New comprehensive regulations on representatives of foreign financial institutions that do not hold a local banking license

On October 1, 2009 the Central Bank issued Communiqué “A” 4981, which embraces a new regulatory regime applicable to representatives of foreign financial institutions that are not authorized to operate in Argentina (the “New Regulations”).  This new regime embraces several requirements that -in practice- representatives were already subject to, makes clearer certain interpretations of Central Bank on the few prior existing rules, and also introduces new signifcant provisions.

 

The New Regulations set forth that in order for an individual to act in Argentina as a representative of a foreign financial institution such individual must have the prior authorization of the Argentine Central Bank.  Likewise, the New Regulations make it clear that the representative shall be authorized to carry out in Argentina the permitted transactions in the name and on behalf of a foreign financial institution, whether as an attorney-in-fact, agent or in any other capacity.

 

The local structure and development of day-to-day activity of such representatives will now have to comply with new cumbersome requirements.  Representatives are required to have at least one alternate or deputy representative duly registered with the Public Registry of Commerce and their activity will be scrutinized much closer by the Central Bank. In this respect, for example, representatives are required to maintain a special book keeping a detailed registration of all the activities carried out by them, in chronological order, even if such activities do not generate any movements in the financial statements of the representative office.  This special book shall also record each of the tasks and mandates received and shall be permanently available for Central Bank officers.

 

The Central Bank has also broadened the obligations and commitments that the respective foreign banks have to offer when appointing or maintaining a representative in Argentina.  In this respect, the New Regulations confirm the obligations of representatives to report the transactions that his or her represented bank have executed with Argentine residents (including transactions performed through the foreign bank’s branches and affiliates in other countries), with or without involvement of the representative.  The scope, manner and frequency of this disclosure issue are still to be specifically regulated by the Superintendence of Financial Institutions.  This is certainly a sensitive issue that may affect foreign secrecy laws and to such end, the New Regulations provide that it is not acceptable to invoke restrictions imposed by the legislation of the foreign entity’s country in order to limit the compliance with these requirements.