BCRA and CNV: Measures on Blue Chip Swap Transactions and FX Market

At the same time that the Argentine Central Bank (the “BCRA” after its acronym in Spanish) and the Argentine Securities and Exchange Commission (the “CNV”, after its acronym in Spanish) issued a series of measures aimed at discouraging the use of certain variants of “blue chip swap” transactions (both in its variant of “dollar cable” and “dollar MEP”), and restricting access to the Argentine FX market, the Financial Intelligence Unit (the “UIF”, after its acronym in Spanish) exercised its control powers in relation to them and the CNV imposed various restrictions on  Mutual Investment Funds (“FCI”, after their acronym in Spanish).

First, on April 24, 2020, through General Resolution No. 835, the CNV limited open FCIs investments in foreign currency. The same day, the BCRA eliminated reserve requirements on sight deposits for these funds through Communique “A” 6992. In this regard, the CNV established that FCIs denominated both in pesos and in dollars that issued their shares denominated in pesos may only invest up to 25% of their net assets in sight or investment deposits in foreign currency, as per a divestment schedule established therein, which is expected to create market opportunities. This measure was supplemented by a regulation issued by the BCRA which eliminated reserve requirements on sight deposits for FCIs, for which a minimum cash requirement rate at 0% was fixed.

Through Communique “A” 6993 of April 24, 2020, the BCRA established the conditions for the granting of “Subsidized Loans” provided for in the framework of the Labor and Production Emergency Assistance Program (the “ATP”, after its acronym in Spanish) launched by the Argentine Government to appease the impact of the social, preventive and mandatory isolation on those adhering to the Simplified Scheme for Small Taxpayers, and self-employed personnel. In this regard, in line with the above, the BCRA clarified that until such financings are fully repaid those who have received said financings will not be allowed to access the Argentine FX market for investment purposes, remittance of family aid or derivatives, nor to sell securities against foreign currency or transfer them to other depository entities.

On April 30, 2020, the BCRA issued Communique “A” 6999, amending the rules on "foreign exchange operators” that allowed legal persons out of the scope of the Financial Entities Law No. 21,526 as amended and restated, that carry out commercial, industrial or other activities, to request an authorization to carry out, simultaneously with said activities, the operations foreseen for the exchange agencies. This measure affects, for instance, the ALyCs that, after Decree No. 27/18 on “De-Bureaucratization and Simplification” of January 10, 2018, had requested authorization to, permanently or habitually, operate in the foreign exchange market through its registration with the BCRA’s “registry of foreign exchange operators”.

By means of Communique “A” 7001 of April 30, 2020, BCRA restricted access to the Argentine foreign exchange market to those who carry out blue chip swap transactions. In this regard, it was established that those who have obtained or will obtain within the following 30 calendar days, subsidized loans in pesos at an interest rate of 24% for working capital, including payments of salaries and coverage of deferred checks, and healthcare service providers, in accordance with Communique “A” 6937 as amended, will require BCRA prior approval for the repayment of principal and interest of foreign indebtedness of any kind.

Likewise, it established that those who maintain outstanding financings in pesos may not, until their full repayment, sell securities against foreign currency or transfer them to depository entities abroad. Likewise, in the case of transactions involving the outflow of funds through the Argentine foreign exchange market –including those that are carried out through swaps or arbitrages- for whatever reason, a sworn statement on the absence of such sales and transfers in the prior and following 30 calendar days must be submitted to the local financial institution intervening in the outflow of the funds.

It is worth noting that the variants of “blue chip swap” (including the dollar MEP) that do not involve the sale of securities against foreign currency do not fall within the scope of the new regulations.

On this opportunity, the BCRA also reduced from USD 2,000,000 to USD 500,000 the amount of transactions that local financial institutions must report to the BCRA at the end of each day within the framework of the “advance of foreign exchange operations” information regime, and incorporated the acquisition of jewelry, precious stones and precious metals (gold, silver, platinum, etc.) within the list of transactions by which local financial institutions and non-financial companies that issue local cards must have the prior consent of the BCRA to access the Argentine FX market to make payments abroad, when credit, purchase, debit or prepaid cards issued in the country have been used for such purposes.

Lastly, it is worth noting that, on April 23, 2020, as a result of the increase in the demand for blue chip swaps and dollar MEP transactions in recent weeks, the UIF issued a press release exhorting financial institutions and broker-dealers under its purview to fulfill their obligations and to closely analyze the risks involved in blue chip swap transactions, pursuant to applicable anti-money laundering and terrorism financing regulations, and on April 28, 2020, the CNV distributed an email amongst broker-dealers licensed in Argentina to request, within a maximum period of 24 hours, information on those clients with the highest daily operating volume of blue chip swaps in its different variants, dollar MEP and dollar Cable for the period from April 6, 2020 through April 28, 2020.