Argentine Central Bank's Charter Reform

Summary of the BCRA’s Charter Reform

The bill amending the BCRA’s charter, Law No. 25,562 was passed on February 6, 2002 (the "Law)

The following are the Law´s principal amendments

• Section 3: Imposes on the BCRA the obligation of disclosing the monetary program for each fiscal year, informing the projected target inflation and total variation of money.

• Section 14: Introduces a change in the guidelines for the BCRA’s credit operations. The new law provides that the sole restriction is that the interest rate should not be lower than the average rate obtained by the investment of reserves. References to prohibition of subsidizes transactions were revoked.

• Section 17: The BCRA is granted broader powers to grant rediscounts and advances for temporary iliquidity (the former Charter sets forth that same can only be granted for 30 days) eliminating the term therefor.

• Section 20: Eliminates the BCRA’s restriction to finance the Government only by means of the purchase at market values of securities issued by the Treasury. The new Charter empowers the BCRA to make temporary advances to the National Government up to an amount not exceeding 10% of BCRA’s cash resources obtained during the preceding 12 months. Such advances shall be reimbursed within twelve months after they have been granted. If they are not reimbursed, the BCRA will be prevented from using this faculty until reimbursement.

• Section 28: Authorizes financial institutions to comply with the minimum reserve requirements with government securities in the proportion determined by the BCRA.

Provisions of Decree 214/2002 - of 02/03/2002 - having an impact on the Charter

Section 15 of Decree 214/2002 provides that the BCRA may grant the facilities contemplated in Section 17 of its Charter to entities with impaired solvency. It refers mainly to rediscounts and advances.

It should be noted that the current Charter empowers the BCRA to grant rediscount loans and advances, but only in cases of banks suffering temporary iliquidity and not to insolvent banks as is now stated by the Decree.

Finally, Decree 401/2002 of 02/28/2002, partially amends the BCRA’s Charter, once again, empowering the BCRA to issue notes, bonds and certificates of participation.