The Central Bank authorizes financial entities to issue long-term debt or “perpetuities” computable

These instruments must have a maturity of at least 30 years, and combine similar characteristics to bonds, such as regular coupon payments, and to shares, such as having coupons that can not be paid if the financial entity does not have profits to distribute, and holder’s priority rights over the shareholders only.

Financial entities must request prior approval from the Superintendencia de Entidades Financieras y Cambiarias of the Central Bank (“SEFyC”) in order to be able to calculate these instruments in their net worth. The SECyC must grant such authorization within 30 business days following the filing.

The instruments must comply with a set of requirements, in addition to those described above, in order to be computed as part of the basic net worth of the entity:

(i)          prior authorization from shareholders of similar corporate body;

(ii)         denomination in local or foreign currency;

(iii)         payments can not exceed the accounting profits of the entity;

(iv)         coupon payments must be made on a quarterly basis;

(v)          redemption must be at the option of the entity, after 5 years, with prior authorization from the SEFyC, provided that the instruments are replaced with capital or with other perpetuities;

(vi)          the rate can be increased only once and 10 years following the issuance;

(vii)         they can not include accelerating provisions upon default or any other motive, except in the case of bankruptcy;

(viii)         the unpaid coupons can not be accumulated or deferred;

(ix)          the reserve fund can not exceed 10% of the issuance;

(x)           the issuance must be authorized for public offering and trading in local or foreign regulated markets.

The Central Bank expressly forbids financial entities to purchase its own issuance to resell them, as well as acquire issuances of other entities.

Also, it sets forth certain maximum limits for the total instruments that can be issued, calculated as a percentage of the basic net worth of each entity.

Finally, the Central Bank authorizes to compute as supplementary net worth such instruments that:

(a)     are issued in excess of the above maximum limits;

(b)     with residual term of less that 10 years; and/or

(c)     which financial services can be accumulated.