Bank Restructuring Commission Created (the URSF)

Decree No 1262/03 (the “Decree”) which created the URSF was published in the Official Gazette on May 26, 2003. The URSF should begin functioning within (30) days as of such date.

The Decree consists of seven paragraphs, some of which are worrisome to analysts, economists and bankers who consider the URSF to be an “interference to the Central Banks autonomy since it already has the structure and mechanisms of supervision needed to execute this task”.

In the recitals to the Decree it is stated that in order to achieve the consolidation of the financial system it was necessary to create a strategy which would allow the establishment of guidelines for the restructuring of the financial system. As a result the URSF was created. The URSF will be comprised of members of the Ministry of Economy and the Central Bank, each functioning within their respective fields of expertise.

Article one of the Decree provides that the purpose of the URSF is to define the strategy for the restructuring of the financial system and the corresponding plan of action. This leads critics to argue that the wording of this Article could allow the commission to become a parallel Central Bank.

The URSF must establish its rules of operation and it will be comprised by six (6) members, three (3) members appointed by the Ministry of Economy and three (3) members appointed by the Central Bank. The URSF will be chaired by one of its members to be selected annually and alternating between officials of these entities.

Under the terms provided in the Decree and with the prior authorization of the URSF, the Central Bank will modify conditions of amortization of Central Bank financing (“redescuentos”).

Lastly, the Decree has a provision allowing for the Executive Branch to expand URSF’s scope of faculties. Therefore such expansion of faculties is likely to occur.