Restructurings of Financial Institutions in Crisis

Marval, O’Farrell & Mairal, through its partners Roberto E. Silva, Jr., and Fermín O. Castro Madero, participated in the survey regarding restructurings of financial institutions in crisis in countries that are members of the G-20 group (the “G-20 Survey”).  The Republic of Argentina is a member country of such group.

The G-20 Survey was prepared by the Financial Crisis Task Force of the International Bar Association (“IBA”).  Most of the members of the IBA’s Banking Law Committee (being Mr. Silva its secretary) have participated in it.  Marval, O’Farrell & Mairal was in charge of the information concerning Argentine regulations in connection with financial institutions in crisis.

The G-20 Survey’s goal was to analyze the feasibility of applying the bail-in mechanism; that is to say that, in financial institution crisis scenarios, the authorities of each country have the ability to write certain assets of the financial institution down and, above all, mandate the conversion of preferred shares, subordinated debt instruments and part of non-subordinated debt ones into common shares in order to allow a kind of recapitalization of the financial institution.  The alternative opposed to the bail-in is bail-out which, basically, consists of the injection of fresh funds in the financial institution in crisis by the monetary authorities of the pertinent country, as occurred in the recent financial crisis that started in 2008 following Lehman Brothers’ fall.

Several cases of restructurings of financial institutions have taken place in Argentina.  Since 1995, when Section 35 bis of the Financial Institutions Law No. 21,526 was included, Marval, O’Farrell & Mairal participated in almost all of such transactions advising banks and trustees involved in them.