The Argentine Central Bank Abrogated Regulations regarding Foreign Exchange and Financial Institutions’ General Exchange Position

On May 5, 2017, the Central Bank of the Argentine Republic (the “Central Bank”) enacted Communiqué “A” 6237 (the “Communiqué”), addressed to financial institutions, foreign exchange bureaus, agencies and offices, allowing all institutions authorized to trade in currency to freely determine the percentage and usage of their General Exchange Position (“GEP”).

The Communiqué provides that: (i) institutions authorized to trade in currencies may freely determine the percentage and usage of their GEP; (ii) to exclude investments in public external securities issued by members of the Organisation for Economic Cooperation and Development (OECD) whose sovereign debt is rated no lower than “AA”, as well as fixed term deposit certificates in foreign financial institutions with international rating no lower than “AA”, included in the GEP, from the limits to financings to foreign residents abroad in accordance with Communiqué “A” 4311; (iii) carry out arbitration and foreign exchange swaps abroad under certain conditions; and (iv) abrogate certain restriction established in various Central Bank Communiqués which did not allow for such operations as described herein.

Consequently, financial and foreign exchange institutions may now carry out arbitrations and foreign currency swaps abroad as long as their counterparty is: (i) a branch or agency located abroad of local official banks; (ii) a foreign financial institution owned fully or in its majority by foreign states; (iii) a foreign financial or foreign exchange institutions which is not established in countries or territories where the Recommendations of the Financial Action Task Force are no applied or not sufficiently applied; or (iv) a foreign company dedicated to the trade of different bills and/or coined precious metals and ingots and whose headquarters is located in a country which is a member of the Basel Committee for Banking Supervision.

Finally, the Communique also abrogated:

• Communiqué “A” 3640 (which established the Central Bank’s approval as a requisite for financial institutions to trade in all kinds of securities);
• Communiqué “A” 4322 (which established an exemption to the authorization required by Communiqué “A” 3640);
• Communiqué “A” 4560 (which modified Communiqué “A” 3661);
• Communiqué “A” 5391 (which restricted arbitrations and swaps with foreign financial institutions);
• Communiqué “A” 6011 (which adjusted certain aspects regarding access to the Foreign Exchange Market);
• Communiqué “A” 6067 (which modified conditions regarding the trading of securities in exchanges and self-regulated markets);
• Communiqué “A” 6088 (modified certain aspects of the GEP within the framework of Law No. 27.260);
• subsection (b) of Communiqué “A” 3661 (which established the approval of the Central Bank as a requisite to carry out arbitrations and swaps over certain amounts);
• subsections (4) to (9) of Communiqué “A” 4646 (which established limits to financial institutions’ GEP);
• subsections (2), (3) and (5) of Communiqué “A” 4814 (which modified Communiqué “A” 4646);
• subsection (23) of Communiqué “A” 5850 (which established limits to the access of financial institutions to the Foreign Exchange Market for the purchase of securities); and
• subsection (7) of Communiqué “A” 6220 (which amended Communiqué “A” 5850).

In conclusion, financial and foreign exchange institutions are no longer required to request the Central Bank’s authorization to increase their GEP.  These institutions are now authorized to carry out arbitration, foreign exchange swaps and operate in securities with foreign financial institutions.  Moreover, foreign securities are no longer computable towards establishing financial institutions’ limits to the financing of foreign residents abroad.

It is worth mentioning that the Communiqué will only be in force until July 1, 2017, when the new Foreign Exchange Regime Enacted by Communiqué “A” 6244 will take effect.