UPDATED PROGRAM`S OFFERING MEMORANDUM BANCO

Transcription

UPDATED PROGRAM’S 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”). 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.
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 CNV has not rendered any opinion in respect of
the information contained in the Offering Memorandum. 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 and, to the extent
applicable, its supervisory committee and the auditors who signed their reports on the financial statements attached hereto and other
responsible persons as set forth in Sections 119 and 120 of the Capital Markets Law No. 26,831 (together with its supplementary
rules and amendments, including, without limitation, Decree No. 1023/13, the “Capital Markets Law”). The Board of Directors
hereby represents and warrants that, as of the date hereof, the Offering Memorandum contains true and complete information
regarding any material fact that may affect the Bank’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.
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”) in effect at such time.
The Notes will qualify as “obligaciones negociables” pursuant to Law No. 23,576, as amended (the “Negotiable Obligations
Law”), and will be issued in accordance with such law, the Capital Markets Law, and the CNV rules approved by General Resolution No.
622/13, as amended and supplemented (the “CNV Rules”) and shall enjoy the benefits provided thereby, and will be subject to the procedural
requirements described therein.
The notes issued under the Program may be listed in one or more stock exchanges, 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 the Board of Directors’s powers were renewed by resolution of the Shareholders’ Meetings
dated April 30, 2010, March 27, 2012 and March 24, 2014. The Program was originally approved by the Shareholders’ Meeting for an
outstanding maximum amount of up to US$ 2,000,000,000 and on February 9, 2011, the Board of Directors, exercising its delegated powers,
resolved to reduce the Program’s amount to an outstanding amount of up to US$ 500,000,000. On February 11, 2015, the Board of Directors
approved the Program’s update.
See “Risk Factors” on page 38 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
Republic (“Argentina”) 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 “Financial Institutions Law”), 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.
AS AUTHORIZED BY THE CAPITAL MARKETS LAW, THE PROGRAM HAS NO CREDIT RATING. CREDIT
RATINGS MAY BE REQUESTED UPON ISSUANCE OF EACH SERIES OR TRANCHE, AS DETERMINED IN THE
APPLICABLE PRICING SUPPLEMENT.
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. 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 the Republic of Argentina) and may not be offered or sold in
the United States of America 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 of America 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 CNV 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 CNV.
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. ANY EXPERTS OR THIRD PARTIES WHO PASS
UPON CERTAIN PARTS OF THE OFFERING MEMORANDUM WILL ONLY BE LIABLE FOR THE INFORMATION
ON WHICH THEY HAVE RENDERED AN OPINION.
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.
The Bank is a corporation (sociedad anónima) organized under the laws of Argentina in accordance with Law No. 19,550 on
Business Companies, as supplemented and amended (the “Argentine Companies Law”). Therefore, the liability of the Bank’s shareholders is
limited to the shares subscribed by each of them.
The Bank’s quarterly financial statements as of March 31, 2015 are available at the CNV’s website, www.cnv.gob.ar,
under “Información Financiera” of the Financial Information Highway (“AIF”), on the Buenos Aires Stock Exchange’s website
(“BCBA”), www.bolsar.com, under “Estados Contables” and on the Bank’s website, http://www.hipotecario.com.ar. In addition, they
are included as Exhibit I hereto.
NIOTICE TO INVESTORS
The notes issued under this Program will qualify as obligaciones negociables simples no convertibles en acciones (simple, nonconvertible 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.
The notes may 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), as specified in the applicable pricing supplement.
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 (in such case, in accordance with the BCRA
Rules, the Bank shall not receive documents as security of payment of loans or as counter-guarantee of guarantees issued in favor of third
parties or any potential liabilities assumed on behalf of third parties).
NOTICE TO INVESTORS
In connection with the issuance of Notes, the dealers, if any, or any person acting on your behalf may enter into transactions that
stabilize, maintain or otherwise affect the price of the Notes, including securities purchases to stabilize the market price, to cover partially or
totally a sold position in the securities held by the dealers, and the imposition of sanctions through tenders in accordance with the Capital
Markets Law and Article 11 of Section III of Chapter IV, Title VI of Rules of the CNV on “Reglamentación de Actividades de Estabilización
del Mercado.” Under that article, stabilization operations must meet the following conditions:
A.
Cannot exceed a period of thirty (30) calendar days following the first day on which trading in the securities market began.
B. The public offering prospectus must include a notice to investors of the possibility of stability operations, duration and
conditions described.
C. Stability operations can only be performed by agents who participated in arranging and coordinating the placement and
distribution of the issue.
D. Stability operations must be performed in order to avoid or mitigate sudden changes in the price of securities under the
primary placement.
E.
None of the stabilization operations carried out within the time allowed will be implemented at prices higher than those
negotiated in the markets in transactions between unrelated parties with organizational, placement and distribution activities.
F.
The markets should identify these transactions as such, and make them known to the public, either at the time of each
individual operation performed, or the end of the trading day.
The date of this Offering Memorandum is May 11, 2015.
TABLE OF CONTENTS
GENERAL INVESTMENTS CONSIDERATIONS ....................................................................................9 INCORPORATION BY REFERENCE ........................................................................................................9 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS ................................................11 AVAILABLE INFORMATION .................................................................................................................12 OFFERING MEMORANDUM SUMMARY.............................................................................................13 INFORMATION ABOUT DIRECTORS, OFFICERS, SENIOR MANAGEMENT, LEGAL COUNSEL
AND MEMBERS OF THE SUPERVISORY COMMITTEE ....................................................................16 a) Board of Directors ................................................................................................... 16 b) Supervisory Committee ........................................................................................... 22 c) Legal counsel ........................................................................................................... 25 d) Auditors ................................................................................................................... 25 STATISTICAL DATA AND OFFERING SCHEDULE............................................................................26 KEY INFORMATION ABOUT THE ISSUER..........................................................................................31 a) Accounting and Financial Information .................................................................................. 31 b) Ratios ..................................................................................................................................... 35 c) Capitalization and Indebtedness............................................................................................. 37 d) Reason for the Offering and Use of Proceeds........................................................................ 37 e) Risk Factors............................................................................................................................ 38 Risks Relating To Argentina........................................................................................ 38 Risks Relating to the Argentine Financial System ...................................................... 45 Risks Relating to the Bank’s Business ........................................................................ 50 Risks Relating to the Notes.......................................................................................... 55 INFORMATION ABOUT THE ISSUER ...................................................................................................58 a) History and Development of the Bank................................................................................... 58 Brief Description of the Loan Portfolio ....................................................................... 59 Strategy ............................................................................................................................
...................................................................................................................................... 60 b) Description of the Bank’s Business ....................................................................................... 61 Business Lines ............................................................................................................. 61 Risk Management Policy ............................................................................................. 69 Organizational Structure: ............................................................................................. 71 Management devices.................................................................................................... 72 Regulatory Framework of the Argentine Financial System ........................................ 75 c) Relevant Events...................................................................................................................... 97 d) Structure and Organization of the Bank and its Economic Group......................................... 99 e) Fixed Assets ......................................................................................................................... 101 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ....................................................................................................................................102 (a) Operating Result ................................................................................................................. 102 Presentation of Information ....................................................................................... 102 Factors Affecting Comparability of Financial Data .................................................. 102 Critical Accounting Policies ...................................................................................... 102 Years ended December 31, 2013 and 2014 ............................................................... 103 Years ended December 31, 2012 and 2013 ............................................................... 107 b) Liquidity and Capital Resources.......................................................................................... 111 Funding ............................................................................................................................
.................................................................................................................................... 111 DIRECTORS, OFFICERS, SENIOR MANAGEMENT AND MEMBERS OF THE SUPERVISORY
COMMITTEE ...........................................................................................................................................117 a) Board of Directors................................................................................................................ 117 b) Compensation: ..................................................................................................................... 123 c) Other information related to the administrative, supervisory and special committee bodies:124 Committees reporting to the Board of Directors ....................................................... 124 d) Employees............................................................................................................................ 131 e) Share Ownership .................................................................................................................. 131 PRINCIPAL SHAREHOLDERS AND RELATED PARTY TRANSACTIONS....................................132 A) PRINCIPAL SHAREHOLDERS.........................................................................................................132 Voting Rights of Principal Shareholders ................................................................... 133 Percentage of shares recorded in Argentina and percentage of shares recorded abroad
.................................................................................................................................... 133 b) Related Party Transactions .................................................................................................. 134 Transactions with companies pursuant to Section 33 of the Argentine Companies Law
on a comparative basis as of December 31, 2014, 2013 and 2012. ........................... 135 FINANCIAL INFORMATION.................................................................................................................137 a) Financial Statements and other Financial Information .............................................. 137 Financial Statements as of the Latest Fiscal Year ..................................................... 137 Exports .............................................................................................................................
.................................................................................................................................... 137 Legal and Regulatory Affairs .................................................................................... 137 Dividend Distribution Policy ..................................................................................... 141 b) Material Changes ....................................................................................................... 141 OFFERING AND TRADING ...................................................................................................................142 A) DESCRIPTION OF THE NOTES .......................................................................................................142 General....................................................................................................................... 142 Program Duration ...................................................................................................... 143 Form and Denomination ............................................................................................ 143 Replacement of Notes ................................................................................................ 144 Definitive and Temporary Notes ............................................................................... 144 Ranking ...................................................................................................................... 144 Interest Rate ............................................................................................................... 145 Payment of Principal and Interest .............................................................................. 149 Redemption and Repurchase ..................................................................................... 152 Cancellation ............................................................................................................... 154 Additional Amounts................................................................................................... 154 Listing and Trading.................................................................................................... 155 Transfer Restrictions.................................................................................................. 155 Registration Rights .................................................................................................... 155 Meetings, Modification and Waiver .......................................................................... 155 Repayment of Monies; Prescription .......................................................................... 155 Covenants................................................................................................................... 155 Events of Default ....................................................................................................... 155 Paying Agents; Transfer Agents; Registrars.............................................................. 156 Notices ....................................................................................................................... 157 Judgment Currency Indemnity................................................................................... 157 Summary Action ........................................................................................................ 157 Governing Law .......................................................................................................... 157 b) Plan of Distribution.............................................................................................................. 157 Subscription and Sale................................................................................................. 158 Republic of Argentina................................................................................................. 158 Placement ................................................................................................................... 158 Allocation................................................................................................................... 159 General Provisions ..................................................................................................... 159 c) Markets................................................................................................................................. 159 Clearing and Settlement............................................................................................. 159 d) Selling Shareholders ............................................................................................................ 159 e) Dilution ................................................................................................................................ 159 f) Issue Expenses...................................................................................................................... 159 ADDITIONAL INFORMATION .............................................................................................................160 a) Description of Capital Stock ................................................................................................ 160 Voting Rights ............................................................................................................. 161 Registration Rights .................................................................................................... 163 Certain Provisions Relating to Acquisitions of Shares .............................................. 163 b) Articles of Incorporation and Bylaws .................................................................................. 164 Incorporation; Corporate Purpose.............................................................................. 164 Relations between the Directors and the Bank; Conflict of Interest.......................... 165 Shareholder rights and obligations ............................................................................ 165 Shareholders’ Meetings ............................................................................................. 167 Restrictions on Control Acquisitions ......................................................................... 168 c) Significant Agreements........................................................................................................ 171 d) Exchange Controls ............................................................................................................... 171 Exchange Rates.......................................................................................................... 171 Regulations governing Foreign Exchange Transactions ........................................... 171 Outflow and Inflow of Funds..................................................................................... 172 Obligation to settle funds through the MULC. .......................................................... 173 Money Laundering and Financing of Terrorism........................................................ 178 e) Taxation................................................................................................................................ 181 Argentine tax-related considerations ......................................................................... 181 f) Dividends and Paying Agents............................................................................................... 189 g) Experts’ Declaration ............................................................................................................ 189 h) Available Documents........................................................................................................... 189 EXHIBIT I .................................................................................................................................................190 GENERAL INVESTMENTS 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 of America. The terms “Argentine Pesos”,
“Ps.”, “Peso” and “Pesos” refer to the legal tender of Argentina. References to “Argentine Banking
GAAP” refer to the BCRA’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.
Unless otherwise stated, the Bank’s assets and liabilities denominated in foreign currency are
valued at the exchange rate reported by the BCRA for each period. From April 1, 1991 until the end of
2001, Law No. 23,928 (the “Convertibility Law”) established a system under which the BCRA was
required to sell U.S. Dollars at a fixed exchange 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 BCRA’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, confers on the Argentine
Executive Branch the Power the authority to set the exchange rate between the Peso and foreign
currencies and to 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 has been allowed to float since February 2002. The shortage of US
Dollars and the increase in demand caused the Peso to depreciate again. As a result, the BCRA has
intervened on several occasions since that date by selling U.S. Dollars in order to lower the exchange rate.
However, The BCRA’s ability to maintain 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 compared to the U.S. Dollar,
decreasing in value to an exchange rate of Ps. 8.8692 per US$ 1.00 as of April 20, 2015.
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 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, always
safeguarding the investors’ interests. 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.
In addition, with respect to a certain issue of Notes, the Pricing Supplement related to such
issuance will be incorporated by reference to this Offering Memorandum and will be a part thereof. In the
same sense, any amendment o supplement to this Offering Memorandum issued from time to time will
also be incorporated by reference hereto, being an integral part hereof.
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,
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Argentina, and in the Bank’s web page, http://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
[email protected]. Finally, this Offering Memorandum and the notices related to the issuance
and the financial statements therein mentioned are available on the CNV’s web site, www.cnv.gob.ar,
under the item “Financial Information”, as well as in the institutional websites of operating stock
exchanges.
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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;
•
current and future government regulation;
•
adverse legal or regulatory disputes or proceedings;
•
increased competition in the banking, financial services, and related industries, and loss of
market share;
•
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;
•
foreign exchange controls and restrictions on transfers to foreign countries as well as restrictions
on the inflow of capitals;
•
economic events in other global markets;
•
restrictions on the supply of energy that could adversely affect the Argentine economy;
•
consumer protection laws may limit the enforceability of certain of the Bank's rights;
•
class actions against financial institutions for an indefinite amount may have an impact on the
profitability of the financial system and of the Bank, in particular;
•
new business opportunities, which may not be successful;
•
BCRA regulations intended to limit interest rates and registration of non-financial credit
suppliers;
•
•
non-development of an active market for the notes;
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,
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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
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 http://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
[email protected]. Finally, this Offering Memorandum, the notices related to the issuance and
the financial statements therein mentioned are available on the CNV’s web site, www.cnv.gob.ar, under the
item “Financial Information”.
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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 59 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, 2014, the Bank ranked eleventh amongst Argentine banks in terms of net
shareholders’ equity, with a consolidated net shareholders’ equity of Ps. 4,397.0 million and thirteenth
terms of total consolidated assets, with consolidated assets for Ps. 31,351.5 million. The Bank’s net
income for the fiscal years ended December 31, 2012, 2013 and 2014 was Ps. 343.6 million, Ps. 421.0
million and Ps. 550.0 million, respectively, which stands for an average return on equity of 10.3%, 11.5%
and 13.3%, respectively and a return on average assets of 2.4%, 2,3% and 2.1%, respectively.
In line with its strategy to diversify its loan portfolio, the Bank has posted an increase in its nonmortgage loans1, from Ps. 7,676.1 million as of December 31, 2012, to Ps. 10,708.0 million as of
December 31, 2013 and Ps. 14,845.9 million as of December 31, 2014, representative of an increase over
the Bank’s total portfolio of loans to the non-financial private sector from December 31, 2012 to
December 31, 2014 from 80.4% to 86.3%, respectively.
Additionally, the Bank has improved the quality of these assets. Non-performing loans over
Total portfolio stood at 2.3% as of December 31, 2012, 2.2% as of December 31, 2013 and 2.3% as of
December 31, 2014.
The Bank has also diversified its funding sources: it reduced in relative terms its international
financial borrowings, developed the local capital market and increased its deposit base. In response to the
volatility prevailing in the markets over the past years, the Bank increased its liquidity and mitigated its
re-financing risks. The financial indebtedness2 as of December 31, 2012, 2013 and 2014 was Ps. 2,317.0
million, Ps. 3,146.2 million and Ps. 4,787.5 million, respectively, whereas the bank’s funding3 as of such
dates was Ps. 10,328.1 million, Ps. 14,036.0 million and Ps. 23,121.6 million, respectively. Therefore,
financial indebtedness’ share in the total funding were 22.4% as of December 31, 2012, 22.4% as of
December, 31, 2013 and 20.7% as of December 31, 2014. 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. As of the
date of this Offering Memorandum, and pursuant to the provisions of the Capital Markets Law and the
CNV Rules, it has been resolved that the Bank’s shares formerly listed on the BCBA became
automatically listed on the Buenos Aires Stock Exchange (Mercado de Valores de Buenos Aires,
“MVBA”).
Strategy
1
The information on Non-mortgage loans arises from the Consolidated financial statements. These loans are calculated by simply
subtracting “Mortgage loans” from “Loans to the private, non-financial sector and to residents abroad, both in the “Loans” line,
within the “Assets” caption.
1
Financial indebtedness has been taken from the caption “Other liabilities for financial transactions” in the Consolidated financial
statements and it comprises the balances of unsubordinated negotiable obligations, repos and loans received from banks and other
international institutions, including interest and payable foreign exchange differences accrued.
2
The information on Funding arises from the Bank’s Consolidated financial statements. This account is made up by Financial
indebtedness (exactly as described in the preceding paragraph, this amount stems from the caption Other liabilities for financial
transactions” in the Consolidated financial statements and it comprises the balances of unsubordinated negotiable obligations, repos
and loans received from banks and other international institutions and including interest), loans received from the BCRA and
deposits.
13
Following an extensive period of reconversion of its business structure, characterized by the
release of new products, system adaptations, redesign of processes and strengthening of its market
positioning, 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. The Bank adopted a new vision as a
contemporaneous, straightforward and inclusive bank. During the past year, the actions taken were
focused on reducing costs, adapting the volumes of loan origination so that they could fit in the new
context of lower liquidity, attracting deposits, designing programs together with governmental agencies
and diversified growth.
For 2015, the main actions will be focused on:
•
Universal banking focused on a solution for homes: the Bank will continue to endeavor in
discharging its functions as trustee for the PROCREAR program. This program consists in granting
150,000 individual loans. Urban undertakings will continue with the award of new land for
developing new urban complexes;
•
Management of 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 these
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 issue debt securities in the local market as long as it is possible under
market conditions;
•
Intensified focus on the interaction between the Bank, its customers, employees and suppliers: the
objective pursued is to secure synergies in the interaction between the Bank, its customers and
suppliers, both internal and external though aiming at the Bank being the main bank and at it being
chosen as the first option for conducting transactions;
•
Increasing the pace of branch openings: in the coming years, the objective will be to open a larger
number of branches to outreach to more customers and to provide support to existing Bank customers
and in all the markets where the Bank is managing PROCREAR urban projects aiming for their
success;
•
Laying down the foundations for greater operating efficiency - 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 reprocess-associated costs. The “industrial metaphor” has a leading role in
the Institution's operating organization system;
•
Maintaining adequate levels in portfolio quality, seeking to maximize risk/return ratios in the
segments that receive credit offerings. Keep adequate levels in the credit quality of new loans;
perform segmented actions on the retail banking portfolio; foster atomization in 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. In this respect, the notion of “principality”, that is, of
becoming the first option for customers from accounts to loans, plays a lead role.
•
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 continue to be given to small and
medium-sized 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, a path along which the Bank set out in previous
years.
14
•
Maintaining high standards in the field of risk management: Continuous improvement in the
comprehensive risk management process to converge to the international best practices; in addition,
the Bank will measure profitability adjusted by the risks of the different business units (RAROC
models);
•
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;
•
Comprehensive communications plan to reinforce brand image. Emphasis will be placed on
promotional actions conducted in order to continue to foster the concept of contemporary, simple and
inclusive bank. Continue to have a leading presence in the social media. Underscore relational
marketing.
This is how the Bank aspires to deploy its strategic plan in 2015 continuously adapting to changes in
context and constantly monitoring the relevant financial variables without overlooking focus on the
business and being on the watch out for unforeseen changes.
15
INFORMATION ABOUT DIRECTORS, OFFICERS, SENIOR MANAGEMENT, LEGAL
COUNSEL AND MEMBERS OF THE SUPERVISORY COMMITTEE
a) Board of Directors
The Bank is managed by a board of directors, which is currently composed of thirteen directors
and nine alternate directors. The members of the board of directors are elected to hold office for twofiscal 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 and their respective alternates representing Class A shares;
one member and its respective alternate representing Class B shares;
one member representing Class C shares; and
nine members and 6 alternates representing Class D shares.
The following table sets forth the current members of the Bank's board of directors:
First and last name
Identity
Document No.
Eduardo Sergio Elsztain
14,014,114
Mario Blejer
4,619,694
Date of Birth
01/26/1960
Taxpayer’s Code
(CUIL/CUIT)
20-14010114-4
06/11/1948
20-04619694-6
09/09/1979
Diego Luis Bossio
Mariana González(1)
Edgardo Luis José
Fornero
27,605,823
20-27605823-2
02/13/1976
25,182,275
27-25182275-7
10/14/1951
10,201,571
20-10201571-2
09/17/1958
Ada Mercedes Maza
12,851,009
27-12851009-0
10/23/1956
Mauricio Elías Wior
12,746,435
Saúl Zang
4,533,949
23-12746435-9
12/30/1945
20-04533949-2
02/05/1944
Ernesto Manuel Viñes
4,596,798
Gabriel Adolfo
Gregorio Reznik
12,945,351
20-04596798-1
11/18/1958
20-12945351-7
10/13/1955
Jacobo Julio Dreizzen
11,955,534
Pablo Daniel Vergara
del Carril
17,839,402
20-11955534-6
10/03/1965
23-17839402-9
12/16/1948
Carlos Bernardo Písula
4,699,992
20-04699992-5
09/23/1985
Marcela Sacavini(2)
31,896,421
27-31896421-7
Domicile
Bolívar 108, City
of Buenos Aires
Reconquista 151,
5th Floor, City of
Buenos Aires
Córdoba 720, 5th
Floor, City of
Buenos Aires
Hipolito Yrigoyen
250 8th Floor, City
of Buenos Aires
Reconquista 151
5th Floor, City of
Buenos Aires
Reconquista 151
5th Floor, City of
Buenos Aires
Reconquista 151
5th Floor, City of
Buenos Aires
Florida 537 18th
Floor, City of
Buenos Aires
Reconquista 151
5th Floor, City of
Buenos Aires
Reconquista 151
5th Floor City of
Buenos Aires
Reconquista 151
5th Floor, City of
Buenos Aires
Florida 537 18th
Floor, City of
Buenos Aires
Reconquista 151
5th Floor, City of
Buenos Aires
Hipolito Yrigoyen
250 office 806 8th
Floor, City of
Buenos Aires
16
Term
Position
Class
Chairman
D
04/24/2014 –
12/31/2015
Vice Chairman
D
03/31/2015 –
12/31/2016
Director
A
03/31/2015 –
12/31/2016
Director
A
03/31/2015 –
12/31/2016
Director
B
04/24/2014 –
12/31/2015
Director
C
04/24/2014 –
12/31/2015
Director
D
04/24/2014 –
12/31/2015
Director
D
04/24/2014 –
12/31/2015
Director
D
03/31/2015 –
12/31/2016
Director
D
03/31/2015 –
12/31/2016
Director
D
03/31/2015 –
12/31/2016
Director
D
04/24/2014 –
12/31/2015
D
04/24/2014 –
12/31/2015
A
03/31/2015 –
12/31/2016
In Office
Since
03/15/1999
05/12/2010
01/13/2009
04/24/2013
09/28/1997
04/18/2012
03/06/2008
03/15/1999
10/03/2002
08/15/2002
07/07/2004
09/17/2002
05/02/2003
Director
04/24/2013
Alternate Director
09/21/1964
Daniela Alvarez(2)
17,481,162
Jorge Augusto
Alvarez(2)
13,806,850
Gustavo Daniel
Efkhanian
17,012,120
27-174891162-3
01/11/1960
20-13806850-2
10/28/1964
20-17012120-2
12/22/1972
Daniel Ricardo Elsztain
23,086,679
Andrés Fabián Ocampo
12,454,604
20-23086679-2
11/09/1956
20-124546045-5
04/11/1959
Mario César Parrado
92,005,026
Gabriel Pablo Blasi
14,222,826
20-92005026-4
11/22/1960
Federico León
Bensadón
20-14222826-3
01/17/1933
4,100,916
(1)
(2)
20-04100916-1
Hipolito Yrigoyen
250 3rd Floor
office 826, City of
Buenos Aires
Av, España 1057,
City of Buenos
Aires
Reconquista 151
5th Floor, City of
Buenos Aires
Moreno 877 22nd
Floor, City of
Buenos Aires
Reconquista 151,
th
5 Floor, City of
Buenos Aires
Rosales 2620 2nd
4 Floor, City of
Buenos Aires
Reconquista 151,
City of Buenos
Aires
Florida 15 9th
Floor, City of
Buenos Aires
04/24/2013
A
03/31/2015 –
12/31/2016
Alternate Director
B
04/24/2014 –
12/31/2015
Alternate Director
D
04/24/2014 –
12/31/2015
Alternate Director
D
04/24/2014 –
12/31/2015
Alternate Director
D
03/31/2015 –
12/31/2016
Alternate Director
D
04/24/2014 –
12/31/2015
Alternate Director
D
04/24/2014 –
12/31/2015
D
04/24/2014 –
12/31/2015
Alternate Director
03/06/2008
02/03/2000
03/06/2008
03/06/2008
04/16/2009
02/03/2011
08/22/2002
Alternate Director
Class “A” Regular Director took office on an interim basis until the BCRA issues a formal authorization (pursuant
to Communication “A” 4490).
Class “A” Alternate Directors, subject to BCRA’s approval.
Carlos Bernardo Písula, Jacobo Julio Dreizzen, Diego Luis Bossio, Ada Mercedes Maza and
Mariana Laura González and alternate directors Verónica Daniela Alvarez, Marcela Constanza Sacavini
and Federico León Bensadón are independent under the terms of the CNV Rules.
Directors Eduardo Sergio Elsztain, Saúl Zang, Ernesto Manuel Viñes, Gabriel Gregorio Reznik,
Pablo Vergara del Carril, Mauricio Elías Wior, Mario Blejer, Edgardo Luis José Fornero and alternate
directors Ricardo Daniel Elsztain, Jorge Augusto Alvarez, Gustavo Daniel Efkhanian, Andrés Ocampo,
Mario César Parrado and Gabriel Pablo Blasi are non-independent under the terms of the CNV Rules.
Below is a summarized biography of the Bank’s directors and alternate directors:
Eduardo Sergio Elsztain. Mr. Elsztain is the Chairman of the Bank and of IRSA Inversiones y
Representaciones Sociedad Anónima, Alto Palermo S.A. (APSA), (whose change of name for IRSA
Propiedades Comerciales S.A. is pending before the Superintendency of Corporations) (hereinafter,
“IRSA Propiedades Comerciales S.A.”), Cresud S.A.C.I.F. y A., Tarshop S.A, BACS Banco de Crédito y
Securitización, and Brasilagro Compañía de Propiedades Agrícolas, among other companies. He is also
Chairman of Fundación IRSA, which promotes the education and development of young professionals
through its Puerta 18 program, Museo de los Niños Abasto and Alto Rosario. He is also member of the
Global Consulting Committee of Endeavor, which promotes the development of high-impact
entrepreneurs.
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 International Monetary Fund in its European and
Asia Departments. He was Vice Chairman and Chairman of the BCRA between 2001 and 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. He was also an external advisor to the Monetary
Policy Board of the Central Bank of Mauritius and is professor of post-graduate courses at Universidad
Torcuato Di Tella.
Diego Luis 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 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
17
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. He has been Executive Director of ANSES (Federal Social
Security Agency) since July 2009
Mariana González. Mrs. Gonzalez obtained a Bachelor Degree in Economics and a Master
degree in Economics from Universidad de Buenos Aires. She obtained a PhD in Social Sciences from
Facultad Latinoamericana de Ciencias Sociales. She performed research and consulting activities. She is a
university professor and at present, is Assistant Secretary of Economic Coordination and Competitiveness
Improvement at the Economic Policy and Development Planning Office of the Ministry of Economy and
Public Finance.
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 obtained a degree in Mining Engineering from Universidad
Nacional de La Rioja and completed the Technical Degree in Legislative Administration at the
Educational Institute of the Ministry of Education of the Province of La Rioja. She worked at Compañía
Financiera Condecor, as Municipal Councilor in the Province of La Rioja and then, she served as Private
Secretary of the Government and of the Operating Department of the Government of the Province of La
Rioja. She later served as National Senator of such province for 10 years. She also participated as member
of the Latin American Parliament in her capacity of Senator.
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 Movicom and as regional Vice President for the Latin
America for Bellsouth until 2005. Mr. Wior is also the vicechairman of Tarshop S.A.
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, IRSA Propiedades Comerciales S.A., Puerto Retiro
and Fibesa, and first 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 S.A., BACS Banco de Crédito y Securitización and
BrasilAgro Companhia Brasilera de Propiedades Agrícolas, 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. At present, he serves as Legal Department
Manager of the Bank. He is a founding partner of the law firm Zang, Bergel & Viñes Abogados.
Gabriel Adolfo Gregorio Reznik. Mr. Reznik has been a Director of the Bank 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 IRSA Propiedades Comerciales S.A., 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.
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 BCRA 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),
18
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. Mr. Dreizzen has been professor of Corporate Finance at the
Universidad de Buenos Aires Capital Markets Graduate Program since 1993.
Pablo Daniel Vergara del Carril. Mr. Vergara del Carril obtained a degree in Law from
Universidad Católica de Buenos Aires, 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 IRSA Propiedades Comerciales S.A..
He is one of the partners at Zang, Bergel & Viñes Abogados law firm.
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 member of the Board of Directors of the Bank, representing Class D
shares. He is Chairman of the Audit Committee of the Bank and member of the Credit Risk Committee.
He takes part in different commissions of the Cámara Argentina de la Construcción (CAC) and the
Instituto de Estadística y Registro de la Industria de la Construcción (IERIC) as member of the Executive
Committee. He is also a board member of various private construction and real estate companies.
Marcela Sacavini. Ms. Sacavini obtained a Bachelor degree in Economics from Universidad de
Buenos Aires, where she took postgraduate courses, conducted research activities and acts as professor.
At present, she serves as officer of the Economic Policy and Development Planning Office of the
Ministry of Economy and Public Finance.
Daniela Álvarez. Mrs. Álvarez obtained a Bachelor degree in Economics from Universidad de
Buenos Aires, performed specialization activities in legislative budgets and forms part of the work group
managing the budget of the National Constitutional Convention (Convención Constituyente Nacional)
and the Constitutional Convention of the City of Buenos Aires (Convención Constituyente de la Ciudad
de Buenos Aires). At present, she acts as assistant officer of the Economic Policy and Development
Planning Office of the Ministry of Economy and Public Finance.
Jorge Augusto Álvarez. Mr. Álvarez took courses as system programmer at the Universidad de
Champagnat, Mendoza. He has served as Head of Division of the Bank since 1979.
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
(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.
Daniel R. Elsztain. Mr. Elsztain obtained a bachelor degree in Economics from Universidad
Torcuato Di Tella and a Master’s degree in Business Administration from the IAE. He currently serves as
Chief Operating Officer of IRSA Inversiones y Representaciones Sociedad Anónima, and as Director at
IRSA Propiedades Comerciales S.A., IRSA Inversiones y Representaciones Sociedad Anónima and
Supertel Hospitality Inc., among other companies. Mr. Elsztain is brother of the Bank President Eduardo
S. 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,
19
having served as President of The Boston Investment Group, Director of BankBoston Argentina and
Director of Fleet International Advisors S.A.
Gabriel Pablo Blasi. Mr. Blasi obtained a degree in Business Administration and carried out
post-graduate 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 S.A.C.I.F.I.A. (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 IRSA
Propiedades Comerciales S.A. Currently, he is the Bank’s Chief Financial Officer.
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.
Senior Management
The Bank’s senior management consists of the following officers:
Name
Fernando
Rubín
Position
Identity
Document
Taxpayer’s
Code
(CUIL/CUIT)
Date of
Birth
General Manager
17,996,278
20-17996278-1
06/20/1966
17,730,181
Gerardo
Rovner
Auditing Manager
Ernesto
Manuel
Viñes
Legal Department
Manager
Gustavo
Daniel
Efkhanian
Risk
Controlling
Manager
Manuel
Herrera
Corporate Banking
Manager
Esteban
Guillermo
Vainer
Retail
Manager
Sebastián
Argibay
Molina
Organizational and
Quality
Development
Manager
Favio
Gabriel
Podjarny
Corporate Services
Manager
Gabriel
Pablo Blasi
Finance Manager
Javier
Eduardo
Varani
Institutional
Relations Manager
Jorge
Alberto
Cruces
PROCREAR Urban
Projects Manager
Fernando
Javier Turri
Systems and
Technology Manager
and
20-17730181-8
01/30/1965
4,596,798
20-04596798-1
02/05/1944
17,012,120
20-17012120-2
10/28/1964
Banking
92,761,368
23-92761368-9
11/04/1966
22,431,651
20-22431651-9
10/11/1971
24,227,378
20-24227378-9
10/10/1974
17,140,517
20-17140517-4
07/01/1964
14,222,826
20-14222826-6
11/22/1960
17,203,766
20-17203766-7
12/31/1964
92,307,903
20-92307903-4
11/07/1966
22,099,184
23-22099184-9
03/14/1971
Below is a summarized biography of the Bank’s senior managers:
20
Domicile
Reconquista 151,
City of Buenos
Aires.
Reconquista 151
5th Floor, City of
Buenos Aires.
Reconquista 151
5th Floor, City of
Buenos Aires.
Reconquista 151
5th Floor, City of
Buenos Aires.
Tte. Gral. Perón
525, City of
Buenos Aires.
Reconquista 151
4th Floor, City of
Buenos Aires.
Reconquista 151,
City of Buenos
Aires.
Reconquista 151,
City of Buenos
Aires.
Reconquista 151,
City of Buenos
Aires.
Reconquista 151,
City of Buenos
Aires.
Tte. Gral. Perón
525, City of
Buenos Aires.
Reconquista 151,
City of Buenos
Aires
In Office
Since
01/01/2010
02/01/2012
10/01/2003
07/01/2009
11/02/2009
06/01/2010
06/01/2013
06/01/2010
12/07/2011
09/01/2011
12/01/2013
12/17/2014
Fernando Rubín. Mr. Rubín joined the Bank as the Bank’s 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 Inversiones y
Representaciones Sociedad Anónima. 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 & Partner-International Management Consultant.
Gerardo Rovner. Mr. Rovner holds a degree in Economics from Universidad de Buenos Aires.
He has been working at the Bank 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.
university professor and has worked on a self-employed basis. He is a founding partner of the law firm
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 USA 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 the United
States of America.
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 y Buenos Aires S.A.’s Insurance
Banking Division for nine years.
Sebastián Argibay Molina. Mr. Sebastián Argibay Molina holds a degree in Business
Administration from Universidad de Belgrano and a Post-graduate degree in Banking Management from
Universidad Torcuato Di Tella. He developed his career in Consulting at Coopers & Lybrand
(subsequently merged with Price Waterhouse). In 1999, he joined the Bank performing different duties.
He acted first as officer responsible for MIS Projects and Customer Service Model, he then was Customer
Service Head, Logistics Manager and Administration and Logistics Manager. He currently serves as
Organizational Development and Quality Manager.
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.
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
21
Propiedades Comerciales S.A. Currently, he is the Bank’s Chief Financial Officer.
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.
Jorge Alberto Cruces. Mr. Cruces graduated as Architect and obtained a Master degree in
Business Administration, with specialty in Finance and Strategic Management from Universidad de
Belgrano. Before joining the Bank, he served from 2007 to 2013 as Real Estate manager of IRSA
Inversiones y Representaciones Sociedad Anónima, and before that, he served as Business Developer –
Real Estate Manager at Diveo, Diginet and as Real Estate Projects Manager at Giménez Zapiola
Binswagner. Furthermore, he is academic coordinator and professor of Cluster Portfolio and Asset
Management in the Real Estate Management Executive Program at Universidad Torcuato Di Tella.
Fernando Javier Turri. Mr. Turri graduated as certified public accountant from Universidad de
Belgrano and obtained SAP and PMI (Project Management Professional) certifications from the JLI
Institute of Chicago. He made a career at Pricewaterhouse Consulting – Argentina and Switzerland for 6
years, and then as CIO at Sc Johnson & Son from 2002 to November 2014 in Latin American and Asian
regions. He currently serves as Manager of the Bank’s IT Department.
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.
b) Supervisory Committee
Article 20 of the bylaws of the Bank (hereinafter, the “Bylaws”) provides for a Supervisory
Committee consisting of five members (“Statutory Auditors”) 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. Statutory Auditors and alternate statutory auditors are appointed for a twoyear period. Pursuant to Argentine law, only lawyers and accountants admitted to practice in Argentina
may serve as statutory auditors 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 statutory auditors 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
22
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.
Currently the Supervisory Committee is composed of five statutory auditors and five alternate
statutory auditors:
Name
Position
Class
Francisco Daniel
González
Statutory
Auditor
A
Héctor Oscar
Ivancich
Statutory
Auditor
José Daniel
Abelovich
Identity
Document
(DNI)
Taxpayer’s
Code
(CUIL/CUIT)
December
31, 2016
8,474,624
20-08474624-0
B
December
31, 2016
4,532,118
20-04532118-6
Statutory
Auditor
C and D
December
31, 2016
12,076,652
20-12076652-0
Marcelo Héctor
Fuxman
Statutory
Auditor
C and D
December
31, 2016
11,889,826
20-11889826-6
Ricardo Flammini
Statutory
Auditor
C and D
December
31, 2016
4,351,316
20-04351316-9
A
December
31, 2016
10,133,805
20-10133805-4
B
December
31, 2016
22,447,554
20-22447554-4
C and D
December
31, 2016
13,120,813
20-13120813-9
Alfredo Groppo
Martin Scotto
Roberto Murmis
Alternate
Statutory
Auditor
Alternate
Statutory
Auditor
Alternate
Statutory
Auditor
Expiration
of Term
Alicia Rigueira
Alternate
Statutory
Auditor
C and D
December
31, 2016
10,181,131
27-10181131-5
Noemí Cohn
Alternate
Statutory
Auditor
C and D
December
31, 2016
13,081,575
27-13081575-3
Domicile
Corrientes 381,
City of Buenos
Aires
Corrientes 381,
City of Buenos
Aires
25 de mayo
596 8th Floor,
City of Buenos
Aires.
25 de mayo
596, 8th Floor,
City of Buenos
Aires.
Reconquista
151 5th Floor,
City of Buenos
Aires.
Corrientes 381,
City of Buenos
Aires.
Corrientes 381,
City of Buenos
Aires.
25 de mayo
596, City of
Buenos Aires.
25 de mayo
596 8th Floor,
City of Buenos
Aires.
25 de mayo
596 8th Floor,
City of Buenos
Aires.
In Office
Since
03/31/2015
03/31/2015
05/17/2001
05/17/2001
05/30/2003
03/14/2011
03/14/2011
04/24/2013
03/31/2015
04/24/2013
Statutory Auditors Francisco Daniel González and Héctor Oscar Ivancich, and Alternate
Statutory Auditors Alfredo Héctor Groppo and Martín Esteban Scotto appointed by the Sindicatura
General de la Nación (“SIGEN”) are independent.
Statutory Auditors José Daniel Abelovich, Marcelo Héctor Fuxman and Ricardo Flammini and
alternate statutory auditors Roberto Mumis, Noemí Cohn and Alicia Rigueira are independent according
to the CNV Rules.
Below is a summarized biography of the members of the Bank’s Supervisory Committee:
Francisco Daniel González. Mr. González graduated as Certified Public Accountant from the
School of Economic Sciences of the National University of Buenos Aires. Currently, as officer of
Sindicatura General de la Nación, from 1995 to date, he has been a member of the Supervisory
Committee of Banco Hipotecario S.A. since March 31, 2015 and serves as Regular Statutory Auditor at
AySA S.A. – CAMMESA S.A. and LOTERÍA NACIONAL S.E. He formerly served as auditor at the
Argentine General Auditing Office (Auditoría General de la Nación) in 1993 / 1994. He practiced his
profession in 1992 / 1993. He served as tax accountant in the Argentine Court of Accounts (Tribunal de
Cuentas de la Nación) from 1981 to 1991.
23
Héctor Oscar Ivancich. Mr. Ivancich graduated as Lawyer from the School of Law and Social
Sciences of the National University of Buenos Aires. Today, Mr. Ivancich serves as officer of Sindicatura
General de la Nación, and has been a member of the Bank’s Supervisory Committee since March 31,
2015; in addition, he serves as Regular Statutory Auditor at Empresa Argentina de Soluciones Satelitales
S.A. – ARSAT, VENG. S.A. and Centro de Ensayos de Alta Tecnología S.A. – CEATSA.
José Daniel 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, IRSA Propiedades Comerciales S.A., Hoteles
Argentinos e Inversora Bolívar S.A., among other companies.
Marcelo Héctor 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 IRSA Propiedades
Comerciales S.A., among other companies.
Ricardo Flammini. Mr. Flammini holds a degree in Accounting from Universidad Nacional de
La Plata. Mr. Flammini acted as statutory auditor 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
statutory auditor 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 statutory auditor 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.
Alfredo Héctor Groppo. Mr. Groppo is a public accountant. He graduated from the University of
Buenos Aires and works at Sindicatura General de la Nación. He has been a Regular Statutory Auditor at
Nación Factoring S.A., Nación Bursátil S.A., Nación Servicios S.A. and Polo Tecnológico Constituyentes
S.A. since 2006.
Martín Esteban Scotto. Mr. Scotto is a lawyer who graduated from the University of Buenos
Aires and works at Sindicatura General de la Nación. He has been Regular Statutory Auditor at Banco de
Inversión y Comercio Exterior S.A. (BICE) and Nación Seguros since 2001. In addition, he has been a
member of the Supervisory Committee of Nación Seguros de Retiro SA since 2005, of Nación Bursátil
Sociedad de Bolsa S.A. since 2008 and of Nación Reaseguros SA. since 2012. He has been also a
member of the Supervisory Committees of Nuevo Banco Bisel S.A., Nuevo Banco Suquía S.A., Bisel
Servicios S.A., Nación Servicios SA, Nación Fideicomisos S.A. and Pellegrini S.A., a Mutual Fund
Management Company.
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.
Alicia Rigueira. Mrs. Rigueira graduated as certified public accountant from the School of
Economic Sciences of the University of Buenos Aires in 1975. She is audit manager at Abelovich, Polano
y Asociados S.R.L. / NEXIA International, a firm of public accountants in Argentina. She formerly
served as manager at Harteneck, López y Cía. (correspondent company of Coopers & Lybrand). In
addition, she serves as alternate member in the Supervisory Committees of Llao Llao Resorts S.A.,
Hoteles Argentinos S.A. and Nuevas Fronteras S.A.
24
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 IRSA Propiedades Comerciales S.A., among other companies.
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 (C100AAK) 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 8th 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 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. At the General Ordinary Shareholders' Meeting dated
April 24, 2013 Accountant Marcelo Alejandro Trama was reelected as regular external auditor and
Accountant Daniel Hugo Cravino (CPCE Autonomous City of Buenos Aires Volume 94 – Page 111) was
designated as alternate external auditor. At the General Ordinary Shareholders’ Meeting held on April 24,
2014, the accountant Marcelo Alejandro Trama was reelected as regular external auditor and Daniel Hugo
Cravino was reelected as alternate external auditor. At the General Ordinary Shareholders’ Meeting held
on March 31, 2015, the accountant Marcelo Alejandro Trama was reelected as regular external auditor
and Daniel Hugo Cravino was reelected as alternate external auditor. Below is a piece of information
about auditors:
Identity
Document
(DNI)
Taxpayer’s
Code
(CUIL/CUIT)
Marcelo Alejandro Trama
14,643,938
20-14643938-2
Daniel Hugo Cravino
11,450,803
23-11450803-9
Name
Domicile
Bouchard 557 City of
Buenos Aires
Bouchard 557 City of
Buenos Aires
The Bank’s financial statements reflect fairly in all material respects the Bank’s financial
condition as of December 31, 2014, the results of its operations and cash and cash equivalent flows for
the fiscal year then ended, and the changes in the shareholders’ equity for the fiscal year ended December
31, 2014, in accordance with the Argentine Central Bank's standards and, except for the deviation from
professional accounting standards specified in paragraph 3., with accounting standards in force in the City
of Buenos Aires.
25
STATISTICAL DATA AND OFFERING SCHEDULE
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 series 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
26
Bank’s unsubordinated indebtedness, in accordance with the applicable
laws. (in such case, in accordance with the BCRA Rules, the Bank shall
not receive documents that secure loans or as counter-guarantee of
guarantees granted in favor of third parties or potential liabilities
assumed on behalf of third parties).
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 the Capital Markets Law and the CNV Rules 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 Capital Markets 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 of
America 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
of America 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 class and/or series, all subject to compliance with the laws and
regulations that may be applicable from time to time. The maturity date
of the Notes shall never be less than 30 days or greater than 30 years as
from the date of issuance.
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 LEBAC rate, 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
27
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
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
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 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
by Communication “A” 5571, as amended by the Central Bank, 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 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
Additional Amounts
withholding or deduction for any taxes or other governmental charges
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. It is put on
record that the Bank will observe the minimum amount set forth by the
BCRA, by means of Communication “A” 5034 as amended, which at
present is Ps. 400,000.
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
28
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.
Trading and Listing
The Bank may apply to have the notes of any series admitted for trading
and/or listing on the Luxembourg stock exchange for trading on the
EuroMTF and/or admitted for trading and/or listing on Mercado Abierto
Electrónico S.A. (“MAE”), and/or admitted for trading and/or listing on
the MVBA, and/or such other stock exchange or market authorized in the
country or abroad, 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 authorized market, 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, and/or admitted for trading and/or
listing on the MAE, and/or admitted for trading and/or listing on the
MVBA, and/or on any other stock exchange or market authorized in the
country or abroad. 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 CNV’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
29
pricing supplements.
Risk Factors
See “Risk Factors” beginning on page 38 of this Offering Memorandum
and the applicable pricing supplement for a description of certain
significant risks involved in making an investment in the notes.
30
KEY INFORMATION ABOUT THE ISSUER
a) Accounting and Financial Information
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, 2014, 2013, and 2012 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 financial statements reflect fairly in all material respects the Bank’s financial
condition as of December 31, 2014, the results of its operations and cash and cash equivalent flows for
the fiscal year then ended, and the changes in the shareholders’ equity for the fiscal year ended December
31, 2014, in accordance with the Argentine Central Bank's standards and, except for the deviation from
professional accounting standards specified in paragraph 3., with accounting standards in force in the City
of Buenos Aires.
The Bank's audited financial statements have been prepared in accordance with Argentine
Banking GAAP, which differ in certain significant respects from Argentine Generally Accepted
Accounting Principles (“Argentine GAAP”) and from United States 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, 2014, December 31,
2013 or December 31, 2012, 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.
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. and of Tarshop S.A. for the fiscal years ended
December 31, 2014, 2013 and 2012. 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 BCRA 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, 2014, 2013 and 2012 do not include the effects of
inflation.
31
December 31,
2014
In
thousands
of
2014
2013
In thousands
of:
2012
US$(14)
Ps.
Ps.
Ps.
Consolidated Income Statement
Financial income
619,142
5,294,899
3,232,073
2,180,725
(347,682)
(2,973,378)
(1,602,511)
(1,138,629)
Net financial income
271,459
2,321,521
1,629,562
1,042,096
Provision for losses on loans
(40,159)
(343,437)
(264,290)
(200,922)
Net contribution from insurance(1)
98,297
840,640
500,992
314,031
Other net income from services(2)
125,021
1,069,178
718,289
666,792
(333,926)
(2,855,738)
(1,896,956)
(1,440,391)
(9,495)
(81,204)
(65,346)
26,666
3,000
25,653
(7,178)
(9,569)
(49,888)
(426,641)
(194,123)
(55,096)
64,309
549,972
420,950
343,607
Cash and due from banks
627,750
5,368,514
2,240,567
1,450,494
Government and corporate securities(4)
528,302
4,518,035
1,740,587
2,078,936
To the non-financial public sector
13,112
112,131
139,373
91,806
To the financial sector
39,662
339,190
379,308
391,343
2,010,681
17,195,344
12,928,639
9,544,383
137,223
1,173,527
792,178
1,031,178
43,190
369,360
371,267
229,629
274,727
2,349,468
2,220,627
1,868,330
Financial expenses
Administrative expenses
Miscellaneous income (loss), net(3)
Minority interest
Income tax
Net income
Consolidated Balance Sheet
Loans:
To the non-financial private sector and residents abroad
Overdrafts
Promissory notes
Mortgage loans
Pledge loans
12,111
103,576
42,460
55,346
Personal loans
275,350
2,354,793
1,822,810
1,199,211
Credit cards
836,677
7,155,260
5,181,068
3,551,203
(4,042)
(34,565)
(8,007)
(1,723)
413,522
3,536,442
2,380,749
1,538,527
Non-applied collections
Other
Accrued interest and trading differences receivable
25,017
213,947
144,807
87,837
Documented interest
(3,094)
(26,464)
(19,320)
(15,155)
Provisions
Loan Sub-total
(47,608)
(407,140)
(308,632)
(273,101)
2,015,847
17,239,525
13,138,688
9,754,431
Loans pending securitization(5)
1,220
10,436
12,154
18,238
12,481
106,740
58,175
10,576
533
4,561
3,925
3,978
(399)
(3,415)
(3,450)
(3,660)
2,029,683
17,357,847
13,209,492
9,783,563
275,424
2,355,423
1,812,381
1,677,380
Receivables for financial leases (5)
Accrued interest receivable(5)
Provisions(5)
Total Loans
Other receivables from financial transactions
32
December 31,
Other assets
Total Assets
2014
In
thousands
of
2014
2013
In thousands
of:
2012
US$(14)
Ps.
Ps.
Ps.
204,828
1,751,692
1,384,866
1,013,301
3,665,986
31,351,511
20,387,893
16,003,674
1,064,175
9,100,822
4,142,809
2,990,892
867
7,416
8,109
8,563
1,078,797
9,225,875
6,738,876
5,011,674
595,564
Deposits:
Non-financial public sector
Financial sector
Non-financial private sector and residents abroad
Checking accounts
88,930
760,533
526,413
Savings accounts
289,949
2,479,643
1,443,467
741,892
Fixed-term deposits
582,767
4,983,820
4,265,680
3,355,131
Investment accounts
83,424
713,438
304,241
160,035
Other
18,249
156,068
126,748
101,650
Accrued interest and trading differences payable
15,479
132,373
72,327
57,402
2,143,839
18,334,113
10,889,794
8,011,129
Other liabilities from financial transactions(6)
757,176
6,475,372
4,137,110
3,539,730
Other liabilities
242,929
2,077,528
1,442,743
928,796
3,143,944
26,887,013
16,469,647
12,479,655
7,904
67,591
71,311
68,034
514,138
4,396,907
3,846,935
3,455,985
Total deposits
Total Liabilities
Third parties’ interests
Total Shareholders’ Equity
33
Statement of Changes in Shareholders’ Equity
Non-capitalized Contributions
Changes
Capital
Stock
Share issuance
premiums
Profit Reserves
Irrevocable
contributions for
future capital
increases
Equity
Adjustment
Legal
Retained
earnings
Others
Total for the
fiscal year
12/31/2013
3,846,935
3,455,985
3,846,935
3,455,985
1. Opening Balances
1,500,000
834
-
717,115
595,549
612,487
2. Subtotal (*)
3. Distribution of
Retained Earnings –
Shareholders’ Meeting
dated 08/23/2013
3. Distribution of
Retained Earnings –
Shareholders’ Meeting
dated 04/24/2014
6. Net income for the
year
7. Fiscal year closing
balances
1,500,000
834
-
717,115
595,549
612,487
-
-
-
-
-
-
-
-
(30,000)
-
-
-
-
84,190
336,760
(420,950)
-
-
-
-
-
-
-
-
549,972
549,972
420,950
1,500,000
834
-
717,115
679,739
949,247
549,972
4,396,907
3,846,935
(*) Treasury shares 36,634,733 corresponding 153,473 ADR (1,534,733 shares) to third parties.
34
420,950
Total for the
fiscal year
12/31/2014
420,950
b) Ratios
Year ended December 31,
2014
Selected Ratios
2013
2012
(7)
Profitability
Return on average assets(8)
Return on average shareholders’ equity(9)
Net financial margin(10)
2.13%
2.31%
2.39%
13.34%
11.53%
10.31%
8.97%
8.96%
7.24%
67.49%
66.59%
71.20%
Shareholders’ Equity / Assets
14.02%
18.87%
21.59%
Shareholders’ Equity / Liabilities
16.35%
23.36%
27.69%
5.59%
6.79%
6.33%
Efficiency(11)
Solvency
Other Assets(12) / Assets
Liquidity
Cash and due from banks plus government and corporate securities /
Deposits
53.92%
36.56%
44.06%
Loans / Deposits
94.68%
121.30%
121.76%
Non-performing commercial loans as a % of Total Commercial Loans(13)
0.58%
0.51%
0.57%
Non-performing consumer loans as a % of Total Consumer Loans(13)
3.41%
3.15%
3.20%
Non-performing loans as a % of Total Loans(13)
2.34%
2.17%
2.31%
Portfolio Quality
Provisions as a % of Total Loans
(13)
Provisions as a percentage of Non-performing Loans(13)
2.24%
2.20%
2.37%
95.89%
101.62%
102.64%
References
(1)
(2)
(3)
(4)
(5)
(6)
(7)
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. 2,524.7 million, Ps. 29.9 million and Ps. 972.1 million from instruments issued by the
Argentine Central Bank as of December 31, 2014, 2013, and 2012, respectively.
For a better exposure of the Bank’s situation, Loans pending securitization and receivables for financial
leases jointly with its accrued interest receivable and provisions are exposed separately. Due to this
exposure, “Loans” and “Other Receivables for Financial Transactions” differ from the Consolidated
Financial Statements.
Includes Ps. 4,347.1 million, Ps. 2,660.1 million, and Ps. 2,013.7 million in unsubordinated negotiable
obligations as of December 31, 2014, 2013 and 2012, respectively.
Selected Ratios were prepared in accordance with the BCRA’s accounting and auditing Standards, which
provide for the Plan of Accounts pursuant to which the Bank’s Financial Statements are prepared. For
example, it is informed that pursuant to those standards, current and non-current assets as well as current
and non-current liabilities are not broken down, therefore, it is impossible to calculate ratios such as
“Capital Immobilization”, which differs from the CNV Rules and the Argentine GAAP.
35
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Consists of net income as a percentage of average assets. Average assets consist in the simple average from
the balance of consolidated assets at the beginning of the period and the balance of consolidated assets at
the end of the period, as it arises from the Consolidated Financial Statements.
Consists of net income as a percentage of average shareholders’ equity. Average shareholders’ equity
consists in the simple average from the balance of consolidated shareholders’ equity at the beginning of the
period and the balance of consolidated shareholders’ equity at the end of the period, as it arises from the
Consolidated Financial Statements.
Consists of financial margin as a percentage of average assets.
Consists of administrative expenses to the sum of net financial margin, net contribution from insurance and
other income from services, net.
Other Assets consist of the sum of “Investments in other Companies”; “Miscellaneous Receivables”,
“Bank Premises and Equipment”, “Miscellaneous Assets”, “Intangible Assets” and “Items pending
Allocation”.
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, 2014 was Ps. 8.5520 =
US$ 1.00 in accordance with the Reference Exchange Rate published by the BCRA as of such date.
36
c) Capitalization and Indebtedness
The following table sets forth the Bank’s capitalization and indebtedness as of December 31,
2014, 2013 and 2012, in thousands of Pesos and U.S. Dollars:
As of December 31,
2014
2014
2013
2012
In
thousand
s of:
US$(4)
Short-term Debt
Variation 2014/2013- Variation 2013/2012
In thousands of:
Ps.
Ps.
Ps.
Ps.
in %
Ps.
in %
(1)
Deposits
Notes
Financial
Institutions
Interest Payable
Total Short-term
Debt
2,128,177
18,200,169
10,814,898
7,949,332
7,385,271
68.3%
2,865,566
36.0%
171,754
1,468,840
475,586
827,991
993,254
208.8%
(352,405)
(42.6)%
37,758
322,909
420,353
261,983
(97,444)
(23.2)%
158,370
60.5%
29,217
249,865
138,096
98,726
111,769
80.9%
39,370
39.9%
2,366,906
20,241,783
11,848,933
9,138,032
8,392,850
70.8%
2,710,901
29.7%
Long-term Debt(1)
Deposits
184
1,571
2,569
4,395
(998)
(38.8)%
(1,826)
(41.5)%
336,558
2,878,244
2,184,506
1,185,687
693,738
31.8%
998,819
84.2%
336,742
2,879,815
2,187,075
1,190,082
692,740
31.7%
996,993
83.8%
Capital Stock(2)
Non-capitalized
Contributions
Adjustments to
shareholders’
equity
Statutory
Reserves(3)
175,398
1,500,000
1,500,000
1,500,000
-
0.0%
-
0.0%
98
834
834
834
-
(0.1)%
-
0.0%
83,853
717,115
717,115
717,115
-
0.0%
-
0.0%
79,483
679,739
595,549
526,828
84,190
14.1%
68,721
13.0%
Other Reserves
110,997
949,248
612,487
367,601
336,760
55.0%
244,886
66.6%
64,309
549,972
420,950
343,607
129,022
30.7%
77,343
22.5%
514,138
4,396,907
3,846,935
3,455,985
549,972
14.3%
390,950
11.3%
3,217,786
27,518,505
17,882,943
13,784,099
9,635,562
53.9%
4,098,844
29.7%
Notes
Total Long-term
Debt
Capital
Accumulated Profit
Total
shareholders’
equity
Total
capitalization
(1)
(2)
(3)
(4)
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, 2014 was Ps. 8.5520= US$ 1.00.
Source: Central Bank
d) Reason for the Offering and 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 BCRA Communication “A” 3046, as amended and supplemented, and other applicable
regulations, as specified in the relevant pricing supplement.
37
Article 36 of the Negotiable Obligations Law and the BCRA Communication referred to above
require that the Bank use such proceeds for:
•
•
•
•
•
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 BCRA 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.
e) 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 of
America 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.
The Argentine economy has been subject to significant volatility in the recent decades,
characterized by periods of low or negative growth, high inflation and currency depreciation. During
2001 and 2002, Argentina experienced a period of severe political, economic and social crisis, which
caused a significant economic contraction and led to radical changes in government policies. Although
the economy has recovered since then, during 2014, the Argentine economy has shown signs of
slowdown due to the increase in the applicable exchange rates and the decrease in the commodity prices.
During the first nine months of 2014 the Gross Domestic Product (“GDP”) of Argentina showed
no significant changes as reported by the Argentine Institute of Statistics and Censuses (Instituto
Nacional de Estadísticas y Censos, “INDEC”). As of December 31, 2014, the Monthly Estimate of
Economic Activity (Estimador Mensual de Actividad Económica, “EMAE”) also reported by INDEC
increased by 0.6% compared to the same period in the previous year.
The country’s relative stability since 2002 has been recently affected by an increase in political
tension and the governmental intervention in the economy. In addition, the government’s negotiations
with holdouts with respect to the foreign debt continue unresolved, which may have an impact on the
growth of the country. For more information see the risk “Argentina’s limited ability to obtain funding in
international markets could adversely affect the country’s ability to implement reforms and boost the
economy.”
Our business depends to a significant extent on macroeconomic and political conditions in
Argentina. Therefore, deterioration of the country’s economy would likely have a significant adverse
effect on our business, financial condition and results of operations.
38
Continuing inflation may have an adverse effect on the economy
During fiscal years 2012 and 2013, the inflation rate reported by INDEC was 9.9%, 10.5%,
respectively (in January 2014 the Argentine government established a new consumer price index, as
described below, which reflects with a broader scope the consumer prices (“IPCNu”) on the basis of the
price information reported by the 24 Argentine provinces). Until 2013 the inflation rate had been
controlled in part due to actions implemented by the Argentine government to control inflation, including
limitations on exports and pricing agreements with companies in the private sector. During 2014 the
inflation rate has increased, mainly due to the devaluation process triggered by the BCRA. According to
new calculations, the IPCNu increased by 23.9% during 2014.
In the past, inflation has materially undermined the Argentine economy and the government’s
ability to create conditions that would permit stable growth. Continuity of high inflation rates could have
an adverse impact on the availability of long-term loans, the real estate business and could also undermine
Argentina’s competitiveness abroad upon dilution of the effects of devaluation of the Peso, thus adversely
affecting the volume of economic activity, employment, real salaries, consumption and interest rates; in
addition, future uncertainty concerning inflation could have an adverse impact on the growth of the
country. Dilution of the positive effects of the peso devaluation on the export-oriented sectors of the
Argentine economy will decrease the level of economic activity in the country. In turn, a portion of the
Argentine debt is adjusted by the Coeficiente de Estabilización de Referencia (“CER” per its acronym in
Spanish), a currency index that is strongly tied to inflation. Therefore, any significant increase in inflation
would cause an increase in Argentina’s debt and, consequently, the country’s financial obligation.
The government has taken certain measures in order to control inflation, such as implementing a
fair price program, by virtue of which supermarkets have to offer certain products at a determined price,
and sectorial agreements in order to implement salaries increases. Additionally, on September 19, 2014,
the Argentine government amended Law No.20,680 (the “Supply Law”), which enables the federal
government to intervene the markets when it considers that any party to such market is trying to impose
prices, or supply restrictions over such market. The Supply Law provides among others pecuniary
sanctions, suspension, seizure of operations, and confiscation of goods.
If inflation remains high or continues to rise, Argentina’s economy may be negatively impacted
and our business could be adversely affected.
There is concern about the accuracy of Argentina’s official inflation statistics.
In January 2007, the INDEC modified its methodology used to calculate the consumer price
index (the “CPI”) for Greater Buenos Aires, which was calculated as the monthly average of a weighted
basket of consumer goods and services that reflects the pattern of consumption of Argentine households.
Several economists, as well as the international and Argentine press, have suggested that this change in
methodology was related to the policy of the Argentine government intended to curb the increase of
inflation and consequently reduce payments on the outstanding inflation-linked bonds issued by
Argentina and which, according to measures performed by private consulting agencies, it is greater.
At the time that the INDEC adopted this change in methodology the Argentine government also
replaced several key officers at the INDEC, prompting complaints of governmental interference from the
technical staff at the INDEC. In addition, the International Monetary Fund (“IMF”) requested to clarify its
inflation rates several times.
Notwithstanding the foregoing, in November, 2010, the Argentine government began consulting
with the IMF for technical assistance in order to prepare a new national consumer price index with the
aim of modernizing the current statistical system. During the first quarter of 2011, a team from the IMF
started working in conjunction with the INDEC in order to create such an index. Notwithstanding the
foregoing, reports published by the IMF stated that its staff also used alternative measures of inflation for
macroeconomic surveillance, including data produced by private sources, and such measures have shown
inflation rates that are considerably higher than those issued by the INDEC since 2007.
Consequently, the IMF called on Argentina to adopt measures to improve the quality of used
data by the INDEC. In a meeting held on February 1, 2013, the Executive Board of the IMF emphasized
that the progress in implementing remedial measures since September 2012 has not been sufficient. As a
39
result, the IMF issued a declaration of censure against Argentina in connection with the breach of its
related obligations to the IMF and called on Argentina to adopt remedial measures to address the
inaccuracy of inflation and GDP data without further delay.
In order to address the quality of official data, a new consumer price index the (“IPCNu”), was
enacted on February 13, 2014. The IPCNu represents the first national indicator to measure changes in
prices of final consumption by households. While the previous price index only measured inflation in the
Greater Buenos Aires, the IPCNu is calculated by measuring prices on goods across the entire urban
population of the 24 provinces of Argentina.
Furthermore, on February 21, 2014, Resolution No. 35/2014 was published in the Official
Gazette of the Argentine Republic (the “Official Gazette”) pursuant to which bonds adjusted by CER
shall be governed by the new IPC-NU. As the former CPI was replaced by the new one, it is now required
that bonds adjusted by CER shall also change the index used to make the calculation.
According to the new calculatins, the IPCNu increased by 23.9% during 2014.
The ability of Argentina to access credit in the capital markets could be limited not only by the
global economic conditions and the current negotiations of Argentina with the holdouts, but also by the
uncertainty relating to the inaccuracy of the economic indexes and rates in question which could
adversely affect our results of operations and financial conditions.
In the event of high inflation rates, private consumption could decline, causing a negative effect
on economic activity and employment.
Argentina’s ability to obtain financing from international markets is limited, which may
impair its ability to implement reforms and public policies and foster economic growth.
Between 2005 and 2010, Argentina restructured a portion of the defaulted sovereign debt that
had remained unpaid since 2001. As a result of the restructuring, the Argentine Government announced
that the total gross government debt amounted to approximately US$ 129,2 thousand million,
restructuring more than 92.4% of the debt in the exchange offers of 2005 and 2010. Certain bondholders
who had refused to take part in such restructuring process ("holdouts"), mainly located in United States of
America, Italy and Germany, filed legal actions against Argentina so as to collect payments under such
defaulted bonds. Several of such proceedings are still pending as of the date of this Offering
Memorandum and non-restructured bondholders could make new claims in the future, pursuing the
attachment or precautionary measures on Argentine assets located abroad,
On January 3, 2006, Argentina repaid in full its debt of approximately U.S.$9.8 billion with the
International Monetary Fund.
After many years of negotiations, in May 2014, the Argentine Government agreed with the París
Club on the consolidated amount of the debt which as of April 30, 2014 totaled US$9.7 billion, which
will be repaid in full within the next 5 years. Interest will accrue at a rate of 3% on the unpaid principal
amounts during the first 5 years. The agreement further provides for a minimum payment to be made by
Argentina every year and sets forth payment conditions in the event that additional investments are made
by the Paris Club member nations. The agreement also established that if during the 5-year period the
additional investments are insufficient, Argentina may delay repayments for two additional years, thus
resulting in seven years in the aggregate, with the ensuing increase in the financial cost of about 1% for
the whole period.
In addition, foreign shareholders of several Argentine companies have filed claims before the
ICSID (International Centre for Settlement of Investment Disputes) alleging that certain government
measures adopted during the country’s 2001 crisis were inconsistent with fair and equitable treatment
standards set forth in various bilateral investment treaties to which Argentina is a party. Since May 2005,
the ICSID tribunals have issued several awards against Argentina. Only the cases “CMS v. Argentina”,
“Azurix v. Argentina” and “Vivendi v. Argentina” are currently final and unappealable. As of the date of
this Offering Memorandum there are still 45 pending complaints filed with ICSID against Argentina the
outcome of which is unknown yet. On the other hand, in accordance with the arbitration rules of the
United Nations Commission on International Trade Law ("UNCITRAL"), certain arbitration tribunals
held Argentina liable to pay British Gas (shareholder of Metrogas Argentina) and National Grid plc.
40
(shareholder of Transener, the power distribution company in Argentina). Argentina filed with the Federal
District Court of the United States of America for the District of Columbia a motion for dismissal of both
rulings. The annulment of the ruling in relation to National Grid plc. was rejected by the District Court.
Furthermore, on March 5, 2014 the Supreme Court of the United States delivered its judgment regarding
the appeal filed by British Gas from the judgment of the Court of Appeals in Washington, rejecting the
request made by British Gas based on the fact that it should have been filed in Argentina. The judgment
of the Supreme Court of the United States, by a vote of 7-2, reversed the decision of the Court of Appeals
of Washington and ordered Argentina to pay the sum of US$ 185 million as compensation for paying the
debt back in a foreign currency to the British company, then controlling Metrogas, during the crisis of
2002 and as a consequence the freezing of fees charged by the Government to Metrogas. As of the date
hereof, the Argentine Government made no public statements relating to the way the country should give
effect to the judgment against it.
During the month of October 2013, the Argentine Government reached an agreement with five
companies - four of which litigate in the ICSID (CMS Gas, Azurix, Vivendi and Continental Casualty)
and the fifth, National Grid, litigating under the arbitration rules of the UNCITRAL, whereby Argentina
made the payment which was cut down by 25%, subject to companies’ agreement to invest in government
securities issued by the Argentine government, among others.
Late in December 2012, Argentina filed a request with the applicable District Court in New York
in order to reopen the restructuring of its defaulted debt to some of the holdouts who were left out of
previous exchanges. This exchange offer was part of a filing made by Argentina in the New York Court
of Appeals requesting the review of the judgment which ordered Argentina to pay US$1.3 billion plus
interest in favor of the holdouts. Argentina also alleged in its filing (which was on the same terms and
conditions of the 2010 restructuring) that such judgment violated the pari passu clause.
On September 23, 2013, Law No. 26,886 (the "Restructuring Law") was enacted. The
Restructuring Law provides that holders of government securities that were eligible for the 2005-2010
restructuring could participate in a new restructuring, waiving all their rights under the securities they
held, including those recognized by judicial or administrative judgments, or arbitration awards, releasing
Argentina from any judicial, administrative, arbitral proceedings or otherwise, initiated or to be initiated
in the future with respect to such securities or obligations that may arise, including any action intended to
receive service of capital or interest of such securities. Also, the Restructuring Law sets forth that the
financial terms and conditions offered are not precisely better than those offered to creditors in the 20032010 financial restructuring.
The holdouts have obtained favorable judgments ordering the payment of outstanding original
principal and interest, and compliance with the pari passu clause concerning future payments. Such
decisions were appealed by Argentina. The Court of Appeals of New York confirmed the decision on
several occasions, and ordered Argentina to pay US$ 1.3 billion plus interest accrued from the date of
judgment in favor of the holdouts, staying the execution judgment delivered by the lower court until the
Supreme Court of Justice of the United States hands down its ruling. The court's judgment (like the lower
court judgment) provides for a "stay" clause, this being an injunction suspending the payment. The
Court's judgment was appealed to the Supreme Court of the United States, which on January 10, 2014
agreed to hear the case. On June 16, 2014 the Supreme Court of the United States refused to hear the
Argentine case against holdouts and removed the "stay".
The decision of the Supreme Court of Justice of the United States to dismiss the appeals filed by
the Argentine government confirmed the decisions of the Court of Appeals for the Second Circuit in
Manhattan, which in principle required the Argentine government to pay US$ 1.3 billion enabling other
holdouts to require payment on the same terms (estimated at a total of approximately US$ 15 billion).
While the Argentine government has expressed on several occasions its intention to pay the full amount
to the creditors who accepted the terms of 2003-2010 restructuring, the decisions of the Court of Appeals
for the Second Circuit in Manhattan, confirmed by the Supreme Court of the United States of America,
imply that any potential payment of restructured debt, which is not accompanied by a payment to the
creditors favored by the aforementioned rulings could be subject to attachment. On June 30, 2014 the
term for payment of the bond coupon expired. The government wired the respective sums of money in
order to make the payment but the Court blocked such payment. On July 30, 2014 the grace period under
the terms of such bonds expired, and notwithstanding the foregoing payment has not been made yet.
On September 11, 2014 the Argentine government enacted Law No. 26,984 whereby it changed
the paying agent of the 2003-2010 restructuring, and established Buenos Aires as the domicile for
payment of the bonds issued under each restructuring. By enacting this law the government sought to
41
create a new voluntary exchange of the restructured debt. Additionally, during August, 2014 the BCRA
revoked the authorization of Bank of New York Mellon –current paying agent of the Argentine sovereign
debt- to act in Argentina. On September 29, 2014, Judge Thomas Griesa declared Argentina in contempt
of court, considering that it had ignored the payment ordered to be made to the holdouts.
During August and September 2014, the District Court of the Southern District of New York
authorized Citibank N.A. to pay creditors who held debt issued under Argentine Law but payable in New
York. As of the date of this Offering Memorandum, the District Court of the Southern District of New
York is still reviewing the possibility for a third exception to be made on December 2014 in order to
allow payment. However, motions filed by debt holders under U.S., European or Japanese law to allow
payment were dismissed.
The lawsuits filed by the holdouts against the Argentine government could result in the freezing
or injunctions on assets owned or deemed to be owned by Argentina, which could have a material adverse
effect on the economy of the country and affect our ability to access international financing or to repay
our debts. As a result of Argentina's failure to restructure in full its remaining sovereign debt and fully
negotiate with the holdout creditors, the Argentine government may not have the financial resources
necessary to implement reforms and foster economic growth, which could, in turn, have a material
adverse effect on the country's economy and, consequently, our businesses and results of operations.
Furthermore, Argentina's inability to obtain credit in international markets could have a direct impact on
our own ability to access international credit markets to finance our operations and growth, which could
adversely affect our results of operations and financial condition.
During both debt restructuration proceedings carried out by the Argentine government in 2005
and 2010, a Rights Upon Future Offers clause (the "RUFO Clause") was incorporated and expired on
December 31, 2014. The RUFO Clause established that if any debt holder received any improvement,
every other debt holder was entitled to benefit from the same conditions. Prior to expiration of the clause,
the payment to the holdouts could potentially be interpreted as a condition for the application of such
clause and would have allowed the rest of the debt holders to claim the amount originally owed to them.
In view of expiration of such clause, the Argentine government would be in a position to make any
potential offer to the holdouts, without being subject to any potential claim from the rest of the bond
holders.
The judge Thomas Griesa ruled that the holders of defaulted Argentine bonds who would like to
take part in the judgment obtained by holdouts as "me too" could do so until March 2, 2015. Argentina’s
deadline to challenge the claims will be April 7 of such year and finally on April 31, 2015 the judge will
render judgment thereon.
As of the date of this Program no agreement has been reached with the creditors and there is uncertainty
about the bondholders' willingness to participate in a new swap deal that could be inconsistent with the ruling issued
by the US court.
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.
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 businesses and individuals’ financial condition. The devaluation of the peso has had a
negative impact on the ability of Argentine businesses to honor their foreign currency-denominated debt,
initially led to very high inflation, significantly reduced real wages, had a negative impact on businesses
whose success is dependent on domestic market demand, such as utilities and the financial industry, and
adversely affected the government’s ability to honor its foreign debt obligations. During January and
December 2014, the Argentine government significantly devaluated the Argentine peso. If the peso
continues to devaluate, all of the negative effects on the Argentine economy related to such devaluation
could recur, with adverse consequences on our business.
On the other hand, 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, such as us. 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
42
terms, given its current heavy reliance on taxes on exports. The appreciation of the peso against the U.S.
dollar could have an adverse effect on the Argentine economy and our business.
Certain measures that may be taken by the Argentine government may adversely affect the
Argentine economy and, as a result, our business
During recent years, the Argentine government has increased its direct intervention in the
economy through the implementation of nationalization and expropriation measures, price and exchange
controls.
In November 2008, the Argentine government enacted Law No. 26,425 which provided for the
nationalization of the Administradoras de Fondos de Jubilaciones y Pensiones (the “AFJPs”). More
recently, beginning in April 2012, the Argentine government provided for the nationalization of YPF S.A.
and imposed major changes to the system under which oil companies operate, principally through the
enactment of Law No. 26,741 and Decree No. 1277/2012. In February 2014, the Argentine government
and Repsol (which was the principal shareholder of YPF S.A.) announced that they had reached
agreement on the terms of the compensation payable to Repsol for the expropriation of the YPF S.A.
shares. Such compensation totaled US$ 5 billion, payable by delivery of Argentine sovereign bonds with
various maturities.
We cannot assure you that these or other measures that may be adopted by the Argentine
government, such as expropriation, nationalization, forced renegotiation or modification of existing
contracts, new taxation policies, changes in laws, regulations and policies affecting foreign trade,
investment, etc., will not have a material adverse effect on the Argentine economy and, as a consequence,
adversely affect our financial condition, our results of operations and the market value of our securities.
The Argentine government may order salary increases to be paid to employees in the private
sector, which would increase our operating costs.
In the past, the Argentine government has passed laws, regulations and decrees requiring
companies in the private sector to maintain minimum wage levels and provide specified benefits to
employees and may do so again in the future. In the aftermath of the Argentine economic crisis,
employers both in the public and private sectors have experienced significant pressure from their
employees and labor organizations to increase wages and to provide additional employee benefits. Due to
high levels of inflation, employers in both the public and private sectors are experiencing significant
pressure from unions and their employees to increase salaries. It is possible that the Argentine
government could adopt measures mandating salary increases and/or the provision of additional employee
benefits in the future. Any such measures could have a material and adverse effect on our business, results
of operations and financial condition.
Exchange controls and restrictions on transfers abroad and capital inflow restrictions have
limited, and can be expected to continue to limit, the availability of international credit.
In 2001 and 2002, Argentina imposed exchange controls and transfer restrictions substantially
limiting the ability of companies to retain foreign currency or make payments abroad.
On June 2005, the government established additional controls on capital inflow, including the
requirement that, subject to limited exemptions, 30% of all funds remitted to Argentina remain deposited
in a domestic financial institution for one year without earning any interest.
On October 2011, new exchange controls measures that restrict foreign exchange inflows and
outflows of capital have been implemented, among them it was established as a requirement for the
repatriation of the direct investment of the non-resident (purchase of shares of local companies and real
estate), the demonstration of the income of the currency and its settlement in the MULC.
Furthermore, in July 2012, the Central Bank issued Communication “A” 5318, which among
other, suspended access to the MULC for residents creating assets abroad without a specific purpose.
Through resolution No. 3210/2011 of the AFIP and the Communications “A” 5239, 5240, 5242 and 5245
and its amendments of the Central Bank, the “Consultation of Exchange Operations Programme,” was
established, a system by which an assessment will be made at the time of each transaction, in order to
43
have the possibility to acquired U.S. Dollars for tourism purpose. The system analyzes the consistency
with tax information of each currency buyer, and validates or invalidates the transaction.
In January 2014, the Argentine government established that the resident individuals in the
country will be able to access the local exchange market for purchases made by the concept “buy for the
possession of foreign currency in the country” according to their income declared to the AFIP and
other quantitative parameters established in the framework of exchange rate policy for its approval for the
purposes of this regime. The purchase amount that individuals can access for this concept will be found in
the “Exchange Operations Consultation Program”, available on the corporate website of the AFIP.
Additionally, on July 10, 2014, by means of Communication “A” 5604, the BCRA amended
Communication “A” 5526 (which regulates access to MULC by residents for the purchase of foreign
currency for their application to specific destinations in local assets) establishing the possibility that local
governments and/or residents of the nonfinancial private sector issue new bonds and other debt securities
with a public offering, can access the MULC simultaneously to the liquidation of the funds they receive
for these emissions, to purchase foreign currency Notes, for up to 90% of the amount liquidated in the
MULC. To do this, they must meet the other requirements in the Communication “A” 5604 and allocate
foreign currency acquired for determined purposes. On October 9, 2014, such situation was extended to
the funds received from external financial loans and direct investments under Communication “A” 5643.
The Argentine government may, in the future, impose additional controls on the foreign
exchange market and on capital flows from and into Argentina, in response to capital flight or
depreciation of the peso. These restrictions may have a negative effect on the economy and on our
business if imposed in an economic environment where access to local capital is constrained. For more
information, please see “Exchange Rates and Exchange Controls” in this Offering Memorandum.
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. 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.
In addition, Argentina is also affected by the economic conditions of major trade partners, such
as Brazil and/or countries that have influence over world economic cycles, such as the United States. If
interest rates rise significantly in developed economies, including the United States, Argentina and other
emerging market economies could find it more difficult and expensive to borrow capital and refinance
existing debt, which would negatively affect their economic growth. In addition, if these developing
countries, which are also Argentina’s trade partners, fall into a recession the Argentine economy would be
affected by a decrease in exports. All of these factors would have a negative impact on us, our business,
operations, financial condition and prospects.
Furthermore, several EU members have been required to reduce public expenditure due to their
high indebtedness rates, which have adversely affected the Eurozone economy.
The situation of global economics would have significant effects on Latin America, Argentina
and its main business partners, mainly reflected in a reduction in the exports and foreign direct
investments, which could adversely affect Argentine economy and indirectly, the Bank’s business and
results of operations.
44
Restrictions on the supply of energy could negatively affect Argentina’s economy.
As a result of prolonged recession, and the forced conversion into pesos and subsequent freeze
of gas and electricity tariffs in Argentina, there has been a lack of investment in gas and electricity supply
and transport capacity in Argentina in recent years. At the same time, demand for natural gas and
electricity has increased substantially, driven by a recovery in economic conditions and price constraints,
which has prompted the government to adopt a series of measures that have resulted in industry shortages
and/or costs increase.
The federal government has been taking a number of measures to alleviate the short-term impact
of energy shortages on residential and industrial users. If these measures prove to be insufficient, or if the
investment that is required to increase natural gas production and transportation capacity and energy
generation and transportation capacity over the medium-and long-term fails to materialize on a timely
basis, economic activity in Argentina could be curtailed which may have a significant adverse effect on
our business.
During 2011 and 2012, a series of rate increases and the reduction of subsidies mainly amongst
industries and high-income consumers occurred. As a result, energy costs raised significantly, which
could affect substantially and adversely the Argentine economy, as well as business operations and results
of our operations.
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 2008 crisis, Argentina’s banking industry underwent a significant slowdown. 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. According to the information published by
BCRA, loans to the private sector rose by 9.7% in 2009, 37.8% in 2010, 47.0% in 2011, 30.8% in 2012
and 30.9% in 2013, and 20.2% in 2014. Despite the recovery in credit extension, the recovery of the longterm 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 BCRA
as a potential liquidity guarantor.
The stability of the financial system depends upon the ability of financial institutions, 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, after 2008 the volume of bank deposits has decreased and the average
term of such deposits has also shortened as a result of different economic and financial events that
occurred in the last years. In addition, the recovery in the volume of deposits after 2002 took place in a
context in which the volume of loans has not increased in a manner commensurate to the increase in
deposits, which has resulted in an improvement in the financial system liquidity. However, the liquidity
problems cannot be held to be overcome, as most of the new deposits are short-term, sight or savings
account deposits, therefore the system is yet exposed to a potential bank run due to adverse economic
events, even if unrelated to the financial system. In turn, a bank run could trigger a new round of
governmental interventions. The Bank may not assure that the deposit base of the Argentine financial
system, will not be negatively affected in the future by adverse economic, social and political events.
45
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 to act as financial intermediaries.
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, 2014, the Bank’s total exposure
to the public sector’s debts, included Central Bank’s bills and notes, was Ps. 3,359.6 million, reaching
10.7% of assets.
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 given
the debtor’s default, including mortgage foreclosures and bankruptcy petitions.
Although those measures were lifted, 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 creditors’ rights,
including in the foreclosure of the Bank’s non-performing loans.
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.
In addition, the BCRA has issued the rules governing the Protection of users of financial services
by enacting Communication “A” 5388, as amended, thus increasing the level of protection afforded to
users of financial services and limiting the ability of financial institutions, including the Bank, to
determine the amount of charges, commissions and/or expenses charged for their services and/or
products, with the ensuing impact on their businesses and the results of their operations.
In this context, in August 2010 the Argentine Superintendence of Insurance (Superintendencia
de Seguros de la Nación, “SSN”) issued Resolution No. 35,308, which amended, effective from January
1, 2011, the basic guidelines applicable to the granting of group life insurance on the debt balance of
credit cards, pledge-backed loans and personal loans, among other. In accordance with the BCRA rules,
purchase of such insurance is mandatory only with respect to the granting of pledge- and mortgagebacked loans and it is optional with respect to the debt balance of credit cards and personal loans, among
other. In addition, the BCRA issued Communication “A” 5460, whereby it established that financial
institutions are required to offer users of financial services at least three insurance companies that are not
related to each other, for the users to be able to choose. Furthermore, such communication expressly
establishes that charges and commissions charged for purchase and/or management of insurance shall be
deemed inadmissible as the premium is only transferable to the user.
Resolution No. 35,678/2011 and issuance of Communication “A” 5460 (as amended by
Communication “A” 5608) could have an adverse impact on the sustained increase in revenues from
services of financial institutions (including those of the Bank) in the last years.
46
Class actions against financial institutions for unliquidated amounts may adversely affect the
financial system’s and, in particular, the Bank’s profitability.
Certain public and private organizations have initiated class actions against financial institutions
in Argentina. Class actions are established in the Argentine National Constitution but the implementation
thereof is not regulated. However, the courts have admitted class actions in the absence of specific
regulations, to fill the legal gap. These courts have admitted various actions against financial institutions
seeking to protect collective interests, arguing overcharging on products, interest rates, advice in the sale
of government securities, etc.
Final judgments against financial institutions as a result of these class actions could affect the
profitability of financial institutions in general and of the Bank in particular when it comes to class
actions instituted against the Bank.
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 BCRA and other regulatory authorities. The BCRA 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
terrorism financing 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.
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.
Compliance with laws and regulations governing prevention of asset laundering and terrorism
financing
Financial institutions are required to comply with laws and regulations intended to prevent asset
laundering and terrorism financing and other regulations in Argentina. These laws and regulations
require, among other things, that financial institutions adhere to and enforce policies and procedures
related to the“Know Your Client” requirement and to report suspicious and transactions involving huge
amounts to the relevant regulatory authorities.
While the Bank has adopted the policies and procedures intended to prevent asset laundering and
terrorism financing, such policies and procedures may not, in certain cases, fully eliminate the risk of the
Bank having been or being used –unaware- to consummate activities related to asset laundering or
terrorism financing, or other unlawful or improper activities. If any such activities take place or had taken
place and the Bank had failed to detect them or does not detect them in the future, the relevant
governmental offices to which such activities should be reported would be empowered to impose fines
and other penalties on the Bank. In addition, the Bank’s business and reputation could be affected if
clients use the Bank to consummate activities related to asset laundering, terrorism financing or other
unlawful or improper activities.
47
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.
A significant reform of the Financial Institutions Law could have a substantial adverse effect on
the Argentine financial system. Various bills have been sent to the National Congress to amend the
Financial Institutions Law. If any of these legislative bills were to be enacted into law or if the Financial
Institutions Law were substantially amended in any other way, such amendments could have an adverse
effect on the financial system, the financial institutions, and the Bank’s businesses, operations and
revenues.
Accordingly, Law No. 26,739 was enacted in March 2012 to amend the BCRA 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”. In addition, certain restrictions on the use of “freely
available reserves” were eliminated, therefore the Executive Branch of Power has current access to a
higher amount of reserves to pay debt.
In the event that the Executive Branch of Power decides to use BCRA reserves to pay debt in
Pesos or to finance public spending, inflation rates could rise, thus having an impact on the Argentine
economy. Accordingly, a discretionary use of the BCRA reserves may cause Argentina to be more
vulnerable to global events, thus affecting Argentina’s ability to overcome the effects of an international
crisis. Some of these situations, such as payment of debt and meeting other maturities of obligations
assumed by Argentina in the local and international markets, have resulted in a significant decrease in
official reserves in the last years, to about US$30,000 million from up to US$52,700 million in 2011.
On the other hand, Law No. 26,739 amended certain requirements related to the mandatory bank
deposit (encaje bancario) (amounts required to be deposited by financial institutions in a specific account
in Pesos or in foreign currency in the BCRA). This amendment forced financial institutions to increase
their liquidity, with a potential impact on their ability to grant loans, which may also have an impact on
growth of the Argentine economy.
The restrictions applicable to financial institutions preventing them from filing a voluntary petition for
reorganization proceedings and preventing creditors from filing a petition in bankruptcy against the
Bank, could have an adverse effect on enforcement of the Notes by the noteholders
Pursuant to the Financial Institutions Law and in accordance with recent court rulings handed
down by the Argentine Supreme Court of Justice (“CSJN”), financial institutions (including the Bank) are
not allowed to file a petition for reorganization proceedings (concurso preventivo), or for court approval
of out-of-court restructuring agreements or their own bankruptcy. In addition, financial institutions
(including the bank) cannot be adjudged bankrupt until the BCRA revokes their license to operate. If a
petition in bankruptcy is filed for valid grounds under applicable law, the judges could dismiss the
petition at their own initiative and refer the matter to the BCRA for it to intervene and, if applicable, for
the petition in bankruptcy to be admitted.
Under the Financial Institutions Law, in certain circumstances, the BCRA may resolve, prior to
revoking the license to operate, to order the institution's restructuring provided that bank deposits and
creditors are protected in accordance with Section 35 bis of the Financial Institutions Law. For
information on the cases where the BCRA may adopt such resolution and different restructuring
alternatives, see Regulatory Framework of the Argentine Banking System” in this Offering Memorandum.
48
If the Bank becomes subject to restructuring proceedings in accordance with Section 35 bis of
the Financial Institutions Law, the Bank’s creditors’ chances (including, without limitation, Noteholders)
of collecting on their claims could be significantly lower.
Financial institutions have made payments related to foreign exchange differences in returning
deposits under court orders, in respect of which the financial institutions have received no
compensation. Such payments have had and may continue to have a material adverse effect on the
liquidity and solvency of the financial system
The measures adopted by the national government during the political, economic and financial
crisis of 2001 and 2002 gave rise to a large number of complaints (amparo actions) against the Argentine
Government, the BCRA and the financial institutions, in which petitioners mainly argue that the
emergency measures issued by the Argentine Government are unconstitutional. Mainly as a result of the
ruling handed down by the Argentine Supreme Court of Justice in the case entitled “Kiper v. Federal
Government et al” lower courts began to massively compel financial institution, under amparo actions, to
partially return Dollar-denominated bank deposits or the equivalent amount in Pesos at the “floating”
exchange rate.
On March 11, 2002, the Argentine Association of Public and Private Banks (Asociación
Argentina de Bancos Públicos y Privados) and the Argentine Banking Association (Asociación de Bancos
de la Argentina) lodged a “per saltum” appeal with the CSJN pursuant to Section 195 “bis” et seq. of the
Argentine Code of Civil and Commercial Procedure (as amended by Law No. 25,261, the “Argentine
Code of Procedure”). The appeal was lodged for the benefit of public and private banks that are members
of such associations and in view of the institutional and systemic crisis and the need to comply with
effective regulations to attain a well-ordered and gradual solution to the restrictions that were affecting
the financial system, thus assuring a plurality of interests.
On February 3, 2004, the Argentine Banking Association, representing all national banks owned
by foreign persons, filed a petition for compensation with the Ministry of Economy for the foreign
exchange differences ordered to be paid as a result of court decisions entered on amparo actions filed by
depositors who held Dollar-denominated accounts with the banks prior to the reform of the convertibility
regime.
On December 27, 2006, in the case entitled “Massa, Juan Agustín v. National Executive Branch
of Power, Amparo Action”, the CSJN confirmed the constitutionality of the emergency law enacted in
2001 and 2002 with respect to the asymmetrical pesification and established the calculation method
applicable to the return of deposits in the financial system subject to such emergency law. This
calculation method is substantially different from such originally applied by the Executive Branch of
Power in that it authorizes each depositor to receive from the applicable financial institution a
reimbursement for the deposit it held at the exchange rate of Ps.1.4 = US$1, adjusted by the CER until the
date of payment, plus 4% annual compensatory interest on each non-compoundable item. The CSJN
further ruled that any amount already withdrawn under court orders were to be considered as partial
payments, therefore the percentage represented by the payments -after conversion to the relevant
currency- converted into Dollars at the exchange rate prevailing in the floating market on such date is
required to be deducted from the original tax in foreign currency. The payments so made are thus
consolidated and deducted in accordance with the settlement so ordered in the Massa case. The legal costs
are awarded at such instance as incurred and in accordance with the decisions handed down by the Court
of Appeals in previous cases. The CSJN further established a restriction on the remaining amount to be
reimbursed to the limit set by such CSJN, i.e. the Dollar value of the original deposit.
Most Argentine financial institutions continue to be subject to the injunctions and execution of
judgments rendered by lower and higher courts in a manner consistent with the CSJN decisions as to the
constitutionality of the Pesification and in accordance with the principle of estoppel (as referred to in the
cases mentioned above).
Enforcement of the injunctions ordered by different courts in response to amparo actions results
in substantial losses to the financial system. The provisions of Communication “A” 3916 issued on April
3, 2003 (as amended from time to time), that establish the accounting method for compounding purposes
in complying with court orders in cases challenging the applicable regulations in accordance with Law
No. 25,561 on Public Emergency, Decree No. 214/02 and supplementary measures related to deposits
held in the financial system are still in force.
49
As of the date of this Offering Memorandum, the authorities have not issued any decision yet on
the potential compensation to the financial system in relation to this matter.
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 affected in the event of a decrease in the level of activity.
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.
While the Bank makes allowances for loan losses of its portfolio, the Bank may be subject to an
increase in the rate of loan defaults if the repayment ability of the private sector in Argentina is
deteriorated.
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 a potential
decrease in yield spreads between funding costs and return on assets is not offset by the increase in
lending volumes, then the increase in operating costs could lead to losses that will give rise to mergers in
the industry. These mergers could lead to the establishment of larger, stronger banks with more resources
than the Bank. The Bank foresees increased competition. Therefore, although the demand for financial
products and services in these markets continues to grow, competition in the banking sector may
adversely affect the Bank’s results of operations, shrinking net spreads and commissions that the Bank
can generate.
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 of America, 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 of America. 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”).
50
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.
Decree No. 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 No. 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 No. 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 BCRA’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, 2014, the Bank’s foreign-denominated liabilities exceed its foreigndenominated assets. In order to hedge such exposure, the Bank maintains locally traded foreign currency
futures. 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:
51
• Unforeseen difficulties in integrating operations and systems;
• Problems inherent in assimilating or retaining the target’s employees;
• 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.
Estimations and provisions for credit risk and potential losses due to Bank’s credits could be
inaccurate or insufficient, which may have a material adverse effect on its financial condition and the
results of operations
Certain Bank products expose the Bank to credit risk, including acquired commercial loans and
other loans granted by the Bank. The variations in the levels of borrowers' income, increases in the
inflation rate or an increase in interest rates could have an adverse effect on the quality of the Bank’s loan
portfolio, which would result in an increase in loan losses and would translate into lower revenues or into
losses.
Simultaneously with the BCRA capital requirement to face credit risk situations and the relevant
provisions, the Bank conducts its own assessment process involving allocation of capital to cover
potential losses due to credit-related events. This process involves complex subjective judgments,
including estimations of financial and economic conditions and presumptions about the borrowers’ ability
to repay loans. The Bank may not detect changes in these risks in time, or due to limited resources or
available tools, its employees may not efficiently implement or change their credit risk management
system, which could increase credit risk exposure.
In general, if any unexpected changes in the conditions foreseen by the Bank and any associated
risks or estimation errors cause the level of defaulted loans or non-performing loans to be higher than
estimated according to the relevant risk-related calculations, and therefore its allowances for loan losses
were insufficient to meet future losses, the Bank’s financial condition and the results of operations could
be materially and adversely affected.
The Bank may be affected by recent regulations issued by the BCRA intended to restrict interest rates
and for registration of non-financial credit suppliers.
Pursuant to Communication “A” 5319, the BCRA has established the so called “Credit facility
for production investment,” that shall be provided by certain financial institutions in order to allocate in
2012 a certain share of their resources to financing investment projects intended to purchase capital goods
and/or to construct the facilities required for production of goods and services and commercialization of
goods, at a maximum interest rate for definite periods. Such credit facility for production purposes has
been extended until the end of 2014 pursuant to Communication “A” 5516 issued by the BCRA. This
regulation established that the institutions concerned are required to allocate to such program at least 5%
of the aggregate balance of deposits from the private non-financial sector held by them by the end of
November 2013 and further established that the loans granted in this framework shall be subject to a
17.5% fixed interest rate for the first 36 months, and thereafter a variable interest rate up to 300 basic
points over BADLAR may be applied.
Recently, the BCRA has issued Communications “A” 5590, 5591 and 5592 to restrict the interest
rate applicable to personal loans and pledge-backed loans granted or acquired by it. Pursuant to the new
regulations, the interest rate applicable to these loans shall not exceed the product of the cut-off interest
rate of LEBAC (BCRA Bills) with a 90-day term and a coefficient within the range of 1.25 and 2.00,
depending on the type of loan and bank group.
If the Bank were required to absorb all the adjustment of tax rates imposed by the regulations,
without being able to pass it through at least in part to the other market dealers, these business lines may
be affected.
In addition, on February 4, 2014 the BCRA issued Communication "A" 5536 which restricts foreign
currency positions of financial institutions. This limit has been set at 20 % of the Regulatory Capital
(Responsabilidad Patrimonial Computable (“RPC”)) of each institution.
52
Furthermore, Communication “A” 5593 was issued to create a registry of non-financial credit
companies and credit card issuers, and it was established that such non-financial credit providers that fail
to be registered with the relevant registry will be unable to have access to financing from the financial
institutions. In the event that most of financing providers fail to be registered with the relevant registry,
the Bank will be unable to acquire their credits and therefore the consumer credit acquisition business
segment could be significantly affected. In addition, it was established that such institutions shall apply a
rate not in excess of 54% per annum (LEBAC for 90 days multiplied by 2) if they are intent on obtaining
funding from banks (loans or financial trusts). If they operate with their own funds they will be subject to
no cap on the interest rate charged by them.
The Bank devises policies intended to manage the credit risk and to limit potential losses of loans,
which may be inaccurate or insufficient and have a material adverse effect on its financial condition
and the results of its operations
The Bank implements credit approval policies aimed at reducing expected portfolio losses due to
default in payment and to limit unexpected losses. In this context, one of the main duties of the Credit
Committee is to monitor the policies and strategies used in credit risk assessment and monitoring
activities.
This process requires performance of a full and subjective analysis, including economic forecasts
on the assumption of debtors' ability to repay their loans. The Bank may fail to detect changes in these
risks in due time, the Bank employees may fail to effectively implement credit risk management
strategies, and thus increase the Bank’ credit risk exposure. For such reasons, if in the future the Bank is
unable to control the loan portfolio quality, the Bank’s financial condition and the results of operations
could be materially and adversely affected. In addition, the number of non-productive loans of the Bank
may increase in the future, including loan portfolios acquired by it subject to the same credit risk
described.
The Bank’s assets quality may become deteriorated if the Bank's debtors' ability to repay their loans is
deteriorated
The ability of many debtors in the private sector to repay their loans is usually considerably
deteriorated as a result of economic crises and retail price inflation and the ensuing loss of purchasing
power, substantially affecting the quality of assets held by financial institutions.
While the Bank makes allowances for bad debts in relation to its portfolio, the Bank may
experience an increase in the number of loan losses in its portfolio if the private sector repayment ability
is deteriorated in Argentina.
The Bank may not detect asset laundering and other unlawful or improper activities in time or in full,
which could expose the Bank to an additional obligation and damage its interests and reputation
The Bank is required to comply with applicable laws governing prevention of asset laundering,
against terrorism and other regulations in force in Argentina. These laws and regulations require the Bank
to adhere to and enforce “Know Your Client” policies and procedures and to report any suspicious
transactions to the relevant regulatory authorities. While the Bank has adhered to policies and procedures
intended to detect and prevent use of its banking network to consummate activities involving asset
laundering and performed by terrorists and organizations related to terrorists and individuals in general,
such policies and procedures, in certain cases, cannot fully eliminate the risk of having been or being used
–unaware- by other parties to perform activities related to asset laundering or other unlawful or improper
activities. To the extent that the Bank has failed to or does not detect such unlawful activities, the relevant
governmental offices to which such activities should be reported would be empowered to impose fines
and other penalties on the Bank. In addition, the Bank’s business and reputation could be affected if
clients use the Bank to consummate activities related to asset laundering, or other unlawful or improper
activities. For more information on laws and regulations applicable to financial institutions in relation to
prevention of asset laundering derived from unlawful activities see the sections “Notice to Investors” and
“Regulatory Framework of the Argentine Banking System”.
A change in the enforcement criteria of consumer protection laws and regulations (as a result of
intervention by governmental authorities or class actions filed by consumers' associations) may
adversely affect the results of the Bank’s businesses
53
The Secretariat of Home Trade and other enforcement authorities of the Consumer Protection
Law may impose penalties for violations of such law and its implementing regulations. The consumer
protection rules contain specific provisions governing financing transactions for the acquisition of things,
and expressly provide that the BCRA shall adopt any such measures required for the entities under its
jurisdiction to comply –when it comes to consumer financing transactions- with the provisions of the
Consumer Protection Law. In such context, the BCRA has issued the Protection Rules for Users of
Financial Services (Normas de Protección de los Usuarios de los Servicios Financieros) which have been
recently amended by Communication “A” 5460. Among the most relevant provisions of such
communication, it is worth mentioning that financial institutions will be subject to limitations on the
ability to charge fees or commissions to users of financial services, and such charges shall be based on a
real, direct and provable cost and they are required to be justified from a technical and economic
perspective.
No assurance can be given that in the future, as a result of judgments and resolutions handed
down by the enforcement authorities under the Consumer Protection Law and/or consumers’ associations,
and the enactment of regulations or rules supplementary to such law, the claims filed by consumers'
groups and associations will not be favored and/or that the level of protection of the Bank's clients will
not be increased and/or that clauses of standard form agreements used by the Bank will not be required to
be amended. These assets and/or the interest, commissions and/or stipulated expenses.
If the authorities find in favor of claims filed by consumers' groups or associations and/or the
level of protection of the Bank’s clients is increased and/or it is necessary to amend clauses of standard
form agreements used by the Bank, the financial and economic conditions, and the results of operations,
businesses, and the Bank's ability to meet its liabilities in general, and its liabilities under the Notes in
particular, may be significantly and adversely affected.
The Bank is subject to certain credit, interest rate variation, market liquidity, operational, default and
reputational risks
The Bank faces the following main risks:
•
Credit risk is the likelihood of incurring losses higher than average expected losses
(the “Unexpected Losses”) due to a debtor's or counterparty’s default on contract
obligations.
•
The interest rate risk is the likelihood of incurring losses due to changes in the
Bank’s financial conditions as a result of changes in interest rates. The Bank is
exposed to the risk associated with changes in the interest rates in two ways:
a)
Risk of changes in present value (changes in the “economic
value” of equity): it refers to the potential adverse impact in
terms of the present value of the Bank’s portfolio of assets and
liabilities in view of changes in the interest rates –particularly,
medium and long-term interest rates.
b) Risk of adverse changes in the Bank's projected accounting
results due to the impact from lower interest rates charged on
lending transactions or higher costs due to an increase in the
rates of liabilities.
•
Liquidity Risk is the risk of the Bank's defaulting on its obligations due to a lack of
liquid resources (cash and cash equivalents and short-term assets that are easily
realizable) or the likelihood of incurring in significant losses to obtain them. This
may be caused by a series of factors, such as the impossibility of selling financial
instruments when so required.
•
The market risk is the likelihood of incurring losses resulting from adverse and
unexpected changes in the market prices of different assets.
•
The operational risk has been defined by the Basel Committee as the risk of loss
resulting from inadequate or failed internal processes, people and systems or from
external events. Such definition includes the legal risk but excludes strategic and
reputational risks.
54
•
The risk of default consists in the risk of imposition of a penalty for violation of
current laws, either internally or externally.
•
Reputational risk, as the Bank’s prestige is of utmost importance for success.
Therefore, while the Bank implements policies and procedures to manage and/or mitigate the
risks described above, occurrence of certain of such risks may give rise to a materially adverse effect on
the Bank’s businesses, the results of its operations and the financial and economic condition.
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 BCRA 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 BCRA 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 BCRA, in the following order of priority: (a) deposits of up to Ps.
50,000 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 BCRA 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 BCRA 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 BCRA 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 would 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 of America 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 and/or trade notes in a series on any securities exchange or quotation system.
Moreover, even if a listing and/or trading in respect of an issue of notes is possible, the Bank cannot
55
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 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 of America. 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 of America.
As a result, it may be difficult for holders of notes to effect service of process within the United States of
America 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
Argentine Code of 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 No. 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 BCRA’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
56
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
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”.
57
INFORMATION ABOUT THE ISSUER
a) History and Development of the Bank
Information about the issuer:
Name: Banco Hipotecario S.A.
CUIT (Taxpayer’s Code): 30-50001107-2
Registered with the Public Registry of Commerce of the City of Buenos Aires on October 23,
1997, under number 12,296, book 122, Volume A of Corporations, for a term expiring on October 23,
2097.
Legal domicile: Reconquista 151 (C1003ABC), City of Buenos Aires
Stock capital: Ps. 1,500,000,000.
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 59 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, 2014, the Bank ranked eleventh amongst Argentine banks in terms of net
shareholders’ equity, with net consolidated shareholders’ equity of Ps. 4,397.0 million and thirteenth in
terms of total consolidated assets, with assets for Ps. 31,351.5 million. The Bank’s net income for the
fiscal years ended December 31, 2012, 2013 and 2014 was Ps. 343.6 million, Ps. 421.0 million and
Ps. 550.0 million, respectively, which stands for an average return on equity of 10.3%, 11.5% and 13.3%,
respectively and a return on average assets of 2.4%, 2.3% and 2.1%, respectively.
In line with its strategy to diversify its loan portfolio, the Bank has posted an increase in its nonmortgage loans4, from Ps. 7,676.1 million as of December 31, 2012, Ps. 10,708.0 million as of December
2013 and Ps. 14,845.9 million as of December 2014, representative of an increase in loans to the nonfinancial private sector from December 31, 2012 to December 31, 2014 from 80.4% to 86.3%,
respectively.
Additionally, the Bank has improved the quality of these assets. Non-performing loans over
Total portfolio stood at 2.3% as of December 31, 2012, 2.2% as of December 31, 2013 and 2.3% as of
December 31, 2014.
The Bank has also diversified its funding sources: it reduced in relative terms its international
financial borrowings, developing the local capital market and increasing its deposit base. In response to
the volatility prevailing in the markets over the past years, the Bank increased its liquidity and mitigated
its re-financing risks. The financial indebtedness5 as of December 31, 2012, 2013 and 2014 was
Ps. 2,317.0 million, Ps. 3,146.2 million and Ps. 4,787.5 million, respectively. Whereas the funding6 of the
bank as of such dates was Ps. 10,328.1 million, Ps. 14,0.36.0 million and Ps. 23,121.6 million,
respectively. Therefore, financial indebtedness’ share in total funding was 22.4% as of December 31,
4
Non-mortgage loans derive from the Consolidated Financial Statements and are calculated as the simple subtraction of “Loans to
the non-financial private sector and foreign residents” minus “Mortgage loans”, both within Asset Loans.
5
Financial indebtedness derives from Other Liabilities for Financial Intermediation in the Consolidated Financial Statements and is
composed of the balances of unsubordinated negotiable obligations, repos and borrowings from banks and other international
institutions.
7
Bank’s internal information.
58
user 5/22/15 4:59 PM
Eliminado: ances of unsubordinated negotiable
obligations, repos and borrowings from banks and
other international institutions), borrowings from
BCRA and deposits.
2012, 22.4% as of December 31, 2013 and 20.7% as of December 31, 2014. 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. As of the date of this Offering Memorandum, and under the provisions of the Capital Market
Law and the CNV Rules, the Bank’s shares previously listed on the BCBA have automatically started to
be listed on the MVBA.
Brief Description of the Loan Portfolio
As of December 31, 2014, the Bank’s loan portfolio totaled Ps. 17,357.8 million. The following is
a detail of the Bank’s loan portfolio as of the dates indicated:
As of December 31,
2014
in
thousands
of:
US$(1)
Loan Portfolio
To the non-financial public sector
13,112
To the financial sector
To the non-financial private sector and
residents abroad
39,662
Advances
Promissory notes
Mortgage loans
Pledge loans
2,010,681
137,223
43,190
274,727
12,111
Personal loans
275,350
Credit cards
836,677
Unapplied cash
Other
Accrued interest and foreign
exchange differences receivable
Documented interest
(4,042)
413,522
25,017
(3,094)
Provisions
(47,608)
Subtotal loans
2,015,847
Loans pending securitization(2)
1,220
Receivables for financial leases
12,481
Accrued interest receivable(2)
Provisions(2)
Total Loans
(1)
(2)
533
(399)
2,029,683
2014
Ps.
17,195,344
1,173,527
2012
in thousands of:
112,131
339,190
2013
Ps.
Ps.
139,373
91,806
379,308
391,343
12,928,639
9,544,383
792,178
1,031,178
3
2
369,360
371,267
229,629
2,349,468
2,220,627
1,868,330
103,576
42,460
55,346
2,354,793
1,822,810
1,199,211
7,155,260
5,181,068
3,551,203
(34,565)
(8,007)
(1,723)
3,536,442
2,380,749
1,538,527
213,947
144,807
87,837
(26,464)
(19,320)
(15,155)
(407,140)
(308,632)
(273,101)
17,239,525
13,138,688
9,754,431
10,436
12,154
18,238
106,740
58,175
10,576
4,561
3,925
3,978
(3,415)
(3,450)
(3,660)
17,357,847
13,209,492
9,783,563
The exchange rate used for purposes of translation of balances as of December 31, 2014 was Ps. 8.5520 = US$ 1.00.
Source: BCRA.
For a better exposure of the Bank’s situation, Loans pending securitization and receivables for financial leases, jointly
with its interest accrued receivable and provisions are exposed separately. Due to this exposure, “Loans” and “Other
Receivables for Financial Transactions” differ from the Consolidated Financial Statements.
59
Strategy
After going through an extensive period of reconversion of its business structure, characterized
by the release of new products, system adaptations, redesign of processes and strengthening of its market
positioning. 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. The Bank adopted a new vision as a
contemporaneous, straightforward and inclusive bank. During the past year, the actions taken were
focused on reducing costs, making changes in the volumes of loan origination so that they could fit in the
new context of lower liquidity, attracting deposits, designing programs together with governmental
agencies and diversified growth.
For 2015, the main actions will be focused on:
•
Universal banking focused on a solution for homes: the Bank will continue to endeavor in
discharging its functions as trustee for the PROCREAR program. This program consists in granting
150,000 individual loans. Urban undertakings will continue with the award of new land for
developing new urban complexes;
•
Management of 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 these
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 issue debt securities in the local market as long as it is possible under
market conditions;
•
Intensified focus on the interaction between the Bank, its customers, employees and suppliers: the
objective pursued is to secure synergies in the interaction between the Bank, its customers and
suppliers, both internal and external though aiming at the Bank being the main bank and at it being
chosen as the first option for conducting transactions;
•
Increasing the pace of branch openings: in the coming years, the objective will be to open a larger
number of branches to outreach to more customers and to provide support to existing Bank customers
and in all the markets where the Bank is managing PROCREAR urban projects aiming for their
success;
•
Laying down the foundations for greater operating efficiency - 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 reprocess-associated costs. The “industrial metaphor” has a leading role in
the Institution's operating organization system;
•
Maintaining adequate levels in portfolio quality, seeking to maximize risk/return ratios in the
segments that receive credit offerings. Keep adequate levels in the credit quality of new loans;
perform segmented actions on the retail banking portfolio; foster atomization in 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. In this respect, the notion of “principality”, that is, of
becoming the first option for customers from accounts to loans, plays a lead role.
•
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 continue to be given to small and
medium-sized 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
60
companies may obtain access to the capital markets, a path along which the Bank set out in previous
years.
•
Maintaining high standards in the field of risk management: Continuous improvement in the
comprehensive risk management process to converge to the international best practices; in addition,
the Bank will measure profitability adjusted by the risks of the different business units (RAROC
models);
•
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;
•
Comprehensive communications plan to reinforce brand image. Emphasis will be placed on
promotional actions conducted in order to continue to foster the concept of contemporary, simple and
inclusive bank. Continue to have a leading presence in the social media. Underscore relational
marketing.
This is how the Bank aspires to deploy its strategic plan in 2015 continuously adapting to changes in
context and constantly monitoring the relevant financial variables without overlooking focus on the
business and being on the watch out for unforeseen changes.
b) Description of the Bank’s Business
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 the Bank) 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 2012 and 2013, amounted to Ps. 264.7 million
and Ps. 155.1 million, respectively. And, in the year ended on December 31, 2014, originations amounted
to Ps. 140.07 million.
61
Procrear Bicentenario
The National Government launched in 2012 the PROCREAR Bicentenario Program, known as
Programa Crédito Argentino del Bicentenario, intended to provide housing loans, together with the
Ministry of Economy, ANSES, the Ministry of Federal Planning and the Government Property
Management Agency. Under this program the Bank acts as trustee of the PROCREAR trust and its main
function is to implement and execute the program.
PROCREAR Bicentenario expects to grant 200,000 loans for the construction of houses.
As of December 31, 2014 the trust consisted of committed loans in the amount of Ps.44,987.9
million.
The program has two types of credit facilities:
With own land: For people who have their own land or a piece of land owned by an immediate
relative (i.e. a parent or child of applicant, or the applicant’s spouse) where they can build a new
independent house.
Without own land: For construction of houses on 1700 hectares of government-owned lands
made available by the Argentine government, plus any such lands assigned by the provincial and/or
municipal governments.
Urban construction projects are developed on such lands for an intelligent use of the space, and
different family characteristics and the possibility of future expansion are contemplated.
The Bank reaffirms its historical mission of creating owners by taking part in this mortgagebacked loan origination project.
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. 300,000. Whilst in
2012 and 2013, the Bank had originated Ps. 751.5 million and Ps. 1,135.9 million, respectively, in the
fiscal year ended on December 31, 2014, the Bank originated Ps. 1,279.18 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.
8
62
As a result of the actions described above, plus the acquisition of an 80% stake in Tarshop S.A.,
the Bank’s Credit card balances grew from Ps. 3,551.2 million at December 31, 2012, Ps. 5,181.1 million
as of December 31, 2013 and to Ps. 7,155.39 million as of December 31, 2014.
Corporate Banking
The Bank’s objective 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 5,0 million to Ps. 200,0 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.
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 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. 2,854.7 million as of December 31, 2012, Ps. 3,533.1 million as of December
31, 2013 to Ps. 5,148.310 million as of December 31, 2014.
Deposits
9
10
63
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
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 December 31,
2014
in thousands
of:
US$
Deposits
Financial sector
Non-financial private sector and residents abroad
Checking accounts
(1)
2014
2013
2012
in thousands of:
Ps.
Ps.
Ps.
1,064,175
867
1,078,797
88,930
9,100,822
7,416
9,225,875
760,533
4,142,809
8,109
6,738,876
526,413
Savings accounts
289,949
2,479,643
1,443,467
741,892
Term deposits
582,767
4,983,820
4,265,680
3,355,131
Investment accounts
83,424
713,438
304,241
160,035
Other
18,249
156,068
126,748
101,650
15,479
132,373
72,327
57,402
2,143,839
18,334,113
10,889,794
8,011,129
Interest and foreign exchange differences payable
Total deposits
(1)
2,990,892
8,563
5,011,674
595,564
The exchange rate used for purposes of translation of balances as of December 31, 2014 was Ps. 8.5520 = US$ 1.00.
Source: BCRA.
Distribution channels
The Bank’s branch network is presently made up by 59 branches and 16 sales offices, which, in
the aggregate, represent 75 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
64
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.
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 MVBA. The Bank issued a total
of 14 series for approximately Ps. 1,785 million.
Tarshop S.A.
In order to further its strategy towards consumer finance, on September 29, 2009, the Bank
acquired 80% of Tarshop S.A.’s capital stock. Tarshop’s business is based on selling consumer finance
65
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. 1,800 million and over 45,000 stores adhered to it.
See “Transactions with Related Parties” for further information.
On October 22, 2014, our Board of Directors unanimously resolved to approve an irrevocable
capital contribution in Tarshop S.A. for Ps. 110,000 thousand to be made by our shareholders and the
shareholders of IRSA Propiedades Comerciales S.A. in proportion to their shareholdings in order for
Tarshop S.A. to have sufficient resources for its operating activities and to be able to comply with the
business plan forecast for the year 2015.
At its Unanimous Ordinary and Extraordinary General Shareholders’ Meeting dated December
15, 2014, Tarshop S.A. unanimously approved the capitalization described in the preceding paragraph.
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, 2012, 2013 and 2014, the Bank had raised provisions for lawsuits for
approximately Ps. 81.8 million, Ps. 82.5 million and Ps. 86.1 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.
Proceedings instituted
I – Summary proceedings being heard by administrative authorities
1. On September 13, 2013, we were notified of Resolution No. 611 adopted by the Office of the
Superintendent of Financial and Foreign Exchange Institutions regarding a summary proceeding against
us, our Organization and Procedures Manager Christian Giummarra and our former IT Manager, Aixa
Manelli (Summary Proceedings for Foreign Exchange Offences No. 5469 – Case File 100.082/08). The
aforementioned resolution alleges that the foreign exchange rules and regulations currently in place had
been breached upon selling foreign currency to persons whose authorization to operate in foreign
exchange had been suspended by the Central Bank. The accumulated amount of sales of foreign currency
supposedly in violation of the rules and regulations was approximately US$39,9 00 and € 1,100. All
defenses available to the defendants in these proceedings have been raised and evidence in support
thereof has been offered. The case file of these summary proceedings has been accumulated with the
Summary Proceedings for Foreign Exchange Offences No. 5529 (Case File 101.327/10) as a “joinder of
claims.” Therefore, the procedural status of this case file is discussed together with Case File 101.327/10.
2. On October 8, 2013, we were notified of Resolution No. 720 adopted by the Office of the
us, our Organization and Procedures Manager Christian Giummarra and our former IT Manager, Aixa
Manelli (Summary Proceedings for Foreign Exchange Offences No. 5529), as set forth in Section 8 of the
Foreign Exchange Criminal Law (as restated by Decree No. 480/95). The aforementioned resolution
alleges that the foreign exchange rules and regulations currently in place had been breached upon selling
foreign currency to persons whose authorization to operate in foreign exchange had been suspended by
the Central Bank. The accumulated amount of sales of foreign currency supposedly in violation of the
rules and regulations was approximately US$ 86,4 thousand. All defenses available to the defendants in
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these proceedings have been raised and evidence in support thereof has been offered. The Central Bank
called for the production of evidence, which is now underway.
In the opinion of our defense counsel and in view of the current status of these proceedings,
there are arguments of law and of fact that generate reasonable expectations that both us and the
defendants may be acquitted. The likelihood of us being subject to the financial penalties set forth by the
Foreign Exchange Criminal Law is therefore low. As a result, no provisions have been raised in this
respect.
3. On February 19, 2014, we were notified of Resolution No. 209/13 adopted by the UIF which
regarding summary proceedings against us, our directors Eduardo S. Elsztain; Mario Blejer; Ernesto M.
Viñes; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B. Pisula; Gabriel G. Resnik; Pablo D. Vergara
del Carril; Mauricio E. Wior; Saul Zang; our Risk and Controlling Area Manager Gustavo D. Efkhanian
and our Money Laundering Prevention and Control Unit Manager, Jorge Gimeno. We and the
aforementioned people are being investigated to determine if they were liable on grounds of an alleged
failure to comply with the provisions of Law No. 25,246, Section 21, as subsequently modified and UIFs’
Resolution No. 228/2007 by reason of the weaknesses identified by the Central Bank’s inspection of the
organization and the internal controls implemented to prevent the laundering of money from unlawful
activities. All the defenses in our favor and the defendants were raised on March 25, 2014.
In view of the current status of these proceedings, and based on how UIF has behaved in similar
cases, it is the opinion of our defense counsel that there is the probability that a fine will be imposed by
the administrative authorities. It is for this reason that a provision has been raised in this respect.
4. On August 26, 2014, we were notified of the Resolution No. 416 adopted by the Office of the
Superintendent of Financial and Foreign Exchange Institutions regarding Summary Proceedings No. 5843
in the manner set forth in Section 8 of the Foreign Exchange Criminal Law No. 19,359 (as restated by
Decree No. 480/95). In these summary proceedings, an action is brought against us, our current directors
(Eduardo S. Elsztain; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B. Pisula; Gabriel G. Resnik; Pablo
D. Vergara del Carril; Ernesto M. VIÑES; Saul Zang; and Mauricio E. Wior), our former directors
(Clarisa D. Lifsic de Estol and Federico L. Bensadon), and two former managers (Gabriel G. Saidon and
Enrique L. Benitez) for failure to comply with the rules announced by Communication “A” 3471 (points
2 and 3) and by Communication “A” 4805 (point 2.2) by reason of transfers of foreign currency abroad,
taking place between August and October 2008, to secure a swap transaction entitled “CER Swap Linked
to PG08 and External Debt” totaling US$ 45,968,000 without the authorization of the Central Bank. The
case file of the proceedings (Case File No. 100.308/10) as being dealt with by the Central Bank’s
Department of Contentious Foreign Exchange Matters was reviewed and a petition was lodged for an
extension in the term for filing all defenses.
In the opinion of our defense counsel and in view of the current status of these proceedings,
there are arguments of law and of fact that generate reasonable expectations that us and the defendants
may be acquitted. The likelihood of us being subject to the financial penalties prescribed by the Foreign
Exchange Criminal Law is therefore low. As a result, no provisions have been raised in this respect.
5. On December 29, 2014, we were notified of the Resolution No. 824 adopted by the Office of
the Superintendent of Financial and Foreign Exchange Institutions regarding Summary Proceedings for
Foreign Exchange Offences No. 6086 (Case File 101.534/11) against us and our former manager (Gabriel
Cambiasso) and five of our employees (Claudio H. Martin; Daniel J. Sagray; Rubén E. Perón; Marcelo D.
Buzetti and Pablo E. Pizarro) at the Córdoba branch, in the manner set forth in Section 8 of the Foreign
Exchange Criminal Law No. 19,359 (as restated by Decree No. 480/95). This action investigates into their
liabilities for exceeding the limits placed on sales of foreign currency in favor of two entities in the city of
Córdoba (excesses that in the aggregate amount to US$ 701,270), presumably breaching the provisions
under Communication “A” 5085, point 4.2.1. Due to the Central Bank’s Department of Contentious
Foreign Exchange Matters’ recess during the month of January, our counsel was unable to obtain
sufficient knowledge of the proceedings in order to dovetail the defendants’ defenses. Therefore, as of the
date of these financial statements, the potential consequences of this action cannot be evaluated.
II – Summary proceedings being heard by the courts
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1. On May 4, 2012, we were notified of Resolution No. 186 dated April 25, 2012 adopted by the
Office of the Superintendent of Financial and Foreign Exchange Institutions regarding an investigation in
the framework of the Summary Proceedings for Foreign Exchange Offences No. 4976 against us, our
directors (Eduardo S. Elsztain; Gabriel G. Resnik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saul
Zang; Carlos B. Pisula; Edgardo L. Fornero; Jacobo J. Dreizzen); our former directors (Clarisa D. Lifsic
de Estol; Julio A. Macchi; Federico L. Bensadon; and Jorge M. Grouman) and our former Finance
Manager (Gabriel G. Saidón); as set forth in Section 8 of the Foreign Exchange Criminal Law No. 19,359
(as restated by Decree No. 480/95).
The charges brought in these proceedings consisted of alleged breaches of the provisions under
Communications “A” 3640, 3645, 4347 for the acquisition of Good Delivery Silver Bars during the
period 2003-2006 with funds originating in its General Foreign Exchange Position.
The defenses to which we are entitled were raised in due time. Within the period provided to that
end, we and the other defendants produced the evidence offered. Once this procedural stage came to an
end, the lawyers filed the defense’s allegations and in August this year, the Central Bank sent the case file
to the competent court (which happened to be the Court with Jurisdiction over Financial Crimes No. 7
presided by Judge Juan Galvan Greenway).
In accordance with the opinion of the counsel for the defense, given the current status of the
proceedings, there are arguments of law and of fact that generate reasonable expectations that both us and
the defendants shall be acquitted. Therefore, the likelihood of us being subject to the financial fines
imposed by the Foreign Exchange Criminal Law is considered to be low and therefore, no provisions
have been raised.
2. On October 7, 2014, we were notified of Resolution No.513 dated August 16, 2014 handed
down by the Office of the Superintendent of Financial and Foreign Exchange Institutions regarding
Summary Proceedings for Financial Offences No.1365 (alleged failure to abide by the minimum internal
control requirements imposed by Communication “A” 2525) whereby we were imposed a Ps. 112,000
fine and our directors (Pablo D. Vergara del Carril; Carlos B. Písula, Eduardo S. Elsztain, Jacobo J.
Dreizzen, Gabriel G. Resnik; Edgardo L. Fornero; Ernesto M. Viñes; and Saul Zang) and our former
directors (Clarisa D. Lifsic de Estol, Jorge L. March; and Federico L. Bensadon) were imposed fines for
different amounts.
By virtue of the provisions under Section 42 of the Financial Institutions Law, the fines were
paid and the relevant appeal was lodged with the National Court of Appeals with jurisdiction over federal
administrative contentious matters against the resolution previously mentioned. The proceedings were
sent by mid December 2014 by the Central Bank to the competent courts and they are now being heard by
Panel IV under Case File No. 71,379/2014. The Ps. 112,000 fine paid by us was included in the income
statement as a loss.
3. On October 31, 2014, we were notified of Resolution No. 685 dated October 29, 2014, by the
Office of the Superintendent of Financial and Foreign Exchange Institutions regarding Summary
Proceedings for Financial Offences No. 1320, whereby us and our authorities were charged with
presumed breaches of the rules and regulations concerning financial aid to the Non-Financial Public
Sector, excesses over the limits of credit risk fractioning vis-à-vis the non-financial public sector,
excesses in the assets applied as collateral, failure to abide by the minimum capital requirements and
objections against the accounting treatment afforded to the transaction entitled “Cer Swap Linked to
PG08 and External Debt”; and also, delays in communicating the appointment of new directors and delay
in the supply of documentation related to the new directors appointed by the shareholders’ meetings.
By virtue of the above-mentioned resolution, we were imposed a Ps. 4,040,000 fine and our
directors (Eduardo S. Elsztain; Jacobo J. Dreizzen; Carlos B. Pisula; Edgardo L. Fornero; Gabriel G.
Resnik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saul Zang; Mauricio E. Wior), our former
directors (Clarisa D. Lifsic de Estol; Federico L. Bensadon; Jorge L. March and Jaime A. Grinberg), our
members of the Supervisory Committee (Ricardo Flammini; José D. Abelovich; Marcelo H. Fuxman;
Alfredo H. Groppo; and Martín E. Scotto), the Area Manager Gustavo D. Efkhanian and our former
managers (Gabriel G. Saidon and Enrique L. Benitez) were subject to fines for various amounts which in
total Ps. 51,581,790. This same resolution acquitted former supervisory auditor Silvana M. Gentile.
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On November 25, 2014, we and the individual defendants lodged the appeal set forth in Section
42 of the Law of Financial Institutions against the sanctions discussed above. The Central Bank sent the
appeal to the Federal Court of Appeals in Contentious and Administrative Matters and it is now being
heard by Panel I of this appellate court. Also pending before this Panel are now the self-standing
provisional remedies filed by us and the individual defendants on December 30, 2014 against the forced
collection proceedings brought by the Central Bank to collect the fines.
Despite the expectations that the sanctions ordered by the BCRA will be revoked by the Court,
we have recorded an allowance equal to 100% of the amount of the penalty ordered by Resolution No.
685/14 against us.
III – Summary proceedings in which a court decision has been rendered
Under Resolution No. 286 dated July 2, 2010, issued by the Office of the Superintendent of
Financial and Foreign Exchange Institutions summary proceedings were commenced against us and our
directors (Summary Proceedings for Foreign Exchange Offences No. 4364) under Section 8 of the
Foreign Exchange Criminal Regime Law (as restated by Decree No. 480/95).
Under the abovementioned proceedings, charges were pressed for violation of certain provisions
under Communications “A” 4087 and 4177 concerning early repayments of restructured external debt for
US$ 91,420,135 and € 2,803,965 from February 2004 through June 2005. The relevant defenses and
arguments in support of our position were filed in due course. Within the period granted for the
production of evidence, we and the other defendants produced the evidence previously offered. As soon
as that stage in the procedure came to a conclusion, the counsel for the defense presented their closing
arguments and in August this year, the Central Bank sent the case file to the competent court (Court with
Jurisdiction over Criminal Economic Matters No. 5 presided by Judge Jorge Brugo).
Through his judgment dated December 12, 2014, the above mentioned Judge decided that we
were exempt from liability and acquitted our directors (Eduardo S. Elsztain; Gabriel G. Resnik; Pablo
Vergara del Carril; Ernesto M. Viñes; Carlos B. Písula; Edgardo L. Fornero; Saúl Zang; Jacobo J.
Dreizzen); our former directors (Ms. Clarisa D. Lifsic de Estol; Miguel A. Kiguel; Julio A. Macchi;
Federico L. Bensadón; Guillermo H. Sorondo and Jorge Miguel Grouman); and our Area Manager
Gustavo D. Efkhanian; our Manager Daniel H. Fittipaldi; our former General Sub-Manager Gustavo D.
Chiera; our former managers Gabriel G. Saidón; Carlos Gonzalez Pagano and Marcelo C. Icikson; and
Mr. Miguel J. Diaz, all defendants in those proceedings. The judgment will become final upon expiration
of the term to file appeals.
At this stage of the proceedings, the likelihood that the above mentioned court judgment be
reviewed is unfeasible, turning it unreasonable to raise any provisions in this regard.
Risk Management Policy
Comprehensive Risk Management
The Bank has a comprehensive risk management process in place which is intended to identify,
assess, follow up on, control and mitigate all significant risks. The comprehensive risk management
process is intended for the Board of Directors and senior management to get involved and oversee
management of all significant risks and for them to have an insight on the nature and risk level assumed
by the entity and its relation to sufficiency of capital.
In addition, it is in line with the best risk management practices and, in particular, with the BCRA’s
guidelines for financial institutions' risk management. To make sure that its significant risks are properly
managed, the Bank relies on a management framework and on management devices that are adequate to
its size, complexity, economic weight and risk profile.
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Policies
The Bank has policies, that is, guidelines that govern the Bank’s decisions intended to implement its
comprehensive risk management strategy. The following are its main policies:
Rule Ranking Policy
This policy defines the Bank’s internal rule ranking structure and the guidelines that govern the process to
create, issue, manage or update and distribute the rules that make up the policy.
Overall, it lays down the hierarchy of the different rules, the positions responsible for drafting them and
the scheme for approving each rule.
In particular, it regulates, among other things, the launch of new products and/or services in order to
ensure that the Board approves them and that they are subsequently enforced.
In respect to the launch of new products or services, this policy establishes the duty to draft a Product
Program and, if applicable, a Credit Program and obtain the requisite approval.
Product Programs are documents that lay down in a structured and formal manner all the relevant
information concerning the product and/or service –considering, in particular, aspects associated to
profitability and the risks inherent in the product or service.
Credit Programs are, in turn, documents that detail the guidelines laid down to manage credit risk in the
various stages of the product's loan cycle.
Comprehensive Risk Management Policy
This policy lays down the main guidelines to undertake appropriate management actions vis-á-vis the
main risks faced by the Bank.
It comprises risks such as credit risk, liquidity risk, market risk, interest rate risk, operational risk,
securitization risk, concentration risk, reputational risk and strategic risk.
This policy establishes the general organizational and legal framework and the devices shared for the
comprehensive management of the risks faced by the entity.
In addition, it describes the specific management processes for each one of the risks mentioned above
and, in particular, it thoroughly describes the management methodologies applicable to market and
liquidity risks.
The following are, in addition, part of this policy:
•
The Benchmark Policy for Quoting Loans and Deposits;
•
The Stress-testing Policy and the Contingency Plan;
•
The Contingency Plan itself.
Strategic Planning Policy
This lays down the general guidelines for preparing the Bank's Business Plan, which is approved annually
by the Board of Directors.
The preparation of the Business Plan implies a strategic planning process. As such, it entails the definition
of a group of specific activities that seek to consummate the Vision and Mission that the organization has
proposed for itself.
The organization’s Vision is a description of its long-term goals. It draws a picture, defines a guiding idea
as well as the manner in which the organization wishes to be externally perceived.
The Mission specifies medium-term objectives. It describes the basic purpose pursued by the
organization’s activities and its central values aiming at the definition of internal perception.
The establishment of both the Vision and the Mission is the responsibility of the Bank’s General
Manager’s office and its validation is the responsibility of the Board of Directors. At all times, strategic
planning must take into account these main aspects.
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Specifically, the preparation of the Business Plan implies strategic planning by all of the areas of the
Bank and its subsidiaries, in response to the following topics:
•
Levels of origination and of new businesses
•
Funding structure
•
Risk Management strategy
•
Distribution channels
• Productivity and quality
• Image and relationship with customers
Organizational Structure:
The Bank has divisions responsible for management of each of the significant risks contemplated
by this policy. Such divisions are organized in the form of committees or are comprised by management
areas, in which case they report to the highest-ranking officer in the risk area, Risk and Controlling
Manager, who reports to the General Manager.
In addition, the Bank has created a Risk Management Committee made up by at least 3 (three)
Directors and by the highest-ranking officer in the Risk and Controlling Area. This Committee has been
primarily created to follow up on the activities of Senior Management in connection with risk
management and to advise the Board of Directors on the entity’s risks.
The following are the units responsible for managing each one of the risks:
Retail Banking Credit Risk Area:
Retail Banking Credit Risk including management of the risks inherent in asset concentration in Retail
Banking and securitization (as to the underlying exposures).
Corporate Banking Credit Risk Area:
Corporate Banking, Public Sector and Finance Banking Credit Risk including management of
counterparty risks and country risk as well as the risks inherent in asset concentration in Corporate
Banking.
When it comes to credit risk management, the Credit Committee is also involved. The Credit Committee
is made up by no less than 3 regular directors and no more than 7 regular directors. A majority of these
directors must be knowledgeable in the matter. Also part of the Credit Committee are the highest ranking
officers in credit risk in both the retail and the corporate banking segments. Credit Committee sessions
may be attended by the General Manager who is allowed to voice opinions but not to cast votes.
Market Risk Area:
Market risks encompass interest rate risk, price and exchange rate and securitization.
Finance Committee:
Liquidity risk entails managing the risk of liability concentration.
The Finance Committee is made up by at least 3 (three) Directors and by the highest-ranking officers in
the Finance, Financial Operations and Market Risk Areas; its functions have been approved by the Board
of Directors.
Operational Risk:
-
Operational risk
-
Reputational risk
Budget and Controller Area:
-
Strategic risk
Committee membership as well as their responsibilities are described in the Corporate Governance Code.
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Management devices
The Bank has appropriate devices -feasible, stable, efficient and efficacious- for managing each one of the
significant risks comprised in this policy. These processes reflect in each case the specifics of their
purviews. Notwithstanding, the Bank also has devices that favor risk management comprehensiveness.
The Bank has the following devices, shared in managing the main risks:
1.
Risk Strategy:
The Risk Strategy is a document that is prepared every year at the time when the Business Plan is put
together and that lays down the Bank’s general approach to risk management.
The objective pursued by the Risk Strategy consists in defining for each one of the Bank’s main risks a
level of tolerance and the risk management strategy.
The tolerance level is a limit imposed on one or more indicators to determine how much risk (credit risk,
interest rate risk, etc.) the Bank is willing to accept as a maximum while striving for attaining its strategic
objectives (profitability, growth, value, etc.) within the context described in the Business Plan.
The limits or levels of tolerance imposed may be re-defined if a significant change were verified in the
context referred to, for instance, if there were evidence of a substantial alteration in the assumed macroeconomic scenario. All changes must be approved by the Risk Management and/or Financial Committee
and then notified to the Board of Directors.
The definition of a tolerance level for an indicator is compared to the risk profile, which is the current
value of such indicator.
The risk management strategy for each one of the main risks is the deployment of the means for ensuring
that the risk profile is adjusted to the tolerance level established for that risk and for attaining the desired
risk positioning.
The definition of the management strategy consists in a description of the main devices (policies,
processes, tools, etc.) that will be available in each case for that purpose.
Any significant change concerning the Risk Strategy approved for a given period, resulting from the
variation in the economic and/or regulatory context must be informed and the Board of Directors must
give its formal approval.
2.
Stress Testing Program
Stress testing comprises a series of analytical simulation drills that are conducted to determine the Bank's
ability to bear extreme adverse economic situations as regards liquidity, profitability and solvency. To
this end, the analysis must:
!
Identify those aspects of the business that present meaningful vulnerability in the face of the
occurrence of sizable events, either external and/or internal.
!
Measure the impact on the Bank of the occurrence of events that are very adverse, highly
unlikely but possible.
!
Infer the capitalization levels required in connection with the scenarios posited.
Stress tests are considered to be comprehensive when they comprise the main risks and their interaction
jointly. Besides, stress tests are considered to be individual when the analysis is conducted in isolation on
each one of the factors with an impact on each one of the risks taken in isolation, that is, with the rest of
the variables being equal. Comprehensive and individual tests complement each other: whilst
comprehensive tests are useful to assess crossed effects between risks -feedback and offsets- and
individual tests are useful to focus the analysis on risk factors that are either microeconomic or highly
specific, hard to take into account in comprehensive tests.
The environment in which stress tests are conducted, assessed and used in the Bank's decision-making
process is defined as a Stress Testing Program.
The establishment of a stress testing program has multiple benefits: it provides a prospective risk
assessment, favors the procedures to plan capital and manage liquidity, helps to fix risk tolerance levels
and facilitates contingency plans in the event of stress situations.
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Closely related to stress tests are the contingency plans which comprise planning the actions geared
towards facing possible stress situations.
The conclusions of stress tests as well as the assumptions and scenarios used are disclosed, documented
and submitted to the Board in due time. Comprehensive tests are conducted at least once a year and more
tests can be run in response to special requirements or when such are warranted by changes in conditions
at any given time.
3.
Contingency Plan
Contingency Plans are the set of actions geared towards facing stress situations.
The Bank has a Contingency Plan that establishes a menu of possible actions and measures to deal with
the occurrence or the increase in the likelihood of stress situations in the economic and/or financial
situations and which are, a priori, classified as highly adverse to the Bank’s solvency, liquidity and
profitability.
This Plan is regularly reviewed, at least annually, and updated to ensure efficacy, feasibility and
operational appropriateness.
4.
Economic capital
Economic capital is the capital needed by the Bank to cover any unexpected losses caused by the
exposure to material risks as well as those originating in other risks to which the Bank may be exposed.
In contrast to “unexpected losses” which must be supported by economic capital, “expected losses” are
implied in the price of the product (interest rates, commissions, etc.) which must be fixed based on risk
and are therefore covered by ordinary operating income. When this is not the case, expected losses must
be equally supported by capital.
The methodology employed by the Bank in determining economic capital is based on the quantitative
approach “Value at Risk” (VaR). Using this approach, economic capital is the sum of all "Values at Risk"
(likely loss in a given horizon and the associated likelihood) of each one of the individual risks.
The time horizon as defined is one year (except in the portfolio of securities, which provides for a holding
period of at least 10 rounds) and the associated likelihood of no less than 99% which in theory implies
that there is a 1% likelihood that the economic capital determined is insufficient for the portfolio under
discussion.
5.
Internal Capital Adequacy Assessment Process (ICAAP)
This is the internal process implemented by the Bank in order to assess whether it has both at the standalone and at the consolidated levels, an adequate level of capital to cover all its material risks as well as a
long-term capital maintenance strategy.
Every year, together with the Business Plan, the Risk and Controlling Area drafts a document that
describes the scope and the conclusions of said process, for consideration by the Bank's Risk
Management Committee and Board of Directors.
Besides, the Risk and Controlling Area prepares a “Capital Self-Assessment Report” which constitutes an
integral part of the information to be submitted by the Bank to satisfy the requirements imposed by
BCRA’s Communication “A” 5515 (dated December 27, 2013, on “Reporting Requirements for Business
Plan and Forecasts 2014/2015”).
6.
Information systems
The Bank’s Management Information System helps to determine and track the components and
characteristics of exposures in due time and manner so that the Bank's risk profile and capital
requirements can be quickly and accurately assessed. This information contains the exposures to all the
risks, including those originating in off-balance sheet transactions.
The Bank’s Management Information System helps:
!
To add risk exposures and measurements from different lines of business,
!
Identify emerging risks and concentrations,
!
Identify departures from the established limits
!
Evaluate the effect of different types of adverse economic and financial scenarios.
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In this respect, the Bank has a comprehensive report that is submitted to Senior Management on a
monthly basis, to the Risk Management Committee on a bi-monthly basis and to the Board of Directors
on a quarterly basis. This is the “Risk Dashboard” which reflects the risk profile at the Bank and its
subsidiaries that helps to monitor the most relevant indicators of each one of the main risks.
In addition, for each risk, the Bank has more specific reports addressed to Senior Management, to the
Finance Committee, the Risk Committee and/or the Board of Directors. These include:
-
Futures Report (daily)
-
Value At Risk Market Risk Position - Trading and Enhanced Portfolios (daily)
-
FX Position Summary (weekly)
-
Main Credit Risk Indicators for Retail Banking (monthly)
-
High Liquidity and Minimum Liquidity Level Report (monthly)
-
Interest Rate Risk Report (monthly)
-
Corporate Banking Credit Risk Report (quarterly)
-
Price Risk and Backtest Reports (quarterly)
-
Operating Risk Report (half-yearly)
-
Individual Stress Test Report – Securities Portfolio (half-yearly)
7.
Subsidiary Risk Management
The Bank’s Corporate Governance Code lays down the corporate supervision and coordination structure
in relation to the Bank’s subsidiaries. This structure allows each Company’s Board of Directors to:
a)
Periodically review risk management policies and strategies and determine tolerance levels;
b) Control that management levels take the steps necessary to identify, assess, monitor, control
and mitigate the risks assumed.
This in turn, it facilitates each company’s Senior Management ability to:
a) Implement the policies and strategies approved by their Boards of Directors;
b) Undertake risk management processes to identify, assess, monitor, control and mitigate the
risks incurred by the Company;
c) Implement appropriate internal control systems and monitor their effectiveness, periodically
reporting to the Board of Directors on the attainment of objectives.
According to this structure, the objectives, risk management strategies and, overall, the business plans and
budgets of each subsidiary are approved by the subsidiary’s Board of Directors made up by the Bank’s
Board of Directors and communicated by the Boards of Directors to the different organizational levels at
each company.
In order to perform a periodical review of the attainment of the objectives and the deployment of the
strategies and general business plans and control how management levels manage risks, this structure
defines several mechanisms for supervision and coordination.
On one hand, each Company's internal supervision and coordination mechanisms and on the other hand,
the application to the subsidiaries of the Bank's supervision and coordination mechanisms. The
mechanisms applied by the Bank to the subsidiaries mandate that the Board can obtain information from
the Bank's Senior Management, which receives information from each Company's Senior Management.
In this respect, it must be mentioned that the Bank monitors observance of the limits established in each
subsidiary's risk management strategies through the Risk Dashboard that the Bank’s Senior Management
submits to the Risk Management Committee and to the Board.
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Regulatory Framework of the Argentine Financial System
A summary is provided below of the main aspects related to regulations governing the Argentine banking
sector. This summary is not intended to be considered as an in-depth analysis of all laws and regulations
applicable to financial institutions in Argentina or a thorough and comprehensive analysis of all aspects
that may be of interest to a Noteholder.
This summary is provided for information purposes, is based on the laws and regulations in effect in
Argentina as of the date of this Offering Memorandum and is subject to any subsequent change in such
laws and regulations that may come into effect after the date of this Offering Memorandum. No assurance
can be provided that the courts and governmental authorities responsible for enforcement of such laws
and regulations will agree with the interpretation thereof as described in this summary or that there will be
no changes in such laws and regulations or in the interpretation thereof by such courts and governmental
authorities. Any potential investors should seek advice from their legal advisors for a more in-depth
analysis in this regard.
Overview
Founded in 1935, the Central Bank is the principal monetary and financial authority in
Argentina. Its primary mission is to promote –within its scope of authority and in accordance with the
policies laid down by the National Government- stability in the value of the domestic currency, financial
stability, employment and economic development with social equity. The BCRA is an autarchic entity
within the sphere of the National Government that is bound by the provisions of the Charter and other
related rules and regulations. The National Government secures the liabilities incurred by the BCRA. In
discharging its functions and authority, the BCRA shall not be subject to orders, indications or
instructions from the Executive Branch of Power and shall not assume any kind of obligations that may
imply conditioning, restricting or delegating them without the Argentine Congress' express authorization.
Since 1977, banking activities in Argentina have been regulated primarily by the FIL, which
empowers the Central Bank to regulate the financial sector. The BCRA regulates and supervises the
Argentine banking system through the Superintendencia de Entidades Financieras y Cambiarias
(Superintendency of Financial and Exchange Institutions). The Superintendency is responsible for rating
financial institutions for the FIL purposes, cancelling the authorization to perform foreign exchange
transactions, approving financial institution regularization and/or reorganization plans, implementing and
enforcing regulations for the implementation of the FIL, issued by the Board of Directors of the BCRA
and establishing the requirements that should be met by auditors of financial and foreign exchange
institutions. In addition, the Superintendency has authority to oversee compliance with the reporting and
accounting requirements applicable to financial and foreign exchange institutions; order publication of
monthly balance sheets of financial institutions, statements of debtors and any such other information as
may be useful in assessing the situation of the system, order institutions to cease to or no longer
implement lending or financial aid policies that threaten their creditworthiness, impose the penalties
established by the Financial Institutions Law in the event of violations by individuals or entities, or both,
of the provisions thereof, exercise any other powers conferred by the law on the bank in relation to the
superintendency, except for those expressly assigned by the FIL to BCRA’s board of directors, enforce
legal provisions passed by the Argentine Congress on operation of credit cards, purchase cards, electronic
money and the like, and the regulations issued by the BCRA within its scope of authority.
The powers of the BCRA 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 BCRA 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 BCRA for the disposition of their
assets, such as opening branches or ATMs, acquiring share interests in other financial or non-financial
corporations and establishing liens over their assets, among others.
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As supervisor of the financial system, the BCRA 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 BCRA to
monitor the business practices of financial entities. In order to confirm the accuracy of the information
provided, the BCRA is authorized to carry out inspections.
If the BCRA 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 BCRA. These plans must be approved by the BCRA in
order to permit the financial institution to remain in business.
The BCRA 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
BCRA Supervision
Since September 1994, the BCRA 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
Financial Institutions Law
The Financial Institutions Law 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 Financial
Institutions Law 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 Financial Institutions Law and BCRA Communication “A” 3086, as amended
from time to time, 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. However, even when commercial
banks’ interests do not reach such percentages, they are not allowed to operate such companies if such
interest allows them to control a majority of votes at a shareholders’ or board of directors’ meeting.
Pursuant to Communication “A” 5107, commercial banks are classified into (i) first tier: they may engage
in any lending, borrowing and service transactions in accordance with Section 21 of the Financial
Institutions Law; and (ii) second tier: they may engage in any such lending, borrowing and service
transactions as the law and regulations may establish for first tier banks, but only second tier public banks
may receive deposits from the financial sector of the country and from foreign banks. In addition, they
76
will be subject to such ratios related to credit risk diversification as may be especially established in
regulations.
Operations and Activities that Banks Are Not Permitted to Perform
The Financial Institutions Law prohibits commercial banks from: (a) creating liens on their
assets without prior approval from the BCRA, (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)
make drafts of money or transfers from market to market, except for commercial banks. The banks may
own shares in other financial institutions with the prior approval of the Central Bank, as well as shares
and notes in utility companies, if necessary, for the provision of such services.
Liquidity and Solvency Requirements
The financial statements and other information required to be filed by financial institutions must
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, and, in certain cases, those of
other companies in which the entity may have an interest. 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.
Legal Reserve
According to the Financial Institutions Law 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. If the legal reserve has been affected, financial institutions are not able to pay dividends until its
reversal.
Non-liquid Assets
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 regulatory capital of the financial institution in the relevant month, 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 companies that are not listed on authorized markets or
shares listed on authorized markets, if the holding exceeds 2.5% of the issuing company’s equity. Any
non-compliance with such requirement will give rise to an increase in minimum capital requirements
equivalent to 100% of the excess over the ratio required by the BCRA Rules as from the month in which
the non-compliance occurs and during its term of duration.
Minimum Capital Requirements
The BCRA requires that financial institutions maintain minimum capital amounts measured as of
each month’s closing. Such minimum capital amount is defined as the higher value that results from a
comparison between the basic minimum capital requirement, which is explained below, and the sum
resulting from credit risk, the market risk to which the financial institution’s assets are exposed and
operational risk. Pursuant to the Argentine Central Bank’s Communication “A” 5580, it is the Regulatory
Capital (“RPC”) that must be taken into consideration in determining that the minimum capital
requirements laid down by applicable rules and regulations are satisfied.
Basic Minimum Capital
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In order to determine Basic Minimum Capital, financial institutions are classified according to
the type and jurisdiction in which their head office is located as per the categories set forth in the
Argentine Central Bank’s CREEFI – 2 Circular Letter’s Chapter II, Section 3, Sub-section 3.3 detailed
hereinbelow:
Category
Banks
I and II
III to VI
26
15
Other Entities (except
Credit Entities)
-In million Pesos12
8
Regulatory Capital (“RPC”, as per the initials in Spanish of Responsabilidad Patrimonial
Computable)
The BCRA takes into consideration a financial institution’s regulatory capital (RPC) in order to
determine compliance with capital requirements. In conformity with the Central Bank’s standards
(Communication “A” 5580), Regulatory Capital (RPC) is expressed as follows:
RPC = Basic Net Worth + Complementary Net Worth,
NWb: basic net worth –level 1 capital.
NWb = COn1-CDCOn1 +CAn1 -CDCAn1
where:
COn1: ordinary capital level 1.
CDCOn1: deductible concepts from ordinary capital level 1.
CAn1: additional capital level 1.
CDCAn1: deductible items from additional capital level 1.
NWc: complementary net worth; level 2 capital, net of applicable deductions (CDPNc).
Basic Net Worth. Common Equity Tier 1
Basic Net Worth consists in Common Equity Tier 1 (“COn1”) and in Additional Tier 1
(“CAn1”). Common Equity Tier 1 (COn1) comprises the following Shareholders’ equity captions: (i)
Capital stock –save for shares with preferential rights to equity-; (ii) Non-capitalized contributions –to the
exclusion of stock surplus; (iii) Adjustments to equity; (iv) Reserved earnings –to the exclusion of the
special reserve for debt instruments-; (v) Unappropriated retained earnings. Net income for the most
recently closed fiscal year will be computed only when accompanied by the auditor’s report; (vi) Other
income/(loss) will be computed as follows: a) 100% of any Income/(loss) recorded up and until the most
recent quarterly financial statement accompanied by an auditor’s report for the most recently closed fiscal
year and on which the auditor has not yet issued an auditor’s report; b) 100% of any Income/(loss) for the
current fiscal year as recorded at the close of the most recently closed quarterly financial statement only
when accompanied by the auditor’s report; c) 50% of income or 100% of losses as from the most recent
quarterly or annual financial statement accompanied by an auditor’s report or opinion. These percentages
shall be applied to the net accumulated balance calculated at the close of each month in so far as none of
the instructions discussed in the preceding two sub-sections apply; d) 100% of any losses not considered
in the financial statements corresponding to the quantification of the facts and circumstances
communicated by the auditor in accordance with the Minimum External Audit Requirements applicable
to limited review reports at the end of each quarter. For purposes of computing 100% of any
income/(loss) posted until the most recent quarterly or annual financial statement, the respective financial
statements accompanied by the auditor’s report must have been filed with the Argentine Central Bank as
of the date of mandatory submission of monthly financial statements; (vii) Stock surplus (share premium)
resulting from the issue of instruments included in Common Equity Tier 1.
Additional Tier 1 capital (Can1)
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Additional Tier 1 capital consists of instruments issued by the financial institution that are not
included in Common Equity Tier 1 (Con1) and meet the following criteria:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
They have been fully subscribed and paid in.
They are subordinated to depositors, unsecured creditors and subordinated indebtedness
of the financial institution and must 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.
They are neither secured nor covered by any other guarantee either from the issuer or
from a party related to the issuer. Neither should they be the subject matter of any other
agreement that improves from either a legal or financial standpoint the order of priority
for collection in the event of bankruptcy of the financial institution.
They do not provide for any kind of payment of principal, except in the event of the
entity’s liquidation, if applicable and they cannot 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 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.
Any repayment of principal (e.g. through repurchase or redemption) must be with prior
approval from the Superintendency of Financial and Foreign Exchange Institutions and
the financial institution should not assume or create market expectations that
supervisory approval will be given.
Dividend/interest coupon discretion: i) The financial institution must have full
discretion at all times to cancel distributions/payments; ii) the provision discussed in the
preceding heading must not constitute an event of default and neither may it impose
restrictions on the financial institution, except in relation to distributions of dividends to
the holders of common shares.
Dividends/coupons must be paid out of distributable items as prescribed in Section 3 of
the rules governing “Distribution of earnings”.
The instrument cannot have a dividend/coupon that is reset periodically based in whole
or in part on the financial institution’s credit risk.
Neither the financial institution nor a related party over which the financial institution
exercises control or significant influence can have purchased the instrument.
They must not have been bought with direct or indirect funding from the financial
institution.
The instrument cannot have any features that hinder recapitalization, such as provisions
that require the issuer to compensate investors if a new instrument is issued at a lower
price during a specified time frame.
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.
Also comprised are the stock surplus amounts of the instruments comprised in Additional Tier 1
(Can1).
Complementary Net Worth, Tier 2 Capital
Complementary Net Worth –Tier 2 capital– consists of the sum of the following elements:
(i)
Instruments issued by the financial institution that meet the following criteria –and are
not included in Basic Net Worth–
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(ii)
Stock surplus (share premium) resulting from the issue of instruments included in Tier
2 capital -Complementary Net Worth-.
Loan loss provisions raised on the portfolio that comprises debtors classified as
“performing” (numerals 6.5.1 and 7.2.1 under the Central Bank’s Debtor
Classification rules) and on the extension of credit secured with preferred
“A” guarantees without surpassing 1.25 % assets weighted by credit risk.
(iii)
The criteria to be met or exceeded by instruments for inclusion in Tier 2 capital –Complementary
Net Worth- are as follows:
(i)
(ii)
They must have been fully subscribed and paid in.
They must be subordinated to depositors and unsecured creditors of the financial
institution.
They must be neither secured nor covered by a guarantee of the issuer or related entity or
other arrangement that legally or economically enhances the seniority of the claim for
purposes of collection in the event of bankruptcy of the financial institution.
Maturity: i) minimum original maturity of at least five years ii) there are no step-ups or
other incentives to early redemption; and iii) as from the start of each one of the last five
years of each issue, the computable amount shall be reduced by 20% of the par value of
the issue.
May be callable at the initiative of the issuer only after a minimum of five years –
provided that: i) the Superintendency of Financial and Foreign Exchange Institutions
grants its authorization previous to the exercise of the call option; ii) the financial
institution abstains from generating expectations that the call will be exercised; and iii)
the financial institution replaces the called instrument with regulatory capital of the same
or better quality and the replacement of this capital is done at conditions which are
sustainable for the income capacity of the financial institution, or the financial institution
demonstrates that its capital position –RPC- is well above the minimum capital
requirements –by at least 20%- after the call option is exercised.
The investor must have no rights to accelerate the repayment of future scheduled
payments (coupon or principal), except in bankruptcy and liquidation.
The instrument cannot have a dividend/coupon that is reset periodically based in whole
or in part on the financial institution’s credit risk.
Neither the financial institution nor a related party over which the financial institution
exercises control or significant influence can have purchased the instrument,
nor can the financial institution directly or indirectly have funded the purchase of the
instrument
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
Additional criteria to be met by instruments computable as Additional Tier 1 (Can1) and Complementary
Net Worth, Tier 2 Capital to assure their loss-absorption capacity.
Any instruments computed as Additional Tier 1 (Can1) and Complementary Net Worth, Tier 2
Capital must meet the following additional criteria:
1.
2.
3.
4.
Their terms and conditions must include a stipulation whereby the instruments must absorb
losses –either through a write-down mechanism or through their conversion into common
shares– in the event any of the events described in 4 below were to occur.
Should the holders of these instruments be entitled to compensation for the write-down
effected –arising from the absorption of losses- such compensation shall proceed
immediately and only through common shares according to the applicable law.
The financial institution must have, at all times, any requisite authorizations to immediately
issue the relevant quantity of shares as stipulated in the instrument’s terms and conditions
when any of the events described in 4 below occurs.
Triggering events. The occurrence of any of the events detailed hereinbelow shall render
the provision described in 1. above operational:
i)
amidst solvency and/or liquidity constraints at the financial institution, at the earliest of
a), b) or c), as follows: a) the BCRA rejects the regularization and turnaround plan
submitted by the institution in distress –Section 34 of the Argentine Financial
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Institutions Law-; b) repeals its authorization to operate –Section 44, Sub-section c) of
the Argentine Financial Institutions Law- or c) authorizes its restructuring for the
safeguard of depositors –Section 35 bis of the Argentine Financial Institutions Law; or
ii) a decision is made to capitalize the financial institution with government funds –or an
analogous support measure– furnished by the Deposit Guarantee Insurance System in
the framework of the enforcement of Section 35 bis of the Argentine Financial
Institutions Law by reason of liquidity and solvency constraints.
The issuance of new shares as a result of the occurrence of any such events must take place
before any decision is made to capitalize the institution with government funds –or adopting an
analogous supporting measure- in the manner discussed in sub-section ii) above.
Requirements Applicable to Dividend Distribution
The BCRA has imposed restrictions on the payment of dividends, substantially limiting the
ability of financial institutions to distribute such dividends without its prior consent.
Pursuant to Communication “A” 5485, the BCRA amended and restated its regulations regarding
dividend distribution by financial institutions. According to such regulation, the Superintendency 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 for authorization:
(i) the financial institution is not subject to a liquidation procedure or the mandatory transfer of
assets at the request of theBCRA in accordance with section 34 or 35 bis of the Financial
Institutions Law;
(ii) the institution is not receiving financial assistance on grounds of liquidity issues from the
BCRA;
(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 a stand-alone
and consolidated basis) and with minimum cash reserves (on average) be it in Pesos, foreign
currency or Government securities;
(vi) there is no history of significant sanctions having been imposed by the Financial Information
Unit against the financial institution except when corrective measures have been implemented to
the satisfaction of the Superintendent of Financial and Exchange Institutions and when, having
been requested to submit a risk mitigation plan, the financial institution submitted it and the plan
was approved by the Superintendent of Financial and Exchange Institutions.
Under no circumstances will the distribution of earnings be allowed if:
(i) the satisfaction of minimum cash requirements on average –be it in Pesos, foreign currency or
in Government securities– were below the requirement applicable to the most recently closed position or
to the position forecast as a result of computing the effect of earnings distribution, and/or
(ii) the satisfaction of the ensuing minimum capital requirements were smaller than the
requirement recalculated as discussed above and raised by 75%, and/or
(iii) the Argentine Central Bank has lent aid to the financial institution on grounds of illiquidity
as contemplated in Section 17 of the BCRA’s Charter.
Risk Management
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Pursuant to Communication “A” 5398, financial institutions’ internal capital adequacy must be in line
with their risk profiles. Should the profile of any given financial institution demand capital in excess of
regulatory capital, said financial institution must increase its capital level accordingly.
Credit Risk
Communication “A” 5580 defines capital by credit risk as follows:
CRC = k x [0.08 x (APRc + no DvP) + DvP + RCD] + INC + IP
where:
k:
factor associated to the score given to the entity as per the assessment performed by the
Superintendency of Financial and Foreign Exchange Institutions based on the following
scale:
Value of
“k”
1
1
2
1.03
3
1.08
4
1.13
5
1.19
For these purposes, the latest reported score for calculation of the amount required to be
paid in the third month following the month of notice shall be taken into account. While not
reported, the "k" value will be equal to 1.03.
Score
APRc:
assets weighted by credit risk, determined through the sum of the values yielded by the
following expression:
A x p + PFB x CCF x p
where:
A: computable assets/exposures.
PFB:
computable items that are not recorded in the trial balance sheet (“offbalance sheet items”), irrespective of whether they have been
accounted for in memorandum accounts or not.
CCF:
credit conversion factor
p:
risk weighting factor in so far as it is by one as per the detail
contained in Communication “A” 5580, Sub-section 4.
no DvP:
trades without Delivery Versus Payment. Amount determined by adding the values yielded
by the application of the relevant risk weighting factor (p) to transactions without Delivery
Versus Payment as per the detail contained in Communication “A” 5580, Sub-section 3.8.
DvP:
failed Delivery Versus Payment trades (for purposes of these rules, these include failed
Payment Versus Payment -PvP- trades). Amount determined by adding the values yielded
by multiplying current positive exposure by the applicable minimum capital requirement
laid down in Sub-section 3.8.
RCD:
requirement by counterparty credit risk in trades with over-the-counter derivatives,
determined as laid down in Communication “A” 5369, Sub-section 3.9.
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INC:
computable increases in minimum requirements arising from excesses posted in certain
technical ratios
IP
increase resulting from the enhancement of the general limit on negative net global position
in foreign currency, in conformity with the provisions contained in Section 2, Sub-section
2.1. of the rules on “Net global position in foreign currency”.
Interest rate risk
When it comes to interest rate risk, Communication “A” 5369 of the Argentine Central Bank, as
amended, repealed as from January 1, 2013 the duty to compute the minimum capital requirement by
interest rate risk –as set forth in Section 5 of the rules on “Minimum capital requirements applicable to
financial institutions” as well as all other measures concerning this matter and set forth in the rules issued
by the Argentine Central Bank without prejudice to the fact that financial institutions must continue to
manage this risk, which will be reviewed by the Superintendency of Financial and Foreign Exchange
Institutions, which is empowered to impose the duty to satisfy a larger regulatory capital requirement.
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.
There are five categories of assets. Domestic assets are divided into equity and public
bonds/BCRA’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 BCRA 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.
Operational Risk
The regulation on operational risk (“OR”) recognizes the management of OR as a 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
83
− 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.
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, as amended from time to time, 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 with 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, and Section 41 of the Financial Institutions Law shall be
applicable. Furthermore, summary actions may be started in accordance with the guidelines set forth by
the Superintendency of Financial and Foreign Exchange Institutions. In addition, the Superintendency
may appoint a delegate, who shall have the powers set forth by the Financial Institutions Law.
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. Pursuant to
Communication “A” 3498 issued by the BCRA, as amended from time to time, as from March 1, 2002,
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the mandatory reserve (encaje) in the liquidity base system applies not only to demand transactions but
also to fixed-term transactions.
Minimum cash requirements are applicable to demand and 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 BCRA, to domestic financial
institutions, to foreign banks (including headquarters, parent companies of local entities and their
branches) in connection loans intended to finance foreign trade transactions; and (ii) amounts owed in
connection with 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.
The minimum cash amount arising from application of the prevailing rates shall be paid, which
in the event of transactions denominated in Pesos and pursuant to Communication “A” 5356, as from
October 1, 2012, will depend on the category of the location where the operating house in which they are
made is set up pursuant to subsection 3.3 of Section 3, Chapter II of the CREFI Circular -2.
Such Communication “A" 5356 further provided for a progressive reduction in the required
percentages for transactions denominated in Pesos by application of a provisional schedule from October
2012 to February 2013 and final percentages shall become effective in March 2013.
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 BCRA in Pesos;
(ii) Accounts of minimum cash maintained by financial institutions with the BCRA in U.S.
dollars, or other foreign currency;
(iii) Special guarantee accounts for the benefit of electronic clearing houses and to cover
settlement of credit card and ATM transactions;
(iv) Checking accounts maintained by non-bank financial institutions with commercial banks
for the purpose of meeting the minimum reserve requirement;
(v) Special guarantee accounts with the BCRA 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);
(vi) Special accounts maintained with the BCRA for transactions involving social security
payments by the ANSES; and
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(vii) Special accounts maintained by financial institutions with the BCRA in public bonds and
other securities issued by the BCRA.
These eligible items are subject to review by the BCRA and may be changed in the future.
Compliance on time deposits, national government bonds must be done with holdings marked to
market and of the same type, only in terms of monthly status.
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.
Total balances of the eligible items referred to in (ii) to (vii) above, recorded as of the close of
business of each day, shall not, on any day of a given month, be lower than 50% of the total minimum
cash requirement, as determined for the immediately preceding month recalculated on the basis of
requirements and items in effect in the month to which the cash requirement relates. Such daily
requirements must be equal to 70% if there was a deficit in the preceding month.
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 Dollar LIBOR rate for the last business day of the month (whichever is higher).
Risk Management in Financial Institutions
Communication “A” 5398 effective as of February 13, 2013 provided that as from January 2,
2012 financial institutions shall have in place a comprehensive risk management process that includes all
guidelines set forth therein. Such process shall require monitoring by the Board and the Senior
Management in order to identify, assess, follow up on, control and mitigate any significant risks assumed
by the entity and their relation to the sufficiency of the economic capital, which shall be in proportion to
the economic size and significance of the financial institution in question and the nature and complexity
of its operations.
The guidelines cover credit, liquidity, market, interest rate and operational risks, securitizations,
concentration, reputational, strategic risks and performance of stress tests, and they are based on the
following general principles:
•
•
•
•
•
•
•
•
Strategies approved by the Board.
Internal processes required in order to assess the sufficiency of capital when it
comes to the risk profile.
Adequate reporting and follow up systems.
Examination of internal controls.
Policies and procedures providing assurance that the new products and any
risk management efforts are approved by the Board.
One or more unit(s) responsible for risk management.
Stress testing program.
Contingency plan.
The comprehensive risk management process must be regularly revised and adjusted in line with any
changes in the risk profile of the institution and the market.
Credit Limits
The BCRA standards seek to mitigate the economic risk linked to loans granted by a financial
institution, and hence ensure a minimum diversification. For such purposes, the loan applicant's capital
and the financial institution's RPC are taken into account.
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There are three types of ratios that limit risk exposure, namely: risk concentration limits, limits
on transactions with customers on the basis of the institution’s RPC (credit risk diversification) and limits
on the basis of the customer’s net worth (credit rating).
Risk Concentration
The rules and regulations refer to Risk Concentration, which is defined as the sum of the loans
that individually exceed 10% of the financial institution’s regulatory capital (RPC). As a rule of thumb,
risk concentration may not exceed:
- 3 times the financial institution’s regulatory capital (RPC) to the exclusion of loans to local
- 5 times the financial institution’s regulatory capital (RPC) computing the loans to local
- 10 times the regulatory capital (RPC) of second grade merchant banks when their transactions
are computed with other financial institutions.
Credit Risk Fractioning - Measuring the extension of credit to a group of clients in a given
business vis-à-vis the financial institution’s regulatory capital (RPC)
The rules and regulations that govern measures of the extension of credit to a group of clients in
a given business vis-à-vis the financial institution’s regulatory capital (RPC) lay down minimum
standards for diversifying risk in a manner such as to mitigate such risks without significantly
compromising average profitability.
These limits, fixed as percentages of a financial institution’s regulatory capital (RPC) on the last
day of the month preceding the relevant month are as follows:
To the country’s non-financial public sector.
Extension of credit attributable to:
Maximum limit
a) The national public sector.
50%
b) Each provincial jurisdiction or the Autonomous City of Buenos
Aires.
c) Each municipal jurisdiction.
10%
3% (without exceeding 15% in
general)
To the country’s non-financial private sector and to the foreign non-financial sector.
Maximum limit
i) Each borrower.
a) Extension of credit without computable guarantees.
b) Total extension of credit (whether or not secured with
computable guarantees and/or guarantees comprised in Section 1,
sub-section1.8.2..
ii) Each reciprocal guarantee company (including those related to the
lender) or government-run guarantee fund, in accordance with
Section 1, sub-section 1.3..
iii) Each insurance company that extends credit to exporters in
accordance with Section 1, sub-section 1.4.
15%
25%
25%
15%
To the country’s financial sector.
Maximum limit
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Maximum limit
i) If the lender entity has been rated as 1, 2 or 3 by the
Superintendency of Financial and Foreign Exchange Institutions and
it is not a second grade merchant bank.
a) To each financial institution rated as 1, 2 or 3 by the
Superintendency of Financial and Foreign Exchange Institutions.
- Basic margin.
- Additional margins.
*Leg I
* Leg II
b) To each financial institution rated as 4 or 5 by the
25%
25%
25%
25%
ii) If the lender entity has been rated as 4 or 5 by the
Superintendency of Financial and Foreign Exchange Institutions and
it is not a second grade merchant bank.
a) To each financial institution rated as 1, 2 or 3 by the
b) To each financial institution rated as 4 or 5 by the
25%
0%
iii) If the lender entity is a second grade merchant bank and has
been rated as 1, 2 or 3 by the Superintendency of Financial and
Foreign Exchange Institutions.
To each financial institution rated as 1 to 5 by
the Superintendency of Financial and Foreign
Exchange Institutions.
iv) If the lender entity is a second grade merchant bank and has
been rated as 4 or 5 by the Superintendency of Financial and Foreign
Exchange Institutions.
100%
100%
a) To each financial institution rated as 1 to 3 by the
b)
Superintendency of Financial and Foreign Exchange
Institutions.
To each financial institution rated as 4 or 5 by the
Superintendency of Financial and Foreign Exchange
Institutions.
0%
Corroborating the extension of credit based on the client’s regulatory capital (RPC):
As a rule of thumb, total loans cannot exceed 100% of clients’ regulatory capital. This limit is enhanced
by up to 200% when additional aid does not exceed 2.5% of the financial institution’s regulatory capital
(RPC) and it has been approved by the Board of Directors by simple majority of all its members or
analogous authority.
Related Parties
The rules of the BCRA concerning transactions with individuals and legal entities that are related
to the financial institutions limit the amount by which a financial institution may lend them financial aid.
The definition of related party is based on criteria of direct or indirect control over the
company’s decisions, measured by the quantity of shares held, a majority of directors in common or
current or potential involvement in governance or, in exceptional cases, as determined by the Board of
Trustees of the BCRA following a proposal by the Superintendent of Financial Institutions (for instance,
because the financial institution exerts controlling influence over the related party).
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
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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 authorized to be listed in local or foreign authorized 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)
inter-financing loans (any inter-financing loans granted with such resources must be identified), and (i)
BCRA’s domestic bills in US dollars.
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 (“GEP”) 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 48 hours. 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.
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 of the regulatory capital at the end of the month immediately preceding the last
month when filing with the BCRA 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 BCRA’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).
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In addition, forward transactions under master agreements entered within domestic securities
exchanges 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, as amended from time to time) 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): as from September, 2014
(Communication A 5627) this position-as a monthly average of daily balances converted to Pesos at the
reference exchange rate- shall not exceed 20% of the RPC for the relevant immediately preceding month
or liquid resources, whichever is lower.
This limit will be extended by an amount equivalent to the increase for the period from January
2014 and the month to which the net global position relates, in respect of foreign credit facilities brought
into the country through the Argentine Single and Free Exchange Market (MULC).
In addition, Communication “A” 5536 set a limit on the positive net global position of forward
foreign currency. The net positive position of future foreign currency –as a monthly average of daily
balances converted to Pesos at the reference exchange rate- shall not exceed 10% of the RPC for the
relevant immediately preceding month (Communication “A” 5611).
The excesses of these ratios are subject to a charge equal to 1.5 times the nominal interest rate of
the Peso denominated LEBAC (BCRA bill).
In turn, and notwithstanding the charge described in the foregoing paragraph, the provisions
related to penalties of Section 41 and related sections of the Financial Institutions Law shall apply.
Fixed Assets and Other Items
The BCRA determines that the fixed assets and other items maintained by the financial entities
must not exceed 100% of the entity’s RPC. The limit could be increased to 150% of the RPC of the
financial institution for the relevant month. The 50 point increase will apply to the extent that nature of
fixed assets derives from the holding of national government securities –with volatility reported by the
BCRA- and/or monetary regulating instruments of the BCRA provided as collateral by the financial
institutions in favor of such institution as required by law for operations implemented under the
Agreement for reciprocal payments and credits - ALADI, to the extent that they are related to
infrastructure or equipment supply works –which, in both cases, constitute capital expenditurescontemplated by the rules of the BCRA in such regard (Communication "B" 9745).
Such fixed assets and other items include the following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Shares of local companies
Miscellaneous receivables
Property for own use
Other assets,
Organization and development expenses
Goodwill, and
Financing granted to related clients.
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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.
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 personal housing loans (purchase, construction or remodeling), consumer loans, credit-card
financings and other types of installment credits to individuals. In addition, commercial financing up to
an amount equivalent to Ps. 2,500,000 with or without preferred guarantees may be classified as
consumer or housing loans, if so decided by the financial institution (“A” 5637). All other loans are
considered commercial loans, including consumer or housing loans in excess of Ps. 2,500,000, the
repayment of which is not linked to the customer’s fixed or regular income but to the development of its
production or commercial business (“A” 5637).
In addition, the BCRA rules establish that where the client has taken loans under both systems,
the consumer or housing loans will be added to the commercial portfolio in order to determine its
classification into one or the other portfolio on the basis of the stated amount, for which purpose the loans
secured by preferred guarantees will be considered at 50%.
Under the current debt classification system, each customer, as well as the customer’s
outstanding debts, are included within one of its 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.
Subject to special
Borrowers that, among other criteria, have been in arrears for no more than 90 days
Monitoring/Under
and, although considered to be able to meet all their financial obligations, are
observation ............................................
sensitive to changes 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 appropriate lower 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
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Classification
Criteria
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 BCRA,
which report includes (1) financial institutions liquidated by the BCRA, (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 BCRA 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 BCRA 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 BCRA.
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.
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 BCRA
rules.
Low Risk
Medium Risk
High Risk
Uncollectible
Uncollectible according to
Central Bank rules
Prior to improvement of a debtor's rating as a result of refinancing, the minimum installments of the
percentage of repayment of refinanced liabilities should be repaid, taking into account the specific
guidelines laid down for each category.
Minimum Credit Provisions
The following minimum credit provisions are required to be made by Argentine banks in relation
to the credit portfolio category:
Category
With Preferred
Guarantees
“Normal”
“Under Observation” and “Low Risk”
“Under negotiation or subject to refinancing agreements”
“With Problems” and “Medium Risk”
1. “With high risk of insolvency” and “High Risk”
“Uncollectible”
“Uncollectible according to Central Bank rules”
1%
3%
6%
12%
25%
50%
100%
Without
Preferred
Guarantees
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 BCRA Rules. 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
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the next credit portfolio category set forth by the BCRA Rules, 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
Central Bank rules. Nevertheless, a quarterly review is required for credits that amount to 5% or more of
the entity’s RPC and mid-year review for credits that amount to the lower of: (i) Ps. 2 million or (ii) the
range between 1% and 5% of the entity’s RPC.
On the other hand, financial institutions must mandatorily reconsider the classification assigned
to a debtor in the following events:
•
Changes in any of the objective classification criteria arising from the BCRA rules (overdue
period, legal condition of the client or its debts, meeting of refinancing requirements and
requests for refinancing of liabilities).
•
Another financial institution reduces the debtor classification in the “Central Debtors Database
of the Financial System” and grants 10% or more of the debtor’s total financing in the financial
system.
•
A reduction by more than one level of the classification assigned by a credit rating agency to
securities issued by the client.
•
Receipt of notice of a final determination by the Superintendency on provision adjustment, as
determined following inspection tasks.
•
Any inconsistency by more than one level between the classification assigned by the financial
institution and those assigned by at least two other financial institutions or trusts in categories
that are lower than such assigned by the former one, where the claims of these two or more
financial institutions or trusts account for at least 20% and are lower than 40% of the aggregate
amount reported by all of the client's creditors according to the latest information available at
the Central Debtors Database of the Financial System. It should be noted that where the claims
of these two or more financial institutions or trusts exceed 40% of the aggregate amount
reported by the creditors, the financial institution shall be required to recategorize the client and
assign to it at least the category that ranks immediately higher than such in which it has the
highest indebtedness level, considering for such purposes the institutions subject to such
inconsistency.
Allowances for Loan Losses
The allowance for loan losses is maintained in accordance with applicable regulatory
requirements of the BCRA. 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.
Interest Rate applicable to Credit Transactions
Communication “A” 5615 added financing granted by financial institutions to users of financial services
falling within the scope of the definitions of the rules on Protection of users of financial services as
subject to the regulation of interest rates by the BCRA, provided that they are individuals and are bound
by the MiPyme rules.
Such financings to individuals granted by financial institutions subject to the new rules do not include
financings in Pesos granted to such users as:
•
advances in checking accounts;
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•
credit card financings (which as set forth in Section 2 shall not exceed more than 25%
of the cost of personal loans) and
•
mortgage-backed housing loans.
If the financings covered by the rule were assigned to third parties (for example, as a loan portfolio) they
will continue to be covered by the interest rate regulation rules.
However, in relation to financings to individuals that the financial institution may add
•
due to an assignment with or without recourse to assignor;
•
as a result of being part of a trust in which the financial institution is the
owner/beneficiary and
•
as a guarantee,
the same rules under the new regulations will be applied with regard to interest rates.
In addition to establishing the financings covered by the rule, it refers to the mechanism to be applied for
interest rate determination purposes. The BCRA shall report on a monthly basis the maximum interest
rate that can be applied by the financial institutions on each financing so disbursed and/or in respect of
which the interest rate is reset in such period, on the basis of the product of the "reference interest rate"
and a coefficient to be applied. For such purposes, Group I will be comprised by Financial Institutions
that operate as financial agents of the National, provincial governments, the City of Buenos Aires and/or
municipal governments and/or the deposit amount of which in the non-financial private sector in Pesos based on the average of balances for the period concerned- is equal to or higher than 1% of the aggregate
amount of deposits of the non-financial private sector in Pesos in the financial system, as reported by the
Monthly Accounting Information System – Balance Statement; and Group II encompasses the remaining
institutions.
It is worth mentioning that when a financial institution covered by Group II is significantly affected in
terms of its economic equation, it may file with the BCRA an application for authorization to use a higher
coefficient so as to be able to operate on a level of economic balance.
Penalties for breach are only the following two:
•
increase in the minimum cash requirement in Pesos; or
•
the penalties set forth in Section 41 of the Financial Institutions Law ranging from a
warning to withdrawal of the license to operate, and the penalty can be changed
depending on the seriousness of the breach and the resulting damages, among other
factors.
It is important to note that the penalty set forth in clause (i) above may be revoked by granting certain
financings to MiPymes through the granting of credit facilities or deferred payment check discounts.
However, the use of this remedy or the increase in minimum cash will not prevent the filing of summary
proceedings by the BCRA.
The maximum interest rate limit will not be verified if the financings have been originated by other
financial institutions at a fixed interest rate.
The provisions of Communication “A” 5615 shall apply to financings disbursed or added on or after June
11, 2014.
Liquidity Coverage Ratio
In line with the provisions of Basel III, the BCRA –through Com. “A” 5583- ordered on May 19, 2014
the creation of the quarterly regime of assessment and follow up on liquidity (LCR), and on February 13,
2015 –through Com. “A” 5713- it implemented it as a Monthly Reporting Regime.
The liquidity coverage ratio (LCR) is an indicator defined by Com. “A” 5693 issued by the BCRA and is
based on liquidity coverage ratio methodologies used by the banks at a global level; this ratio shows the
manner in which financial institutions may withstand stress scenarios that are a month long. The
institutions are required to maintain high quality liquid assets sufficient to meet net cash outflows
expected in the following thirty days. For such purposes, they shall calculate cash outflows and inflows
expected to occur in situations of stress, in line with predetermined rates of renewal of liabilities that
94
contemplate the higher or lower stability of each source of funds. This regulation requires application of
the coverage requirement subject to the following schedule:
LCR Requirement
2015
2016
2017
2018
2019
60%
70%
80%
90%
100%
Priority Rights of Depositors
Under section 49 of the Financial Institutions Law, 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 BCRA 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 BCRA pursuant to section 35 of the Financial
Institutions Law, 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 BCRA.
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 (“SSGD”), which is mandatory for bank
deposits, and delegated the responsibility for organizing and implementing the system to the BCRA. The
SSGD is a supplemental protection to the privilege granted to depositors by means of section 49 of the
Financial Institutions Law as mentioned above.
The SSGD has been implemented through the establishment of a Deposit Guarantee Fund
(“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 Argentine government through the BCRA 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 BCRA Communication “A” 5659, dated October 31, 2014, as
amended.
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 Ps. 350,000.
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 that affected 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
95
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 BCRA for time deposits and demand deposit account balances and available
amounts from overdue deposits or closed accounts.
Pursuant to Communication “A” 5710, every financial institution is required to contribute to the
FGD a monthly amount equal to 0.06% of the monthly average of daily balances of deposits in local and
foreign currency, as determined by the BCRA. If fixed-term deposits in US dollars from the non-financial
private sector of the country are applied to the subscription of US dollar BCRA’s Domestic Bills, the
normal contribution shall be equivalent to 0.015%. 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 BCRA 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 BCRA. The BCRA 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 BCRA may suspend or reduce the monthly contributions, and reinstate them
when the contributions subsequently fall below that level (Decree No. 1292/1996).
Other Restrictions
Pursuant to the Financial Institutions Law, financial institutions cannot create any kind of rights
over their assets without the BCRA’s authorization, nor enter into transactions with their directors,
officers or affiliates in terms more favorable than those offered to their clients.
Capital Markets
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.
Financial Institutions undergoing Economic Difficulties
The Financial Institutions Law 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 BCRA 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 Financial
Institutions Law, must (upon request from the BCRA 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 BCRA on a specified date, not later than 30 calendar days from the date on which a request to that
effect is made by the BCRA. Upon the institution’s failure to submit, secure regulatory approval of, or
comply with, a restructuring plan, the BCRA will be empowered to revoke the institution’s license to
operate as such.
Furthermore, the BCRA Charter authorizes the Superintendency to fully or partially suspend,
exclusively subject to the approval of the President of the BCRA, 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 BCRA’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 BCRA’s criteria a financial institution is undergoing a situation which, under the
Financial Institutions Law, would authorize the BCRA to revoke its license to operate as such, the BCRA
96
may, before considering such revocation, order a plan of restructuring that may consist of a series of
measures, including, among others:
•
•
•
•
•
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 BCRA 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 Financial Institutions Law. 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 Financial Institutions Law, the BCRA 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 Financial Institutions Law, 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 BCRA 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 (Ley de Concursos y Quiebras) and the Financial Institutions Law shall be applicable; provided
however that in certain cases, specific provisions of the Financial Institutions Law 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 BCRA. The new entity must submit a
financial-economic structure profile supporting the project in order to obtain authorization from the
BCRA.
c) Relevant Events
General Ordinary Shareholders’ Meeting held on March 31, 2015: On March 31, 2015 the General
Ordinary Shareholders’ Meetings of the Bank was held. At such meeting the following agenda was
discussed: (i) approval of the documents required under Section 234, Subsection 1 of the Business
Companies Law, for the fiscal year ended December 31, 2014; (ii) approval of allocation of retained
earnings in the amount of Ps.549,972 thousand recorded as of December 31, 2014, as follows: (a) 20%,
97
i.e. the amount of Ps.109,994 thousand, to the statutory reserve; and (b) the balance amounting to
Ps.439,978 thousand to the optional reserve for the fulfillment of the Bank’s purposes; (iii) unanimous
approval of the Board of Director’s and Supervisory Committee’s performance; (iv) approval of
compensation payable to the Board of Directors for the fiscal year ended December 31, 2014 in the
amount of Ps.14,821 thousand; (v) approval of fees payable to the Executive Committee for the fiscal
year ended December 31, 2014 for the technical and administrative duties discharged during such year;
(vi) approval of payment of advance fees and compensation to the directors for up to such amount as may
be similar to the one paid during 2014 but increased in the same proportion and as many times as the
salary rises acknowledged to employees under the scope of the applicable collective bargaining
employment agreement; (vii) approval of fees payable to the Supervisory Committee for the fiscal year
ended December 31, 2014 in the amount of Ps.3,534 thousand and authorization for payment of advance
fees during 2015; and (viii) approval by unanimous resolution of engagement of “Price Waterhouse &
Co” firm through the appointment of the partners of such firm, Public Accountants Marcelo Alejandro
Trama and Daniel Hugo Cravino, as regular and alternate independent auditors, respectively, and for them
to sign as certifying accountants the financial statements for the year 2015.
Special Meeting of Class “D” Shareholders held on March 31, 2015: On March 31, 2015 the Special
Meeting of Class "D" Shareholders of the Bank was held. At such meeting, the following agenda was
discussed: (i) unanimous approval of appointment of Regular Directors: Mario Blejer, Ernesto Manuel
Viñes, Jacobo Julio Dreizzen and Gabriel Adolfo Gregorio Reznik for a term of two fiscal years; and (ii)
unanimous approval of appointment of alternate Director Andrés Fabián Ocampo for a term of two fiscal
years.
Special Joint Meeting of Classes “C” and “D” Shareholders held on March 31, 2015: On March 31,
2015 the Special Joint Meeting of Classes “C” and “D” Shareholders of the Bank was held. At such
meeting the shareholders approved the appointment of Regular Statutory Auditors José Daniel Abelovich,
Marcelo Héctor Fuxman and Ricardo Flammini and the Alternate Statutory Auditors Roberto Murmis,
Alicia Rigueira and Noemí Cohn for a term of two fiscal years.
Special Meeting of Class “A” Shareholders held on March 31, 2015: On March 31, 2015 the Special
Meeting of Class "A" Shareholders of the Bank was held. At such meeting, the following agenda was
discussed: (i) unanimous approval of appointment of Regular Directors Lic. Mariana Laura González and
Lic. Diego Luis Bossio for a term of two fiscal years; (ii) unanimous approval of appointment of Regular
Directors Lic. Marcela Constanza Sacavini and Lic. Verónica Daniela Alvarez for a term of two fiscal
years; and (iii) unanimous approval of the appointment of Accountant Francisco Daniel González as
Regular Statutory Auditor and Mr. Alfredo Héctor Groppo as Alternate Statutory Auditor for a term of
two fiscal years.
Special Meeting of Class “B” Shareholders held on March 31, 2015: On March 31, 2015 the Special
Meeting of Class "B" Shareholders of the Bank was held. At such meeting, the shareholders unanimously
approved the appointment of Mr. Héctor Oscar Ivancich as Regular Statutory Auditor and Mr. Martín
Esteban Scotto as Alternate Statutory Auditor for a term of two fiscal years.
Special Meeting of Class “C” Shareholders held on March 31, 2015: On March 31, 2015 the Special
Meeting of Class "C" Shareholders of the Bank was held. At such meeting, the shareholders unanimously
approved to postpone the election of the Alternate Director until the next Shareholders’ Meeting.
Implementation of Employee Participation Program (Programa de Propiedad Participada, “PPP”):
Pursuant to Sections 4 and 5 of Decree No. 2127 dated November 7, 2012 and Section 3 of Resolution
No. 264 issued by the Ministry of Economy and Public Finance on June 18, 2013, the National
Government through the National Office of Equity Standardization (Dirección Nacional de
Normalización Patrimonial), Office of the Programa de Propiedad Participada of the Ministry of
Economy, established the transfer of Class “A” shares to certain former employees. As a result of such
transfer, the Bank reported that:
•
On March 4, 2015, it has requested Caja de Valores S.A. to convert 5,502 Class “A”
common shares into the same number of Class “D” shares and to make the relevant
changes in the ownership thereof. Therefore, listing of such shares converted into
Class “D” has been required.
•
On February 25, 2015, it has requested Caja de Valores S.A. to convert 22,832 Class
“A” common shares into the same number of Class “D” shares and to make the
relevant changes in the ownership thereof. Therefore, listing of such shares
converted into Class “D” has been required.
98
•
On February 23, 2015, it has requested Caja de Valores S.A. to convert 35,130 Class
•
On January 13, 2015, it has requested Caja de Valores S.A. to convert 40,365 Class
Payment of Debt Securities (VRD) Tranche I and Tranche II of the ProCreAr Financial Trust: On
February 13, 2015, the Bank reported that the disbursements under the ProCreAr Financial Trust
amounted to Ps.30,000,000,000. Therefore, as established under the heading “Payment of Debt Securities
(VRD)” of the Offering Memorandum Supplements published in the Daily Newsletter of the Buenos
Aires Stock Exchange on October 21, 2013 and on December 17, 2014, notice was given to holders of
VRD Tranche I and Tranche II that they will be required to pay Ps.700,000,000 and Ps.1,800,000,000,
respectively, within ten (10) days of publication of this Notice of Payment in the Daily Newsletter of the
Buenos Aires Stock Exchange.
Granting of Authorization of listing and trading of Common Shares on Mercado Abierto Electrónico
S.A. (“MAE”): On February 10, 2015, the MAE –through MAE Resolution “C” 4542- has authorized the
Bank: (i) to list on the MAE the Class “A” Book-Entry Common Shares of Ps.1. par value each carrying
one vote per share, in the amount of Ps.670,933,087 par value; (ii) to list on the MAE the Class “B”
Book-Entry Common Shares of Ps.1 par value each carrying one vote per share, in the amount of
Ps.57,009,279 par value; (iii) to list on the MAE the Class “C” Book-Entry Common Shares of Ps.1 par
value each carrying one vote per share, in the amount of Ps.75,000,000 par value; and (iv) to list and trade
on the MAE the Class “D” Book-Entry Common Shares of Ps.1 par value each carrying three votes per
share, in the amount of Ps.697,057,634 par value.Notice of payment of a cash dividend: On January 7, 2015 the Bank's Board of Directors resolved in
connetion with payment of a cash dividend as approved by the General Ordinary Shareholders' Meetings
held on April 24, 2014 (i) to order that the cash dividend in the amount of Ps.42,000,000 be made
available to the shareholders after January 16, 2015; and (ii) to order that the amount paid by the Bank on
account of Personal Asset Tax for 2013 and deductions under Law No. 26,893 which amended the
Income Tax Law shall be deducted from the cash dividend payable to the shareholders who are
companies domiciled in foreing countries and individuals.
d) 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, 2014:
Subsidiary
Business
BACS Banco de
Crédito y
Securitización S.A.
Banking
transactions
BHN Sociedad de
Inversión S.A.
Country of
Incorporation
Argentina
Ownership
interest
(%)
87.50
Percentage of
voting rights
(%)
87.50
Investments
Argentina
99.99
99.99
BH Valores SA
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.
99
A) BACS Banco de Crédito y Securitización 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
TOTAL
B)
BHN Sociedad de Inversión S.A.
Shareholder
Shares
Class
39,131,682
BACS – Banco de Crédito y Securitización S.A.
80
TOTAL
39,131,762
C)
-
Par Value
(Ps.)
39,131,682
80
39,131,762
Votes
%
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
TOTAL
16.201.205
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
TOTAL
10,111,402
E)
Par Value
(Ps.)
120
10,111,282
10,111,402
Votes
120
10,111,282
10,111,402
%
0.002
99.998
100
BH Valores S.A.
Shareholders
Shares
1,425,000
BHN Sociedad de Inversión S.A.
75,000
TOTAL
1,500,000
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
195,037,152 IRSA Propiedades Comerciales S.A. 48,759,288 TOTAL
243,796,440 -
100
Par Value
Votes
%
(Ps.)
195,037,152 195,037,152 80.00
48,759,288 48,759,288 20.00
243,796,440 243,796,440 100.00
e) Fixed Assets11
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$ 32.012 million.
Changes in Bank Premises, Equipment and
Miscellaneous Assets
Net book
value at
the
beginnin
g of the
year
Item
BANK PREMISES
AND
EQUIPMENT
- Real Estate
Properties
- Furniture and
facilities
- Machinery and
Equipment
- Computer
equipment
- Vehicles
- Sundry
Total
MISCELLANEOU
S ASSETS
- Construction in
progress
- Works of art and
collectors’ items
- Leased assets
- Assets acquired
through foreclosures
- Stationery and
office supplies
- Other
miscellaneous assets
Total
Additions
Transfers
Withdra
wals
Losses due
to
impairment
of value
Depreciations for the
Year
Years of
Useful Life
Net Book
Value as of
the Fiscal
Year End
12/31/2014
Amount
Net Book
Value as of
the Fiscal
Year End
12/31/2013
79,058
-
-
-
-
50
2,076
76,982
79,058
16,329
11,852
-
(140)
-
10
3,922
24,119
16,329
15,012
10,169
-
(42)
-
5
5,204
19,935
15,012
10,476
35,293
6,188
-
-
3
12,935
39,022
10,476
54
-
-
-
-
5
27
27
54
1,755
5,236
-
-
-
5
1,917
5,074
1,755
122,684
62,550
6,188
(182)
-
-
26,080
165,159
122,684
2,100
876
-
-
-
2,976
2,100
226
2,731
-
-
-
-
226
226
-
-
50
84
2,647
2,731
2,554
1,003
(2,129)
50
26
1,402
2,554
14,075
7,479
-
-
-
21,554
14,075
25,822
6,217
-
50
1,996
30,985
25,822
47,508
15,575
(2,129)
-
2,106
59,790
47,508
11
This table has been prepared with the Bank’s internal information, and may not be comparable with Schedule F to the Bank’s
financial statements, as the latter are prepared in unconsolidated form whereas this table was prepared in consolidated form for
purposes of providing a better disclosure and understanding of the Bank’s operations by the investors.
12
Bank's internal information
101
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 BCRA 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, 2012, 2013 and 2014 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.A. GAAP and how those differences
affect the financial information herein contained.
(a) Operating Result
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 BCRA 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, 2014, 2013 and 2012 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
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. and Tarshop S.A. for the fiscal years ended December
31, 2014, 2013 and 2012.
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
BCRA. 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.
102
Income Tax
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 Bank has determined Income Tax liability in accordance with the rules and provisions
mentioned above.
Minimum Presumed Income Tax
The Bank has recognized as a tax credit as of December 31, 2014 the minimum presumed
income tax paid from 2006 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.
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, 2013 and 2014
General
The following table sets forth the principal components of the Bank’s net income for the years
ended December 31, 2013 and 2014:
103
Net Income
Year ended
2014
Financial income
Financial expenses
Net financial margin
Net contribution from insurance
Other net income from services
Minority interest
Miscellaneous income, net
Income tax
Net income
% Change
2014/2013
2013
(in Million Pesos)
5,294.9
3,232.1
63.8%
(2,973.4)
(1,602.5)
85.5%
2,321.5
1,629.6
42.5%
(343.4)
840.6
1,069.3
(2,855.7)
25.7
(81.2)
(264.3)
501.0
718.3
(1,897.0)
(7.2)
(65.3)
29.9%
67.8%
48.9%
50.5%
N/A
24.3%
(426.6)
(194.1)
119.8%
550.0
421.0
30.7%
The net income for the year ended December 31, 2014 increased by 30.7%, compared to the
income for the year ended December 31, 2013, mainly due to higher financial income, net income from
services and net contribution from insurance as a result of a general increase in the volume of the Bank’s
businesses and increased diversity of products offered to clients. Such increases were partially offset by
increased administration expenses related to higher salaries and higher income tax payments.
Financial Income
The following table sets forth the principal components of financial income for the years ended
December 31, 2013 and 2014:
Year ended
2014
2013
(in Million Pesos)
3,794.0
2,241.5
Interest from loans to the private sector
Income from Government and corporate
securities
Interest from loans to the public sector
Hedging transactions
Total financial income
% Change
2014 / 2013
69.3%
1,091.7
24.5
384.6
674.3
18.0
298.3
61.9%
36.2%
28.9%
5,294.9
3,232.1
63.8%
Financial income for the year ended December 31, 2014 increased by 63.8% from the previous
period due to higher interest income from loans to the private sector and higher income from Government
and corporate securities.
Financial Expenses
The following table sets forth the principal components of financial expenses for the years ended
Interest on financial liabilities
Interest on deposits
Interest on other liabilities
Foreign exchange differences
Taxes
Year ended
2014
2013
(in Million Pesos)
602.7
350.1
1,661.1
854.3
204.1
104.2
108.9
74.0
72.6
33.8
324.0
186.2
Total financial expenses
2,973.4
104
1,602.5
% Change
2014 / 2013
72.2%
94.4%
95.8%
47.2%
114.5%
74.1%
85.5%
Financial expenses for the fiscal year ended December 31, 2014 increased 85.5% as compared to
the previous fiscal year, mainly due to higher interest on deposits due to an increase in the basis of
deposits and higher interest on financial liabilities.
Provision for Losses on Loans
The following table sets forth the provision for loan losses for the years ended December 31,
2013 and 2014:
Year ended
2014
2013
(in Millions Pesos)
343.4
264.3
Provisions for loan losses
% Change
2014 / 2013
29.9%
Provisions for loan losses increased by Ps. 79.1 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, 2013 and 2014:
Year ended
2014
2013
(in Million Pesos)
% Change
2014 / 2013
Insurance premiums earned:
Life
Property damage
Unemployment
Other
Subsidiaries
25.7
11.9
0.2
72.8
868.3
38.0
13.0
0.3
47.6
491.1
(32.5)%
(8.8)%
(37.1)%
53.0%
76.8%
Total insurance premiums earned
978.8
590.0
65.9%
Claims paid:
Life
Property damage
Unemployment
Other
Subsidiaries
3.7
0.3
0.0
0.6
133.7
5.1
0.2
0.0
1.1
82.5
(26.5)%
6.4%
(64.3)%
(48.8)%
62.0%
Total claims paid
138.3
89.0
55.4%
Total net contribution from insurance
840.6
501.0
67.8%
Net contribution from insurance increased from Ps. 501.0 million in 2013 to Ps. 840.6 million in
2014, accounting for an increase of 67.8% as a result of increased activities of our subsidiary BHN
Inversión S.A. explained by 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, 2013 and 2014:
Year ended
2014
2013
(in Million Pesos)
105
% Change
2014 / 2013
Other income from services
Loan commissions
FONAVI commissions
Deposits commissions
Credit card commissions
Other commissions
67.0
116.6
874.2
572.8
99.4
0.4
65.6
610.4
371.6
(32.6)%
(100.0)%
77.7%
43.2%
54.2%
1,630.6
1,147.4
42.1%
Other expenses on services
Loan commissions
Placement commissions
Taxes
Other commissions
47.8
13.9
56.3
32.1
236.3
175.0
41.1
11.9
55.2
20.0
166.8
134.1
16.2%
16.8%
2.0%
60.5%
41.7%
30.5%
Total other expenses on services
561.4
429.1
30.8%
1,069.3
718.3
48.9%
Total other income from services
Total other income from services, net
Other income from services, net increased by Ps. 351.0 million, compared to the previous year,
due to an increase in the Bank’s and Tarshop’s volume of credit card business.
Administrative Expenses
The following table sets forth the principal components of administrative expenses for the years
Year ended
2014
2013
(in Million Pesos)
1,579.6
1,070.4
293.2
185.6
56.0
54.6
171.9
97.0
145.5
106.2
84.4
45.9
321.2
195.5
203.9
141.7
Salaries and social security contributions
Other fees
Fees to directors and statutory auditors
Advertising and publicity
Taxes
Amortizations
Operating expenses
Other
Total administrative expenses
2,855.7
1,897.0
% Change
2014 / 2013
47.6%
58.0%
2.5%
77.2%
37.0%
84.1%
64.3%
43.9%
50.5%
Administrative expenses increased by 50.5%, compared to year 2013. 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
Year ended
2014
2013
(in Million Pesos)
Miscellaneous income
Penalty interest
77.3
106
% Change
2014 / 2013
48.3
59.9%
Reversal of provisions
Loan recoveries
7.4
98.0
Other
9.9
59.7
(25.6)%
64.1%
97.9
59.1
65.5%
Total miscellaneous income
280.5
177.1
58.4%
Miscellaneous losses
Lawsuits
Other provisions charges
Provisions for taxes
Taxes
Loan rebates
22.5
93.9
54.8
19.9
170.7
29.9
30.6
3.3
34.0
19.0
125.7
(24.8)%
207.2%
(100.0)%
61.1%
4.8%
35.8%
Other
361.7
242.4
49.2%
Total miscellaneous losses
Total miscellaneous income, net
(81.2)
(65.3)
24.3%
Miscellaneous income, net decreased by Ps. 15.9 million, compared to the previous year mainly
due to higher other provisions charges and increased miscellaneous losses, partially offset by higher loan
recoveries and other miscellaneous income.
Years ended December 31, 2012 and 2013
General
The following table sets forth the principal components of the Bank’s net income for the years
107
Net Income
Financial income
Year ended
2013
2012
(in Million Pesos)
3,232.1
2,180.7
Financial expenses
(1,602.5)
(1,138.6)
40.7%
1,629.6
1,042.1
56.4%
(264.3)
501.0
718.3
(1,897.0)
(7.2)
(65.3)
(200.9)
314.0
666.8
(1,440.4)
(9.6)
26.7
31.5%
59.5%
7.7%
31.7%
(25.0)%
N/A
(194.1)
(55.1)
252.3%
421.0
343.6
22.5%
Net financial income
Other net income from services
Minority interest
Miscellaneous income, net
Income tax
Net income
% Change
2013/2012
48.2%
The net income for the year ended December 31, 2013 increased by 22.5%, compared to the
income for the year ended December 31, 2012, mainly due to higher financial income and net
contribution from insurance, due to a general increase in the Bank’s business volume and improvements
in the diversity of products offered to the customers. Such increases were partially offset by increased
administration expenses related to higher salaries and higher income tax payments.
Financial Income
The following table sets forth the principal components of financial income for the years ended
Year ended
2013
2012
(in Million Pesos)
2,241.5
1,559.4
Interest from loans to the private sector
Income from Government and corporate
securities
Interest from loans to the public sector
Total financial income
% Change
2013 / 2012
43.7%
674.3
18.0
298.3
548.8
18.7
53.9
22.9%
(3.7)%
N/A
3,232.1
2,180.7
48.2%
Financial income for the year ended December 31, 2013 increased by 48.2% from the previous
year due to higher interest income from loans to the private sector and higher income from hedging
transactions.
Financial Expenses
The following table sets forth the principal components of financial expenses for the years ended
Interest on financial liabilities
Interest on deposits
Interest on other liabilities
Foreign exchange differences
Taxes
Total financial expenses
Year ended
2013
2012
(in Million Pesos)
350.1
225.8
854.3
585.4
104.2
78.6
74.0
137.6
33.8
15.5
186.2
95.7
1,602.5
108
1,138.6
% Change
2013 / 2012
55.0%
45.9%
32.5%
(46.2)%
117.7%
94.6%
40.7%
Financial expenses for the year ended December 31, 2013 increased Ps. 40.7% compared to the
previous fiscal year, primarily as a result of increased interest on deposits due to an increase in deposits
and higher interest on financial liabilities.
Provision for Losses on Loans
The following table sets forth the provision for loan losses for the years ended December 31,
2012 and 2013:
Year ended
2013
2012
(in Millions Pesos)
264.3
200.9
Provisions for loan losses
% Change
2013 / 2012
31.5%
Provisions for loan losses increased by Ps. 63.4 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, 2012 and 2013:
Year ended
2013
% Change
2012
2013/2012
(in Million Pesos)
Insurance premiums earned:
Life
Property damage
Unemployment
Other
Subsidiaries
Total insurance premiums earned
38.0
13.0
0.3
47.6
491.1
590.0
52.8
15.2
0.4
33.3
280.9
382.7
Claims paid:
Life
Property damage
Unemployment
Other
Subsidiaries
Total claims paid
5.1
0.2
0.0
1.1
82.5
89.0
5.4
0.6
0.0
1.2
61.5
68.7
Total net contribution from insurance
(28.0)%
(14.8)%
(27.8)%
42.7%
74.8%
54.1%
501.0
314.0
Net contribution from insurance increased from Ps. 314.0 million in 2012 to Ps. 501.0 million in
2013 as a result of the increased activity of our subsidiary BHN Inversión S.A. explained by 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, 2012 and 2013:
Year ended
2013
2012
109
(6.5)%
(60.7)%
(17.6)%
(4.7)%
34.2%
29.5%
% Change
2013/2012
59.5%
(in Million Pesos)
Other income from services
Loan commissions
FONAVI commissions
Other commissions
99.4
0.4
65.6
610.4
371.6
99.8
20.5
46.8
500.6
121.7
(0.4)%
(98.3)%
40.2%
21.9%
205.4%
1.147.4
789.4
45.3%
Other expenses on services
Loan commissions
Placement commissions
Taxes
Other commissions
41.1
11.9
55.2
20.0
166.8
134.1
30.1
8.2
29.4
13.8
106.5
(65.4)
36.4%
45.5%
87.7%
44.5%
56.6%
N/A
Total other expenses on services
429.1
122.6
249.9%
Total other income from services, net
718.3
666.8
7.7%
Total other income from services
Other income from services, net increased by Ps. 51.5 million, compared to the previous year,
due to an increased activity in the credit card business of the Bank and Tarshop S.A.
Administrative Expenses
The following table sets forth the principal components of administrative expenses for the years
Salaries and social security contributions
Other fees
Fees to directors and statutory auditors
Advertising and publicity
Taxes
Amortizations
Operating expenses
Other
Year ended
2013
2012
(in Million Pesos)
1,070.4
773.5
185.6
149.1
54.6
35.3
97.0
85.9
106.2
91.8
45.9
32.8
195.5
145.2
141.7
126.9
Total administrative expenses
1,897.0
1,440.4
% Change
2013/2012
38.4%
24.5%
54.8%
12.9%
15.6%
39.9%
34.7%
11.7%
31.7%
Administrative expenses increased by 31.7%, compared to year 2012. 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
Year ended
2013
2012
(in Million Pesos)
Miscellaneous income
110
% Change
2013/2012
Penalty interest
Reversal of provisions
Loan recoveries
48.3
9.9
59.7
Other
Total miscellaneous income
Miscellaneous losses
Lawsuits
Other provisions charges
Provisions for taxes
Taxes
Loan rebates
52.0
10.6
98.6
(7.0)%
(6.6)%
(39.5)%
59.1
48.3
22.5%
177.1
209.4
(15.4)%
29.9
30.6
3.3
34.0
19.0
35.6
31.0
(3.9)
20.6
19.6
(16.2)%
(1.4)%
(184.3)%
64.8%
(3.4)%
Other
125.7
79.7
57.7%
Total miscellaneous losses
242.4
182.8
32.6%
Total miscellaneous income, net
(65.3)
26.7
N/A
Miscellaneous income, net decreased by Ps. 92.0 million, compared to the previous year mainly
due to lower loan recoveries and higher miscellaneous losses.
b) Liquidity and Capital Resources
The Bank’s general policy has been to maintain adequate liquidity to meet its operational needs
and financial obligations. At December 31, 2014, the Bank’s liquid assets consisted of:
•
•
•
•
Ps. 1,211.1 million of cash and due from banks, (net of regulatory minimum reserve
[encaje]),
Ps. 141.1 million of government securities recorded at cost plus return,
Ps. 1,770.7 million of government and corporate securities recorded as holdings at fair
market value, and
Ps. 2,524.7 million of BCRA instruments.
As of December 31, 2013, the Bank’s liquid assets consisted of:
•
•
•
•
Ps. 840.7 million of cash and due from banks, (net of regulatory minimum reserve [encaje]),
Ps. 1,537.6 million of government and corporate securities recorded at fair market value,
and
Ps. 29.9 million of BCRA instruments.
As of 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. 894.4 million of government and corporate securities recorded at fair market value, and
Ps. 972.1 million of BCRA instruments.
Funding
The Bank finances its lending operations mainly through:
•
•
deposits,
the issuance of notes in international and domestic capital markets,
111
•
•
•
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
2012
2013
2014
(in Million Pesos)
Notes......................................................................................
2,049.7
2,721.5
Borrowings from banks and other international entities.................
267.2
424.7
327.5
Deposits .................................................................................
8,011.1
10,889.8
18,334.1
Total ......................................................................................
10,328.1
14,036.0
23,121.6
4,460.0
Notes13
The following table shows the Bank’s series of notes outstanding as of December 31, 2014:
13
Prepared using Bank’s internal information.
112
Depo
sits
The
follo
wing
table
show
s the
Bank
’s
depos
its as
of the
dates
indic
ated:
Issue Date
Maturity Date
04/27/2006
04/27/2016
Balance as of
December
14
31,2014
In thousands of Pesos
BHSA Program US$ 1,200 million
Series 5 (US$ 250,000,000)
BHSA Program US$ 500 million
Series IX (Pesos 258,997 thousand)
Series XI (Pesos 146,137 thousand)
Series XII (US$ 44,508 thousand)
Series XIV (Pesos 115,400 thousand)
Series XV (Pesos 12,340 thousand)
Series XVI (Pesos 89,683 thousand)
Series XVIII (Pesos 20,046 thousand)
Series XIX (Pesos 275,830 thousand)
Series XX (Pesos 45,241 thousand)
Series XXI (Pesos 222,345 thousand)
Series XXII (Pesos 253,152 thousand)
Series XXIII (Pesos 119,386
thousand)
Annual
Interest
Rate
9.75%
1,799,956
04/25/2013
08/14/2013
08/14/2013
11/11/2013
01/31/2014
01/31/2014
05/16/2014
05/16/2014
07/30/2014
07/30/2014
11/05/2014
11/05/2014
01/25/2015
05/14/2015
08/14/2017
11/11/2015
01/26/2015
01/31/2016
02/16/2015
11/16/2015
04/30/2015
01/30/2016
08/05/2015
05/05/2016
Badlar+2.80%
Badlar+3.75%
3.95%
Badlar+3.75%
27.00%
Badlar+4.25%
27%
Badlar+3.75%
25.50%
Badlar+2.75%
Lebac*0.95%
Badlar+3.25%
202,793
146,137
322,804
115,400
12,340
89,683
20,046
275,830
45,241
222,345
253,152
119,386
Tarshop Program US$ 200 million
Class XI (Pesos 10,837 thousand)
Class XII (Pesos 83,588 thousand)
Class XIV (Pesos 30,245 thousand)
Class XV (Pesos 119,775 thousand)
Class XVII (Pesos 41,066 thousand)
Class XVIII (Pesos 69,291 thousand)
Class XIX (Pesos 6,316 thousand)
05/23/2013
08/09/2013
04/21/2014
04/21/2014
11/26/2014
11/26/2014
11/26/2014
05/23/2016
08/09/2015
01/21/2015
10/21/2015
08/26/2015
05/26/2016
11/26/2017
Badlar+5.80%
15.00%
30.00%
Badlar+4.90%
Lebac*0.95
Badlar+4.25%
Badlar+5.25%
10,755
77,848
30,016
118,848
40,755
68,766
6,268
BACS Program US$ 150 million
Class I (Pesos 130,435 thousand)
Class III (Pesos 132,726 thousand)
Class IV (Pesos 105,555 thousand)
02/19/2014
08/19/2014
11/21/2014
08/19/2015
05/19/2016
08/21/2016
Badlar+4.50%
Badlar+2.75%
Badlar+3.50%
130,435
132,726
105,555
4,347,084
14
The balances stated in the offering memorandum include outstanding principal and capitalized issue expenses of each species, net
of eliminations.
113
As of December,
2014
In thousands
of:
US$(1)
Deposits
2014
2013
Variation 2014/2013
In thousands of:
Ps.
Ps.
Ps.
In%
1,064,175
9,100,822
4,142,809
4,958,013
119.7%
867
7,416
8,109
(693)
(8.5)%
1,078,797
9,225,875
6,738,876
2,486,999
36.9%
88,930
760,533
526,413
234,120
44.5%
Savings accounts
289,949
2,479,643
1,443,467
1,036,176
71.8%
Fixed-term deposits
582,767
4,983,820
4,265,680
718,140
16.8%
Investment accounts
83,424
713,438
304,241
409,197
134.5%
18,249
156,068
126,748
29,320
23.1%
15,479
132,373
72,327
60,046
83.0%
2,143,839
18,334,113
10,889,794
7,444,319
68.4%
Financial sector
Non-financial private sector and residents
abroad
Checking accounts
Other
Accrued interest and exchange differences
payable
Total deposits
(1) The exchange rate used for purposes of translation of balances as of December 31, 2014 was Ps. 8.5520 = US$ 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.
As of December 31, 2014, the financial trusts funds executed by the Bank as trustor(1):
Debt Securities
Class A1/AV
Debt
Securities
Class A2/AF
Debt Securities
Class B
Participation Certificates
BHN II- Issued on 05.09.1997 (*)
Face value in thousands of Ps.
Declared Maturity Date
445.5
03.25.2001
513.6
07.25.2009
11,780.0
03.25.2012
137,695.5
05.25.2013
BHN III- Issued on 10.29.1997 (*)
8.3
05.31.2017
14.9
05.31.2017
20,455.5
05.31.2018
74,730.7
05.31.2018
BHN IV- Issued on 03.15.2000 (*)
36.6
03.31.2011
120.3
03.31.2011
165,225.2
01.31.2020
6,768.9
01.31.2020
-
-
-
-
BACS Funding I-Issued on 11.15.2001 (*)
114
BACS Funding II-Issued on 11.23.2001 (*)
-
-
-
-
BHSA I - Issued on 02.01.2002
-
-
-
8,148.5
CHA VI – Issued on 04.07.2006
9,244.3
12.31.2016
13,639.0
12.31.2026
CHA VII – Issued on 09.27.2006
23,292.1
08.31.2017
2,738.6
02.28.2028
CHA VIII – Issued on 03.26.2007
28,158.9
08.31.2024
917.4
08.31.2028
CHA IX – Issued on 08.28.2009
139,779.7
02.07.2027
9,983.4
07.07.2027
CHA X – Issued on 08.28.2009
Face value in thousands of US$
63,676,4
01.07.2027
06.07.2028
CHA XI – Issued on 12.21.2009
137,505.6
03.10.2024
14,273.5
10.10.2024
CHA XII – Issued on 07.21.2010
182,876.4
11.10.2028
18,886.7
02.10.2029
CHA XIII – Issued on 12.02.2010
92,972.7
12.10.2029
5,816.8
04.10.2030
CHA XIV – Issued on 03.18.2011
101,159.1
05.10.2030
5,978.1
08.10.2030
3,122.1
(*)Trusts subject to the pesification of foreign currency assets and liabilities at the $1.00=US$ 1 rate established by Law No.
25561 and Decree No. 214, as they were created under Argentine legislation. Certain holders of Class A debt securities have
started declarative actions against the trustee pursuant to the application of the pesification measures set forth in Law No.
25561 and Decree No. 214, in order to maintain the currency of origin of said securities. In these declarative actions, the
Bank acted together with BACS as third party. The trustee has duly answered to this claim, being the final resolution to this
situation still pending.
(1)
Prepared using Bank’s internal information, in thousands of Pesos, except as otherwise indicated.
115
The following table shows the balances outstanding under the financial trust agreements executed by
Tarshop S.A., as trustor (1):
Commencement
Date
Series 75
Series 76
Series 77
Series 78
Series 79
Series 80
Series 81
(1)
12/09/2013
01/17/2014
02/28/2014
04/09/2014
07/15/2014
08/08/2014
10/17/2014
Bonds
Class A
Class A2/AF
17,850.0
11,813.6
18,823.7
54,030.6
72,081.3
51,221.4
59,841.5
Participation
Certificates
Class B
-
-
32,374.2
26,600.0
37,799.6
49,100.4
49,659.3
33,867.8
28,231.1
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(1):
Bonds
Bonds
Bonds
Commencement Date
Class A1/AV
Class A2/AF
Class B
Participation Certificates
BACS I
02/15/2001
1,594.2
72.4
39,718.5
-
BACS III
08/17/2011
13,271.0
-
-
-
(1)
Prepared using Bank’s internal information, in thousands of Pesos.
116
DIRECTORS, OFFICERS, SENIOR MANAGEMENT AND MEMBERS OF THE
SUPERVISORY COMMITTEE
a) Board of Directors
The Bank is managed by a board of directors, which is currently composed of thirteen directors
and nine alternate directors. The members of the board of directors are elected to hold office for twofiscal 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 and their respective alternates representing Class A shares;
one member and its respective alternate representing Class B shares;
one member representing Class C shares; and
nine members and 6 alternates representing Class D shares.
The following table shows the current members of the Bank's board of directors:
First and last name
Identity Document
No.
Date of Birth
Taxpayer’s Code
(CUIL/CUIT)
01/26/1960
Eduardo Sergio Elsztain
14,014,114
20-14010114-4
Mario Blejer
4,619,694
06/11/1948
20-04619694-6
Diego Luis Bossio
27,605,823
09/09/1979
20-27605823-2
Mariana González(1)
25,182,275
02/13/1976
27-25182275-7
Edgardo Luis José
Fornero
10,201,571
10/14/1951
20-10201571-2
Ada Mercedes Maza
12,851,009
09/17/1958
27-12851009-0
Mauricio Elías Wior
12,746,435
10/23/1956
23-12746435-9
Saúl Zang
4,533,949
12/30/1945
20-04533949-2
Ernesto Manuel Viñes
4,596,798
02/05/1944
20-04596798-1
Gabriel Adolfo Gregorio
Reznik
12,945,351
11/18/1958
20-12945351-7
Jacobo Julio Dreizzen
11,955,534
10/13/1955
20-11955534-6
Pablo Daniel Vergara del
Carril
17,839,402
10/03/1965
23-17839402-9
Carlos Bernardo Písula
4,699,992
12/16/1948
20-04699992-5
117
Term
Domicile
Position
Bolívar 108,
City of Buenos
Aires
Chairman
Reconquista
151, 5th Floor,
Vice-chairman
City of Buenos
Aires
Córdoba 720,
5th Floor, City
Director
of Buenos Aires
Hipolito
Yrigoyen 250
Director
th
8 Floor, City of
Buenos Aires
Reconquista 151
Director
5th Floor, City
of Buenos Aires
Reconquista 151
Director
5th Floor, City
of Buenos Aires
Reconquista 151
5th Floor,
Director
City of Buenos
Aires
Florida 537 18th
Floor, City of
Director
Buenos Aires
Reconquista 151
5th Floor, City
Director
of Buenos Aires
Reconquista
151, 5th Floor,
Director
City of Buenos
Aires
Reconquista 151
5th Floor, City
Director
of Buenos Aires
Florida 537 18th
Floor, City of
Director
Buenos Aires
Reconquista 151
5th Floor, City
Director
of Buenos Aires
Class
In Office
Since
03/15/1999
D
04/24/2014 –
12/31/2015
D
03/31/2015 –
05/12/2010
12/31/2016
A
03/31/2015 –
01/13/2009
12/31/2016
A
03/31/2015 –
04/24/2013
12/31/2016
B
04/24/2014 –
09/28/1997
12/31/2015
C
04/24/2014 –
04/18/2012
12/31/2015
D
04/24/2014 –
03/06/2008
12/31/2015
D
04/24/2014 –
03/15/1999
12/31/2015
D
03/31/2015 –
10/03/2002
12/31/2016
D
03/31/2015 –
08/15/2002
12/31/2016
D
03/31/2015 –
07/07/2004
12/31/2016
D
04/24/2014 –
09/17/2002
12/31/2015
D
04/24/2014 –
05/02/2003
12/31/2015
Marcela Sacavini(3)
31,896,421
09/23/1985
27-31896421-7
Daniela Alvarez(3)
17,481,162
09/21/1964
27-174891162-3
Jorge Augusto Alvarez(2)
13,806,850
01/11/1960
20-13806850-2
Gustavo Daniel
Efkhanian
17,012,120
10/28/1964
20-17012120-2
Daniel Ricardo Elsztain
23,086,679
12/22/1972
20-23086679-2
Andrés Fabián Ocampo
12,454,604
11/09/1956
20-124546045-5
Mario César Parrado
92,005,026
04/11/1959
20-92005026-4
Gabriel Pablo Blasi
14,222,826
11/22/1960
20-14222826-3
Federico León Bensadón
4,100,916
01/17/1933
20-04100916-1
(1)
(2)
(3)
Hipolito
Yrigoyen 250
office 806 8th
Floor, City of
Buenos Aires
Hipolito
Yrigoyen 250
8th Floor office
826, City of
Buenos Aires
Av. España
1057, City of
Buenos Aires
Reconquista 151
5th Floor, City
of Buenos Aires
Moreno 877
22nd Floor, City
of Buenos Aires
Reconquista
151, 5th Floor,
City of Buenos
Aires
Rosales 2620
2nd 4th Floor,
City of Buenos
Aires
Reconquista
151, City of
Buenos Aires
Florida 15 9th
Floor, City of
Buenos Aires
Alternate
Director
A
03/31/2015 –
04/24/2013
12/31/2016
Alternate
Director
A
03/31/2015 –
04/24/2013
12/31/2016
Alternate
Director
B
04/24/2014 –
03/06/2008
12/31/2015
Alternate
Director
D
04/24/2014 –
02/03/2000
12/31/2015
Alternate
Director
D
04/24/2014 –
03/06/2008
12/31/2015
Alternate
Director
D
03/31/2015 –
03/06/2008
12/31/2016
Alternate
Director
D
04/24/2014 –
04/16/2009
12/31/2015
Alternate
Director
D
04/24/2014 –
02/03/2011
12/31/2015
Alternate
Director
D
04/24/2014 –
08/22/2002
12/31/2015
Class A Regular Director took office on an interim basis until the BCRA issues a formal authorization (pursuant to
Communication “A” 4490).
Continue in their positions until their replacements are appointed at the next Shareholders’ Meeting.
Class “A” Alternate Directors, subject to BCRA’s approval.
Carlos Bernardo Písula, Jacobo Julio Dreizzen, Diego Luis Bossio, Ada Mercedes Maza and
Mariana Laura González and alternate directors Verónica Daniela Alvarez, Marcela Constanza Sacavini
and Federico León Bensadón are independent under the terms of the CNV Rules
Directors Eduardo Sergio Elsztain, Saúl Zang, Ernesto Manuel Viñes, Gabriel Gregorio Reznik,
Pablo Vergara del Carril, Mauricio Elías Wior, Mario Blejer, Edgardo Luis José Fornero and alternate
directors, Ricardo Daniel Elsztain, Jorge Augusto Alvarez, Gustavo Daniel Efkhanian, Andrés Ocampo,
Mario César Parrado and Gabriel Pablo Blasi are non-independent under the terms of the CNV Rules.
Below is a summarized biography of the Bank’s directors and alternate directors:
Eduardo Sergio Elsztain. Mr. Elsztain is the Chairman of the Bank and of IRSA Inversiones y
Representaciones Sociedad Anónima, IRSA Propiedades Comerciales S.A. Cresud S.A.C.I.F. y A.,
Tarshop S.A, BACS Banco de Crédito y Securitización, and Brasilagro Compañía de Propiedades
Agrícolas, among other companies. He is also Chairman of Fundación IRSA, which promotes the
education and development of young professionals through its Puerta 18 program, Museo de los Niños
Abasto and Alto Rosario. He is also member of the Global Consulting Committee of Endeavor, which
promotes the development of high-impact entrepreneurs.
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 International Monetary Fund in its European and
Asia Departments. He was Vice Chairman and Chairman of the BCRA between 2001 and 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. He was also an external advisor to the Monetary
Policy Board of the Central Bank of Mauritius and is professor of post-graduate courses at Universidad
Torcuato Di Tella.
118
Diego Luis 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 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. He has been Executive Director of ANSES (Federal Social
Security Agency) since July 2009.
Mariana González. Mrs. González obtained a Bachelor Degree in Economics and a Master
degree in Economics from Universidad de Buenos Aires. She obtained a PhD in Social Sciences from
Facultad Latinoamericana de Ciencias Sociales. She performed research and consulting activities. She is a
university professor and at present, she is Assistant Secretary of Economic Coordination and
Competitiveness Improvement at the Economic Policy and Development Planning Office of the Ministry
of Economy and Public Finance.
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 obtained a degree in Mining Engineering from Universidad
Nacional de La Rioja and completed the Technical Degree in Legislative Administration at the
Educational Institute of the Ministry of Education of the Province of La Rioja. She worked at Compañía
Financiera Condecor, as Municipal Councilor in the Province of La Rioja and then, she served as Private
Secretary of the Government and of the Operating Department of the Government of the Province of La
Rioja. She later served as National Senator of such province for 10 years. She also participated as member
of the Latin American Parliament in her capacity of Senator.
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 Movicom and as regional Vice President for the Latin
America for Bellsouth until 2005. Mr. Wior is also the Vice Chairman of Tarshop S.A.
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, IRSA Propiedades Comerciales S.A., Puerto Retiro
and Fibesa, and first 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 S.A., BACS Banco de Crédito y Securitización and
BrasilAgro Companhia Brasilera de Propiedades Agrícolas, among other companies.
university professor and has worked on a self-employed basis. At present, he serves as Legal Department
Manager of the Bank. He is a founding partner of the law firm Zang, Bergel & Viñes Abogados.
Gabriel Adolfo Gregorio Reznik. Mr. Reznik has been a Director of the Bank 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 IRSA Propiedades Comerciales S.A., 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.
119
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 BCRA 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. Mr. Dreizzen has been professor of Corporate Finance at the
Universidad de Buenos Aires Capital Markets Graduate Program since 1993.
Pablo Daniel Vergara del Carril. Mr. Vergara del Carril obtained a degree in Law from
Universidad Católica de Buenos Aires, 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 IRSA Propiedades Comerciales S.A..
He is one of the partners at Zang, Bergel & Viñes Abogados law firm.
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 member of the Board of Directors of the Bank, representing Class D
shares. He is Chairman of the Audit Committee of the Bank and member of the Credit Risk Committee.
He takes part in different commissions of the Cámara Argentina de la Construcción (CAC) and the
Instituto de Estadística y Registro de la Industria de la Construcción (IERIC) as member of the Executive
Committee. He is also a board member of various private construction and real estate companies.
Marcela Sacavini. Mrs. Sacavini obtained a Bachelor degree in Economics from Universidad de
Buenos Aires, where she took postgraduate courses, conducted research activities and acts as professor.
At present, she serves as officer of the Economic Policy and Development Planning Office of the
Ministry of Economy and Public Finance.
Daniela Álvarez. Mrs. Álvarez obtained a Bachelor degree in Economics from Universidad de
Buenos Aires, performed specialization activities in legislative budgets and forms part of the work team
managing the budget of the National Constitutional Convention (Convención Constituyente Nacional)
and the Constitutional Convention of the City of Buenos Aires (Convención Constituyente de la Ciudad
de Buenos Aires). At present, she acts as assistant officer of the Economic Policy and Development
Planning Office of the Ministry of Economy and Public Finance.
Jorge Augusto Álvarez. Mr. Álvarez took courses as system programmer at the Universidad de
Champagnat, Mendoza. He has served as Head of Division ofthe Bank since 1979.
(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.
Daniel R. Elsztain. Mr. Elsztain obtained a bachelor degree in Economics from Universidad
Torcuato Di Tella and a Master’s degree in Business Administration from the IAE. He currently serves as
Chief Operating Officer of IRSA Inversiones y Representaciones Sociedad Anónima, and as Director at
IRSA Propiedades Comerciales S.A., IRSA Inversiones y Representaciones Sociedad Anónima and
Supertel Hospitality Inc., among other companies. Mr. Daniel R. Elsztain is brother of the Bank
Chairman, Eduardo S. Elsztain.
120
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 Pablo Blasi. Mr. Blasi obtained a degree in Business Administration and carried out
post-graduate studies in Finance at Universidad del CEMA—Centro de Estudios Macroeconómicos
Propiedades Comerciales S.A. Currently he is the Bank's Chief Financial Officer.
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.
Senior Management
The Bank’s Senior Management consists of the following officers:
Name
Identity
Document
Position
17,996,278
Fernando
Rubín
General Manager
Gerardo
Rovner
Corporate Auditing
Manager
Ernesto
Manuel
Viñes
Legal Department
Manager
Gustavo
Daniel
Efkhanian
Risk
Controlling
Manager
Manuel
Herrera
Corporate Banking
Manager
Esteban
Guillermo
Vainer
Retail
Manager
Sebastián
Argibay
Molina
Organizational and
Quality
Development
Manager
Favio
Gabriel
Podjarny
Corporate Services
Manager
Gabriel
Pablo Blasi
Finance Manager
Javier
Eduardo
Varani
Institutional
Relations Manager
and
Taxpayer’s
Code
(CUIL/CUIT)
20-17996278-1
Date of
Birth
06/20/1966
17,730,181
20-17730181-8
01/30/1965
4,596,798
20-04596798-1
02/05/1944
17,012,120
20-17012120-2
10/28/1964
Banking
92,761,368
23-92761368-9
11/04/1966
22,431,651
20-22431651-9
10/11/1971
24,227,378
20-24227378-9
10/10/1974
17,140,517
20-17140517-4
07/01/1964
14,222,826
20-14222826-6
11/22/1960
17,203,766
20-17203766-7
12/31/1964
121
Domicile
In Office
Since
Reconquista 151,
City of Buenos
Aires.
Reconquista 151
5th Floor, City of
Buenos Aires.
Reconquista 151
5th Floor, City of
Buenos Aires.
Reconquista 151
5th Floor, City of
Buenos Aires.
Tte. Gral. Perón
525, City of
Buenos Aires.
Reconquista 151
4th Floor, City of
Buenos Aires.
Reconquista 151,
City of Buenos
Aires.
01/01/2010
Reconquista 151,
City of Buenos
Aires.
Reconquista 151,
City of Buenos
Aires.
Reconquista 151,
City of Buenos
Aires.
06/01/2010
02/01/2012
10/01/2003
07/01/2009
11/02/2009
06/01/2010
06/01/2013
12/07/2011
09/01/2011
Jorge
Alberto
Cruces
PROCREAR Urban
Projects Manager
Fernando
Javier Turri
Systems and
Technology Manager
92,307,903
22,099,184
20-92307903-4
23-22099184-9
11/07/1966
Tte. Gral. Perón
525, City of
Buenos Aires.
03/14/1971
Reconquista 151,
City of Buenos
Aires
12/01/2013
12/17/2014
Below is a summarized biography of the Bank’s senior managers:
Fernando Rubín. Mr. Rubín joined the Bank as the Bank’s 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 Inversiones y
Representaciones Sociedad Anónima. 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 & Partner-International Management Consultant.
Gerardo Rovner. Mr. Rovner holds a degree in Economics from Universidad de Buenos Aires.
He has been working at the Bank 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.
university professor and has worked on a self-employed basis. He is a founding partner of the law firm
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 USA 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 the United
States of America.
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 y Buenos Aires S.A.’s Insurance
Banking Division for nine years.
Sebastián Argibay Molina. Mr. Sebastián Argibay Molina holds a degree in Business
Administration from Universidad de Belgrano and a Post-graduate degree in Banking Management from
Universidad Torcuato Di Tella. He developed his career in Consulting at Coopers & Lybrand
(subsequently merged with Price Waterhouse). In 1999, he joined the Bank performing different duties.
He acted first as officer responsible for MIS Projects and Customer Service Model, he then was Customer
Service Head, Logistics Manager and Administration and Logistics Manager. He currently serves as
Organizational Development and Quality Manager.
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,
122
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.
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
Propiedades Comerciales S.A.. Currently, he is the Bank’s Chief Financial Officer.
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.
Jorge Alberto Cruces. Mr. Cruces graduated as Architect and obtained a Master degree in
Business Administration, with specialty in Finance and Strategic Management from Universidad de
Belgrano. Before joining the Bank, he served from 2007 to 2013 as Real Estate manager of IRSA
Inversiones y Representaciones Sociedad Anónima, and before that, he served as Business Developer –
Real Estate Manager at Diveo, Diginet and as Real Estate Projects Manager at Giménez Zapiola
Binswagner. Furthermore, he is academic coordinator and professor of Cluster Portfolio and Asset
Management in the Real Estate Management Executive Program at Universidad Torcuato Di Tella.
Fernando Javier Turri. Mr. Turri graduated as certified public accountant from Universidad de
Belgrano and obtained SAP and PMI (Project Management Professional) certifications from the JLI
Institute of Chicago. He made a career at Pricewaterhouse Consulting – Argentina and Switzerland for 6
years, and then as CIO at Sc Johnson & Son from 2002 to November 2014 in Latin American and Asian
regions. He currently serves as Manager of the Bank’s IT Department.
b) 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
123
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 charged to income by the Bank for the fiscal year ended
December 31, 2014 to directors was Ps. 14,821 thousand, while the aggregate amount charged to income
for the Executive Committee members was Ps. 5,687 thousand and the aggregate amount charged to
income for the Supervisory Committee members was Ps. 3,534 thousand, while the aggregate amount
charged to income for senior managers was Ps. 62,145.94 thousand.
c) Other information related to the administrative, supervisory and special committee bodies:
Committees reporting to the Board of Directors
Executive Committee
Section 19 of the Bylaws provides for the operation of 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. In turn, whenever so called to participate, the
General Manager may participate and shall have a right to speak but no voting rights.
The appointment of the members of this Committee as well as any change in its composition,
due to either resignation, leave of absence, addition or substitution of members, or otherwise shall be
communicated by the Bank to the BCRA and to the CNV as soon as it has been considered by the Board
and within the period of time stipulated to that end by currently applicable rules and regulations.
The Executive Committee is required to meet at least once a month or whenever called by the
Chairman of the Board of Directors and shall have all such powers and authority described in the Bank’s
bylaws and the "Executive Committee Operating Rules" as contemplated by the Code of Corporate
Governance.
In addition, when it comes to internal control tasks and the Bank’s risk management, in its role as the
Board’s first Committee, the Executive Committee must supply and approve the standards and procedures
for internal control and risk management. In this respect, the Executive Committee is responsible for
designing, documenting and implementing the procedures and, taking into account the size of the entity,
the number of venues, the volume and complexity of the operations conducted, it falls on the Executive
Committee the duty to appoint the persons who will discharge such duties.
Composition:
Regular
Title
Eduardo Sergio Elsztain ............................................................Director
Mario Blejer...............................................................................Director
Pablo D. Vergara del Carril .......................................................Director
Ernesto Manuel Viñes ...............................................................Director
Saúl Zang ...................................................................................Director
Gabriel A. G. Reznik .................................................................Director
124
Alternate
Mauricio Elías Wior ..................................................................Director
Audit Committee
The Bank has an audit committee as required by the CNV and Central Bank rules.
Composition:
Regular
Title
Carlos B. Pisula (*)....................................................................Director
Jacobo Julio Dreizzen ................................................................Director
Alternate
Gerardo Rovner .........................................................................Corporate Audit Manager
(*) Independent Director
Duties:
In conformity with its rules, the Audit Committee shall be made up by no less than 3 and no
more than 7 regular Directors and the highest-ranking internal audit officer shall be in attendance at its
meetings. At present, the Committee is made up by 3 directors, with its majority meeting the independent
director requirement and with one of them serving as chairman. Besides, their members are skilled in
corporate, financial or accounting matters.
The members of this Committee who are directors shall serve in the Audit Committee for a
minimum period of 2 years (in so far as their term of office does not come to an end sooner) and for a
maximum of 3 years. This term may be extended only on a case-by-case basis by express decision of the
Board. The term in office as member of the Audit Committee must not coincide with the term in office as
Director in a manner such that the Committee shall always have amongst its members a director
experienced in the matter.
The highest-ranking internal audit officer must not be within the scope of the prohibitions and
incompatibilities set forth in Section 264 of the Argentine Companies Law and Section 10 of the
Financial Institutions Law. This officer participates in the Audit Committee meetings and may voice
his/her opinions though not cast votes.
Furthermore, the members of the Audit Committee are bound by the principles laid down under
the headings “Duty of Diligence”; “Duty of Secrecy and Confidentiality”; and “Duty of Loyalty and NonCompete Obligation” of the Code of Corporate Governance.
The appointment of the members of the Audit Committee as well as any change in its
composition, due to either resignation, leave of absence, addition or substitution of members, or otherwise
shall be communicated by the Bank to the BCRA and to the CNV as soon as it has been considered by the
Board and within the period of time stipulated to that end by currently applicable rules and regulations.
The Audit Committee shall have the following powers and duties, which shall be discharged in the
framework of: (i) the minimum requirements on internal controls issued by the Argentine Central Bank
and (ii) the Capital Markets Law and CNV’s General Resolution No. 622 and any supplementary
resolutions or amendments thereto; including, among others:
•
To oversee the operation of the Bank’s risk management, internal control and
administrative and accounting systems, as well as the reliability of the accounting system
and of all financial information or other material events filed with the CNV, the Argentine
Central Bank and the self-regulated entities in the discharge of reporting obligations.
125
•
•
•
•
•
•
•
•
•
•
•
•
To contribute to an improvement in control effectiveness.
To follow up on the implementation of the observations made by the internal and external
audits.
To review and approve the work plan of the internal audit and its degree of completion.
To coordinate the tasks between the internal audit and the external audit.
To become familiar with the outcomes obtained by the Statutory Auditors or Supervisory
Committee.
To become familiar with the annual and quarterly financial statements and the external
auditors’ reports issued on them and with all the relevant accounting information.
To issue an opinion about the Board’s proposal concerning the appointment of the external
auditors and the lead partner of the firm of university professionals to be hired by the Bank
(or, when applicable, the revocation of the firm currently appointed) and to make sure that
they remain independent.
To watch over compliance with the Bank’s currently applicable Code of Ethics.
To become familiar with the External Audit’s annual plan, the reports on internal controls
prepared by the external auditors, the results of the verifications performed by the SEFyC
(Superintendency of Financial and Exchange Institutions) regarding the external auditors’
performance and to assess their performance.
To consider the outcomes of the SEFyC’s verifications in the field of internal controls, to
propose an answer to the Board, and, if applicable, the measures to solve the observations
made.
To supervise the application of policies governing information on the Company’s risk
management.
To provide the market with complete information about transactions involving conflicts of
interest with the members of the Company’s governance or with controlling shareholders.
Social and Institutional Committee
Composition:
Regular
Title
Edgardo Fornero ........................................................................Director
Ada Mercedes Maza ..................................................................Director
Alternate
Fernando Rubin .........................................................................General Manager
Javier Varani..............................................................................Manager of Institutional Affairs
Duties:
•
•
•
•
•
•
•
To define the policies governing donations and subsidies for their approval by the Board of
Directors.
To grant subsidies for social and/or cultural purposes.
To approve the donation of unused real property.
To take part in any matter relating to the Bank’s image or insertion in society.
To consider the environmental impacts of the construction projects or civil works funded
by the Bank.
To consider the Annual Social Balance Sheet in the terms discussed under the heading
“Social Balance Sheet” and the report issued on it and to submit it to approval by the
Board, and
To familiarize with all relevant information in connection with the enterprise social
responsibility of the Bank and its subsidiaries.
Information Technology Committee
Composition:
Regular
Title
Edgardo Fornero (Regular)........................................................Director
126
Ada Mercedes Maza (Regular)..................................................Director
Gabriel A. Reznik (Alternate) ...................................................Director
Favio Gabriel Podjarny..............................................................Manager of IT and Technology
Ricardo Gaston ..........................................................................Manager of Individual Security and
Logistics
Duties:
The Information Technology 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 BCRA 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.
Committee for Controlling and Preventing Money Laundering and Terrorism Financing
Composition:
Regular
Title
Alternate
Gustavo Daniel Efkhanian.........................................................Manager of Risk and Controlling Division
Jorge Gimeno.............................................................................Manager of Money Laundering Prevention
Unit
Duties:
Banco Hipotecario S.A.’s Committee for Controlling and Preventing Money Laundering and Terrorism
Financing shall discharge its duties in compliance with: (i) the Rules governing Money Laundering
Prevention and Control and other Unlawful Activities as issued by the Central Bank; and (ii) Resolution
No. 2/2002 issued by the Financial Information Unit, Laws No. 25,246 and 26,268 and related laws and
regulations, including their implementing Decrees, (iii) Executive Orders issued by the Executive Branch
of the Argentine Government in connection with the resolutions adopted by the UN’s Security Council to
combat terrorism and shall also comply with the provisions laid down by the Ministry of Foreign Affairs,
Foreign Trade and Religion, and (iv) the Code of Corporate Governance of this institution.
Finance Committee
Composition:
Regular
Title
Mario Blejer...............................................................................Director
Carlos Bernardo Pisula ..............................................................Director
Alternate
Gabriel Pablo Blasi ....................................................................Finance Manager
Alejandro Sokol .........................................................................Market Risk Manager
127
Maximiliano Weber ...................................................................Budget and Management Control Manager
Hernán Finkelstein.....................................................................Trading Desk Manager
Manuel Herrera..........................................................................Corporate Banking Manager
Duties:
• To control the liquidity and creditworthiness of the entity.
• To define the levels of tolerance to liquidity risk in the light of the business strategy, systemic
conditions and other relevant considerations.
• To define the limits and/or zones for early alerts in the case of financial risks, including though
not limited to imbalances in cash flows, exchange rate and interest rate.
• To determine the level of liquid asset surpluses that should be maintained in order to face a range
of stress events.
• To take part in the evaluation and approval of financial products.
• To define strategies for investing in liquid assets and to be familiar with financial assets
management and with the entity’s general foreign exchange position.
• To approve limits on the exposure to Government and corporate debt securities, shares, metals
and currencies.
• To authorize, within the limits delegated to it by the Board of Directors, operations involving
futures, forwards and other derivatives both for hedging and arbitrage strategies.
• To fix, assess and control the financial risk of the different portfolios of investments.
• To be familiar with financial liabilities management.
• To propose to the Board of Directors transactions involving the issuance and placement of debt
within the framework and following the modalities laid down by the Shareholders’ Meeting.
• To foster the establishment of financial trusts.
• To recommend the banks, rating agencies, law firms and auditors or due diligence providers to
be hired for issuing and placing debt securities.
• To propose debt repurchase transactions and refinancings.
• To receive reports on a regular basis to learn about the entity’s liquidity position, and
• To verify that the managers of the Finance Department should deploy the strategies conceived by
the Committee.
Credit Committee
Composition:
Regular
Title
Carlos B. Pisula .........................................................................Director
Alternate
Manuel Herrera..........................................................................Corporate Loan Manager
Gustavo D. Efkhanian................................................................Risk and Controlling Manager
Gabriel Pablo Blasi ....................................................................Finance Manager
Marcelo Portas ...........................................................................Credit Risk Manager of Corporate Banking
Duties:
•
To submit the Credit Policies concerning the whole loan cycle for the Personal Banking and
Corporate Banking segments to consideration and approval by the Board.
•
To recommend approval of the Credit Programs that supplement the Product Programs
prepared when launching new products and/or deals that entail credit risk.
•
To approve funding for Legal Entities and for the Public Sector for up to the amount defined
by the Board.
•
To approve funding for Individuals for up to the amount defined by the Board with
mortgage-secured products.
128
•
•
•
•
•
•
•
To approve funding for Individuals for up to the amount defined by the Board for loans not
secured with a mortgage (personal loans, pledges, credit card limits or limits on checking
accounts).
To issue an opinion on the types of funding not described in the preceding paragraphs and
on all the other funding in excess of the basic margin established by the credit rating rules and
2.5% of the Bank’s regulatory capital for consideration by the Executive Committee/Board.
To approve, every month, the levels of loan loss provisions applicable to the loan portfolio
in accordance with the rules of the Central Bank and prudential criteria.
To propose to the Board the criteria to be adopted in the sale of loan portfolios.
To take part in decisions concerning credit aid to related individuals and legal entities and,
accompanied by an opinion, submit them to consideration by the Board when applicable.
To become familiar with the Management Reports concerning loan portfolio performance at
the intervals established in each case and to recommend actions when applicable, and
To become familiar with the Bank’s situation vis-à-vis prudential ratios in terms of credit
fractioning, concentration and rating.
Employee Incentive Committee
Composition:
Regular
Title
Gabriel A. G. Reznik .................................................................Director
Duties:
•
•
•
•
To lay down the policies and practices to financially incentivize personnel to manage risk,
capital and liquidity.
To establish that the policy to financially incentivize personnel should be in harmony with the
guidelines laid down in current rules and regulations governing this matter.
To establish that the financial incentives for the benefit of the organization’s members:
•
should be tied to the contribution by each individual and each business unit to the Bank’s
performance.
•
should be established in line with the objectives sought by the Bank’s shareholders, and
•
should be sensitive to the time dimension of risks.
To promote and coordinate the annual assessment of the system of financial incentives to
personnel, which must be conducted by an independent area of the Bank or an external entity.
Risk Management Committee
Composition:
Regular
Title
Mauricio Wior ...........................................................................Director
Carlos B. Pisula .........................................................................Director
Alternate
Gustavo D. Efkhanian................................................................Risk and Controlling Manager
Duties:
•
•
To monitor risk management in terms of credit, market, liquidity, interest rate and operational
risks, using as a benchmark the best practices in the field of risk management.
To propose risk tolerance levels and risk management strategies to the Board.
129
•
•
•
•
•
•
•
•
•
•
To propose risk management policies to the Board and to review them at regular intervals, at
least annually, and whenever in the opinion of the Committee events or situations occur that
warrant as much.
To propose to the Board a stress testing program and contingency plans and to review them at
regular intervals -at least once a year.
To check for an adequate dissemination of information about the entity’s risk management
framework.
To propose to the Board the exceptions to the strategies, policies and limits in force when they
entail a significant deviation.
To make sure that both senior management and the personnel working in the areas involved rely
on the skills and experience required for managing risk.
To assess the risk profile based on the definitions in the business plan and, when applicable, to
see to it that corrective actions are undertaken.
To assess the outcome of any comprehensive stress tests run and the contingency plans in force
and to see to it that corrective actions are implemented in the event of stress situations.
To make sure that the policy governing financial incentives to personnel does not conflict with
the entity’s risk strategy
To submit the evaluation as to whether the entity’s capital levels are adequate in the face of the
risks assumed to consideration by the Board, and
To become familiar with the outcomes of the internal audit reviews to which the risk
management framework may be subject and, whenever applicable, to see to it that all measures
are taken to solve the observations made.
Corporate Governance Committee
Composition:
Regular
Title
Carlos Pisula ..............................................................................Director
Ernesto M. Viñes .......................................................................Director
Alternate
Duties:
•
•
•
•
•
•
•
•
•
•
To supervise the application of the Corporate Governance Code and adherence to the corporate
principles of “full disclosure”, “transparency”, “efficiency”, “investor protection”, “equal
treatment amongst investors” and “protection of the entity’s stability”;
To submit to the Board the reports concerning Board and Senior management performance for
review;
To take part in all changes in the organization’s structure, rendering an opinion about their
effects vis-à-vis the corporate governance policy;
To oversee implementation of the policies and rules governing the relationships between the
issuer and the business group and with its components;
To gather information about the transactions with affiliates, related companies, the shareholders
and the members of management and, overall, those that may be relevant in determining the
degree of effectiveness and adherence to the duties of loyalty, diligence and independence;
To see to it that the shareholders, investors and the market in general have full and timely access
to any information that the issuer is duty-bound to truthfully disclose;
To monitor any trades conducted by the Bank’s Directors, statutory auditors and managers
involving the securities issued by the Bank and its subsidiaries as well as any agreements with
related parties;
To supervise application of the policies dealing with the remuneration of Board and General
Management members;
To become familiar with the Corporate Governance Codes of the Bank's subsidiaries;
To propose changes to the Corporate Governance Code of the Bank and its subsidiaries, and
130
•
To become aware of the regulatory compliance risks associated with the business including those
related to the development of new products and commercial practices through the reports
produced by the relevant areas.
Ethics Committee
Composition:
Regular
Title
Ada Mercedes Maza ..................................................................Director
Carlos Pisula ..............................................................................Director
Gabriel Reznik ...........................................................................Director
Duties:
•
•
•
To settle issues relating to the interpretation of the code of ethics in connection with Directors’
General Management’s or Divisional Managers' behavior.
To begin investigations following reports received from the Bank’s employees concerning
alleged deviations from the code of ethics by these officers by using the transparency line in
place to that end.
To apply the provisions of the Code of Ethics. Each case shall be confidentially treated by the
Committee. Under no circumstances shall adverse measures be implemented against the person
posing the enquiry or against whom there are suspicions of a potential crime or irregular
situation in breach of the provisions laid down by the Code of Ethics, a law, regulation or
internal procedure at the Bank.
d) Employees
The following table sets forth the number of the Bank’s employees as of December 31, 2012,
2013 and 2014:
Main Office
Branches
Total
12/31/2012
1,320
660
12/31/2013
1,571
917
12/31/2014
1,625
983
1,980
2,488
2,608
The Bank’s employees are represented by a federal union and union membership is optional. As
of December 31, 2014, 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.
e) Share Ownership
The following table sets forth the number of Bank’s shares held by Bank’s Directors as of March
31, 2015.
Director
Number of SharesClass
5,000 D
Elsztain, Eduardo Sergio
30,000 D
Vergara del Carril, Pablo
100 D
Ocampo, Andrés
131
PRINCIPAL SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
a) Principal Shareholders
The following table sets forth information regarding ownership of the Bank’s capital stock in
Argentina and abroad as of December 31, 2014.
Shareholder
Class4
Number of Shares
Percentage
of Shares
Number of
Votes5
Percentage
of Votes
Argentine Government/ Banco de la
Nación Argentina as trustee of
Fideicomiso de Asistencia al Fondo
Federal de Infraestructura
Regional.1
A
669,725,120
44.65%
669,725,120
24.28%
Banco de la Nación Argentina, as
trustee of the PPP
B
57,009,279
3.80%
Banco de la Nación Argentina, as
trustee of Fideicomiso de Asistencia
al Fondo Federal de
Infraestructura Regional.
C
75,000,000
5.00%
57,009,279
75,000,000
2.07%
2.72%
THE BANK OF NEW YORK
ADRs1
Principal Shareholders2
Directors3
D
90,905,000
6.06%
272,715,000
9.89%
D
D
D
446,515,208
36,634,733
37,900
29.77%
2.44%
0.00%
1,317,028,740
0
105,300
47.74%
0.00%
0.00%
Other
ANSES
TOTAL
D
D
48,318,282
74,037,265
1,500,000,000
3.22%
4.94%
100.00%
144,954,846
222,111,795
2,758,650,080
5.25%
8.05%
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, 2014 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 64.56% of its capital stock (373,599,838 shares), (ii) 0.48% shares held by
IFISA (2,780,930 shares), (iii) 0.89% shares held by Cactus S.A. (5,142,378 shares); and (iv) 900 shares directly held by
Mr. Eduardo Sergio Elsztain. Lastly, Mr. Eduardo Sergio Elsztain can be regarded as beneficiary holder of 39.33% (on
an entirely diluted basis) of the aggregate number of shares of Cresud, which includes (i) 190,681,047 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) 1,095,299 common shares directly owned by
Eduardo Sergio Elsztain. Furthermore, Mr. Eduardo Sergio Elsztain can be regarded as beneficial owner of 84,757,594
warrants of Cresud under which he is entitled to acquire 31,129,753.02 new common shares upon exercising such
warrants.
(3)
As of December 31, 2014, Eduardo Sergio Elsztain, Pablo Vergara del Carril and Andrés F. Ocampo held 5,000;
30,000 and 100 Class D shares, respectively.
(4)
The Bank’s Class A, B and C shares carry one (1) vote per share while Class D shares carry three (3) votes per share
provided that Class A shares account for 42% or more of the Bank’s capital stock.
(5)
The number of votes results from multiplying the number of shares by the number of votes per share. The Bank’s
treasury stock shall carry no voting rights pursuant to Section 221 of Law No. 19,550. And the Principal Shareholders
shall have voting rights for up to 30% (thirty percent) of the outstanding capital stock. For more information, see
"Description of Capital Stock" herein.
132
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, 2014.
As of December 31, 2014
Class
Number of
Shares
A
B
C
D
Total
669,725,120
57,009,279
75,000,000
698,265,601
1,500,000,000
Percentage of
Shares
registered in
Argentina
44.65%
3.80%
5.00%
23.84%
77.29%
Percentage of
Shares
registered
outside
Argentina
22.71%
22.71%
Percentage of
Shares held in
Argentina
Percentage of
Shares held
outside
Argentina
44.65%
3.80%
5.00%
23.84%
77.29%
22.71%
22.71%
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.
133
On March 27, 2006 the US Securities and Exchange Commission (SEC) has made effective the
Level I American Depositary Receipts, “ADR” program.
This program allows foreign investors to buy the Bank’s stock through the secondary market
where ADRs are traded freely within the United States of America. 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 Ps. 1 (one peso) 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
Companies 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.
The Shared Ownership Program (Programa de Propiedad Participada or PPP) was
implemented pursuant to Decree No. 2127/2012 and Resolution No. 264/2013 issued by the Ministry of
Economy and Public Finance, whereby during the first stage 17,990,721 Class B shares of stock out of an
aggregate number of 75,000,000 shares were converted into Class A shares so as to be allocated among
the agents who have terminated their relationship with the Bank in accordance with the implementing
guidelines. The 17,990,721 shares shall become Class D shares at the time of delivery to the former
agents. The shares allocated to the Bank’s personnel who are currently in service are Class B shares and
fall within the scope of the Shared Ownership Program.
b) 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
134
engaged in certain credit transactions with the Bank. Pursuant to the Argentine Companies Law and the
BCRA 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 BCRA 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 BCRA 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 BCRA 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.
Transactions with companies pursuant to Section 33 of the Argentine Companies Law on a
comparative basis as of December 31, 2014, 2013 and 2012.
12/31/2014
12/31/2013
12/31/2012
Loans
BACS Banco de Crédito y Securitización S.A. .........................
117,943
396,762
301,952
Tarshop S.A. .........................................................................
-
36,183
-
Other credits from financial intermediation
Tarshop S.A. .........................................................................
5,107
980
12,858
Miscellaneous receivables – Miscellaneous Debtors
6,291
3,896
2,743
BHN Sociedad de Inversión S.A. ............................................
-
22
9
BHN Vida S.A. .....................................................................
13,986
766
493
BHN Seguros Generales S.A...................................................
1,986
182
160
Deposits – Checking Accounts and Fixed-Term Deposits
5,429
129,977
110,312
BHN Vida S.A. .....................................................................
2,357
1,623
6,153
711
334
1,581
BH Valores S.A. ....................................................................
2,992
48,822
3,116
7,908
2,159
287
Tarshop S.A. .........................................................................
7,853
3,671
3,440
Other Liabilities from Financial Intermediation
1,531
1,530
1,024
BHN Vida S.A. .....................................................................
31,380
31,361
11,597
38,362
42,472
-
-
10,654
7,157
1,714
Diver S.A.s Liabilities
47
206
6,001
2,702
3,485
BHN Vida S.A. .....................................................................
15,754
19,809
19,880
Memoranda Accounts
-
-
30,000
Tarshop S.A. .........................................................................
-
-
40,000
135
12/31/2014
12/31/2013
12/31/2012
Financial Income
58,930
73,302
32,182
Tarshop S.A. .........................................................................
2,876
1,968
1,042
Financial Expenses
BH Valores S.A. ....................................................................
218
307
164
BHN Vida S.A. .....................................................................
12,874
1,461
4,752
1,132
282
391
-
-
57
Income from Services
298
378
244
BHN Vida S.A. .....................................................................
73,498
31,906
22,988
39,050
15,734
11,469
Expenses from Services
1,455
854
-
BHN Vida S.A. .....................................................................
222
493
570
222
493
570
136
FINANCIAL INFORMATION
a)
Financial Statements and other Financial Information
Financial Statements as of the Latest Fiscal Year
The Bank’s audited financial statements included in this Offering Memorandum have been
audited by Price Waterhouse & Co. S.R.L., a member of PricewaterhouseCoopers, a firm of independent
certified public accountants, as shown in their reports contained herein. They are licensed to practice by
the Professional Board of Economic Sciences (Consejo Profesional de Ciencias Económicas) of the City
of Buenos Aires as registered in Volume 1, Page 17, and domiciled at Bouchard 557, 8th Floor
(C1106ABG), City of Buenos Aires, Argentina. At the General Ordinary Shareholders’ Meeting held on
March 31, 2014, accountant Marcelo Alejandro Trama, licensed to practice by the C.P.C.E. of the City of
Buenos Aires as registered in Volume 252 – Page 159 was appointed as regular external auditor and
accountant Daniel Hugo Cravino licensed to practice by the C.P.C.E. of the City of Buenos Aires as
registered in Volume 94 – Page 111 was appointed as alternate external auditor.
The financial statements for the period ended December 31, 2012, December 31, 2013 and December 31,
2014 have been published in the Financial Information Highway (AIF) of the Argentine Securities
Commission’s website under ID “4-11960-F”, ID “4-12477-F” and ID “4-13355-F”, respectively. The
Bank’s financial statements reflect fairly in all material respects the Bank’s financial condition as of
December 31, 2014, the results of its operations and cash and cash equivalent flows for the fiscal year
then ended, and the changes in the shareholders’ equity for the fiscal year ended December 31, 2014, in
accordance with the Argentine Central Bank's standards and, except for the deviation from professional
accounting standards specified in paragraph 3., with accounting standards in force in the City of Buenos
Aires.
Exports
The Bank does not perform export operations.
Legal and Regulatory Affairs
Introduction
As of December 31, 2012, 2013 and 2014, the Bank had raised provisions for lawsuits for
approximately Ps. 81.8 million, Ps. 82.5 million and Ps. 86.1 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.
Proceedings instituted
I – Summary proceedings being heard by administrative authorities
1. On September 13, 2013, the Bank was notified of Resolution No. 611 adopted by the Office of
the Superintendent of Financial and Foreign Exchange Institutions regarding a summary proceeding
against this entity, the Organization and Procedures Manager Christian Giummarra and the former IT
Manager, Aixa Manelli (Summary Proceedings for Foreign Exchange Offences No. 5469 – Case File
100.082/08). The aforementioned resolution alleges that the foreign exchange rules and regulations
currently in place had been breached upon selling foreign currency to persons whose authorization to
operate in foreign exchange had been suspended by the BCRA. The accumulated amount of sales of
foreign currency supposedly in violation of the rules and regulations was approximately US$ 39,9 00 and
€ 1,100. All defenses available to the defendants in these proceedings have been raised and evidence in
support thereof has been offered. The case file of these summary proceedings has been accumulated with
137
the Summary Proceedings for Foreign Exchange Offences No. 5529 (Case File 101.327/10) as a “joinder
of claims.” Therefore, the procedural status of this case file is discussed together with Case File
101.327/10.
2. On October 8, 2013, the Bank was notified of Resolution No. 720 adopted by the Office of the
the Bank, the Organization and Procedures Manager Christian Giummarra and the former IT Manager,
Aixa Manelli (Summary Proceedings for Foreign Exchange Offences No. 5529), as set forth in Section 8
of the Foreign Exchange Criminal Law (as restated by Decree No. 480/95). The aforementioned
resolution alleges that the foreign exchange rules and regulations currently in place had been breached
upon selling foreign currency to persons whose authorization to operate in foreign exchange had been
suspended by the Central Bank. The accumulated amount of sales of foreign currency supposedly in
violation of the rules and regulations was approximately US$ 86,400. All defenses available to the
defendants in these proceedings have been raised and evidence in support thereof has been offered. The
BCRA called for the production of evidence, which is now underway.
In the opinion of the Bank’s defense counsel and in view of the current status of these
proceedings, there are arguments of law and of fact that generate reasonable expectations that both the
Bank and the defendants may be acquitted. The likelihood of the Bank being subject to the financial
penalties set forth by the Foreign Exchange Criminal Law is therefore low. As a result, no provisions
have been raised in this respect.
3. On February 19, 2014, the Bank was notified of Resolution No. 209/13 adopted by the UIF
which regarding summary proceedings against the Bank, its directors Eduardo S. Elsztain; Mario Blejer;
Ernesto M. Viñes; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B. Pisula; Gabriel G. Resnik; Pablo D.
Vergara del Carril; Mauricio E. Wior; Saúl Zang; the Risk and Controlling Area Manager Gustavo D.
Efkhanian and the Money Laundering Prevention and Control Unit Manager, Jorge Gimeno. The
aforementioned people are being investigated to determine if they were liable on grounds of an alleged
failure to comply with the provisions of Law No. 25,246, Section 21, as subsequently modified and UIFs’
Resolution No. 228/2007 by reason of the weaknesses identified by the BCRA’s inspection of the
organization and the internal controls implemented to prevent the laundering of money from unlawful
activities. All the defenses in favor of the Bank and the defendants were raised on March 25, 2014.
In view of the current status of these proceedings, and based on how UIF has behaved in similar
cases, it is the opinion of the Bank’s defense counsel that there is the probability that a fine will be
imposed by the administrative authorities. It is for this reason that a provision has been raised in this
respect.
4. On August 26, 2014, the Bank was notified of Resolution No. 416 adopted by the Office of
the Superintendent of Financial and Foreign Exchange Institutions on August 7, 2014 regarding Summary
Proceedings No. 5843 in the manner set forth in Section 8 of the Foreign Exchange Criminal Law No.
19,359 (as restated by Decree No. 480/95). In these summary proceedings, an action is brought against
the Bank, is current directors (Eduardo S. Elsztain; Jacobo J. Dreizzen; Edgardo L. Fornero; Carlos B.
Pisula; Gabriel G. Resnik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saúl Zang; and Mauricio E.
Wior), and former directors (Clarisa D. Lifsic de Estol and Federico L. Bensadon), and two former
managers (Gabriel G. Saidon and Enrique L. Benitez) for failure to comply with the rules announced by
Communication “A” 3471 (items 2 and 3) and by Communication “A” 4805 (item 2.2) by reason of
transfers of foreign currency abroad, taking place between August and October 2008, to secure a swap
transaction entitled “CER Swap Linked to PG08 and External Debt” totaling US$ 45,968,000 without the
authorization of the BCRA. The case file of the proceedings (Case File No. 100.308/10) as being dealt
with by the Central Bank’s Department of Contentious Foreign Exchange Matters was reviewed and a
petition was lodged for an extension of the term for filing all defenses.
In the opinion of the Bank’s defense counsel and in view of the current status of these
proceedings, there are arguments of law and of fact that generate reasonable expectations that the Bank
and the defendants may be acquitted. The likelihood of the Bank being subject to the financial penalties
prescribed by the Foreign Exchange Criminal Law is therefore low. As a result, no provisions have been
raised in this respect.
138
5. On December 29, 2014, the Bank was notified of Resolution No. 824 adopted by the Office
of the Superintendent of Financial and Foreign Exchange Institutions regarding Summary Proceedings for
Foreign Exchange Offences No. 6086 (Case File 101.534/11) against the Bank and the former manager
(Gabriel Cambiasso) and five of the Bank´s employees (Claudio H. Martin; Daniel J. Sagray; Rubén E.
Perón; Marcelo D. Buzetti and Pablo E. Pizarro) at the Córdoba branch, in the manner set forth in
Section 8 of the Foreign Exchange Criminal Law No. 19,359 (as restated by Decree No. 480/95). This
action investigates into their liabilities for exceeding the limits placed on sales of foreign currency in
favor of two entities in the city of Córdoba (excesses that in the aggregate amount to US$ 701,270),
presumably breaching the provisions under Communication “A” 5085, item 4.2.1. Due to the Central
Bank’s Department of Contentious Foreign Exchange Matters’ recess during the month of January, the
Bank’s counsel was unable to obtain sufficient knowledge of the proceedings in order to dovetail the
defendants’ defenses. Therefore, as of the date of these financial statements, the potential consequences of
this action cannot be evaluated.
II – Summary proceedings being heard by the courts
1. On May 4, 2012, the Bank was notified of Resolution No. 186 dated April 25, 2012 adopted
by the Office of the Superintendent of Financial and Foreign Exchange Institutions regarding an
investigation in the framework of the Summary Proceedings for Foreign Exchange Offences No. 4976
against the Bank, is directors (Eduardo S. Elsztain; Gabriel G. Resnik; Pablo D. Vergara del Carril;
Ernesto M. Viñes; Saúl Zang; Carlos B. Pisula; Edgardo L. Fornero; Jacobo J. Dreizzen); former directors
(Clarisa D. Lifsic de Estol; Julio A. Macchi; Federico L. Bensadon; and Jorge M. Grouman) and former
Finance Manager (Gabriel G. Saidón); as set forth in Section 8 of the Foreign Exchange Criminal Law
No. 19,359 (as restated by Decree No. 480/95).
The charges brought in these proceedings consisted of alleged breaches of the provisions under
Communications “A” 3640, 3645, 4347 for the acquisition of Good Delivery Silver Bars during the
period 2003-2006 with funds originating in its General Foreign Exchange Position.
The defenses to which the Bank is entitled were raised in due time. Within the period provided
to that end, the Bank and the other defendants produced the evidence offered. Once this procedural stage
came to an end, the lawyers filed the defense’s allegations and in August this year, the BCRA sent the
case file to the competent court (which happened to be the Court with Jurisdiction over Financial Crimes
No. 7 presided by Judge Juan Galvan Greenway).
In accordance with the opinion of the counsel for the defense, given the current status of the
proceedings, there are arguments of law and of fact that generate reasonable expectations that both the
Bank and the defendants shall be acquitted. Therefore, the likelihood of the Bank being subject to the
financial fines imposed by the Foreign Exchange Criminal Law is considered to be low and therefore, no
provisions have been raised.
2. On October 7, 2014, the Bank was notified of Resolution No. 513 dated August 16, 2014
handed down by the Office of the Superintendent of Financial and Foreign Exchange Institutions
regarding Summary Proceedings for Financial Offences No. 1365 (alleged failure to abide by the
minimum internal control requirements imposed by Communication “A” 2525) whereby a fine was
imposed on the Bank in the amount Ps. 112,000 and directors (Pablo D. Vergara del Carril; Carlos B.
Písula, Eduardo S. Elsztain, Jacobo J. Dreizzen, Gabriel G. Resnik; Edgardo L. Fornero; Ernesto M.
Viñes; and Saúl Zang) and former directors (Clarisa D. Lifsic de Estol, Jorge L. March; and Federico L.
Bensadon) were imposed fines for different amounts.
By virtue of the provisions under Section 42 of the Financial Institutions Law, the fines were
paid and the relevant appeal was lodged with the National Court of Appeals with jurisdiction over federal
administrative contentious matters against the resolution previously mentioned. The proceedings were
sent by mid December 2014 by the BCRA to the competent courts and they are now being heard by Panel
IV under Case File No. 71,379/2014. The Ps. 112,000 fine paid by the Bank was included in the income
statement as a loss.
3. On October 31, 2014, the Bank was notified of Resolution No. 685 dated October 29, 2014,
by the Office of the Superintendent of Financial and Foreign Exchange Institutions regarding Summary
Proceedings for Financial Offences No. 1320, whereby the Bank and the Bank's authorities were charged
139
with presumed breaches of the rules and regulations concerning financial aid to the Non-Financial Public
Sector, excesses over the limits of credit risk fractioning vis-à-vis the non-financial public sector,
excesses in the assets applied as collateral, failure to abide by the minimum capital requirements and
objections against the accounting treatment afforded to the transaction entitled “Cer Swap Linked to
PG08 and External Debt”; and also, delays in communicating the appointment of new directors and delay
in the supply of documentation related to the new directors appointed by the shareholders’ meetings.
By virtue of the above-mentioned resolution, the Bank was imposed a Ps. 4,040,000 fine and the
Bank’s directors (Eduardo S. Elsztain; Jacobo J. Dreizzen; Carlos B. Pisula; Edgardo L. Fornero; Gabriel
G. Resnik; Pablo D. Vergara del Carril; Ernesto M. Viñes; Saúl Zang; Mauricio E. Wior), former
directors (Clarisa D. Lifsic de Estol; Federico L. Bensadon; Jorge L. March and Jaime A. Grinberg),
members of the Supervisory Committee (Ricardo Flammini; José D. Abelovich; Marcelo H. Fuxman;
Alfredo H. Groppo; and Martín E. Scotto), the Area Manager Gustavo D. Efkhanian and the Bank’s
former managers (Gabriel G. Saidon and Enrique L. Benitez) were subject to fines for various amounts
which amount to Ps. 51,581,790. This same resolution acquitted former supervisory auditor Silvana M.
Gentile.
On November 25, 2014, the Bank and the individual defendants lodged the appeal set forth in
Section 42 of the Law of Financial Institutions against the sanctions discussed above. The BCRA sent the
appeal to the Federal Court of Appeals in Contentious and Administrative Matters and it is now being
heard by Panel I of this appellate court. Also pending before this Panel are now the self-standing
provisional remedies filed by the Bank and the individual defendants on December 30, 2014 against the
forced collection proceedings brought by the BCRA to collect the fines.
Despite the expectations that the sanctions ordered by the BCRA will be revoked by the Court,
the Bank has recorded an allowance equal to 100% of the amount of the penalty ordered by Resolution
No. 685/14 against the Bank.
III – Summary proceedings in which a court decision has been rendered
Under Resolution No. 286 dated July 2, 2010, issued by the Office of the Superintendent of
Financial and Foreign Exchange Institutions summary proceedings were commenced against the Bank
and its directors (Summary Proceedings for Foreign Exchange Offences No. 4364) under Section 8 of the
Foreign Exchange Criminal Regime Law (as restated by Decree No. 480/95).
Under the abovementioned proceedings, charges were pressed for violation of certain provisions
under Communications “A” 4087 and 4177 concerning early repayments of restructured external debt for
US$ 91,420,135 and €2,803,965 from February 2004 through June 2005. The relevant defenses and
arguments in support of the Bank’s position were filed in due course. Within the period granted for the
production of evidence, the Bank and the other defendants produced the evidence previously offered. As
soon as that stage in the procedure came to a conclusion, the counsel for the defense presented their
closing arguments and in August this year, the BCRA sent the case file to the competent court (Court with
Jurisdiction over Criminal Economic Matters No. 5 presided by Judge Jorge Brugo).
Through his judgment dated December 12, 2014, the above mentioned Judge decided that the
Bank was exempt from liability and acquitted its directors (Eduardo S. Elsztain; Gabriel G. Resnik; Pablo
Vergara del Carril; Ernesto M. Viñes; Carlos B. Písula; Edgardo L. Fornero; Saúl Zang; Jacobo J.
Dreizzen); former directors (Ms. Clarisa D. Lifsic de Estol; Miguel A. Kiguel; Julio A. Macchi; Federico
L. Bensadón; Guillermo H. Sorondo and Jorge Miguel Grouman); and Area Manager Gustavo D.
Efkhanian; Manager Daniel H. Fittipaldi; former General Sub-Manager Gustavo D. Chiera; former
managers Gabriel G. Saidón; Carlos Gonzalez Pagano and Marcelo C. Icikson; and Mr. Miguel J. Diaz,
all defendants in those proceedings. The judgment will become final upon expiration of the term to file
appeals.
At this stage of the proceedings, the likelihood that the above mentioned court judgment be reviewed is
unfeasible, turning it unreasonable to raise any provisions in this regard.
140
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
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 the 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 subject to, among other things, any exchange control policies applicable in Argentina.
b)
Material Changes
Except as reported in this Offering Memorandum, there have been no material changes in our financial or
trading position as of December 31, 2014.
141
OFFERING AND TRADING
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 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 authorized by resolution of the Bank’s General Ordinary and
Extraordinary Shareholders’ Meeting dated May 23, 2008, after renewal of the delegation of powers to
the Board of Directors at the Shareholders’ Meetings dated April 30, 2010, March 27, 2012 and March
24, 2014. The Program was originally approved by the Shareholders’ Meeting for an outstanding
maximum amount of up to US$ 2,000,000,000 and the Board of Directors, using its delegated powers,
resolved on February 9, 2011 to reduce the Program’s amount to an outstanding amount of up to US$
500,000,000. On February 11, 2015, the Board of Directors approved the Program’s update.
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 BCRA 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.”
142
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 CNV.
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. It is put on record that the Bank will observe
the minimum amount set forth by the BCRA, by means of Communication “A” 5034 as amended, which
at present is Ps. 400,000.
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 CNV 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 CNV. 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 of America to qualified institutional
buyers in reliance on Rule 144A under the Securities Act, they will be represented by one or more Rule
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144A global notes. In the event that the notes are offered in reliance on Regulation S, they will be
represented 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 Capital Markets Law, the CNV
Rules and the Negotiable Obligations Law, 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 Financial Institutions Law, all existing and future depositors of the
Bank will have a general priority over the holders of notes issued under this Program. The Financial
Institutions Law 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 BCRA 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 BCRA.
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 BCRA 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 BCRA, 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
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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 BCRA 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 BCRA 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 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 U.S.A. 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 LEBAC rate, the 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 BCRA 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.
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“CER” means a daily adjustment index issued by the BCRA 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.
“London Banking Day” means any day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market.
“LEBAC” means short-term securities tendered by the BCRA on a weekly basis, which are
referred to as Central Bank Bills.
“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 U.S.A. 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 LEBAC rate, 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.
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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,
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., 9.87654% (or 0.0987654) being rounded to
9.8765% (or 0.098765)), 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
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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
(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$ 1,000,000 (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
U.S.A. 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, “U.S.A. 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 of America (“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
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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 U.S.A. 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.A.
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 U.S.A. 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 of America
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 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 U.S.A. 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.A. 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 U.S.A. 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.A. 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 U.S.A. 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 of America 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 U.S.A. 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.
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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$ 1,000,000 (or the approximate equivalent thereof in a Specified Currency other
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 of America 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, or in
accordance with the interest rate agreed upon in each Pricing Supplement.
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.
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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.
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.
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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
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 CNV, 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 authorized market and the rules of the Luxembourg Stock
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Exchange or such other authorized market 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 authorized markets 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.
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.
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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.
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
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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.
Listing and Trading
The Bank may apply to have the notes of any series admitted to listing on Luxembourg Stock
Exchange for trading on the EuroMTF, and for listing on the MVBA or on any other authorized 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 authorized market, 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, and/or to be admitted to
trading and/or listing on the MAE and/or to be admitted to trading and/or listing on the MBVA, and/or in
any other stock exchange or market authorized in the country or abroad, which circumstances shall be
specified in the relevant pricing supplement.
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 CNV 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:
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(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;
(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 BCRA (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 BCRA 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; or 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.
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Notices
Notices to holders of notes will be deemed to be validly given if published for 1 day in the
MVBA’s Informative 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 the MVBA, or in the
applicable reporting body of the authorized market where the notes are listed, and to the extent required
by law, in the Official Gazette. If the notes of any tranche and/or series are not authorized to be listed on
authorized markets, 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.
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, and other Argentine
laws and regulations will govern the Bank’s capacity and corporate authorization to execute and deliver
the notes and the CNV’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 are 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.
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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 so 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.
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 public
call for bids, as determined in the applicable pricing supplement pursuant to the CNV Rules. The above
mentioned auction or public call for bids shall be carried out through an IT system authorized by the CNV
in accordance with the provisions of the CNV Rules. 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.
In addition, placement of the Notes in Argentina shall take place in accordance with the
provisions of the Capital Markets Law and other applicable rules issued by the CNV, by any of the
following actions, among others: (i) publication of a summary of the terms and conditions of this Offering
Memorandum, any Offering Memorandum supplement and the applicable Pricing Supplement in the
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disclosure system of the market where the Notes are listed and/or traded and/or a in a wide circulation
newspaper in Argentina; (ii) distribution of this Offering Memorandum, any Offering Memorandum
Supplement and the applicable Pricing Supplement to the public in Argentina; (iii) road shows in
Argentina addressed to potential investors; and (iv) call conferences with potential investors in Argentina,
among other actions to be taken, which shall be described in the relevant Pricing Supplement. The Pricing
Supplements shall include detailed information on placement efforts to be used in accordance with the
Capital Markets Law and the CNV Rules. It is set forth that in order to subscribe for the Notes to be
issued in the framework of this Program, interested parties shall submit any such information or
documents as the Bank is required or decides to request in compliance with, among others, the regulations
governing money laundering originated in criminal acts and prevention of money laundering in the capital
markets issued by the Financial Information Unit created pursuant to Law No. 25,246. This Offering
Memorandum shall be made available to the public at large in Argentina.
Allocation
It will be as specified in the applicable Pricing Supplement.
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 on one or more authorized market(s) of
Argentina or abroad, as specified in the applicable Pricing Supplement.
Clearing and Settlement
It will be as specified in the applicable Pricing Supplement.
d) Selling Shareholders
Not applicable.
e) Dilution
Not applicable.
f) Issue Expenses
As specified in the applicable Pricing Supplement.
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ADDITIONAL INFORMATION
a) Description of Capital Stock
Pursuant to the Bank’s Bylaws, the issued capital stock as of February 28, 2015 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
Class B Shares
Class C Shares
Class D Shares
Ps. 669,626,793
Ps. 57,009,279
Ps. 75,000,000
Ps. 698,363,928
In December 2013 and April 2014, we reported that upon requirement of the Argentine
Government under Decree No. 2127 dated November 7, 2912 and Resolution No. 264 of the Ministry of
Economy and Public Finance dated June 18, 2013, we converted “Class A” Common Shares into the
same number of “Class D” Common Shares, and recorded the change of ownership thereof.
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 44.6% 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 3.8% 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 46.5% 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
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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.
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 Companies Law, the BCRA 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.
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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
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.
The Shared Ownership Program (Programa de Propiedad Participada or PPP) was
implemented pursuant to Decree No. 2127/2012 and Resolution No. 264/2013 issued by the Ministry of
Economy and Public Finance, whereby during the first stage 17,990,721 Class B shares of stock out of an
aggregate number of 75,000,000 shares were converted into Class A shares so as to be allocated among
the agents who have terminated their relationship with the Bank in accordance with the implementing
guidelines. The 17,990,721 shares shall become Class D shares at the time of delivery to the former
agents. The shares allocated to the Bank’s personnel who are currently in service are Class B shares and
fall within the scope of the Shared Ownership Program
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
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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
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 of America. 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 BCRA 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 BCRA
The Privatization Law and the supplementary regulations applicable thereto require that
significant acquisitions be approved in advance by the BCRA. 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 BCRA.
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
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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:
1
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 MVBA 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;
2
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
3
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 Financial Institutions
Law 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 authorized 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
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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 BCRA 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 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 BCRA Rules. 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 Companies 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.
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According to Section 206 of Argentine Companies 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.
Acquisition of its own shares by the issuer
According to Section 221 of the Argentine Companies Law and the CNV Rules, corporations
may acquire their own shares, as long as they are admitted to be listed by an authorized market.
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 authorized markets, and (iii) published in the newsletters of such authorized markets 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 the Argentine Companies 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 Companies 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
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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.
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 Companies 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 authorized 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 authorized markets 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 Companies
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.
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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 Companies 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.
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
Companies 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 Companies 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 authorized market, as well as in the newsletters
of those authorized 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, authorized markets in which
the offer is made or in which the Bank’s securities are traded.
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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”):
1
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;
2
the highest selling closing price for Class D Shares on the MVBA during the 30day period immediately preceding the notice provided to the Bank, adjusted for any stock split,
stock dividend, subdivision or reclassification affecting the Class;
3
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 MVBA 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
4
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 PTO. 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:
1
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;
2
the highest closing sale price of shares of the Class on the MVBA during the 30
days immediately preceding the announcement of the Related Party Transaction or the date of
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any Control Acquisition by the Interested Shareholder, adjusted for any stock split, stock
dividend, subdivision or reclassification affecting the Class;
3
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
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
4
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 PTO. 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.
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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 BCRA 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 BCRA’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. The shortage
of US dollars and the increased demand resulted in a new Peso devaluation. As a result, the BCRA has
intervened on several occasions since that date by selling U.S. Dollars in order to lower the exchange rate.
However, The BCRA’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. 8.7243 per US$ 1.00 as of February 27, 2015.
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)
2012
2013
2014
January 2015
February 2015
March 2015
(1)
(2)
(3)
4.9173
6.5180
8.5555
8.6395
8.7260
8.8197
4.3048
4.9228
6.5430
8.5537
8.6488
8.7310
Average(1)(2)
4.5515
5.4789
8.1188
8.6024
8.6859
8.7790
Period-end(3)
4.9173
6.5180
8.5520
8.6395
8.7243
8.8197
Reference exchange rate as published by the BCRA.
Based on daily averages.
Exchange rate used in the Bank’s financial statements.
Regulations governing Foreign Exchange Transactions
All foreign exchange transactions are to be conducted through the MULC 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.
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Outflow and Inflow 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.
Pursuant to Decree No. 616/2005 and its amendments, the Argentine Government imposed
certain restrictions on foreign currency entering and leaving the Argentine foreign exchange market, as
follows: that inflows arising from new indebtedness and rolled-over debt due to persons domiciled abroad
must be agreed upon and repaid within terms of, at least, 365 running days irrespective of the manner of
repayment. Besides, the early repayment of such debt, previous to the expiration of such term, is banned.
Exempted from these restrictions are: (i) foreign trade financing; and (ii) primary public offerings of
equity or debt securities issued as per the public offering regime as well as trading in authorized markets.
Communication “A” 4359 and its amendments, which regulate Decree 616/2005, impose a duty
to maintain in Argentina a registered, non-transferable and non-interest bearing deposit for a term of 365
running days for an amount equivalent to 30% of any foreign currency entering the local foreign
exchange market originating in (i) debt contracted with creditors abroad (save for foreign trade), and (ii)
acquisitions of ownership interests in Argentine companies that are not listed in authorized markets
except for direct investments and other transactions apt to result in inflows of foreign currency or debts
contracted by residents to non-residents. This notwithstanding, offerings of primary debt under the public
offering regime and trades in an authorized market are exempt from these requirements. The abovementioned deposit must be in US Dollars with financial institutions from Argentina and it may not be
used as a guarantee or collateral for any type of credit transaction.
Communication “A” 4377 and its amendments, plus the amendments introduced by
Communications “A” 4762, 4933 and 5532 exclude the following transactions from the duty to make the
deposit:
i.
Proceeds from indebtedness contracted with Multilateral and Bilateral Credit Organizations
and with Official Credit Agencies either directly or through their affiliated agencies.
ii.
Proceeds from other financial indebtedness contracted abroad by the financial sector and
non-financial private sector to the extent that the funds stemming from the foreign exchange
settlement, net of taxes and expenses, are applied to the acquisition of foreign currency for
the repayment of external debt services or principal and/or to the formation of long-term
external assets.
iii.
Other proceeds from financial indebtedness contracted with foreign creditors by the nonfinancial private sector to the extent that they are contracted and repaid over an average life
of no less than two years, including the payments of principal and interest in their
calculation and to the extent that they are allocated by the private sector to investments in
non-financial assets.
iv.
Settlements of foreign currency by residents as from June 10, 2005, inclusive, originating in
loans in foreign currency granted by the local financial institution involved in the
settlement.
v.
Direct investment contributions in local companies (as per Communication “A” 4237, which
defines direct investments as “… a lasting interest of an entity residing in an economy
(direct investor) in an entity residing in another economy (recipient of the direct
investment)…” It is accepted that the ownership interest must not be less than 10% of the
capital stock of the local company).
As regards sub-paragraph v) above, in conformity with Communication “A” 4762 and its
amendments, there must be proof of definitive capitalization of the capital contribution within 540
running days as from the commencement of the proceedings to register the contribution with the Public
172
Registry of Commerce, otherwise, the exception will not apply and the non interest-bearing 30% deposit
shall have to be made within a term of 10 business days. The financial institution could grant an
additional term of 180 days if the delay in registering the contribution is for reasons alien to the customer.
With respect to the sale of the share interest in the capital stock of a domestic company by a direct
investor, the purchase agreement or PTO, as the case may be, shall be submitted. Within 20 business days
of settlement of the transaction through the MULC, the registration of the amendment to the bylaws with
the Public Registry of Commerce or an authenticated copy of the book, depending on the type of
company -corporation or limited liability company- shall be submitted. This exemption is also applicable
to direct investors who had brought funds into the country to cover losses of the domestic company or the
local branch of a foreign company up to the amount required to cover such losses.
Besides, Communication “A” 4901 dated February 5, 2009 excludes inflows into the foreign
exchange market attributable to non-residents from the duty to make the mandatory deposit when it is
corroborated that the Pesos arising from the settlement of foreign currency are applied within ten business
days following items comprised in the classification of current transactions in international accounts, as
follows: a) income tax and/or personal property tax prepayments or debts attributable to individuals who
are residents from the standpoint of tax; b) contributions by non-residents into the social security system
or payments to the medical insurance scheme –be it union-run or private; c) payments of other taxes that,
given their nature, are borne by non-residents as substitute taxpayers and in so far as those payments do
not convey to the non-resident any rights against the tax authority or third parties, and d) other rates and
services rendered by residents. In addition, this exception to the mandatory deposit, subject to certain
additional requirements, also applies to the cases of funds remitted from abroad by non-resident
companies on behalf of personnel from international groups who are temporarily abroad, to local
companies entrusted with tax calculation and tax payments.
As a result of Communication "A" 5604 dated October 8, 2014, direct investments by non-residents in
local companies shall be maintained in a local account in foreign currency from October 9 until
December 30, 2014 in order to comply with the provisions set forth in section 2.7. of Communication "A"
5526, as described below.
Obligation to settle funds through the MULC.
General Rules. Exports.
Pursuant to Decree No. 1606/2011 any disbursement of foreign currency derived from foreign trade must
be settled through the MULC.
Pursuant to Communication "A" 5300, as amended, within 15 business days of the date of the
disbursement of the funds abroad, in connection with payment of export of goods, advance payments of
exports and prefinancing loans for exports, such funds must be settled through the MULC. In any event,
the due date for the settlement of the funds derived from exports shall be the shorter of 15 business days
and the date applicable to the specific goods in accordance with current rules. Such funds shall be
credited in a local bank account duly opened in favor of the client.
In connection with the funds which were disbursed in bank accounts abroad, for the same concept
referred to in the paragraph above, the due date for the transfer of such funds to an account of a local bank
entity is 10 business days.
Pursuant to several regulations enacted by the BCRA, the application of payments for exports abroad to
repayments of exporter's debt is allowed in the following cases:
(a)
advance payments and prefinancing loans for exports.
(b)
financing of new local investment projects for the increase of production of exportable goods or
import substitutes, among others.
(c)
other financial indebtedness for bonds abroad and financial loans granted by foreign banks.
(d)
indebtedness with local financial institutions for a term (not less than 10 years), for an average
term (no less than 5 years) and interest rate (up to 100 b.p. over Libor for 180 days).
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Services
Communication "A" 5264 set forth that payments in foreign currency received by residents for the export
of services and payment of losses of insurance policies purchased from non residents under the applicable
rules must be settled through the MULC within fifteen business days of its collection abroad or locally or
deposit thereof in foreign bank accounts.
Such funds are exempted from settlement through the MULC to the extent such exemption is
actually contemplated in the foreign exchange regulations and such amounts are applied to repayment of
foreign financial indebtedness.
Outflows of capitals, including the availability of cash or cash equivalents
Foreign Exchange Transaction Consultation System
On October 28, 2011, 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” 5239, later superseded by Communication “A” 5245 as
amended, 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 December 20, 2012, the Tax Authority’s Resolution AFIP No. 3356 was replaced by
Resolution AFIP No. 3421 which established a unified registry system for accessing the foreign exchange
market, particularly for outflows attributable to residents and non-residents irrespective of their
application. Resolution No. 3421 is related to Communication “A” 5245.
Financial indebtedness
In accordance with Communication "A" 5265, amended by Communication “A” 5604 (dated
July 10, 2014), transactions stemming from the financial debt contracted by the financial sector, the nonfinancial private sector and local governments must be settled through the foreign exchange market.
These provisions govern indebtedness through bonds, financial loans and any other transaction
under which non-residents may have disbursed funds. The duty to settle through the MULC [initials in
Spanish of Single Free Exchange Market] must be discharged within 30 calendar days as from the date of
the disbursement abroad and the transfer will be deposited in a local bank account.
Any new financial indebtedness lent through the MULC as well as any rolled over debt with
non-residents and private non-residents must be maintained and renewed for at least 365 running days as
from the date of disbursement and may not be repaid in advance prior to the expiration of such term
irrespective of the manner of repayment agreed upon with the creditor and irrespective of whether such
repayment is channeled through the MULC or not.
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Recently on July 10, 2014, pursuant to Communication “A” 5604, the BCRA added a new
section 2.7 to the exhibit of Communication “A” 5526, which regulates access to the MULC by residents
for the purchase of foreign currency to be used for specific purposes in local assets.
It allowed local governments and/or non-financial private sector residents issuing new bonds and
other debt securities under public offering and listed on self-regulated markets and considered as external
debt (within the meaning of section 1 of the exhibit to Communication “A” 5265) to have access to the
MULC simultaneously with the settlement of funds received as a result of such issuances, to purchase
foreign currency notes for up to 90% of the amount settled in the MULC the purchased foreign currency
shall be deposited for a fixed term or in a special account in foreign currency held with a local financial
institution, for up to 180 calendar days and such amount may only be withdrawn for sale in the MULC.
In addition, it was established that in the months after the foreign currency entered the MULC, at
least 80% of net foreign currency needs of the resident (who purchased the notes) on any account shall be
covered by the sale of such notes.
Upon expiration of such 180-calendar-day term from the purchase of foreign currency, if the
funds were not used in full, they shall be settled in the MULC within 10 business days.
Recently, on October 8, 2014, pursuant to Communication “A” 5643, the BCRA added a new
section 2.7 to the exhibit to Communication “A” 5526, in relation to the purchase of foreign currency
intended to be used in the creation of off-shore assets by residents, which shall be applied to the financial
indebtedness from October 9 until December 30, 2014. The inflow of such funds through this channel
shall be subject to Decree No. 616/2005, i.e. the mandatory 30% deposit. However, it will take into
account the final intended use of the funds that are exempt from application of the mandatory deposit
(that is, the financial indebtedness with the non-resident or private financial sector, extending them to the
inflows made and paid within an average term of no less than two years, including principal and interest
and, to the extent that such funds are used in investments in non-financial assets by the private sector). As
a result of such regulation, the funds may be maintained in a local account in foreign currency for the
authorized term.
In any event, the sale of such notes shall not be subject to the mandatory deposit.
Other regulations concerning outflows of capitals
Acquisition of foreign currency to form external assets for subsequent application to specific
purposes.
On October 27, 2011, the BCRA issued its Communication “A” 5236 which rearranged all the
regulations governing the acquisition of foreign currency by residents for the formation of external assets
(Communication “A” 5198 and 5220). Despite this rearrangement and by reason of several regulatory
changes concerning the restrictions on access to the foreign exchange market by residents, some
provisions that allowed individuals and legal entities to access the foreign exchange market for the
acquisition of foreign currency without a specific purpose have been suspended. In particular, the
transactions described hereinbelow –among others- have been affected by the new regulations
(Communication “A” 5318 dated July 5, 2012) and the trusts set up with contributions from the national
public sector, residing individuals and legal entities incorporated in Argentina are only allowed to acquire
up to US$ 2,000,000 a month only and to transfer such funds abroad only for the following purposes:
investments in real estate abroad, loans granted to non-residents, contributions in the framework of direct
investments abroad by residents, portfolio investments abroad by individuals, other investments abroad
by residents, portfolio investments abroad by legal entities, purchase for holding foreign currency notes in
Argentina and purchase of traveler checks and donations in so far as the following requirements are
fulfilled (Communication “A” 5236, sub-section 4.1):
As has already been mentioned, sub-section 4.2 of Communication “A” 5236, which regulates
outflows of foreign currency and authorizes residents to access the MULC for the formation of external
assets without the duty to give such assets a specific allocation, has been suspended. Recently, under
Communication “A” 5526 dated January 27, 2014, BCRA replaced item 4 of Communication “A” 5236,
thus authorizing solely resident individuals in Argentina to have access to the local exchange market to
purchase foreign currency for purposes of holding foreign banknotes for an amount validated through
“Foreign Exchange Transactions Inquiry Program” of AFIP.
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On July 10, 2014, by means of Communication “A” 5604, the BCRA amended Communication
“A” 5526, including section 2.7, which establishes that new offerings of bonds and debt securities issued
under the public offering regime and traded on markets regulated by local governments and/or on the
non-financial private sector may be regarded as the foreign issue, and access to the MULC will be
permitted for purchase of foreign currency to be deposited with local financial institutions –by making a
fixed-term deposit or in a special foreign currency account-, simultaneously with the settlement of the
funds they receive for purchase of such bonds or debt securities abroad. Said authorization may be for up
to 90% of the funds settled in the MULC and for a period of 180 days. At least 80% of such funds must
be applied to any future needs of net foreign currency required by the company concerned. After the due
date of 180 calendar days established by the Communication, the funds that were not used must be settled
through the foreign exchange market within 10 business days. Such funds shall not be subject to the 30%
mandatory deposit regulated by Communication "A" 4359, as amended.
Outflows of foreign currency for payment to non-residents
According to Communication “A” 5264 modified by Communication “A” 5377 issued on
December 14, 2012 and Communication “A” 5604 and its amendments, access to the foreign exchange
market by residents in order to pay services, debts and profits to non-residents is, overall, unlimited and
unrestricted. Access to the MULC requires the submission of certain documentation by the residents that
attests to the validity of the transaction that gives rise to the acquisition of foreign currency.
Payment of services
As has already been mentioned, there are no restrictions on the payment of services rendered by
non-residents. The regulation includes all types of services without distinctions. The financial institution
must request submission of the related documentation that evidences the authenticity of the transaction as
regards the subject matter, the provision of the service by the non-resident to the resident and the amount
to be transferred abroad.
The services rendered must not be related to the activities actually conducted by the resident, the
financial institution must require a copy of the agreement that stipulates the payment of the obligation and
an auditor’s report. These requirements are intended to show that the services have been actually rendered
to the non-resident and the existence of the debt.
Payment of profits (interest, earnings and dividends)
Pursuant to Communication “A” 3859, Section 3, starting on January 8, 2003, Argentine
companies may transfer abroad earnings and dividends on financial statements that have been closed and
audited by external auditors.
Section 3 of Communication “A” 3859 was replaced by Communication “A” 5264. This
Communication establishes an in-depth detail of the scope of the authorization stating that payments
abroad of earnings and dividends to non-residing shareholders and holders of American Depository
Receipts and Brazilian Depositary Receipts on closed financial statements certified by external auditors
with the formalities applicable to the certification of annual financial statements may proceed. The
financial institution must verify that the formalities established in Communication “3602” (filing of the
statement of external debt by the private sector) and the survey of direct investments laid down by
Communication “A” 4237 have been complied with. The date of origin of the debt will be the date when
the shareholders’ meeting or equivalent governance body as per the corporate type approve the
distribution of dividends.
Debt service payments under financial indebtedness to foreign creditors
Access to the foreign exchange market is permitted for overdue debt service payments except in
the case of financial institutions subject to rediscounts granted by the BCRA that are restructuring their
debt to foreign creditors (Decree No. 739/2003 and the BCRA’s Communication “A” 3940).
Overall, access to the MULC for payments of principal and/or interest and/or for the early
repayment of financial debt to foreign creditors contracted by the non-financial private sector or by the
financial sector is subject to the provisions contained in Communication “A” 5265 dated January 3, 2012.
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The general requirement is that sales of foreign exchange for servicing financial debts must be
paid for with the residents’ own checks or by debiting residents’ sight accounts held with local financial
institutions using any of the modalities with allowed means of payment.
In addition, the financial institution must corroborate, when applicable, submission of the
statement of external debt by the private sector (Communication “A” 3602 and supplementary
regulations) which gives rise to the payment and the survey of direct investments established by
Communication “A” 4237 in the event that the foreign creditor belongs to the same conglomerate. On top
of this there is the corroboration that the funds should have stayed for at least 365 running days as from
the date when the foreign currency entered Argentina or as from the most recent roll-over date, all of
which must comply with Decree No. 616/2005.
Disbursements. The proceeds from debt contracted with foreign creditors must be settled in the
Argentine foreign exchange market within 30 days as from the date of the disbursement of the funds. The
free availability of these funds is currently subject to certain restrictions in conformity with Decree No.
616/2005.
Payments of interest. According to Communication “A” 5264, sub-section 3.7. amended by
Communication “A” 5604 dated July 10, 2014, access to the MULC for the acquisition of the foreign
currency necessary to pay interest on amounts owed to foreign creditors is allowed:
1.
up to 10 business days before the due date of each interest installment computed in
arrears or, for the amount accrued, at any time during the current interest period.
2.
for the payment of interest accrued as from the date when foreign currency was settled
through the MULC.
3.
for the payment of interest accrued as from the date of the disbursement if the funds
were credited to correspondent accounts for settlement in the local market within 48 hours as from the
disbursement.
In all cases, and when applicable, compliance with Communication “A” 3602 and supplementary
provisions and of Communication “A” 4237 must be verified.
Amortization of loans. According to Communication "A" 5265, modified by Communication
"A" 5604 (enacted on July 10, 2014), the foreign currency necessary for repaying debt contracted with
foreign creditors by the non-financial sector may be acquired:
(a) within 10 business days previous to the due date agreed upon for the respective
obligation in so far as the funds disbursed under said obligation have stayed in
Argentina for at least 365 days, or
(b) as much in advance as operationally needed for payment to the creditor on the due date
of principal installments whose repayment obligation depends on the consummation of
specific conditions expressly stipulated in the agreements.
(c) in advance, with terms longer than 10 (ten) business days, in whole or in part, to the
extent that the minimum term of 365 days and in so far as the payment is totally funded
with inflows of foreign currency from abroad for capital contributions.
(d) in advance, with terms longer than 10 (ten) business days, in whole or in part, to the
extent that the minimum term for the funds to remain in Argentina applies and in so far
as the payment is totally funded with proceeds received through the foreign exchange
market from new indebtedness to International Organizations and their agencies,
Official Foreign Credit Agencies and foreign banks and to the extent that: i) these
repayments are the conditions expressly stipulated for granting new indebtedness and ii)
they do not imply for the debtor an increase in the current value of the amounts owed
abroad.
Reporting Duties concerning Direct Investments
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Direct Investments in Argentina by non-residents
The Central Bank’s Communication “A” 4237 imposed reporting requirements concerning direct
investments and investments in real estate conducted by non-residents in Argentina and by residents
abroad.
Non-residents must satisfy, on a half-yearly basis, these reporting requirements if the amount of
the investment in Argentina is at least US$ 500,000. If this amount is not reached, satisfaction of such
reporting requirements is optional.
Direct investments made outside Argentina by Argentine residents
Argentine residents must satisfy the reporting requirements imposed by Communication “A”
4237 on an annual basis if the value of their investments is, at least, US$ 1,000,000 though less than US$
5,000,000, and on a half-yearly basis if it is, at least US$ 5,000,000. If the investments do not reach the
equivalent to US$ 1,000,000, satisfaction of information requirements is optional.
Sale of foreign currency to non-residents
Sales of foreign currency to non-residents (for reasons of tourism and traveling) shall be subject
to the previous conformity of the BCRA unless the following conditions are satisfied
(a) evidence is provided of foreign currency having been received through the MULC
during the period when the non-resident stayed in Argentina for an amount that cannot
be smaller than what the non-resident wishes to acquire,
(b) submission of the original version of the foreign exchange transaction slip under which
the foreign currency entered in the Argentine foreign exchange market,
(c) the equivalent to US$ 5,000 by client and length of stay in Argentina are not exceeded.
FOR FURTHER DETAILS ABOUT THE FOREIGN EXCHANGE RULES AND
REGULATIONS IN FORCE IN ARGENTINA, INVESTORS ARE SUGGESTED TO CONSULT
WITH THEIR PROFESSIONAL ADVISORS AND TO READ IN FULL DECREE No. 616/2005,
RESOLUTION MPE No. 365/2005 AND THE CRIMINAL FOREIGN EXCHANGE LAW No.
19,359 AS REGULATED AND SUPPLEMENTED. ANY INTERESTED PARTIES MAY
CONSULT SUCH RULES AND REGULATIONS THROUGH THE WEB SITE OF THE
MINISTRY OF ECONOMY AND PUBLIC FINANCES (WWW.INFOLEG.GOV.AR) OR OF
THE BCRA (WWW.BCRA.GOV.AR)
Money Laundering and Financing of Terrorism.
Law No. 25,246 (as subsequently amended by Laws No. 26,087; 26,119; 26,268, 26,683 and
26,734) (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 originated or substitute assets may appear to be of a legitimate origin, provided the value of the
assets exceeds AR$ 300,000, 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 (“UIF” as per its acronym in
Spanish), subordinate to the National Ministry of Justice, Security and Human Rights. Pursuant to Decree
No. 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
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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 the Financial Institutions Law, 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 reasonable 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, as amended by Res UIF No. 52/2012 on Politically Exposed
Persons, verify that they are not included in the lists of terrorists and/or terrorist organizations (Res UIF
29/2013) 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 a
maximum term of 30 days as of the day on which any such activity is qualified as suspicious (UIF
Resolution No. 3/2014) and a maximum term of 48 hours in the event such transaction is related to
terrorism financing (Res UIF No. 68/2013).
Pursuant to Resolution No. 229/11 issued by the UIF, 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 in
connection with the repealed resolution 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 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 XI of the CNV Rules refers to the guidelines laid down by the Anti-Money
Laundering Law and the regulations issued by the UIF, 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 compliance with the Resolutions issued by the Ministry of Foreign Affairs,
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International Trade and Worship. As from the effective date of the Capital Markets Law, the persons
subject to obligations pursuant to Section 20(4), (5) and (22) of the Anti-Money Laundering Law, as
amended, comprise trading agents, settlement and clearing agents, distribution and placement agents, and
investment fund managers. Such provisions shall be further complied with by: (i) custodians of
investment fund products (depositaries of investment funds pursuant to Law No. 24,083); (ii) brokerage
firms, (iii) collective deposit agents; and (iv) issuing companies in respect of capital contributions,
irrevocable 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 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 Rules establish that the parties falling within its scope 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 listed as cooperating countries
pursuant to Section 2(b) of Decree No. 589/2013. In case such parties are not included in such list and are
considered in their jurisdiction of origin as intermediaries registered with an entity controlled and
regulated by an authority similar to the Argentine CNV, such transactions shall 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.
Interested investors may be required to submit to the Bank and to dealers, if any, any information
and documentation as may be required and such information and documentation as may be requested by
the Bank and/or the dealers, if applicable, in compliance with, criminal laws and other laws and
regulations on prevention of money laundering, including the capital markets rules governing prevention
of money laundering issued by the UIF, and similar rules issued by the CNV and/or BCRA. The Bank
and the dealers, if any, reserve the right to reject any purchase order from any investor if we believe that
such rules have not been complied with to its entire satisfaction.
Finally, late in December 2011, the enactment of Laws No. 26,733 and No. 26,734 provided for
new types of crimes in the criminal code in order to protect financial and trading transactions and to
prevent terrorism financing. On the one hand, Law No. 26,733 established imprisonment, fines and
disqualification on any person who (Section 307) should use or provide privileged information to trade in
securities; (Section 309) should manipulate stock exchanges by offering or trading in securities by
making misstatements, simulated trades or gathering of the principal holders to trade at a certain price;
and (Section 310) should performed unauthorized financial or trading transactions. Law No. 26,734
introduced into the Criminal Code Section 306, which provides for imprisonment and fines on any person
who should directly or indirectly collect property or money to be used in financing a crime, individual or
organization engaged in terrorizing people or should require national, foreign authorities or authorities of
an international organization to take or refrain from taking an action. Such penalties shall be imposed
regardless of whether the crime is actually committed or the funds are actually used. A penalty shall be
also imposed if the crime, individual or organization sought to be financed operates or resides outside the
Argentine Republic. In addition, the UIF was vested with powers to freeze any assets related to terrorism
financing by issuing a resolution stating the grounds therefor and giving immediate notice to the court
having jurisdiction on the matter.
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, 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
ARGENTINE MINISTRY OF ECONOMY AND PUBLIC FINANCE, NAMELY, THE
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.
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e) Taxation
Argentine tax-related considerations
This summary relies on Argentine tax laws as in effect on the date of this Offering Memorandum, and it
is subject to any changes in Argentine laws that may come into effect after such date.
Interested parties are urged to seek advice from their own tax advisors about the consequences of
participating in the offer for the purchase of notes taking into account particular circumstances not
contemplated in this summary, including, without limitation, those derived from payment of interest, the
sale, redemption and disposition of the notes. In addition, it is worth mentioning that Argentine tax laws
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.
Potential buyers of the notes should consult with their own tax advisors about the
consequences based on the tax laws of the country in which they reside, with respect to investment in
the notes, including, without limitation, those derived from payment of interest, the sale, redemption
and disposition of the notes.
Income Tax
Interest
Except as described below, interest payments on 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 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 the requirements set forth by Joint Resolution 470-1738/2004, as amended;
(b) the issuer shall ensure that any proceeds from the issuance of such notes, pursuant to the
corporate resolutions authorizing the offer, are allocated to (i) investments in tangible assets located in
Argentina (ii) working capital to be used in Argentina, (iii) refinancing of debts, (iv) capital contributions
in the issuer’s controlled or affiliated companies, provided that said companies use any proceeds from
such contributions exclusively for the purposes set forth in (i), (ii) or (iii) above, (v) making loans in
accordance with the BCRA Rules to the extent that the issuer is a financial institution 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.
For restructuring of liabilities with notes, the tax benefit only applies to those issued as a result of a
restructuring of notes that were entitled to the tax benefit (pursuant to Section 56 of Resolution No.
470/04 issued by the CNV).
(c) the issuer is required to submit evidence to the Argentine Securities Commission as and when
required by the rules of the fact that the funds obtained from the issuance have been used for the purposes
set forth in subsection (b).
(d) the minimum term of repayment in full of the notes shall not be less than two (2) years. If the
issuance is subject to a partial repayment clause the following additional conditions shall be met: a) The
first repayment shall take place only after six (6) months have elapsed and such repayment shall not
exceed twenty-five percent (25%) of the issue amount; b) The second repayment shall take place only
after twelve (12) months have elapsed and such repayment shall not exceed twenty-five percent (25%) of
the issue amount; c) The total amount repayable within the first eighteen (18) months shall not exceed
seventy-five percent (75%) of the aggregate issue amount.
In such regard, Section 79, second paragraph, of Decree No. 2284/1991 published in the Official Gazette
on November 1, 1991 repealed the minimum repayment term requirements set forth in subsection 4 of
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Section 36 of Law No. 23,576 (as amended by Law No. 23,962), without prejudice to the BCRA’s
powers.
Joint Resolution No. 470-1738/2004, as amended, establishes the scope of the term “placement through a
public offering,” which mainly comprises the following:
•
The definition of “placement through a public offering” should be solely interpreted in
accordance with Argentine laws (Section 2 of the Capital Markets Law). Pursuant to the
Capital Markets Law, the notes offered under Rule 144A or under Regulation S of the
US law may qualify as those placed through public offering under the Capital Markets
Law.
•
Public offering efforts should be properly made, and the issuer is required to maintain
the documents supporting its existence.
•
Public offering efforts may be made not only in Argentina but also abroad.
•
Offerings may be made to the “general public” or to a “specified group of investors”
(including qualified institutional investors).
•
The offer may be subscribed for in the context of an "underwriting agreement". Th
Notes placed under such instrument shall be deemed to be placed through public
offering as long as the underwriter actually makes public offering efforts as per the
Capital Markets Law.
•
Refinancing of “bridge loans” constitutes admitted use of proceeds from the offer.
Therefore, each series of notes shall be issued in compliance with the Conditions of Article 36,
and shall be placed through a public offering as defined in Joint Resolution No. 470-1738/2004, as
amended. The Argentine Securities Commission has authorized the creation of this Program under
Resolution No. 16,573 dated May 24, 2011. For such purposes, after issuance of a series of notes, the
documents required by Resolution No. 368/01 issued by the CNV, as amended and Joint Resolution 4701738/2004, as amended, shall be filed with the CNV. Upon approval of such filing by the CNV, the notes
shall meet the requirements for tax exemption purposes as set forth in Articles 36 and 36 bis of the
Negotiable Obligations Law, provided that the Conditions of Article 36 are me.
However, according to Section 38 of the Negotiable Obligations Law, if the issuer does not
comply with or observe the Article 36 Conditions, the issuer will be liable for payment of taxes applicable
to noteholders that 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 exemptions specified shall benefit the
holders of the notes notwithstanding any further violation or non-compliance by the issuer, and the
holders of the notes shall be entitled to receive the total outstanding amount as if no withholding has been
required. See “Description of the Notes - Additional Amounts”.
Decree No. 1,076, dated July 2, 1992, as amended in accordance with Decree No. 1,157, dated
July 10, 1992, both of them ratified by Law No. 24,307 dated December 30, 1993 (“Decree No. 1,076”)
eliminated the Argentine income tax exemption with respect to taxpayers subject to the tax adjustment for
inflation rules pursuant to Title VI of the Argentine Income Tax Law (the “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) (the “Excluded
Noteholders”) are not entitled to such exemption pursuant to Article 36 and Article 36 bis of the
Negotiable Obligations Law. Therefore, payments of interest on notes to the Excluded Noteholders are
subject to income tax in Argentina at the general rate of 35% on their global net income.
While in certain cases payments of interest to Excluded Noteholders (except for financial
institutions subject to the Financial Institutions Law) are also subject to a 35% tax withholding creditable
against the income tax described above, if the debtor is an Argentine financial institution within the
meaning set forth in the Financial Institutions Law, such tax withholding is not applicable (Section 81(a)
of the ITL). Then such withholding shall be taken as a payment creditable against the income tax payable
by the noteholder and shall be enforceable unless the beneficiary claims an exemption and provided that
evidence is provided by meeting all formal requirements established by the relevant tax authority.
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The Argentine law establishes that, in general, tax exemptions do not apply if application of the
exemption could give rise to a transfer of revenues to foreign tax authorities (Section 21 of the ITL and
106 of the Argentine Law of Tax Procedures). This principle, however, does not apply to securityholders
who are foreign beneficiaries.
Therefore, the exemption under Article 36 and Article 36 bis of the Negotiable Obligations Law
solely applies to (i) resident and non-resident individuals (including undivided estates) and (ii) foreign
beneficiaries (either individuals or legal entities). The exemption does not apply to local companies
(“Excluded Noteholders”), in accordance with Section 4 of Decree No. 1076/1992.
Capital Gains
If the Article 36 Conditions are fully complied with, resident and non-resident individuals and
foreign companies with no permanent establishments in Argentina are not subject to taxation on capital
gains derived from the sale, exchange or other disposition of the notes.
However, even if Article 36 Conditions are not met, Decree No. 2284/91, as ratified by Law No.
24,307, establishes that foreign beneficiaries are not subject to tax on capital gains derived from the sale
or other disposition of securities.
Pursuant to Decree No. 1076, the Excluded Noteholders are liable to pay tax on capital gains
from the sale or other disposition of the notes, as set forth in Argentine tax regulations.
Value Added Tax
As long as Article 36 Conditions are met, all financial transactions and transactions related to the
issuance, placement, purchase, transfer, payment of principal and/or interest or redemption of the Notes
are exempt from payment of any 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, which are regarded as “direct
holders” must include securities, such as the notes, in order to determine their tax liability with respect to
the Personal Assets Tax (the “Personal Assets Tax”). In such cases, taxable assets (excluding shares of
stock and equity interests in any kind of company subject to the Argentine Companies Law) the aggregate
value of which -determined in accordance with the PAT Law- is not higher than Ps. 305,000 shall be
exempted.
This tax is levied on certain taxable assets owned as of December 31 of each year at a rate of (i)
0.50% for individuals domiciled and undivided estates located in Argentina, whose taxable assets exceed
a total amount of Ps.305,000 but are not higher than Ps.750,000; or (ii) 0.75%, for individuals domiciled
and undivided estates located in Argentina whose taxable assets exceed a total amount of Ps.750,000 but
are not higher than Ps.2,000,000: (iii) 1% for individuals domiciled and undivided estates located in
Argentina, whose taxable assets exceed a total amount of Ps.2,000,000 but are not higher than
Ps.5,000,000; or (iv) 1.25% for individuals domiciled and undivided estates located in Argentina whose
taxable assets exceed a total amount of Ps.5,000,000.
Individuals domiciled and undivided estates located abroad, which are regarded as “direct
noteholders, shall only be subject to taxation over the assets located in Argentina (including the Notes).
The applicable rate payable by these taxpayers is 1.25%, provided that their liabilities for the personal
assets tax exceed the amount of Ps. 255.75.
Notwithstanding the foregoing, while securities such as notes held by individuals domiciled or
undivided estates located outside Argentina would be technically subject to the Personal Asset Tax
pursuant to the provisions of Decree No. 127/96, no procedures have been established for collection of
such tax in relation to such marketable securities.
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The companies and other entities organized or incorporated in Argentina and Argentine branches
and permanent representative offices of foreign companies located in Argentina shall not be subject to the
Personal Asset Tax in respect of the holding of Notes.
In general, it will be presumed on a conclusive basis that the Notes which as of December 31 of
each year are held by legal entities and other entities that are not incorporated in Argentina (except for
Argentine branches and permanent representative offices) are indirectly owned by individuals or
undivided estates domiciled or located in Argentina and, therefore, shall be subject to the personal asset
tax.
Notwithstanding the foregoing, the legal presumption shall not apply (i) if the Notes held by
them were authorized by the CNV for public offering in Argentina and were traded in one or more
Argentine or foreign self-regulated securities exchanges; (ii) the capital stock of such legal or other entity
consisted of registered shares of stock; (iii) if the main activity of such legal or other entity is other than
making investments outside the jurisdiction of incorporation and in general is not limited when it comes
to engaging in commercial acts and business in such jurisdiction of incorporation; or (iv) such legal or
other entity qualifies as an exempt company (for example, insurance companies, mutual investment funds
or pension funds, or banks or financial institutions incorporated or domiciled in countries where the
relevant central bank has adopted the standards laid down by the Basel Committee on Banking
Supervision).
In the case of foreign companies and other foreign entities presumed to be owned by individuals
domiciled or settled in Argentina and subject to the Personal Asset Tax, as described above, the tax shall
be applied at the rate of 2.5% of the cost of acquisition plus accrued and unpaid interest.
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.
Notwithstanding the foregoing, Decree No. 812/1996, dated July 24, 1996, establishes that this
legal presumption shall not apply to shares and corporate debt securities, such as notes, whose public
offering has been authorized by the CNV and which are tradable on Argentine or foreign markets.
In order to ensure that this legal presumption will not apply and, accordingly, that the issuer shall
not be liable as Substitute Taxpayer, 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 tax liability derived from the Personal Assets Tax accrued, as required by AFIP Resolution N°
2,151/06.
Minimum Presumed Income Tax
The Minimum Presumed Income Tax (the “MPIT”) is levied on potential income derived from
certain income-generating assets. Corporations (sociedades anónimas) domiciled in Argentina, business
companies, foundations, sole proprietorships, trusts (except for financial trusts created in accordance with
Sections 19 and 20 of the Trust Law), certain mutual funds created in Argentina and permanent
businesses owned by foreign persons, among other taxpayers, among others, are subject to the tax at the
rate of 1%, applicable on the total value of assets, including the notes, that exceed a total amount of
Ps.200,000. The taxable base shall be the market value as of the fiscal year end if the notes are listed in a
self-regulated stock exchange, and the adjusted cost of acquisition if they are not listed. This tax shall be
payable only if the income tax determined for any fiscal year is not equal to or does not exceed the
amount so determined as MPIT. In such case, the amount payable shall be the difference between the so
determined MPIT for such fiscal year and the income tax determined for the same period. Any MPIT so
paid shall be creditable against the income tax required to be paid over the immediately succeeding ten
fiscal years.
Tax on Bank Credits and Debits
Law No. 25,413 (published in the Official Gazette on March 26, 2001), as amended, established,
subject to certain exceptions, a tax levied on debits and credits on checking accounts held with financial
184
institutions in Argentina and on other transactions that replace bank checking accounts. The general
applicable rate is 0.6% on each debit and credit and such rate is doubled in cases of transactions for which
no bank accounts are used and that are deemed to replace bank debits and credits.
Pursuant to Decree No. 380/2001, by amendment introduced 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 may 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.
This credit balance shall be creditable either against income tax, the PMIT or the special
contribution over the capital of cooperative associations. Any excess amountshall not be offset against
other taxes or transferred in favor of third parties. It may only be carried forward -until exhausted- to
other financial period of such taxes.
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 who regularly participate or are presumed to participate in business in any jurisdiction
where revenues are received from interest payable on notes, or from the sale or transfer thereof, could be
subject to payment of turnover tax at the rates established by specific applicable laws enacted by each
Argentine province, unless an exemption applies.
Section 155(1) of the Tax Code of the City of Buenos Aires establishes that revenues derived
from any transactions related to Notes issued in accordance with the Negotiable Obligations Law, such as
collection of interest, accrued updates, and the proceeds from the sale thereof in the event of transfer shall
not be subject to such tax to the extent that such notes are exempted from payment of income tax.
Section 207(c) of the Tax Code of the Province of Buenos Aires establishes that revenues
derived from any transaction involving notes issued in accordance with the Negotiable Obligations Law
and Law No. 23,962, as amended, collection of interest and accrued updates and proceeds from the sale
thereof in the event of transfer shall not be subject to turnover tax to the extent that such notes are
exempted from payment of income tax.
Stamp Tax
The Stamp Tax is a local tax generally levied on acts for consideration carried out within the
territory of a jurisdiction or those carried out outside a given jurisdiction but with effects in such
jurisdiction. Section 430(50) of the Tax Code of the City of Buenos Aires establishes an exemption from
the stamp tax applicable to any actions, contracts and transactions related to the issuance, subscription,
placement and transfer of notes issued in accordance with Law No. 23,576. This exemption shall include
capital increases for the issue of shares to be delivered in exchange for convertible notes, as well as the
creation of any kind of personal guarantees or security interests in favor of investors or third parties who
secure the issue, either prior to, simultaneous with or subsequently to such issue.
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
Law issued by companies authorized by the CNV to engage in public offerings are also 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.
185
In turn, in the Province of Buenos Aires, pursuant to Section 297, subsection 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 on gifts, donations, decedent, donor, legatee or donee.
Notwithstanding the foregoing, as regards the transfer tax, the Province of Buenos Aires
imposed a Tax on Free Transmission of Assets (Law No. 14,044) (the “TFTA”), effective as from
January 1, 2010, the main features of which are:
The TFTA is applicable to any enrichment resulting from any asset transmission for no
consideration, including inheritances, legacies, donations, etc.
Both individuals and legal entities are subject to the TFTA.
For taxpayers domiciled in the Province of Buenos Aires, the tax is levied in respect of property
situated both in and outside of the Province of Buenos Aires. Instead, for taxpayers domiciled outside of
the Province of Buenos Aires, the tax is levied in respect of property situated within the Province of
Buenos Aires.
Among different types of assets, the following assets are deemed to be situated in the Province
of Buenos Aires, when: (i) securities, notes, shares, ownership interests and other equity securities issued
by governmental or private entities and companies domiciled in the Province of Buenos Aires; (ii)
securities, notes, shares as well as any other securities located in the Province of Buenos Aires, at the time
of the transfer, which had been issued by legal entities and/or private entities domiciled in other
jurisdictions; and (iii) securities, notes, shares and other equity securities or equivalent instruments which,
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 jurisdiction, 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 TFTA if the total value of the assets, without computing
deductions, exemptions and exclusions, is equal to, or less than, Ps. 60,000. In the case of transfers
involving parents, children and spouses, such amount shall be Ps. 250,000.
186
Applicable rate ranges progressively from 4% to 21.92505% depending on the degree of kinship
and the relevant taxable base.
Gratuitous transfers of notes may fall within the scope of the TFTA to the extent the gratuitous
transfer - without computing deductions, exemptios and exclusions - exceeds Ps. 60,000. In the case of
transfers involving parents, children and spouses, such amount shall be Ps. 250,000.
Asset transfers are exempt from TFTA if the total value of the assets is an amount equal to, or
less than, Ps. 3,000,000 (excluding exemptions, deductions, etc.).
Applicable rate ranges from 5% to 10.5% depending on the degree of kinship and the relevant
taxable base.
Gratuitous transfers of notes may be subject to the TFTA if it involves transfer of assets
exceeding Ps. 3,000,000.
Pursuant to Law No. 10,197 published in the Official Gazette on January 24, 2013, the Province
of Entre Ríos has implemented the TFTA at the provincial level. This tax is similar in nature to the tax
applied in the Province of Buenos Aires.
Court Tax
In the event that it were necessary to start enforcement proceedings in relation to the Notes in
Argentina, the amount of any claim brought before the Argentine courts of the City of Buenos Aires shall
be subject to a court tax (currently at the rate of 3%).
Inflows of funds from low-tax or no-tax jurisdictions
In accordance with the legal presumption under Section 18.1 of Law No. 11,683, as amended, the funds
from low-tax or no-tax jurisdictions, irrespective of the nature thereof or kind of transactions involved,
shall qualify as unjustified asset increases in favor of the local recipient, and shall be taxable as follows:
(a) income tax shall be levied at the rate of 35%, applied to the issuer on 110% of the
amount of the transferred funds, and
(b) value added tax shall be levied at the rate of 21%, also applied to the issuer on 110% of
the amount of the received funds.
An Argentine taxpayer could refute such legal presumption by submitting evidence to the
Argentine Tax Authority proving that the funds derive from activities actually performed by the
Argentine taxpayer or by 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, low-tax or no-tax jurisdictions are those listed in Article 21.7 of
the regulatory decree of the Income Tax Law.
Decree No. 589/2013 published in the Official Gazette on May 30, 2013 replaced Section 21.7 of
the regulatory decree of the Income Tax Law, providing that for all purposes set forth in the Income Tax
Law and its regulatory decree, any reference to low-tax or no-tax countries should be understood as
countries that are not deemed to cooperate for tax transparency purposes. Cooperating countries for tax
transparency purposes are all those countries that enter into a tax disclosure agreement or convention with
Argentina in order to avoid international double taxation including a broad information exchange clause,
provided that information is actually disclosed.
The AFIP has prepared a list of the countries deemed to be cooperating countries for tax transparency
purposes. Such list is available at AFIP's website (www.afip.gob.ar).
187
Public Offering and Tax Exemption
The AFIP and CNV No. 470/2004 Joint 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 an out-of-court debt
restructuring agreement.
Such Joint Resolution defined some aspects, among others:
The resolution 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 Act 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 Section 2 of 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 traded on self-regulated markets in order to
qualify as placed through a public offering (although the whereases of the Resolution provide that trading
on an Argentine self-regulated entity will be conducive to weighing 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
exchange thereof, to the extent that the underwriters of the latter have also been the holders of the
originally issued notes.
As set forth in the Resolution, the Issuer shall make its best efforts so that the Securities are
elegible for tax benefit purposes.
Tax Agreements
Argentina has entered into tax agreements with several countries. In such regard, the tax
treatment described above could be changed to the benefit of the investor by application of treaties
intended 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
POTENTIAL PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS
ABOUT THE TAX CONSEQUENCES APPLICABLE TO THEIR SPECIFIC SITUATION.
188
f) Dividends and Paying Agents
The Bank has no contract restrictions on the payment of dividends. The Bank has no specific policy
regarding payment of dividends to its shareholders but is bound by the provisions of the Argentine
Companies Law, the BCRA Rules and any applicable laws and regulations.
g) Experts’ Declaration
This section is not applicable.
h) Available Documents
Copies may be obtained of all financial statements comprising this Offering Memorandum and the
Annual Report for our latest annual financial statements from the offices of the Bank located at
Reconquista 151 (C1003ABC), City of Buenos Aires, Argentina (during normal business hours provided
that the securities are outstanding or issued under the Program), unless otherwise stated in the relevant
pricing supplement. In addition, the annual financial statements comprising the Offering Memorandum
are made available on the CNV website: www.cnv.gob.ar under the item “Financial Information”.
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
Zang, Bergel & Viñes Law Firm
Florida 537 – 18th Floor - Galería Jardín
(C1005AAK) City of Buenos Aires
Argentina
189
EXHIBIT I
The Bank’s quarterly financial statements as of March 31, 2015 are available at the CNV’s
website, www.cnv.gob.ar, under “Información Financiera” of the Financial Information Highway
(“AIF”), on the Buenos Aires Stock Exchange’s website (“BCBA”), www.bolsar.com, under
“Estados Contables” and on the Bank’s website, http://www.hipotecario.com.ar.
[THE FINANCIAL STATEMENTS AS OF 03.31.2015 FOLLOW]
190

UPDATED PROGRAM`S OFFERING MEMORANDUM BANCO

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