any issuance of common or preferred stock is to be made by classes
maintaining the existing proportion among the different classes as of the date of commencement of the
subscription period.
The Bank’s Bylaws also provide that any convertible securities issued by the Bank can only be
convertible into Class D Shares and the issuance thereof must be authorized by a Special Meeting of
Class D Shareholders.
Restrictions on Control Acquisitions
Required Approvals and Tender Offers
Pursuant to the Bank’s Bylaws, each acquisition of shares or convertible securities as a result of
which the acquiror, directly or indirectly through or together with its affiliates (collectively, an
“Acquiror”), would own or control Class D Shares that, combined with such Acquiror’s prior Class D
Shares, would represent 30% or more of the outstanding capital stock of the Bank (collectively, “Control
Acquisitions”), must be carried out in accordance with the procedure described in this subsection, except
for acquisitions by an Acquiror owning or controlling more than 50% of the Bank’s capital prior to such
acquisition. Any transaction that would result in the Acquiror holding a controlling interest in the Bank,
as defined under the Argentine Corporate Law, also must be approved in advance by the holders of Class
A Shares.
Prior to consummating any Control Acquisition, an Acquiror must obtain the approval of the
holders of Class A Shares, and make a Public Tender Offer (“PTO”) for all outstanding shares and
securities convertible into shares of the Bank. The Acquiror will be required to provide the Bank written
notice of and certain specified information with respect to any such tender offer, as well as the terms and
conditions of any agreement or proposed agreement which, if consummated, would result in a Control
Acquisition (a “Proposed Agreement”), at least 15 business days prior to the commencement of the offer.
The Bank will send each shareholder and holder of convertible securities a copy of such notice,
at the Acquiror’s expense. The Acquiror is required to publish a notice containing substantially the same
information in a newspaper of general circulation in the City of Buenos Aires, New York City and any
other city in which the Bank’s securities are traded on an exchange or other securities market, as well as
in the informative bulletins of those exchanges or securities markets. The notice must be published at
least once per week beginning on the date notice is provided to the Bank, until the offer expires.
The Board of Directors shall call a Special Meeting of Class A Shareholders for the tenth
Business Day following the receipt of the Acquiror’s notice for the purpose of considering whether
consummation of the tender offer will result in a benefit for the Bank or for the general interest. If the
Special Meeting of Class A Shareholders is not held, or if Class A shareholders disapprove the tender
offer, neither the PTO nor the Proposed Agreement may be consummated.
The PTO must be carried out in accordance with a procedure specified in the Bank’s Bylaws and
in accordance with any additional or stricter requirements of jurisdictions, self-regulated markets or
exchanges in which the offer is made or in which the Bank’s securities are traded.
Under the Bank’s Bylaws, the tender offer must provide for the same price in cash for all shares
tendered. Such price may not be less than the highest of the following (the “Minimum Price”):
(i) the highest price paid by or on behalf of the Acquiror for Class D Shares or
convertible securities during the two years prior to the notice provided to the Bank, adjusted for
any stock split, stock dividend, subdivision or reclassification affecting the Class;
146
(ii) the highest selling closing price for Class D Shares on the Bolsa de Comercio de
Buenos Aires during the 30-day period immediately preceding the notice provided to the Bank,
adjusted for any stock split, stock dividend, subdivision or reclassification affecting the Class;
(iii) the price resulting from clause (ii) above, multiplied by a fraction, the numerator
of which shall be the highest price paid by or on behalf of the Acquiror for Class D Shares
during the two years immediately preceding the date of the notice provided to the Bank and the
denominator of which shall be the closing price for Class D Shares on the Bolsa de Comercio de
Buenos Aires on the date immediately preceding the first day of such two-year period on which
the Acquiror acquired any interest in or right to any Class D Shares, adjusted for any stock split,
stock dividend, subdivision or reclassification affecting the Class; and
(iv) the net earnings per Class D Share during the four most recent full fiscal quarters
immediately preceding the date of the notice provided to the Bank, multiplied by the higher of
(a) the price/earnings ratio during such period for Class D Shares (if any) and (b) the highest
price/earnings ratio for the Bank in the two-year period immediately preceding the date of the
notice provided to the Bank, in each case determined in accordance with standard practices in
the financial community.
Any such offer must remain open for a minimum of 90 days following the provision of notice to
the shareholders or first publication of the offer, and shareholders shall have the right to withdraw
tendered shares at any time until the closing of the offer. Following the closing of such PTO, the Acquiror
will be obliged to acquire all tendered shares or convertible securities, provided that if the number of
shares tendered is less than the minimum, if any, upon which such tender offer was conditioned, the
Acquiror may withdraw the tender offer. The Acquiror may consummate any Proposed Agreement within
30 days following the closing of the tender offer, provided that if such tender offer was conditioned on the
acquisition of a minimum number of shares, the Proposed Agreement may be consummated only if such
minimum was reached. If no Proposed Agreement existed, the Acquiror may acquire the number of
shares indicated in the notice provided to the Bank on the terms indicated in such notice to the extent such
number of shares were not acquired in the tender offer, provided that any condition relating to a minimum
number of shares tendered has been met.
Restrictions on Related Party Transactions
Pursuant to the Bank’s Bylaws, any merger, consolidation or other combination with
substantially the same effect involving the Bank and an Acquiror that has previously carried out a Control
Acquisition, or by any other person or persons, if such transaction would have substantially the same
effects as a Control Acquisition (a “Related Party Transaction”), must be carried out in accordance with
the provisions described below.
Each tendering shareholder must receive the same price per share in any Related Party
Transaction, which price shall not be less than the highest of the following:
(i) the highest price per share paid by or on behalf of the party seeking to carry out
the Related Party Transaction (an “Interested Shareholder”) for (a) shares of the Class to be
transferred in the Related Party Transaction within the two-year period immediately preceding
the announcement of the Related Party Transaction or (b) shares of the Class acquired in any
Control Acquisition, in each case adjusted for any stock split, stock dividend, subdivision or
other reclassification affecting the Class;
(ii) the highest closing sale price of shares of the Class on the Bolsa de Comercio de
Buenos Aires during the 30 days immediately preceding the announcement of the Related Party
Transaction or the date of any Control Acquisition by the Interested Shareholder, adjusted for
any stock split, stock dividend, subdivision or reclassification affecting the Class;
(iii) the price per share resulting from clause (ii), multiplied by a fraction, the
numerator of which shall be the highest price paid by or on behalf of the Interested Shareholder
for any share of the Class during the two years immediately preceding the announcement of the
Related Party Transaction, and the denominator of which shall be the closing sale price for
shares of the Class on the date immediately preceding the first day in the two-year period
147
referred to above on which the Interested Shareholder acquired any interest or right in shares of
the Class, in each case as adjusted for any stock split, stock dividend, subdivision or
reclassification affecting the Class; and
(iv) the net earnings per share of the shares of the Class during the four most recent
full fiscal quarters preceding the announcement of the Related Party Transaction multiplied by
the higher of (a) the price/earnings ratio during such period for the shares of the Class (if any)
and (b) the highest price/earnings ratio for the Bank in the two-year period preceding the
announcement of the Related Party Transaction, in each case determined in accordance with
standard practices in the financial community.
Any such offer must remain open for a minimum of 90 days following the service of notice to
the shareholders or the first publication of the offer, and shareholders shall have the right to withdraw
tendered shares at any time until the closing of the offer. Following the closing of such PTO, the Acquiror
will be obliged to acquire all tendered shares or convertible securities, provided that if the number of
shares tendered is less than the minimum, if any, upon which such tender offer was conditioned, the
Acquiror may withdraw the tender offer. The Acquiror may consummate any Proposed Agreement within
30 days following the closing of the tender offer, provided that if such tender offer was conditioned on the
acquisition of a minimum number of shares, the Proposed Agreement may be consummated only if such
minimum was reached. If no Proposed Agreement existed, the Acquiror may acquire the number of
shares indicated in the notice provided to the Bank on the terms indicated in such notice to the extent such
number of shares were not acquired in the tender offer, provided that any condition relating to a minimum
number of shares tendered has been met.
Acquisitions by the Argentine Government
The threshold levels at which an acquisition of shares by the Argentine Government is deemed
to be a Control Acquisition, and the sanctions applicable to Control Acquisitions carried out by the
Argentine Government in violation of the procedures described above, are different than those applicable
to acquisitions of shares by other persons. Acquisitions of shares by the Argentine Government which
result in (i) the Argentine Government owning or controlling an aggregate of 49% or more of the Bank’s
outstanding capital stock or (ii) acquisitions by the Argentine Government of 8% or more of the
outstanding Class D Shares, provided that Class A Shares represent at least 5% of the outstanding capital
of the Bank as of October 23, 1997, will require the Argentine Government to make a tender offer for all
the outstanding Class D Shares. Acquisitions by the Argentine Government which do not satisfy the
requirements of (i) or (ii) above are subject to the threshold percentages described with respect to Control
Acquisitions. See “―Required Approvals and Tender Offers.”
With respect to acquisitions by the Argentine Government deemed to be Control Acquisitions,
the required tender offer need only be conducted for all outstanding Class D Shares.
Any Control Acquisitions carried out by the Argentine Government other than in accordance
with the procedure described above will result in the cancellation of the voting, dividend and other
distribution rights of the shares so acquired, except for certain indirect acquisitions (e.g., through
foreclosure or liquidation proceedings), and after which the Argentine Government does not own or
control 49% or more of the outstanding capital stock or more than 50% of the outstanding Class D Shares,
in which case only the voting rights of the Argentine Government with respect to the shares so acquired
will be withdrawn.
Dividend Distribution Policy
The declaration, amount and payment of dividends on the Bank’s capital stock are determined by
majority vote of the shareholders and are based generally but not necessarily on the annual
recommendation of the Board of Directors. The Board of Directors submits the financial statements of the
Bank for the preceding fiscal year, together with the reports thereon by the Board of the Directors and the
Supervisory Committee, to the Annual Ordinary Shareholders’ Meeting for approval. The shareholders,
once they have approved the financial statements, determine the allocation of the Bank’s realized net
profits for such year. The Bank is required to allocate a percentage of net income (currently 20%) to the
legal reserve. If the legal reserve is subsequently impaired, dividends may not be paid until the legal
reserve has been fully reestablished, which percentage shall not be available for distribution. Under the
148
Bank’s Bylaws, after the allocation to the legal reserve has been made and after segregating an amount of
the annual net income for the required payment of fees to the members of the Board of Directors and of
the Supervisory Committee, an amount of the annual net income will be segregated to pay dividends on
preferred stock, if any. The remainder of the annual net income may be distributed as dividends on
common stock or retained as a voluntary reserve, contingency reserve or other account, or any
combination thereof, all as determined by the shareholders’ meeting. Following the implementation of the
PPP and for a period that shall not exceed 10 years counted as from such implementation, , up to 0.50%
of the Bank’s net income for each fiscal year shall be paid to the beneficiaries of the PPP, through a
charge to income.
Under the law, dividends may be lawfully declared and paid by the Bank only out of the balance
of its net income for the relevant fiscal year after complying with the requirements set forth above, plus
retained earnings for prior fiscal years, if any, reflected in the Bank’s annual audited financial statements
approved at an Ordinary Shareholders’ Meeting.
Under CNV Rules and the Bank’s Bylaws, cash dividends must be paid to shareholders within
30 days of the shareholders’ meeting approving the dividend. Payment of dividends in shares requires
authorization from the CNV, which authorization must be requested within ten days after the
shareholders’ meeting approving the dividend. The Bank must make payment available to shareholders
within three months after the CNV’s authorization. Payment of dividends in shares and cash also must be
made available to shareholders within three months of such notice.
In addition, the amount, if any, of dividends that holders of ADSs will receive in US dollars will
be affected by, among other things, any exchange control policies applicable in Argentina.
c) Significant Agreements
As of the date hereof, the Bank has no significant agreements other than those executed in the
ordinary course of business that should be reported in this Offering Memorandum.
d) Exchange Controls
Exchange Rates
From April 1, 1991 until the end of 2001, Law No. 23,928 (the “Convertibility Law”)
established a system under which the Central Bank was obliged to sell U.S. Dollars at a fixed rate of one
Peso per U.S. Dollar. On January 6, 2002, Law No. 25,561 (the “Public Emergency Law”) was enacted,
formally abandoning over ten years of U.S. Dollar-Peso fixed parity and eliminating the requirement that
the Central Bank’s reserves in gold and in foreign currency should be at all times equivalent to 100% of
the monetary base. The Public Emergency Law, which has been extended until December 31, 2013 by
Law No. 26,729, grants the Argentine Executive Branch the power to set the exchange rate between the
Peso and foreign currencies and issue regulations related to the foreign exchange market. Following a
brief period during which the Argentine Government established a temporary dual exchange rate system
pursuant to the Public Emergency Law, the Peso was allowed to float since February 2002. As a result,
the Central Bank has intervened on several occasions since that date by selling U.S. Dollars in order to
lower the exchange rate. However, The Central Bank’s ability to support the Peso by selling U.S. Dollars
is restricted to its U.S. Dollar reserves. Since June 30, 2002, the value of the Peso has varied significantly
compares to the U.S. Dollar, decreasing in value to an exchange rate of Ps.5.0448 per US$1.00 as of
February 28, 2013.
The following table sets forth the annual high, low, average and period-end exchange rates for
the stated periods, expressed in Pesos per U.S. Dollar and not adjusted for inflation. The Bank cannot
assure that the Peso will not depreciate again in the future. The Federal Reserve Bank of New York does
not report a noon buying rate for Pesos.
Exchange Rates
Low(1)
High(1)
2005
2006
3.0523
3.1072
2.8592
3.0305
149
Average(1)(2)
2.9232
3.0741
Period-end(3)
3.0315
3.0695
2007
2008
2009
2010
2011
2012
January 2013
February 2013
March 2013(4)
(1)
(2)
(3)
(4)
3.1797
3.4537
3.8545
3.9857
4.3035
4.9173
4.9768
5.0448
5.0788
3.0553
3.0128
3.4497
3.7942
3.9715
4.3048
4.9228
4.9825
5.0475
3.1156
3.1614
3.7301
3.9127
4.1302
4.5515
4.9486
5.0111
5.0629
3.1510
3.4537
3.7967
3.9758
4.3032
4.9173
4.9768
5.0448
5.0788
Reference exchange rate as published by the Central Bank.
Based on daily averages.
Exchange rate used in the Bank’s financial statements.
As of March 13, 2013.
Exchange Market Controls
Regulations governing Foreign Exchange Transactions
All foreign exchange transactions are to be conducted through the single and free-floating
foreign exchange market (hereinafter, “MULC” as per the initials in Spanish) where the Central Bank
oversees the purchases and sales of foreign currency. Pursuant to Decree No. 260/2002, the Argentine
government implemented an exchange market where all exchange transactions are conducted. Such
transactions are subject to regulations and requirements imposed by the Central Bank. Pursuant to
Communication “A” 3471, as amended, the Central Bank established certain restrictions and
requirements applicable to foreign exchange transactions, and in the event of violations thereof criminal
penalties may be imposed.
Inflow and Outflow of Funds
Inflow of Funds
Pursuant to the Argentine Law on Foreign Investments (Ley de Inversiones Extranjeras de
Argentina) No. 21,382, as amended, and unified as per Decree No. 1853/1993, the purchase of shares in
an Argentine company by an individual or legal entity domiciled abroad or in an Argentine company
owned by “foreign investors” (as defined in the Law on Foreign Investments) is a foreign investment.
Communication “A” 5265 disclosed new regulations applicable to financial indebtedness.
Financial Indebtedness to foreign creditors means such debts to non-residents which do not derive from
an Argentine foreign trade transaction or in the event that they derive from an Argentine foreign trade
transaction do not qualify under exchange regulations as a foreign trade debt. Foreign Bonds and other
debt securities are those which meet the following conditions:
a.
b.
c.
d.
they are issued abroad in accordance with the regulations in force in the country of
issuance and such issuance is governed by foreign laws,
they are offered and subscribed for mostly abroad, for which purpose the issuance is
to comply with the regulations in force in the country of subscription,
they are fully paid up abroad,
principal and interest services are payable abroad.
These also include bonds and other debt securities delivered in exchange for other bonds or
securities which meet all the foregoing conditions, and/or in exchange for other notes with non-residents
deriving from an Argentine foreign debt.
Obligation to transfer and settle the funds in the local exchange market
The new foreign financial indebtedness transactions in the financial sector, the non-financial
150
private sector and local governments, provided that they are not related to compounding of interest, must
relate to settlement of foreign currency on the MULC. The foregoing also applies to indebtedness
incurred under issuance of debt securities meeting foreign debt eligibility requirements, financial loans –
including securities swap transactions-, foreign financial credit facilities, and any other transaction
involving a disbursement of funds by the foreign creditor thus resulting in a financial indebtedness to a
non-resident, except where the exception set forth in Section 3 of Decree No. 753/04 applies.
The obligation to channel and settle through the exchange market new financial indebtedness
must be fulfilled within 30 calendar days from the date of disbursement of funds. The proceeds from the
exchange settlement must be credited into a demand account held by the client with a local financial
institution.
Issuances of local debt securities of the financial sector and the non-financial private sector that
are denominated in foreign currency, with principal and interest payments not solely payable in
pesos in Argentina are to be subscribed in foreign currency and the proceeds must be settled through the
MULC within 30 calendar days from the date of payment of the funds.
It is only possible to make a subscription in Pesos for bonds issued in foreign currency or to
issue bonds in foreign currency in exchange for bonds or indebtedness denominated in Pesos, where
payments under the new issuance of indebtedness issued in foreign currency are solely payable in Pesos
within the country.
Minimum terms of financial indebtedness
Any new financial indebtedness channeled through the local exchange market and any renewals
of financial debt to non-residents from the financial sector and from the private, non-financial sector,
must be agreed upon, maintained and renewed for terms of at least 365 calendar days and they may not be
repaid before the lapse of said term, irrespective of the manner of discharge of the liability to the foreign
creditor and of whether said cancellation is effected with or without access to the local exchange market.
Primary issuances of publicly traded debt securities listed on self-regulated markets and the
correspondent balances of institutions authorized to trade in foreign exchange transactions are exempted
from the foregoing requirements provided that they are not credit facilities, in which case they must fulfill
the requirements applicable to channeling of financial loans.
The minimum term required for renewals of financial indebtedness to foreign creditors is to be
deemed completed upon payments of principal on the notes issued to implement foreign debt refinancing
agreements.
365-day term non-interest bearing deposits denominated in foreign currency – Decree No.
616/2005
Pursuant to the provisions of Decree No. 616/2005 dated June 9, 2005, Communication “A”
4359 provided for regulations governing non-interest bearing deposits with local financial institutions,
with the characteristics set forth in Communication “A” 4360, to be made in Dollars at 30% of the
equivalent amount in such currency of the total amount of the transaction that gives rise to such deposit
whenever there is a transfer of foreign currency through the exchange market as from June 10, 2005 for
the following reasons:
a. Financial indebtedness incurred by the financial sector and by the private, non-financial
sector, except for primary issuances of publicly traded debt securities listed on self-regulated
markets.
Deposits made for transfer of foreign currency from financial loans may be released provided
that evidence is shown of the capitalization of such loans by direct investors in the company
incurring in the indebtedness and a record is submitted acknowledging the filing of an
application for registration with the Public Registry of Commerce of the final capitalization of
the contribution. In these cases, the remaining requirements set forth in exchange regulations
must be fulfilled so that the inflow of foreign funds on account of direct investments is exempted
from the non-interest bearing deposit (Communication “A” 4762).
151
b. Primary issuance of shares by resident companies whose shares are neither registered for
public offering nor listed on any self-regulated market, to the extent they do not qualify as direct
investment funds.
c. Portfolio investments by non-residents to be applied to holdings of local currency and
financial assets and liabilities in the financial sector and in the private, non-financial sector, to
the extent they do not relate to the primary subscription for publicly traded debt securities listed
on self-regulated markets and/or to the primary subscription for shares of resident companies
whose shares are publicly traded and listed on self-regulated markets.
d. Portfolio investments by non-residents to be applied to the acquisition of rights in secondary
markets concerning securities issued by the public sector.
Exemption from the non-interest bearing deposit requirement
The following transactions, among others, are exempted from the non-interest bearing deposit
requirement:
1. Foreign currency settlements by residents resulting from foreign currency-denominated loans
granted by local financial institutions.
2. Inflows of foreign currency into the foreign exchange market originating in direct investment
contributions in Argentina and sales of ownership interests in local companies to direct
investors.
3. Inflows originating in investments made by non-residents to be used in the purchase of real
property, provided that they fulfill certain conditions.
4. Other financial indebtedness to foreign creditors of the financial sector and of the private, nonfinancial sector, to the extent the proceeds from the foreign exchange settlement are
simultaneously applied, net of taxes and expenses, to: (i) the acquisition of foreign currency to
repay principal of external debt and/or (ii) the formation of long-term off-shore assets
(Communication “A” 4377).
5. Other financial indebtedness to foreign creditors of the private, non-financial sector, to the
extent it has been incurred and repaid over an average term of not less than two years, including
in the calculation thereof the payment of both principal and interest, and the loan proceeds are
applied to investments in non-financial assets (Communication “A” 4377).
6. Repatriation of off-shore assets owned by residents provided that certain conditions are met.
7. Funds from foreign financing acquired and repaid within no less than two years in average,
including in the calculation thereof payment of principal and interest, and that have been granted
to the non-financial private sector or the financial sector provided that they are used in the
provision of financing services and/or small enterprise training and/or improvements in the
single family dwelling.
8. Purchases of foreign currency intended to be used in portfolio investments for a specific
purpose, to the extent that such application is recorded at the time it is made.
9. Sales of off-shore assets owned by residents from the private sector to be used in the primary
subscription for securities issued by the Argentine Government, the proceeds of which are used
in the purchase of foreign currency for debt servicing purposes.
10. Foreign exchange trading transactions originating in the sale on the local exchange market of
foreign currency transferred on account of repatriation of portfolio investments held by residents
carried out by stock brokers residing in the country, provided that the proceeds resulting from
such transactions are used within 24 business hours following the date of exchange settlement in
payment of purchases of securities issued by no-residents listed in the country or abroad, in
transactions entered into with the public sector no more than 72 business hours in advance, and
152
to be settled in foreign currency in the country.
11. Payments from non-residents to local financial institutions as enforcement of financial
guarantees and collection of financial debts. In such cases, prior authorization is required from
the Central Bank not to make the otherwise mandatory deposit.
12. Inflows of foreign currency through the local exchange market by insurers in compliance
with Resolution No. 36,162/2011 issued by the Argentine Superintendency of Insurance.
Foreign Exchange Transaction Consultation System
On October 28, 2011, General Resolution No. 3210/11 issued by the Argentine Tax Authority
(Administración Federal de Ingresos Públicos - “AFIP”) established the Foreign Exchange Transaction
Consultation System (the “Consultation System”) through which the entities authorized by the Central
Bank to enter into foreign exchange transactions are required to request information on and register,
through a computerized system, the amount in Pesos of each foreign exchange transaction at the time it is
made.
This consultation and registration system is applicable to the sale of foreign currency —foreign
currency or bills—irrespective of the purpose or intended use so as to confirm whether the transaction is
"Validated" or shows "Inconsistencies".
Pursuant to Communication “A” 5237, later superseded by Communication “A” 5245, in the
events of sales of foreign currency for the formation of off-shore assets by residents without an obligation
with respect to a subsequent specific application, the entities authorized to enter into foreign exchange
transactions shall only provide access to the MULC for those transactions with clients who obtain a
validation and who fulfill any other requirements set forth in applicable foreign exchange regulations. The
following entities, among others, are exempted from the Consultation Requirement: a) international
agencies and institutions providing services as official export credit agencies, diplomatic and consular
offices, bilateral agencies created under International Treaties, and b) local governments.
Sales of foreign currency that do not relate to formation of off-shore assets by residents without
a specific application are also exempt from the requirements of the Consultation System. Notwithstanding
the foregoing, the financial institutions must confirm that all other MULC requirements are duly met.
On August 6, 2012, the AFIP Resolution No. 3210 was superseded by AFIP Resolution No.
3356. This resolution establishes stricter restrictions on access to the foreign exchange market, especially
in relation to the outflow of residents’ funds. Both resolutions (3210 and 3356) are related to
Communication “A” 5239 (currently repealed) and 5245.
Outflow of Funds
Payment for Services
Argentine residents may have access to the local exchange market to make transfers abroad for
payment of services rendered by non residents on the terms agreed upon between the parties, in
accordance with applicable legal laws and regulations. For such purposes, documents must be submittted
supporting the genuineness of the transaction in connection with the item, provision of service by the non
resident to the resident and amount to be transferred abroad.
If the nature of the service sought to be paid is not directly related to the business conducted by
the client, the entity authorized to engage in foreign exchange transactions should require certain
minimum documents specified in the rules to certify the existence of a debt to a foreign creditor.
In any event, the intervening entity is required to verify, among other things, compliance with
registration requirements applicable to effective agreements at the national level and request any
documents it deems appropriate to verify the truth of the representations made by the client.
For payments of the services included in item 3.4. of Communication “A” 5377 (including,
without limitation, royalties, business, professional and technical services, commercial commissions) if
153
the payee is an individual or legal entity related to the local debtor, either directly or indirectly (pursuant
to the criteria set forth in Communication “C” 40.209) or is an individual or legal entity residing or
organized or domiciled in associated colonies, jurisdictions, territories or States included in the list set
forth in Decree No. 1344/98 implementing the Income Tax Law No. 20,628 as amended; or where the
payment to the foreign creditor is to be made into an account held in such jurisdictions, prior
authorization from the Central Bank is required.
Such prior authorization requirement is not applicable to agreements that do not create in the
calendar year at the level of the exchange market and debtor, payments and/or new debts higher than US$
100,000 or its equivalent amount.
Current profits and transfers
Access to the local exchange market is permitted for payment of interest on outstanding debts or
debts that are discharged concurrently with payment of interest to the extent that the foreign exchange
rules allow access to the local exchange market for payment of principal due under such debt and
provided that all general conditions established for making such payments of principal are met. Such
access is for any outstanding amounts accrued from the date of settlement of the foreign currency
resulting from such indebtedness to a foreign creditor, or from the actual date of disbursement of the
funds if they were credited in correspondent accounts of entities authorized to settle such funds through
the local exchange market, within 48 business hours from the date of disbursement.
The exchange settlement for the purchase of foreign currency can be made no more than 5
business days prior to the date of maturity of each interest payment installment computed in arrears, or for
the accrued amount at any time of the current interest period.
In any case and if applicable the declaration of Evaluation of issuances of securities and foreign
liabilities of the private sector that give rise to payment of interest must be submitted, with a validation of
data reported for the obligation referred to above and of the “Evaluation of direct investments”, in the
event that the foreign creditor is a member of the same business group.
The entities authorized to enter into foreign exchange transactions may authorize and proceed to
make payments abroad of profits and dividends to non-resident shareholders and holders of ADRs and
BDRs, for financial statements ended and certified by external auditors in compliance with the formal
requirements applicable to certification of the annual balance sheet. If applicable, the declaration of
Evaluation of issuances of securities and foreign liabilities of the private sector must be submitted, with a
validation of data reported for the obligation to make payment of profits and dividends and of the
Evaluation of direct investments.
In the events of payments for “Rents or leases of real property located in the country and owned
by non-residents” and “Other rents payable abroad”, access to the local exchange market will be subject
to approval from the Central Bank if the payee is an individual or legal entity related to the local debtor,
either directly or indirectly, in accordance with the definition of related entities or is an individual or legal
entity residing or organized or domiciled in associated colonies, jurisdictions, territories or States
included in the list set forth in Decree No. 1344/98 implementing the Income Tax Law No. 20,628 as
amended; or where the payment to the foreign creditor is to be made into an account held in such
jurisdictions.
In these cases, such prior authorization requirement is not applicable to agreements that do not
create in the calendar year at the level of the exchange market and debtor, payments and/or debts higher
than US$ 100,000 or its equivalent amount. In any event, the agreements shall be registered with the
mandatory registers at the national level in force due to the specific nature of the item, and/or for the tax
consequences of these transfers abroad.
To make donations, the donee must be a governmental entity, an international organization
and/or its affiliates and/or a foreign institution established in the country and internationally known for its
charitable actions, and they should be used in support of natural disasters, health-related emergencies or
other humanitarian situations that are known to the public at large. For this type of donations, access will
be also provided to diplomatic missions, consular offices and other international offices accredited in the
country. Any other cases are subject to prior authorization from the Central Bank.
154
Argentine residents have access to the foreign exchange market for transfer abroad of funds for
family support, pension and retirement benefits, scholarships and education expenses, payments of fines
imposed on individuals for events that occurred abroad and other transactions qualified as current
transfers in accordance with international guidelines. Transfers for family support must consist in
transfers directed -as clients of the intermediary entity- by resident individuals or diplomatic personnel
accredited in the country, in favor of non-resident individuals. Prior authorization from the Central Bank
shall be required to enter into transactions for family support if an amount equivalent to US$ 1500 is
exceeded per client in a given calendar month at all entities authorized to engage in foreign exchange
transactions.
The transfers for scholarships and education expenses must be transfers made by residents to
foreign educational institutions. The entities granting scholarships to residents for them to study abroad
can also make transfers abroad in the event that the beneficiaries are scholarship holders for the amounts
allocated to cover expenses in the country where they will study. Sales of foreign exchange to residents
for services, rents, scholarships and education expenses, and donations must be made by issuing a check
drawn by the client or debited from the client's demand account held with a local financial institution, by
using any of the available payment methods. Such requirement will also apply to transfers for family
support exceeding US$ 300 or its equivalent amount per client in a given calendar month at all entities
authorized to engage in foreign exchange transactions. This requirement is not applicable to purchases of
foreign currency-denominated bills, the acquisition of which had required a tax validation of the funds
used in the foreign exchange transaction.
Foreign Financial Indebtedness
Communication “A” 5265 as amended by “A” 5337 disclosed new regulations applicable to
financial indebtedness. Debtors from the financial sector and from the non-financial private sector have
access to the local exchange market for payments of principal on their financial debts to foreign creditors:
1.
At any time within 30 calendar days prior to maturity, to the extent the applicable
minimum stay-period has been complied with.
2.
Prior to terms beyond 30 calendar days, either in whole or in part, to the extent the
applicable minimum stay-period has been complied with and any of the following
conditions has been met:
2.1. the amount in foreign currency applied to the prepayment of the debt to
foreign creditors may not exceed the current value of the debt portion being
repaid, or
2.2 should such payment be financed with new indebtedness, either in whole
or in part, or should it be part of a debt-restructuring process with foreign
creditors, the terms of the new indebtedness and any net cash payment being
made must not imply an increase in the current value of the debt. The method
for calculation of the present value is specified in the rules.
3.
Any number of days in advance as operationally required for payment to the creditor
at maturity, in the case of principal installments that must be paid subject to
compliance with specific conditions expressly stipulated in the foreign re-financing
agreements executed and implemented with foreign creditors as from February 11,
2002.
Access to the foreign exchange market for service of interest and principal on bonds and other
foreign securities is, in any event, irrespective of the holder’s residence. Access to the foreign exchange
market is only permitted for payment under services of debt securities that are locally issued, publicly
traded and listed on self-regulated markets, if they are issued and subscribed for in foreign currency, and
the funds are intended to finance infrastructure works in the country. For the other securities issued
locally, irrespective of the condition of issuance, the debtor has no access to the local foreign exchange
market for servicing purposes.
The local banking institutions may have access to the foreign exchange market without the prior
155
consent of the Central Bank to discharge their liabilities due to non residents for cancellation of financial
stand-bys, when the transaction that is being secured can automatically have access to the foreign
exchange market or when the granting thereof allows for execution or maintenance of a work or other
kind of commercial transaction abroad directly or indirectly including the supply of property and/or
services of Argentine residents related to execution thereof.
Sales of Foreign Currency to Non-residents
Communication “A” 4662, as amended by Communications “A” 4692, “A” 4832, “A” 5011,
“A” 5163, “A” 5237 and “A” 5241, governs access to the foreign exchange market by non-residents (as
per the definitions contained in the IMF’s Balance of Payments Manual, fifth edition, chapter IV).
In this respect, no prior Central Bank’s approval is required for any of the following transactions
conducted by non-residents insofar as all the requirements imposed in each case have been met:
1. Purchase of foreign currencies for remittances abroad in the following events, without
limitation, when transactions are made by, or pertain to collections in Argentina of:
1.1. International agencies and institutions providing services as official export credit agencies.
1.2. Diplomatic and consular offices and diplomatic personnel accredited in the country for
transfers made in discharging their duties.
1.3. Missions in Argentina of Courts, Authorities or Offices, Special Missions, Commissions or
Bilateral Agencies created by International Treaties or Agreements to which Argentina is a
party, to the extent such transactions are conducted in the course of their duties.
1.4. Payments of Argentine imports on demand.
1.5. Foreign debts of residents for Argentine imports of goods, provided that the exchange
settlement takes place within 20 business days following the date of collection.
1.6. Services, rents and other current transfers to foreign creditors.
1.7. Financial indebtedness originated in foreign loans from non residents.
1.8. Income from Bonds and Loans guaranteed by the Argentine Government issued in local
currency.
1.9. Inheritances, in accordance with the declaration of heirs.
1.10. Repatriations of direct investments in the private, non-financial sector, in companies which
are not the controlling companies of local financial institutions and/or in real estate, provided
that the investor has maintained such investment in Argentina for at least 365 calendar days, and
the beneficiary does not fall within the scope of item I of Communication "A" 4940, for the
following purposes:
1.10.1. Sale of the direct investment.
1.10.2. Final liquidation of the direct investment.
1.10.3. Capital reduction decided by the local company.
1.10.4. Reimbursement of irrevocable contributions by the local company.
Transactions involving repatriations of direct investments which are subject to the established
requirements and cannot provide evidence of compliance as of the date of access to the local foreign
exchange market require the Central Bank's prior authorization.
1.11. Collections of services or proceeds of sales of other portfolio investments (and their
156
profits) which in the aggregate do not exceed the equivalent of US$ 500,000 per calendar month
per individual or legal entity, in all the institutions authorized to conduct foreign exchange
transactions. These portfolio investment repatriations include, but are not limited to, portfolio
investments in shares and ownership interests in local companies, investments in mutual funds
and local trusts, purchases of portfolios of loans granted to residents by local banks, purchases of
invoices and promissory notes for local business transactions, investments in local bonds issued
in pesos and in foreign currency payable locally, as well as purchases of other internal
receivables.
For payments of principal and interest on government securities issued by the Argentine
Government in foreign currency and other bonds issued by residents in foreign currency, which in
accordance with current regulations are payable abroad, which are deposited by non-residents into local
depositary accounts, the non-resident may choose among the following alternatives: collection in foreign
currency-denominated bills, that the funds be credited to a local foreign currency-denominated account
held in its name or retransfer of the funds to an account of its own held abroad. In these cases, no
exchange form is executed. If following payment of the services, the beneficiary of the funds desires to
convert the funds so collected in foreign currency into local currency, a purchase is required to be
completed through the foreign exchange market based on general regulations on non-residents' portfolio
investments.
Financial Derivatives
Communication “A” 4805 amended foreign exchange regulations governing settlement and
cancellations of futures, forwards and other derivatives transactions entered in the financial sector and the
non-financial private sector. The regulations establish the following:
For transactions performed and settled in the country: settlements and cancellations of futures
transactions on self-regulated markets, forwards, options and any other type of derivatives, the
settlements of which are performed in the country by netting in local currency are not subject to previous
compliance with requirements as concerns foreign exchange regulations. These local transactions are
those executed under Argentine laws, irrespective of the contracting parties' residence, which in no event
may imply present or future obligations to make payments by transfer abroad.
Inflows by non residents through the local exchange market to meet liabilities under these
agreements are subject to the deposit set forth in Decree No. 616/2005.
For transactions entered into with foreign persons: the Central Bank’s prior authorization is not
required for settlement and access to the foreign exchange market for payment of premiums, creation of
guarantees and any appropriate cancellations of transactions involving futures, forwards, options and
other hedging derivatives. Any other transaction involving futures, forwards, options and other
derivatives transactions with foreign persons require the Central Bank’s prior authorization, both for
performance and to obtain access to the foreign exchange market for subsequent cancellation, even if
future access to the local foreign exchange market is not anticipated.
With respect to admitted foreign transactions, access to the MULC is conditional upon
undertaking a commitment to transfer and settle on such market and within 5 business days following the
closing of the transaction the funds payable to the local client as a result of such transaction, or as a result
of the release of funds under the guarantees so set up. Such transfers and the inflow of funds under the
General Exchange Position of local financial institutions due to the release of guarantees created for
passive repo transactions are not subject to the obligation to make the non-interest bearing deposit.
The transactions performed with foreign persons with access to the foreign exchange market for
hedging purposes, shall only be made: (1) on institutionalized and international financial markets, (2)
with foreign banks that meet the requirements set forth in Communication “A” 4560 as supplemented, or
(3) with financial institutions qualified under regulations for this type of transactions, provided that they
are controlled by banks that meet the requirements under the foregoing section.
Formation of Off-shore Assets by Residents
157
Communication “A” 5236 dated October 27, 2011 has rearranged applicable regulations
concerning access to the local foreign exchange market for the formation of off-shore assets, with and
without specific allocation, by resident individuals and legal entities other than entities authorized to deal
in foreign exchange and other estates domiciled in Argentina, as well as by local governments.
Such regulations authorize access to the foreign exchange market to form off-shore assets
provided that the conditions applicable to each case are met, and the other transactions are subject to the
Central Bank’s prior approval.
Capital Markets
Securities-related transactions carried out through Stock Exchanges and self-regulated Securities
Markets must be paid using one of the following mechanisms:
(a) in Pesos, by using the different methods available for payment,
(b) in foreign currency through electronic fund transfers from and to sight accounts in local
financial institutions, and
(c) through wire transfers against foreign accounts.
Under no circumstance shall the settlement of these securities purchase and sale transactions be
made in foreign currency bills or through deposits in escrow accounts or in third-party accounts.
The institutions under the supervision of this Central Bank must comply with the requirements
set forth in Resolution No. 554/09 issued by the Argentine Securities Commission when it comes to all
transactions consisting in the purchase and sale of securities with non-residents and performed under any
conditions, unless they relate to transactions involving foreign financing received by the local entity. In
this sense, upon entering into a transaction with foreign intermediaries, prior to conducting a transaction
consisting in the purchase and sale of securities such requirements must be met with respect to the foreign
intermediary and the client on whose behalf the transaction is performed.
Following issuance of Communication “A” 4864 dated November 3, 2008, access to the foreign
exchange market by financial institutions for transactions consisting in the purchase and sale of securities
on Stock Exchanges and self-regulated Markets, on the terms set forth in Communication “A” 5314 shall
be subject to the Central Bank’s prior authorization if it is not possible to show that the traded security has
remained in the seller’s portfolio for a period of at least 72 business hours from the date of settlement of
the transaction resulting in the incorporation of the securities into the seller’s portfolio.
For further details on foreign exchange regulations applicable in Argentina, investors should
seek advice from their professional advisors and fully read Decree No. 616/2005, MEP Resolution No.
365/2005 and the Argentine Criminal Law on Foreign Exchange Matters No. 19,359, as regulated and
supplemented. Interested parties may have access to such laws and regulations through the website of the
Ministry of Economy and Public Finance (http://www.infoleg.gov.ar) or the Argentine Central Bank
(http://www.bcra.gov.ar).
e) Taxation
Argentine Tax Considerations
The following summary is based upon tax laws of Argentina as in effect on the date of this
Offering Memorandum and is subject to any changes in Argentine laws that may come into effect after
such date.
Interested persons are advised to consult their own tax advisers as to the consequences of
participating in the tender offer of the notes taking into account special circumstances not contemplated in
this summary, including, without limitations, those arising from the receipt of interest payments and the
sale, redemption and disposition of the notes. In addition, it is worth mentioning that Argentine tax laws
158
have been amended on several occasions in the past and may be restated, provide for the abolishment of
exemptions, reinstate taxes and be otherwise amended with the ensuing increase or elimination of the
yield of the investments.
Prospective purchasers of the notes are advised to consult their own tax advisers as to the
consequences under the tax laws of the country of which they are residents of any investment in the notes,
including, without limitation, those arising from the receipt of interest payments and the sale, redemption
and disposition of the notes.
Income Tax
Interest
Except as described below, interest payments on the notes (including original issue discount, if
any) will be exempt from Argentine income tax, provided that the notes are issued in accordance with the
Negotiable Obligations Law, and qualify for tax exempt treatment under Article 36 of such law. Under
Article 36, interest on the notes shall be exempt if the following conditions (the “Article 36 Conditions”)
are satisfied:
(a) the notes must be placed through a public offering authorized by the CNV in compliance
with Resolution 1738/2004 issued by AFIP, as amended and supplemented (the "AFIP Resolution”);
(b) the issuer shall guarantee that, pursuant to the corporate resolutions authorizing the offer, the
proceeds of the issue of such notes shall be allocated to (i) investments in tangible assets situated in
Argentina, (ii) working capital to be used in Argentina, (iii) refinancing of debts, (iv) capital contributions
to the issuer’s controlled or affiliated companies, provided that such companies use the proceeds of such
contributions exclusively for the purposes set forth in (i), (ii) or (iii) above, or (v) making loans in
accordance with Argentine Banking GAAP to the extent that the issuer is a financial entity under the FIL,
provided that the borrowers under such loans allocate the funds so obtained for the purposes described in
(i), (ii) or (iii) above;
In the case of liabilities restructuring with notes, the tax benefit is only applicable to those issued
under a restructuring of notes that were elegible for the tax benefit (pursuant to Section 56 of CNV
Resolution 470/04).
(c) the issuer shall provide evidence to the CNV, in the time and manner prescribed by
regulations, that the proceeds of the issuance have been used for the purposes described in (b).
(d) The minimum term for total repayment of the notes may not be less than two (2) years.
Should the terms of issue of the notes provide for partial repayments, then the following additional
conditions shall be complied with: a) the first repayment shall not occur before six (6) months have
elapsed and the amount thereof may not exceed twenty-five percent (25%) of the amount of the issue; b)
the second repayment shall not occur before twelve (12) months have elapsed and the amount thereof
may not exceed twenty-five percent (25%) of the amount of the issue; c) the total amount to be repaid
during the first eighteen (18) months may not exceed seventy-five percent (75%) of the aggregate amount
of the issue.
In such regard Section 79 -paragraph two- of Decree No. 2284/1991 published in the Official
Gazette on November 1, 1991 set aside the repayment minimum term requirements set forth in paragraph
4 of Section 36 of Law No. 23,576 (as amended by Law No. 23,962), without prejudice to the powers of
the Argentine Central Bank.
The AFIP Resolution provides an interpretation of “public offering placement” which mainly
states the following matters:
•
Whether a securities offering is a “public offering placement” is to be construed
exclusively under Argentine law (Article 16 of the Public Offering Law). Under the
Argentine Public Offering Law, notes offered under Rule 144A or Regulation S of the
159
U.S. laws may qualify as public offerings as such term is defined by the Argentine
Public Offering Law.
•
Public offering efforts should be properly carried out and documentation of such efforts
should be kept by the issuer.
•
Public offering efforts may be conducted not only in Argentina but also abroad.
•
Offerings may be made to the “general public” or to a “specified group of investors”
(such as qualified institutional investors).
•
The offering may be underwritten pursuant to an “underwriting agreement”. The notes
placed under such agreement will be considered as placed by means of a public offering
to the extent that the underwriter effectively makes public offering efforts in accordance
with the Argentine Public Offering Law.
•
The refinancing of “bridge loans” is an accepted use of proceeds from the offering.
Accordingly, each series of notes shall be issued in compliance with the Article 36 Conditions
and placed by means of a public offering as defined in the AFIP Resolution. The CNV has authorized the
establishment of this Program, pursuant to Resolution No. 16,573, dated May 24, 2011. For that purpose,
after the issuance of a series of notes, the documents required by CNV Resolution No. 368/01, as
amended, and the AFIP Resolution, shall be filed with the CNV. Upon approval of such filing by the
CNV, and provided that Article 36 Conditions are met, the notes would qualify for the tax-exempt
treatment set forth under Articles 36 and 36bis of the Negotiable Obligations Law.
However, in accordance with Article 38 of the Negotiable Obligations Law, if the issuer does not
fulfill or comply with the Article 36 Conditions, the issuer will be liable for the payment of taxes payable
by the holders of the notes which would have been otherwise exempt, calculated at the maximum rate
contemplated by article 90 of the Income Tax Law (35%). AFIP has regulated by means of General
Resolution No. 1516/2003, as amended by General Resolution No. 1578/2003, the procedure for payment
of income tax by the issuer in the event it is concluded that the issuer has failed to comply with any of the
requirements of Article 36 of the Negotiable Obligations Law. Consequently, the specified exemptions
will benefit the holders of the notes regardless of any subsequent violation or non-compliance by the
issuer, and holders of the notes will be entitled to receive the full amount due as if no withholding had
been required. See “Description of the Notes—Additional Amounts.”
According to Decree No. 1,076 of July 2, 1992, as amended by Decree No. 1,157 of July 10,
1992, both ratified by Argentine Law No. 24,307 of December 30, 1993 (“Decree No. 1,076”), taxpayers
subject to the tax adjustment for inflation rules pursuant to Title VI of the Argentine Income Tax Law
(“ITL”) (in general, entities organized or incorporated under Argentine law, Argentine branches of
foreign entities, sole proprietorships and individuals carrying on certain commercial activities in
Argentina) (“Excluded Holders”) do not enjoy the aforementioned exemption under Article 36 and
Article 36 bis of the Negotiable Obligations Law. As a result thereof, payments of interest on the notes to
Excluded Holders are subject to income tax in Argentina at the general rate of 35% on their net
worldwide income.
Although in certain cases payments of interest to Excluded Holders (except to financial entities
subject to the FIL) are also subject to a 35% withholding tax on account of the income tax mentioned
above, when the debtor is an Argentine financial institution under Law 21,526, such withholding tax will
not be applicable (Article 81, paragraph a) of the ITL). Any withholding made shall be considered as a
payment on account of the income tax of the noteholder and shall become due unless the beneficiary
alleges the existence of an exemption event and provided that such events shall be evidenced by means of
any of the formal requirements established by the relevant tax authority.
Argentine law provides that, in general, tax exemptions do not apply when, as a result of the
application of an exemption, funds may be transferred to foreign tax authorities (Articles 21 of the ITL
and 106 of the Argentine Tax Procedure Law). This principle, however, does not apply to holders of
notes who are foreign beneficiaries.
160
Therefore, the exemption established under Article 36 and Article 36 bis of the Negotiable
Obligations Law is applicable only to: (i) resident and non-resident individuals (including undivided
estates) and (ii) foreign beneficiaries (either individuals or legal entities). The exemption is not applicable
to local companies ("Excluded Holders") pursuant to Article 4 of Decree No. 1076/1992.
Capital Gains
If the Article 36 Conditions are fully complied with, resident and non-resident individuals and
foreign entities without a permanent establishment in Argentina are not subject to taxation on capital
gains derived from the sale or other disposition of the notes.
However, even if the Article 36 Conditions are not met, Decree No. 2,284/91, as ratified by Law
No. 24,307, provides that foreign beneficiaries are not subject to taxation on capital gains derived from
the sale or other disposition of the notes.
Pursuant to Decree No. 1,076, Excluded Holders are subject to taxation on capital gains derived
from the sale or other disposition of the notes as prescribed by Argentine tax regulations.
Value Added Tax
To the extent that the Article 36 Conditions are met, financial transactions and transactions
related to the issuance, placement, purchase, transfer, payment of principal and/or interest or redemption
of the Notes will be exempted from value added tax in Argentina.
It should be mentioned that Article 38 of the Negotiable Obligations Law provides that, if the
issuer fails to comply with the Article 36 Conditions, it shall be liable for the payment of any applicable
taxes. In this case, the applicable rate shall be 21%, except for the special cases contemplated by the
Value Added Tax Law.
Personal Assets Tax
Individuals domiciled and undivided estates located in Argentina whose personal assets exceed
in the aggregate the amount of $ 305,000.- are subject to pay the Argentine Personal Assets Tax. This tax
is determined by application of an increasing progressive rate depending on the taxable assets. Therefore,
individuals domiciled and undivided estates located in the country are required to include Trust Securities
as part of the taxable assets.
This tax is levied on all taxable assets existing as of December 31 of each year in accordance
with the following rates:
Total value of taxable assets
Applicable Rate
From $ 305,000 to 750,000
0.50 %
From $ 750,000 to 2,000,000
0.75 %
From $ 2,000,000 to 5,000,000
1.00 %
More than $ 5,000,000
1.25 %
As regards the securities held by individuals domiciled or undivided estates located abroad the
Substitute Taxpayer System (“Régimen de Responsables Sustitutos”) set forth in Article 26 of the
Personal Assets Law shall apply. Under such system any individual or legal entity that owns, possesses,
uses, enjoys, disposes of, holds, is depository of, manages or keeps in custody such securities shall remit
as single and final payment 1.25% of the value thereof as of December 31 of each year, without
computing the minimum non-taxable amount. However, the tax shall not be paid if the amount to be
remitted is lower than $ 255.75.- (Argentine Pesos two hundred and fifty-five, and 75 cents).
Individuals domiciled and undivided estates located in Argentina or abroad that are deemed to be
“direct holders” of the Notes are subject to pay the Personal Assets Tax on the market value (or cost of
acquisition plus any accrued and outstanding interest, in the case of unlisted Notes) of their holdings of
such Notes as of December 31 of each year.
161
Notwithstanding the foregoing, although securities, such as the notes, owned by individuals
domiciled or undivided estates located outside Argentina would be technically subject to the Personal
Assets Tax, according to the provisions of Decree No. 127/96, a procedure for the collection of such tax
has not been established in respect of such securities.
The companies and other entities organized or incorporated in Argentina and Argentine branches
and permanent representative offices in Argentina of foreign companies and other foreign entities in
general shall not be subject to pay the Personal Assets Tax for their holdings of Notes.
In general, there will be a conclusive presumption that the Notes that as of December 31 of each
year are held by legal entities and other entities not organized in Argentina (except for Argentine
branches and their permanent representative offices) are indirectly held by individuals domiciled or
undivided estates located in Argentina and accordingly they will be subject to payment of the personal
assets tax.
However, the legal presumption shall not apply (i) if the Notes are authorized by the CNV for
public offering in Argentina and are traded on one or more Argentine or foreign self-regulated market; (ii)
the capital stock of such legal entity or other entity consists of registered shares; (iii) if the main business
of such legal entity or other entity does not consist in making investments outside its jurisdiction of
incorporation and in general it is not subject to any restriction on the performance of commercial
activities and businesses in such jurisdiction of incorporation; or (iv) such legal entity or other entity is an
exempt company (such as insurance companies, mutual investment funds, or retirement and pension
funds or banks or financial institutions incorporated or set up in a country whose central bank has adopted
the standards established by the Basel Committee).
In the case of foreign companies and other foreign entities presumed to be owned by individuals
domiciled or located in Argentina and subject to payment of the Personal Assets Tax, as described above,
the tax will be applied at the rate of 2.5% of the cost of acquisition plus accrued and unpaid interest and
we will be responsible as substitute taxpayer for payment of such tax.
Argentine Executive Branch Decree No. 127 of February 9, 1996 as well as General Resolution
(AFIP) No. 2151/06 provide that the Substitute Taxpayer, i.e. the entity bound to pay the tax, shall be the
issuer of the securities. The PAT also authorizes the Substitute Taxpayer to recover the amount paid,
without limitations, through withholdings or the sale of the assets that triggered such payment.
However, Decree No. 812/1996, dated July 24, 1996, establishes that this legal presumption
shall not apply to shares and corporate debt securities, such as the Notes, whose public offering has been
authorized by the CNV and which are tradable on Argentine or foreign stock exchanges or securities
markets.
In order to ensure that this legal presumption will not apply and, accordingly, that the issuer shall
not be liable as Substitute Taxpayer in respect of the notes, the issuer shall keep in its records a duly
certified copy of the CNV’S resolution whereby such agency has authorized the public offering of shares
or corporate debt securities, and evidence that such certificate or authorization was effective as of
December 31 of the year in which the PAT liability accrued, as required by AFIP Resolution N° 2,151/06.
Tax on Presumed Minimum Income
The tax on minimum presumed income (the “PMIT”) is levied on the potential income from the
ownership of certain income-generating assets. Corporations domiciled in Argentina, business,
companies, foundations, sole proprietorships, trusts (except for financial trusts created under articles 19
and 20 of the Trust Law), certain mutual funds created in Argentina and permanent business
establishments owned by foreign persons, among other taxpayers, are subject to the tax at a 1% rate
applicable over the total value of assets, including the notes, above the aggregate amount of Ps.200,000.
The taxable base shall be the market value of the notes if the notes are listed on a self regulated securities
market, and the adjusted acquisition cost if they are not listed. This tax will be payable only if the income
tax assessed for any fiscal year does not equal or exceed the amount owed under the PMIT. In such case,
only the difference between the PMIT assessed for such fiscal year and the income tax assessed for the
162
same fiscal year shall be paid. Any PMIT paid will be applied as a credit towards income tax to be paid
in the immediately following ten fiscal years.
Tax on Debits and Credits in Bank Accounts
Law No. 25,413 (published in the Official Gazette on March 26, 2001), as amended, establishes,
with certain exceptions, a tax on debits and credits in checking accounts held in financial institutions
located in Argentina and on other transactions that are used as a substitute for the use of checking
accounts. The general tax rate is 0.6% for each debit and credit, and such rate is duplicated for
transactions not involving bank accounts and understood to replace bank credits and debits.
Pursuant to Decree No. 380/2001, as amended by Decree No. 534/04, effective as of May 1,
2004, 34% of the tax paid on the taxable events levied at the 0.6% general tax rate under article 1 a) of the
aforementioned Law (only credits) and 17% of the tax paid on taxable events levied at the 1.2% tax rate
under paragraphs b) and c) of the aforementioned Law will be considered as a payment on account of the
income tax, the tax on presumed minimum income or the special contribution over the capital of
cooperative associations (or advances of such taxes) by the bank accountholders.
The amounts credited as payments on account will be offset, with no distinction, against income
tax, PMIT or the special contribution over the capital of cooperative associations. The amount in excess
may not be offset against other taxes or transferred in favor of third parties, but may be carried forward,
until its exhaustion, to other fiscal periods in which the above-mentioned taxes are payable.
Turnover Tax
Turnover tax is a local tax levied on any habitual activities for profit carried out in a provincial
jurisdiction and/or in the City of Buenos Aires. The taxable base is the gross amounts invoiced for the
business conducted in the relevant jurisdiction.
Investors regularly engaged in activities, or presumed to be engaged in activities, in any
jurisdiction where they receive revenues from interest arising from the holding of notes, or from their sale
or conveyance, might be subject to turnover tax at rates that vary according to the specific laws of each
Argentine province, unless an exemption applies.
Article 155, paragraph (1) of the Tax Code of the City of Buenos Aires establishes that income
resulting from any transaction with notes issued pursuant to the Negotiable Obligations Law such as
interest income, accrued adjustments and the selling value in the event of transfer is exempted from the
turnover tax to the extent the income tax exemption is applicable on such notes.
Article 207, item (c) of the Tax Code of the Province of Buenos Aires establishes that income
resulting from any transaction with notes issued pursuant to the Negotiable Obligations Law and Law No.
23,962, as amended, such as interest income, accrued adjustments and the selling value in the event of
transfer is exempted from the turnover tax to the extent the income tax exemption applies.
Stamp Tax
The Stamp Tax is a local tax generally levied on gratuitous acts carried out within the territory of
a jurisdiction or those carried out outside a given jurisdiction but with effects in such jurisdiction. Article
430, paragraph 50) of the Tax Code of the City of Buenos Aires exempts from stamp tax all acts,
contracts and transactions related to the issuance, subscription, placement and transfer of notes issued
under Law No. 23,576. This exemption applies to capital increases intended to issue shares to be
delivered upon conversion of the notes as well as to the furnishing of any kind of personal guarantees or
security interests in favor of investors or third parties securing the issuance, be they prior to, simultaneous
with or subsequent to such issuance.
In the City of Buenos Aires, all instruments, acts and transactions related to the issuance of debt
securities of the issuer and any other securities intended for public offering under the Capital Markets
163
Law issued by companies authorized by the CNV to engage in public offerings are exempt from stamp
tax. This exemption also applies to the collaterals related to such issuances. However, the exemption shall
become ineffective if, within a period of 90 calendar days, the issuer fails to request authorization for the
public offering of the securities before the CNV and/or if the placement of such securities does not take
place within 180 calendar days after the relevant authorization is granted.
The acts and/or instruments related to the trading of shares and other securities duly admitted for
public offering by the CNV are also exempt from stamp tax in the City of Buenos Aires. This exemption
shall also become ineffective upon the occurrence of the circumstances described in the second sentence
of the paragraph above.
In turn, in the Province of Buenos Aires, pursuant to Article 297, paragraph 46) of the Tax Code
of the Province of Buenos Aires, all acts, contracts and transactions, including deliveries or receipts of
moneys, associated to the issuance, subscription, placement and transfer of notes issued under the
Negotiable Obligations Law are exempt from stamp tax. This exemption applies to capital increases
intended to issue shares to be delivered upon conversion of the notes as well as to the furnishing of any
kind of personal guarantees or the creation of security interests in favor of investors or third parties
securing the issuance, be they prior to, simultaneous with or subsequent to such issuance.
In the Province of Buenos Aires, all instruments, acts and transactions related to the issuance of
debt securities of the issuer and any other securities intended for public offering under the Capital
Markets Law issued by companies duly authorized by the CNV are exempt from stamp tax. This
exemption also applies to the furnishing of any kind of personal guarantees or security interests in favor
of investors or third parties securing the issuance, be they prior to, simultaneous with or subsequent to
such issuance. However, the exemption shall become ineffective if, within a period of 90 calendar days,
the issuer fails to request authorization for the public offering of the securities before the CNV and/or if
the placement of such securities does not take place within 180 calendar days after the relevant
authorization is granted.
Additionally, the acts related to the trading of securities duly admitted for public offering by the
CNV are also exempt from stamp tax in the Province of Buenos Aires. This exemption shall also become
ineffective upon the occurrence of the circumstances described in the second sentence of the paragraph
above.
Considering the autonomy of each provincial jurisdiction as regards tax matters, it will be
necessary to analyze the possible effects that may be triggered by these transactions and the tax treatment
contemplated in the rest of the provincial jurisdictions.
Transfer Tax
There are no taxes on the sale and/or transfer of the Notes. Argentina does not levy any
provincial tax or any tax on gifts, donations, inheritances, donors, legatees or donees.
Notwithstanding the above, as regards transfer taxes, the Province of Buenos Aires established a
Free Transfer of Property Tax (Law No. 14,044) (“FTPT”), effective as from January 1, 2010, the main
characteristics of which are:
The FTPT applies on enrichments from any free transfers of assets, including inheritances,
legacies, donations, etc.
Individuals and legal entities are both subject to the FTPT.
Taxpayers domiciled in the Province of Buenos Aires are subject to the FTPT on assets located
in the Province of Buenos Aires and outside it, and taxpayers domiciled in other provinces are subject to
the FTPT exclusively on their assets located in the Province of Buenos Aires.
The following assets, among others, are deemed to be situated in the Province of Buenos Aires,
when (i) the securities, notes, shares, ownership interests and other equity securities are issued by legal
entities of the public sector and/or the private sector or by companies domiciled in the Province of Buenos
Aires; (ii) the securities, notes, shares as well as any other securities are in the Province of Buenos Aires,
at the time of the transfer, even if the securities had been issued by legal entities and/or companies of the
164
private sector, domiciled in other jurisdictions; and (iii) the securities, notes, shares and other equity
securities or equivalent instruments, at the time of the transfer, were located in a different jurisdiction, and
had also been issued by legal entities and/or companies also domiciled in other jurisdictions, in which
case they shall pay in proportion to the assets of the issuer situated in the Province of Buenos Aires.
Gratuitous transfers are exempt from FTPT when the total value of the assets, without computing
deductions, exemptions and exclusions, is equal to, or less than, Ps. 50,000. In the case of transfers
involving parents, children and spouses, such amount shall be Ps. 200,000.
Applicable rates range progressively from 4% to 21.92505% depending on the degree of kinship
and the relevant taxable base.
Gratuitous transfers of notes may be subject to the FTPT to the extent that such gratuitous
conveyance, without computing deductions, exemptions and exclusions, exceed Ps. 50,000. In the case of
parents, children and spouses, such amount shall be Ps. 200,000.
Transfer of assets are exempt from the FTPT when the total amount of the transferred assets is
equal to or less than Ps. 3,000,00 (excluding exemptions, deductions, etc.).
The tax rate ranges between 5% up to 10.5% depending on the taxable base and the degree of
kinship involved.
Free transfers of notes might be subject to the FTPT if they involve conveyances of assets in
excess of Ps. 3,000,000.
Court Tax
In the event that it were necessary to file enforcement proceedings in relation to the notes in
Argentina, a court tax (currently at a rate of 3%) will be imposed on the amount of any claim brought
before the Argentine courts of the City of Buenos Aires.
Funds Sourced from Low or No Tax Jurisdictions
Executive Branch Decree No. 1,344/98, as amended, provides that following countries, territories and
regimes shall be deemed low- or no-tax-jurisdictions: Anguilla (non-autonomous territory of the UK);
Antigua and Barbuda; the Netherlands Antilles; Aruba; Ascension Island; Bahamas; Barbados; Belize;
Bermudas (non-autonomous territory of the UK); Brunei Darussalan; Campione D’ Italia; Gibraltar;
Commonwealth of Dominica (associated state); United Arab Emirates; Bahrain; Associated State of
Grenada (independent state); Puerto Rico; Kuwait; Qatar; Saint Kitts and Nevis; Rules applicable to
holding corporations in Luxembourg; Greenland; Guam (non-autonomous territory of US); Hong Kong
(territory of China); the Azores; Channel Islands (Guernsey; Jersey; Alderney; Great Stark Island; Herm;
Little Sark; Brechou; Jethou Lihou); Cayman Islands; Christmas Island; Cocos (Keeling) Island; Cook
Islands; Isle of Man (territory of the UK); Norfolk Island; Turks and Caicos Islands (non-autonomous
territory of UK); Pacific Islands; Salomon Islands; Saint Pierre and Miquelon Island; Qeshm Islands;
British Virgin Island; US Virgin Islands; Kiribati; Labuan; Macau; Madeira (Portugal); Montserrat (nonautonomous territory of the UK); Niue; Patau; Pitcairn; French Polynesia; Andorra; Liechtenstein;
Monaco; Rules applicable to financial corporations (governed by Uruguayan Law No. 11,073); Kingdom
of Tonga; Jordan; Swaziland Kingdom; Republic of Albania; Republic of Angola; Republic of Cape
Verde; Republic of Cyprus; Republic of Djibouti; Republic of Guyana; Republic of Panama; Republic of
Trinidad & Tobago; Republic of Liberia; Republic of Seychelles; Republic of Mauritius; Republic of
Tunisia; Republic of Maldives; Republic of the Marshall Islands; Republic of Nauru; Republic of Sri
Lanka; Republic of Vanuatu; Republic of Yemen; Republic of Malta; Saint Helena; Saint Lucia; Saint
Vincent and the Grenadines; American Samoa (non-autonomous territory of the US); Western Samoa;
Republic of San Marino; Oman; Archipelago of Svalbard; Tuvalu; Tristan da Cunha; Trieste (Italy);
Tokelau; Ostrava (city of the Czech Republic).
Pursuant to a legal presumption set forth in article 18.1 of Law No. 11,683, as amended,
incoming funds from low- or no- tax jurisdictions, irrespective of their nature, reason or the type of
transaction, will be deemed to be unjustified asset increases for the local recipient and will be taxed as
follows:
165
(a)
income tax at a 35% rate will be assessed upon the issuer on 110% of the amount of the
transfer; and
(b)
value added tax at a 21% rate will also be assessed upon the issuer on 110% of the
amount of the transfer.
The Argentine taxpayer may rebut such legal presumption by duly evidencing before the
Argentine Tax Authority that the funds arise from activities effectively performed by the Argentine
taxpayer or a third party in such jurisdictions, or that such funds have been previously declared.
Accordingly, the Notes may not be (i) originally acquired by a person domiciled or organized in
a low-tax jurisdiction, or (ii) purchased by a person through a bank account opened in a low-tax
jurisdiction. Pursuant to Argentine law, no-tax jurisdictions are those listed in Article 21.7 of the
regulatory decree of the Income Tax Law.
Public Offering and Tax Exemption
The AFIP Resolution was published in the Official Gazette on September 14, 2004. Until such
date, there were doubts about the position that may be adopted by the Argentine tax authorities in
connection with the tax benefits granted to securities placed through a public offering, including both
originally issued securities (the existing notes) and securities tendered under an exchange offer, including
exchange offers made under reorganization proceedings or APEs.
Such Resolution defined some aspects, among others:
It provides that, in the case of placements of securities abroad, the “placement through public
offering” requirement shall be construed under the Argentine law (Capital Markets Law) and not under
foreign laws, for which reason “the provisions contained in the laws or regulations of such foreign
markets” as well as “the name given to the offer by foreign laws” shall be irrelevant. Securities offered
under Rule 144A / Regulation S of the United States Securities Law may be placed by means of a public
offering (in compliance with Argentine laws).
For securities to be regarded as “placed through a public offering”, it will be necessary to prove
that “actual placement efforts”, as defined in the Capital Markets Law, were made. In other words, the
CNV’s authorization shall not be enough but it will not be necessary to attain a given result, such as a
criterion of minimum dispersion of the investment. In short, a “placement through a public offering” is a
best efforts obligation rather than an obligation to achieve a given result.
Public offering efforts may be made both in Argentina and abroad.
The offering may be targeted to the “general public” or to “a specific group of investors”, and
even to “institutional investors only”, thus clarifying that the offering must not necessarily be targeted to
the general public.
The execution of an underwriting agreement is valid to comply with the public offering
requirement, provided that evidence is provided that the underwriter offered the securities through the
mechanisms contemplated by the Capital Markets Law.
Use of the proceeds of the issue of notes to refinance liabilities, including “bridge loans”, is
expressly admitted.
The Resolution does not require that the securities be listed on self-regulated markets in order to
qualify as placed through a public offering (although the whereases of the Resolution provide that listing
of the securities on an Argentine self-regulated entity will help to weight the issuer’s intention to offer the
securities to the public).
In the case of exchanges of notes by other notes under reorganization proceedings, the benefits
attaching to the notes originally placed through a public offering shall extend to the new notes offered in
166
exchange thereof, to the extent that the underwriters of the latter have also been the holders of the
originally issued notes.
The Resolution provides that the issuer shall exert its best efforts for the securities to qualify for
tax benefits.
Tax Treaties
Argentina has entered into tax treaties with several countries. In such regard, the taxation regulations
described above could be changed to the benefit of the investor by applying treaties to avoid double
taxation.
THE ABOVE SUMMARY DOES NOT CONSTITUTE A FULL DISCUSSION OF ALL
TAX CONSEQUENCES RELATED TO THE OWNERSHIP OF THE NOTES. HOLDERS AND
PROSPECTIVE PURCHASERS OF NOTES ARE URGED TO CONSULT THEIR OWN TAX
ADVISERS ABOUT THE TAX CONSEQUENCES APPLICABLE TO THEIR SPECIFIC
SITUATION.
167
LEGAL MATTERS
The validity of the creation of the Program and the issuance of each series and/or tranche of notes
thereunder and certain matters in connection with Argentine law will be passed upon by Zang, Bergel &
Viñes Law Firm, Argentine counsel to the Bank. Saúl Zang, a director of the Bank, Pablo Vergara del
Carril, a director of the Bank and Ernesto Manuel Viñes, director and general counsel of the Bank, are
each partners of Zang, Bergel & Viñes Law Firm. In addition, Mr. Saul Zang is vice-president of IRSA
Inversiones y Representaciones Sociedad Anónima, one of the Bank’s principal shareholders.
ADVISORS AND AUDITORS
Legal Advisors with respect to the Issue
The Bank’s legal advisors as regards the Argentine law are Zang, Bergel & Viñes Law Firm,
located at Florida 537, 18th Floor, City of Buenos Aires, (C1005AAAK), Argentina.
Auditors
The audited financial statements of the Bank included in this Offering Memorandum have been
audited by Price Waterhouse & Co. S.R.L., member of the firm PricewaterhouseCoopers, an independent
chartered accountants’ firm, as described in their reports attached hereto, which accountants are enrolled
in the Professional Council in Economic Sciences of the City of Buenos Aires, Volume 1, Page 17, and
domiciled at Bouchard 557, 7th Floor (C1106ABG) City of Buenos Aires, Argentina. At the
Shareholders’ Meetings held on May 23, 2008, April 29, 2009, April 30, 2010 and April 13, 2011, the
following accountants were appointed: Marcelo A. Trama C.P.C.E. Ciudad Autónoma de Buenos Aires
Volume 125 – Page 69 and Carlos Horacio Rivarola C.P.C.E. Ciudad Autónoma de Buenos Aires
Volume 124 Page 225, to act as regular and alternate independent auditors, respectively. At the Ordinary
General Shareholders' Meeting dated March 27, 2012 Accountant Marcelo Alejandro Trama (CPCE
SUPPLEMENTARY INFORMATION
1.
The creation of the Program and the issuance of the notes were authorized by the
General Ordinary and Extraordinary Shareholders’ Meeting held on May 23, 2008 and by the Bank’s
Board’s Meeting held on February 9, 2011, March 14, 2012 and February 15, 2013. The renewal of the
delegation of powers to the board of directors was approved by resolution of the General Ordinary
Shareholders’ Meeting held on March 27, 2012. In addition, the referred Board’s resolution dated
February 9, 2011 approved the reduction of the Program’s amount originally approved by the General
Ordinary and Extraordinary Shareholders’ Meeting of the Bank dated May 23, 2008 for up to
US$ 2,000,000,000 (or its equivalent in pesos) to an amount of up to US$ 500,000,000 (or its equivalent
in pesos).
2.
Except as disclosed in this Offering Memorandum, there has been no material adverse
change in the Bank’s financial condition since December 31, 2012, the date of the latest audited financial
statements included in this Offering Memorandum.
3.
Except as disclosed in this Offering Memorandum, the Bank is not involved in any
litigation or arbitration proceedings relating to claims or amounts that are material in the context of the
offerings under the Program, nor so far as we are aware there is any such litigation or arbitration pending
or threatened.
4.
The Bank may file an application for the listing and/or trading of the notes of one or
more series and/or tranches on Argentine and foreign stock exchanges, securities exchanges and over-thecounter markets, as specified in the applicable pricing supplement.
168
Reconquista 151
(C1003ABC) City of Buenos Aires,
Argentina
AUDITORS
Price Waterhouse & Co. S.R.L.
Bouchard 557, 7th Floor
(C1106ABG) City of Buenos Aires,
Argentina.
LEGAL ADVISORS TO THE BANK
As regards Argentine law
Zang, Bergel & Viñes Law Firm
Florida 537 – 18th Floor - Galería Jardín
(C1005AAK) City of Buenos Aires
Argentina
169

UPDATED OFFERING MEMORANDUM BANCO HIPOTECARIO SA

Transcription

Similar documents

Consignment deadline is June 1, 2009 www.thelfa

View Report - Financial Center Credit Union

auditors` report to the members

EscapetoPatagonia.com

lvp bio eng 2015

Volkswagen Argentina - Multisectoral Mission for Investments -

Annual Report 2015

financial management

Green Means Go - Financial Center Credit Union

Company - Alpargatas

2010 20-F - Banco Macro