Bank restructurings according to Section 35 bis of the Financial Entities Law No 21,526 must request approval from the Antitrust Commission

The Argentine Antitrust Commission (the “Antitrust Commission”) has recently interpreted in Consultative Opinion Nº 170, dated September 24 that the recent decision of the Argentine Central Bank to transfer certain privileged liabilities and assets of Banco Scotiabank Quilmes to Banco Comafi S.A. and Banco Bansud S.A. requires antitrust approval. This interpretation represents a conflict between Antitrust Law No. 25,156 (the “Antitrust Law”) and Financial Entities Law No. 21,526 (the “Financial Entities Law”).

Section 35 bis of Financial Entities Law contains a special procedure that authorizes the Argentine Central Bank to re-structure certain financial institutions as a protection for the credit and bank deposits. The procedure is used by the Central Bank when it has decided to revoke the authorization of a financial institution to act as a financial entity and it includes an authorization to the Argentine Central Bank to separate certain assets and liabilities (client deposits) from the failed financial institution and transfer them to other financial entities.

Section 35 bis procedure may be considered as an economic concentration in light of the Antitrust Law. Section 6 of the Antitrust Law states that certain transactions are deemed as economic concentrations when they result in the assumption of control by an agreement or act by which assets of a company are transferred to a person or economic group.

The above-mentioned economic concentrations require notice and approval by the Antitrust Tribunal should the aggregate volume of business of the companies involved in the transaction exceed 200 million Pesos in Argentina. This mandatory notice must be delivered prior to or within one week following the first to occur of: (i) the date that any transfer effectively occurs, or (ii) the publication of any cash tender or exchange offer. In the event the parties do not comply with this requirement, they will be subject to a fine of up to $1,000,000 for each day they fail to comply.

All financial operations of Banco Scotiabank Quilmes in Argentina were suspended by the Argentine Central Bank on April 18, 2002. In August, the Argentine Central Bank invited certain financial entities to make a bid for the assets and liabilities of Banco Scotiabank Quilmes. Banco Comafi and Banco Bansud made offers to receive certain assets and liabilities of Banco Scotiabank Quilmes. In Resolution Nº 523 of August 20, the Argentine Central Bank decided to separate certain assets and liabilities of Banco Scotiabank Quilmes and transfer (i) the liabilities (bank deposits) to Banco Comafi and Banco Bansud on 65-35% basis; and (ii) the assets to a trust owned by Banco Comafi and Bansud (the trust will liquidate all the assets and cancel Banco Comafi and Banco Bansud´s participation).

The Antitrust Commission did not intervene during the bidding and transfer process. However, the Banks requested the Antitrust Commission’s interpretation through a Consultative Opinion. It is worthwhile mentioning that pursuant to Section 8 of Reglamentary Decree No. 89/2001, the request of an interpretation by a consultative opinion suspends all terms for antitrust filings and, as a consequence, suspends all possible imposition of fines.

The Antitrust Commission interpreted in Consultative Opinion Nº 170 that the provisions of the Antitrust Law are applicable to this transaction, although it has been reviewed and approved by the Argentine Central Bank. Therefore and according to the Antitrust Commission’s interpretation, it must also review the competitive effects of a transaction that was performed as a consequence of the Argentine Central Bank’s decision to protect the local financial system. The Antitrust Commission stated that the Antitrust Law derogated all competition procedures provided in other previous legislation and, therefore, is the only government agency authorized to analyze antitrust effects on the economic concentration produced as a consequence of Banco Scotiabank Quilmes´ revocation.

As a conclusion, financial restructuring transactions resolved by the Argentine Central Bank according to Section 35 bis of the Financial Entities Law must be notified to the Antitrust Commission if the volume of business of the involved parties is higher than 200 Million Argentine Pesos. Otherwise, the Antitrust Commission may impose penalties of up to 1 Million Argentine Pesos for each day the parties fail to request antitrust approval.