Cooperative savings and loans institutions

On September 24, 2007, the Argentine Central Bank issued Communication “A” 4712, creating a new regulatory framework for the operation of savings and loans institutions. The reform was approved as a consequence of the amendments promoted in Law No 21,526 (the “Financial Entities Law”) by Law No 26,173, enacted on November 22, 2006.

That regulation was designed by the Central Bank jointly with representatives of the Argentine cooperative sector based on the experiences of Canada, Italy and Germany regarding cooperative savings and loans issues.

This new regime aims to increase the levels of access to banking institutions, providing savings and loans institutions with a new legal framework that allows such institutions to recuperate their primary role as entities providing services, loans, and other financial benefits to sectors of the population that do not have access to the traditional banking system.

In connection with the reforms introduced by Communication “A” 4712, the Central Bank approved Communication “A” 4713 which regulates accounts opened at savings and loans institutions and provides rules applicable to commercial letters of credit.

In this context, the main aspects of the Central Bank’s new regulations are the following. They:

i)             require the integration of a minimum capital adequacy to operate and stipulate a large increase in such capital;

ii)            allow savings and loans institutions to have a head office and up to 5 branches within their area of operation; prior regulations only permitted them to operate with a single office;

iii)            allow the attracting of deposits from and the granting of loans to associates (without a minimum contribution) and to non-associates located within the area of operation of the institution; the prior regime only authorized operating with associates located within the electoral jurisdiction of the institution that had proved the subscription of quotas for at least AR$ 200;

iv)           eliminate the former AR$ 20,000 maximum amount per account and per person to receive time deposits;

v)           authorize the parties to freely arrange the interest rate of the loans, eliminating the restrictions stipulated in prior regulations;

vi)           authorize the clearance of commercial letters of credit through electronic clearing houses; prior regulations stated that commercial letters of credit must be cleared through specific clearing houses;

vii)          implement general provisions regarding minimum cash requirements applicable to all financial entities, eliminating the specific provisions for savings and loans institutions included in the prior regulations.

With these amendments, the Central Bank intends to establish a legal framework applicable to savings and loans institutions throughout the country in order to form, together with other local institutions, a new operation able to administrate savings and expand credit within its sphere of influence.