New regime for the voluntary exchange of Deposits for Government Bonds (Decree 905/2002)

Legal Framework

The regime established by the Decree has been regulated mainly by the following: (i) Resolutions No. 81 and 92 of the Ministry of Economy of the Republic of Argentina of June 11 and June 14, 2002, respectively; (ii) Communications “A” 3637 and “A” 3644 of the Central Bank of the Republic of Argentina (“BCRA”) of June 15 and June 25, 2002, respectively; and (iii) Resolutions No. 408 and 411 of the Argentine Securities Exchange Commission of June 4 and June 21, 2002, respectively.

2. Exchange of deposits in the financial system

The Decree offers a plan to exchange deposits in the financial system for the following government securities: (i) Bonos del Gobierno Nacional en Dólares Estadounidenses LIBOR 2012 (U.S. Dollar Government Securities at LIBOR due 2012, or “BODEN 2012”); (ii) Bonos del Gobierno Nacional en Pesos 2% 2007 (Government Bonds in Pesos at 2% due 2007, or “BODEN 2007”); and (iii) Bonos del Gobierno Nacional en Dólares Estadounidenses LIBOR 2005 (U.S. Dollar Government Bonds at LIBOR due 2005, or “BODEN 2005”).

(i) Rescheduled deposits originally denominated in foreign currency

Holders of deposits originally denominated in foreign currency, later converted into Pesos and rescheduled, have the option to receive through the relevant financial entity, partially or totally, in payment of such deposits, (i) BODEN 2012 at the rate of U$S100 per each $140 of rescheduled deposit, or (ii) BODEN 2007.

(ii) Rescheduled deposits originally denominated in Pesos

Holders of deposits originally denominated in Pesos, later rescheduled, have the option to receive through the relevant financial entity, partially or totally, in payment of such deposits, BODEN 2007.

(iii) Special cases: deposits excluded from rescheduling

Holders of deposits, whatever their currency of origin, who are individuals of 75 or more years of age as of July 16, 2002, or who are individuals that have received severance payments as from July 1, 2000, or who are individuals whose life, health or physical integrity is in danger, have the option to receive BODEN 2005 at the rate of US$100 per each $140 of deposit.

(iv) Rescheduled deposits of up to $10,000

Holders of rescheduled deposits originally denominated in foreign currency with balances of up to $10,000 as of February 3, 2002, have the option to receive through the relevant financial entity, partially or totally, in payment of such deposits, BODEN 2005 at the US$/$ exchange rate that the Ministry of Economy may fixed in the bidding process described in its Resolution No. 81.

(v) Sight deposits

Holders of sight deposits have the option to acquire, through the relevant financial entity, BODEN 2012 and/or BODEN 2007.

Individuals have, in addition, the option to participate in the bidding process described in Resolution No. 81 of the Ministry of Economy for the acquisition of BODEN 2005.

(vi) Deposits with financial institutions in special conditions

Holders of deposits with financial entities that have been included in section 35 bis of the Financial Institutions Law No. 21,526, or suspended in the terms of section 49 of the Central Bank’s Charter, may also exercise the above exchange options.

3. Term to exercise the exchange option and other provisions

The term to exercise the option to exchange deposits for BODEN is 30 banking days as from publication of the Decree in the Official Gazette (in principle, until July 16, 2002).

Holders of rescheduled deposits that have not exercised the BODEN exchange option, or that have partially exercised such option, shall maintain their rescheduled deposits pursuant to the regime in force. Financial institutions shall issue to such holders a certificate evidencing the rescheduled deposits and register the rescheduled deposits in a register kept by Caja de Valores S.A.

The rescheduled deposits so registered will constitute marketable securities, will be publicly listed and will be eligible for trading on self regulatory markets. Holders of rescheduled deposits may use them for the subscription of new issues of shares and corporate bonds, and for the cancellation of loans at the financial institution where the funds are deposited.

Rescheduled deposits that are the subject matter of legal actions may not be evidenced in certificates until such legal actions have concluded.

Lastly, financial entities have been authorized to offer holders of rescheduled deposits conditions more favorable than those contained in the regime on rescheduling of deposits in force.

4. Mechanism to subscribe BODEN

Financial institutions must subscribe BODEN in Pesos at their technical value, considering for those issued in U.S. Dollars a rate of exchange of $1.40 per each U.S. Dollar.

In order for financial institutions to be able to carry out the subscription of BODEN, the BCRA will grant them advances in Pesos, which the financial institutions will secure with certain public debt. In the event the assets of the financial institutions do not cover the advances made by the BCRA, they must collaterally assign their loan portfolios in situation 1 or 2, or their shareholders must collaterally assign their shares.

It is important to highlight that the constitution of the above referred guarantees will imply the financial institution’s express conformity to the emergency rules issued up to the date hereof (inter alia, Decree No. 1570/2001, Law No. 25.561 of Public Emergency and Decree No. 214/2002).

Financial institutions may prepay the advances received from the BCRA to subscribe BODEN by using the collateral (i) if the National Government defaults in the payment of principal of or interest on the BODEN and/or certain eligible public debt earmarked as security, or (ii) as from the closing of the international tranche of the exchange of public securities contemplated in Decree No. 1387/2001, not being able, in this case, to prepay such advances before December 31, 2003.

Financial institutions may also prepay the advances received from the BCRA to subscribe BODEN by using BODEN delivered to them by depositors for the cancellation of bank debts.

5. How may BODEN be used?

The holders of BODEN who are individuals may use BODEN for the cancellation of certain mortgage and personal loans. Financial institutions, however, will not be obliged to receive BODEN in excess of the BCRA’s outstanding advances. Likewise, financial entities may (but will not be obliged to) accept BODEN from legal persons or individuals for the cancellation of other bank loans.

Any holder of BODEN (whether an individual or legal person) may request to the Ministry of Economy to redeem the BODEN in order to use the proceeds to: (i) the acquisition of certain real property from the National Government; (ii) the construction of new buildings; (iii) the acquisition of new vehicles and machines, to the extent such items are subject to registration; (iv) the subscription of trust securities of financial trusts created to finance investment projects, which are authorized to be publicly listed; or (v) the payment of certain national taxes owed as of June 30, 2001. The U.S. Dollar denominated BODENs will be redeemed at the rate of $140 per each U$S100. The Ministry of Economy may limit the redemption rights of the BODEN holders.

In the event of default in the payment of principal of and/or interest in the BODENs, BODEN holders may use the amounts due for the cancellation of certain national taxes.

6. New deposits

The BCRA will issue rules in connection with the creation and functioning of new sight accounts opened to receive deposits in Pesos outside the “corralito”. Such accounts will be of free availability and may be subject to adjustment by application of the Coeficiente de Estabilización de Referencia or “CER”.

The Decree also provides for the making of deposits in foreign currency, provided they are exclusively used to refinance foreign trade transactions and related activities.

7. Compensation to financial entities

The Decree sets forth the delivery of BODEN 2007 and BODEN 2012 to financial institutions as compensation for the negative economic effects derived from the emergency rules.

8. Deposit Guarantee Insurance

Decree No. 540/1995, that regulates the Bank Deposit Guarantee Insurance System and created the Deposit Guarantee Fund, guarantees the return of demand or time deposits up to the amount of $30,000 (taking into account all the deposits of each person with the financial institution).

In the event that upon a generalized claim of depositors, the funds in the Deposit Guarantee Fund were insufficient, the Decree provides for the delivery of (i) Government bonds in Pesos on financial conditions similar to those of the BODEN 2007, or (ii) BODEN 2012 (in which case, the conversion into U.S. Dollars will be at the exchange rate in force as of the date of the entity’s revocation of the authorization to operate as a financial institution), to cancel deposits up to the limit provided for in Decree No. 540/1995.