Memoria Anual ABA 2001 by ABA Argentina

ACTIVE MEMBERS

ABA

Asociación de Bancos de la Argentina

ABN AMRO Bank N.V. American Express Bank Ltd. S.A. Banca Nazionale del Lavoro S.A. Banco Bansud S.A. Banco B.I. Creditanstalt S.A. Banco Bisel S.A. Banco Comafi S.A. Banco de Galicia y Buenos Aires S.A. Banco de la República Oriental del Uruguay Banco de Valores S.A. Banco Europeo para América Latina (B.E.A.L.) S.A. Banco General de Negocios S.A. Banco Hipotecario S.A. Banco Itaú Buen Ayre S.A. Banco Macro S.A. Banco Mariva S.A. Banco Patagonia S.A. Banco Privado de Inversiones S.A. Banco Regional de Cuyo S.A. Banco Río de la Plata S.A. Banco Roela S.A. Banco Sáenz S.A. Banco Société Générale S.A. Banco Sudameris Argentina S.A. Banco Suquía S.A. Banco Velox S.A. Bank of America N.A. BankBoston N.A. BBVA Banco Francés S.A. BNP Paribas

ACTIVE MEMBERS

ABA

Asociaci贸n de Bancos de la Argentina

Citibank N.A. Deutsche Bank S.A. HSBC Bank Argentina S.A. ING Bank N.V. (Argentine Branch) JPMorgan Chase Bank (Buenos Aires Branch) Lloyds TSB Bank plc MBA Banco de Inversiones S.A. Providian Bank S.A. Scotiabank Quilmes S.A. The Bank of Tokyo-Mitsubishi, Ltd.

ASSOCIATED MEMBERS

ABA

Asociación de Bancos de la Argentina

Banco de la Nación Argentina Banco de la Ciudad de Buenos Aires Banco de Inversión y Comercio Exterior S.A. Banca del Gottardo Banca di Roma Societá per Azioni Banco BBA - Creditanstalt S.A. Banco Bilbao Vizcaya S.A. Banco Comercial S.A. Banco de Crédito S.A. Banco de Chile Banco de Finanzas e Inversiones S.A. Banco Dibens S.A. Banco Latinoamericano de Exportaciones Banco Santander Central Hispano S.A. Banco Santiago Bank LEU AG Banque Bruxelles Lambert S.A. Banque Française de L'Orient S.A. Barclays Bank PLC Bayerische Hypo-und Vereinsbank AG BHF Berliner Handels-und Franfurter Bank BSI Banca Della Svizzera Italiana Commerzbank AG Coöperatieve Centrale Raiffeisen-Boerenleebank B.A. (Rabobank) Credit Agricole Indosuez Credit Lyonnais Credit Suisse Discount Bank and Trust Company Dresdner Bank AG

ASSOCIATED MEMBERS

ABA

Asociaci贸n de Bancos de la Argentina

Dresdner Bank Lateinamerika AG First Union National Bank Natexis Banques Populaires Sanpaolo IMI S.p.A. Standard Bank London Limited Standard Chartered Bank The Bank of New York The Bank of Nova Scotia UBS AG Union Bancaire Privee CBI-TDB

BOARD OF DIRECTORS

ABA

Asociación de Bancos de la Argentina

BANCO DE GALICIA Y BUENOS AIRES S.A. Eduardo J. Escasany

President: 1 Vice President:

BANKBOSTON N.A. Manuel R. Sacerdote

2nd Vice President:

CITIBANK N.A. (1) Carlos M. Fedrigotti

BBVA BANCO FRANCÉS S.A. Antonio Martínez-Jorquera (2)

Secretary: Recording Secretary:

BANCO RÍO DE LA PLATA S.A. Enrique Cristofani

Pro-Secretary:

HSBC BANK ARGENTINA S.A. Emilio J. Cárdenas BANCO SUDAMERIS ARGENTINA S.A. Carlos González Taboada

Treasurer:

BANCO HIPOTECARIO S.A. Miguel Kiguel

Pro-Treasurer:

BANCA NAZIONALE DEL LAVORO S.A. Niccoló Pandolfini

Directors:

DEUTSCHE BANK S.A. Patricio E. Kelly BANCO BISEL S.A. Guillermo Harteneck BANCO BANSUD S.A. Raúl Anaya BANK OF AMERICA N.A. Rodolfo Alborelli ING BANK N.V. (Argentine Branch) Steven T. Darch LLOYDS TSB Bank plc Kenneth McEwan JPMORGAN CHASE BANK (Buenos Aires Branch) Marcelo Podestá

(1) (2)

As from 10/01/01 was replaced by Mr. Carlos Giovanelli. As from 09/04/01 was replaced by Mr. Jaime Guardiola.

BOARD OF DIRECTORS

ABA

Asociación de Bancos de la Argentina

SCOTIABANK QUILMES S.A. Roy Scott BANCO VELOX S.A. Juan Peirano BANCO ITAÚ BUEN AYRE S.A. Rodolfo Corvi BANCO MACRO S.A. Jorge H. Brito Alternate Directors:

BANCO MARIVA S.A. José Luis Pardo BANCO SOCIÉTÉ GÉNÉRALE S.A. Marc Emmanuel Vives BANCO PATAGONIA S.A. Jorge G. Stuart Milne BANCO EUROPEO PARA AMÉRICA LATINA (B.E.A.L.) S.A. Jean-Pierre Smeets

Honorary President: Julio J. Gómez Audit of Accounts: ABN AMRO BANK N.V. José Oscar Fernández

Titular:

BANCO GENERAL DE NEGOCIOS S.A. José E. Rohm

Alternate: Executive Director:

Norberto C. Peruzzotti

SPECIALIZED COMMISSIONS

ABA

Asociación de Bancos de la Argentina

FINANCIAL AFFAIRS AND CAPITAL MARKETS

Coordinating Secretaries:

Luis Ribaya - Banco de Galicia y Buenos Aires S.A. Carlos A. Seijas - Banco Europeo para América Latina (B.E.A.L.) S.A.

LEGAL AFFAIRS

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

Coordinating Secretaries:

José Luis Espino - Banco Société Générale S.A. BANK AUDITING

Eulogio Alfaraz - Scotiabank Quilmes S.A.

Coordinating Secretary:

Víctor Trafelati - Banco de la Ciudad de Buenos Aires

Alternates:

Ricardo Escubós - HSBC Bank Argentina S.A. RETAIL BANK

Guillermo Goldberg - Citibank N.A.

Coordinating Secretary:

Guillermo Laje - Banco de Galicia y Buenos Aires S.A.

Alternate: INSURANCE BANK

Guillermo Bronenberg - Citibank N.A.

Coordinating Secretary:

José Luis D'Alessio - BankBoston N.A.

Alternate: QUALITY AND CUSTOMER SATISFACTION

Coordinating Secretary:

Juan Altomare - BBVA Banco Francés S.A.

Alternate:

Santiago Loza - Banco Río de la Plata S.A.

TRAINING

Guillermo Santana - Banco de Galicia y Buenos Aires S.A.

Coordinating Secretary:

Guillermo Scorza - Banco Suquía S.A.

Alternates:

Diana Asencio - Banco Bansud S.A.

SPECIALIZED COMMISSIONS

ABA

Asociación de Bancos de la Argentina

E-COMMERCE

Claudio Migliore - Banco Río de la Plata S.A.

Coordinating Secretary: TAXATION

Bruno Folino - Banco de Galicia y Buenos Aires S.A.

Coordinating Secretary:

Alejandro Romera - ABN AMRO Bank N.V.

Alternates:

Carlos del Mauro - Banca Nazionale del Lavoro S.A. Luis Irigoyen - BBVA Banco Francés S.A. Adriana Cargioli de Vaín - Banco Río de la Plata S.A. BANK MARKETING

To be appointed.

Coordinating Secretary: MERCOSUR

To be appointed.

Coordinating Secretary: ACCOUNTANT AND INFORMATION STANDARDS

Coordinating Secretaries:

Raúl Estévez - Banco de Galicia y Buenos Aires S.A. Juan José Pardo - Banca Nazionale del Lavoro S.A. Susana Davidsohn - Deutsche Bank S.A. (*)

Alternate: TRANSACTIONS

Coordinating Secretaries:

Francisco Santos - Banco Río de la Plata S.A. Hugo Vacca Núñez - BankBoston N.A. José Busto Bran - Banca Nazionale del Lavoro S.A.

Alternates:

Luis Gonzato - BBVA Banco Francés S.A. Manuel García Ojea - Banco Société Générale S.A. FOREIGN TRADE TRANSACTIONS

Juan Carlos Raschi - BankBoston N.A.

Coordinating Secretary:

Luis Martínez - HSBC Bank Argentina S.A.

Alternate:

(*)

Until 11/14/01

SPECIALIZED COMMISSIONS

ABA

Asociación de Bancos de la Argentina

SECURITIES TRANSACTIONS

María Rosa Eiras - BankBoston N.A.

Coordinating Secretary:

Claudia Po - Citibank N.A.

Alternate: PREVENTION OF MONEY LAUNDERING

Rubén J. Silvarredonda - Banca Nazionale del Lavoro S.A.

Coordinating Secretary:

Enrique Antonini - Banco Mariva S.A. INTERNATIONAL BANKING RELATIONS

C. Enrique Martin - Banco de Galicia y Buenos Aires S.A.

Coordinating Secretary:

Armando Feira - Scotiabank Quilmes S.A.

Alternates:

Mauro Mazzarelli - Banca Nazionale del Lavoro S.A. LABOR RELATIONS

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

Coordinating Secretary:

Enrique Eckert - HSBC Bank Argentina S.A.

Alternate: RELATIONS AND COMMUNICATIONS

Roberto Gandini - Banco de Galicia y Buenos Aires S.A.

Coordinating Secretary:

Oscar Correa - Banco Río de la Plata S.A.

Alternates:

CREDIT RISK

Guillermo Pando - Banco de Galicia y Buenos Aires S.A.

Coordinating Secretary:

José M. Pérez Morón - Banco Río de la Plata S.A.

Alternates:

Gustavo De Rosa - ING Bank N.V. (Argentine Branch) BANK SECURITY

Horacio Patalano - Scotiabank Quilmes S.A.

Coordinating Secretary:

Roberto Veltri - Banco Río de la Plata S.A.

Alternate:

SPECIALIZED COMMISSIONS

ABA

Asociación de Bancos de la Argentina

TECHNOLOGY ORGANIZATION AND SYSTEMS

Coordinating Secretary: Alternates:

Federico Stuhldreher - Banco de Galicia y Buenos Aires S.A. José Busto Bran - Banca Nazionale del Lavoro S.A. Claudio Troccoli - Banco Río de la Plata S.A.

INSTITUTIONAL REPRESENTATIVES

ABA

Asociación de Bancos de la Argentina

NATIONAL CUSTOMS ADMINISTRATION

Consultative Customs Committee:

Juan Carlos Raschi - BankBoston N.A. (Member) Luis Martínez - HSBC Bank Argentina S.A. (Alternate Member) Omar Tittarelli - Banco de Galicia y Buenos Aires S.A.

CIVIL ASSOCIATION FOR THE PROMOTION OF THE MICROCENTER

Norberto López Isnardi - Colegio Liberty - UADE

ARGENTINE BANK MARKETING ASSOCIATION

Norberto Carlos Peruzzotti - Executive Director of ABA

CENTRAL BANK OF THE ARGENTINE REPUBLIC (B.C.R.A.)

Antonio Garcés - Banco de Galicia y Buenos Aires S.A. (Member)

Interbank Commission for Means of Payment in the Argentine Republic:

Carlos González Taboada - Banco Sudameris Argentina S.A. (Member) Francisco Santos - Banco Río de la Plata (Alternate Member) Carlos Gallo - Banco de Galicia y Buenos Aires S.A. (Alternate Member) Hugo Vacca Nuñez - BankBoston N.A. (Alternate Member) BUENOS AIRES STOCK EXCHANGE

Council:

Eduardo J. Escasany - President of ABA

Horacio Patalano - Scotiabank Quilmes S.A.

BANK SECURITY ADVISORY COMMISSION

Diego Uribe - ABA José M. Torchetti - ABA Jorge Severino - ABA Juan C. Raschi - BankBoston N.A. (1st Vice President)

ARGENTINE INTERBANKING COMMISSION OF BOLERO (CIAB)

Diego Uribe - ABA (2 Vice President)

INSTITUTIONAL REPRESENTATIVES

ABA

Asociación de Bancos de la Argentina

Norberto Carlos Peruzzotti - Executive Director of ABA (Titular)

ARGENTINE ~ GERMAN JOINT COMMITTEE

Renata Vittek - Deutsche Bank S.A. (Alternate Member) Julio J. Gómez - Honorary President of ABA

JOINT ARGENTINE ~ JAPANESE BUSINESS COMMITTEE

Juan Peirano - Banco Velox S.A.

STAF COMMITTEE ~ B.C.R.A.

FOREIGN TRADE ENTREPRENEURIEL ADVISORY COMMISSION

FOREIGN COMMERCE BUSINESS COMMITTEE

FELABAN

Argentine Commission for Felaban: ARGENTINE FORUM OF E-COMMERCE (FACE)

José Mario Torchetti - ABA

Juan C. Raschi - BankBoston N.A.

Norberto C. Peruzzotti - Executive Director of ABA (Vocal)

Alternate Governor: Juan Peirano - Banco Velox S.A. Norberto C. Peruzzotti - Executive Director of ABA Claudio Migliore - Banco Río de la Plata S.A. Diego Uribe - ABA

SIXTH AMERICAN BUSINESS FORUM

Administrative Committee:

Eduardo J. Escasany - President of ABA Norberto C. Peruzzotti - Executive Director of ABA

Finance Committee: EXPORT AR FOUNDATION

María Elena Deligiannis - ABA Eduardo J. Escasany - President of ABA (Member) Julio J. Gómez - Honorary President of ABA (Alternate)

INSTITUTIONAL REPRESENTATIVES

ABA

Asociación de Bancos de la Argentina

ARGENTINE FEDERAL POLICE FOUNDATION

Administrative Committee:

Norberto Carlos Peruzzotti - ABA (Treasurer) Eduardo J. Escasany - ABA Juan Peirano - ABA Abel Ayerza - ABA M. Cristina Ehbrecht - ABA

Auditing Committee:

Horacio Bauer - ABA

OTC MARKET

President: st

1 Vice President: nd

2 Vice President: Directors:

Marcelo Castro - Banco Río de la Plata S.A. Luis Ribaya - Banco de Galicia y Buenos Aires S.A. Jesús Luis D'Alessandro - Banco de la Nación Argentina Jorge Bledel - BBVA Banco Francés S.A. Daniel Passaro - BankBoston N.A. Martín Marrón - JPMorgan Chase Bank Eduardo E. Trucco - Citibank N.A. Jorge Puente - Banco Bisel S.A. Claudio Hernández - Scotiabank Quilmes S.A. Gabriel Castelli - HSBC Bank Argentina S.A. Carlos Planas - Deutsche Bank S.A.

Alternate Directors:

Marcelo Scenna - Lloyds TSB Bank plc Carlos Seijas - Banco Europeo para América Latina (B.E.A.L.) S.A. Jorge Gilligan - Banco Mariva S.A. Emilio González Moreno - Banco Patagonia S.A. Alejandro Ledesma - Bank of America N.A. Luis Castresana - Banco Itaú Buen Ayre S.A. Guillermo Cerviño - Banco Comafi S.A. Diego Ronconi - Banco Sáenz S.A. Pablo Cousido - Banca Nazionale del Lavoro S.A. José Fernández - ABN AMRO Bank N.V. Ezequiel Carballo - Banco Macro S.A.

INSTITUTIONAL REPRESENTATIVES

ABA

Asociación de Bancos de la Argentina

Shareholders' Audit Committee President:

Italo Pisani - Banco Sudameris Argentina S.A.

Vice President:

Jorge A. Caracoche - Banco de la Ciudad de Buenos Aires

Members:

Enrique Benitez - Banco Hipotecario S.A.

SECURITIES MARKET

Mario S. Rossi - BankBoston N.A.

Vice President:

Felix Lafiandra - Banco Comafi S.A.

Director: MERCOSUR

Mercosur Banking Association Group:

Luis Germán Fernández - Banco Mariva S.A. (*) M. Cristina Ehbrecht - ABA María Elena Deligiannis - ABA

Liaison with N° 4 Work Subgroup "Financial Business" of the Mercosur:

Luis Germán Fernández - Banco Mariva S.A. (*) María Elena Deligiannis - ABA

Liaison with Nº 10 Work Subgroup "Labor Relations, Employment and Social Security" of the Mercosur:

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

MINISTRY OF LABOUR, EMPLOYMENT AND TRAINING ON HUMAN RESOURCES

National Economic Council for Employment Productivity and the Minimum, Living and Mobile Wage: Commission for the Simplification of Hiring Procedures:

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A. Carlos J. Melián - Banco de Galicia y Buenos Aires S.A. Sergio Scattolini - Banco Río de la Plata S.A. Jorge Stange - BBVA Banco Francés S.A.

Mixed Three-Party Commission created by Decree N° 1096 / 00:

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

(*)

Until July, 2001

INSTITUTIONAL REPRESENTATIVES

ABA

Asociación de Bancos de la Argentina

MINISTRY OF LABOUR, EMPLOYMENT AND TRAINING ON HUMAN RESOURCES

Safety and Hygiene and Work Risks Commission:

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A. M. Cristina Ehbrecht - ABA Jorge Severino - ABA

International Affairs Commission:

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A. M. Cristina Ehbrecht - ABA Jorge Severino - ABA Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

Unregistered Work Commission:

M. Cristina Ehbrecht - ABA Jorge Severino - ABA Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

Employment Policy Commission:

M. Cristina Ehbrecht - ABA Jorge Severino - ABA Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

Conflicts Prevention and Follow-up Commission:

M. Cristina Ehbrecht - ABA Jorge Severino - ABA Carlos J. Melián - Banco de Galicia y Buenos Aires S.A.

Training Commission:

M. Cristina Ehbrecht - ABA Jorge Severino - ABA Permanent Advisory Committee for Labour Risk Law:

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A. (Technical Alternate)

Database Unique System (UASUBD):

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A. Sergio Scattolini - Banco Río de la Plata S.A.

INTERNATIONAL LABOUR ORGANIZATION

Carlos J. Melián - Banco de Galicia y Buenos Aires S.A. (Entrepreneur Representative)

INSTITUTIONAL REPRESENTATIVES

ABA

Asociación de Bancos de la Argentina

SECURITY UNDERSECRETARY OF THE GOVERNMENT OF THE CITY OF BUENOS AIRES

CCTV Surveillance Project in Banking District:

Héctor R. Gómez - Banco de Galicia y Buenos Aires S.A. Enrique Picciuolo - BBVA Banco Francés S.A. Eduardo Gutiérrez - Banco Bansud S.A. Diego Uribe - ABA

ARGENTINE UNION OF SERVICES ENTITIES ~ UDES

Norberto C. Peruzzotti - ABA (1 Vice President)

ADVISORS AND CONSULTANTS

ABA

Asociación de Bancos de la Argentina

ECONOMIC ADVISORY

TAX ADVISORY

Luis García Martínez

PricewaterhouseCoopers

LEGAL ADVISORY

Jorge Labanca

FINANCIAL AND CAPITAL MARKETS ADVISORY

Julio A. Piekarz

PARLIAMENTARY AFFAIRS ADVISORY

PENAL ADVISORY

Carlos Bercún

Gustavo E. Gené

CHAPTER I CONTEXT OF ECONOMIC POLICY DURING THE JANUARY ~ DECEMBER 2001 PERIOD

ABA

Asociación de Bancos de la Argentina

The year 2001 started with hope of economic recovery as a consequence of the so-called (1)

“Financial Shielding” . This environment was reflected in lower interest rates and also in the country risk during the first two months of the year. However, the situation started to change in March, after the resignation of the Economy Minister, Dr. José Luis Machinea. From the beginning of the Alianza administration, two ways were proposed to face the fiscal deficit: a) some people considered that the adjustment necessary to keep this deficit at reasonable levels, in order to arise market confidence, should be carried out with an emphasis on the reduction of public expenditure; and b) others considered that, in compliance with promises made during the election campaign, the emphasis should be placed on the increase of tax pressure up to certain income levels. That is, the adjustment should be featured by a redistributive approach. Observing the execution of the year 2000 budget, with regard to the year 1999 budget, it is clear that a slight balance was maintained between the increase of tax income (+ 3%) and the reduction of primary expenses (- 3%). The politic approach of that first stage of the Alianza administration was featured by the maintenance of an equidistance between the market claims and those from more politized sectors within the government. Dr. Ricardo López Murphy assumed as Ministry of Economy and aimed his management, as regards fiscal matters, towards a reduction of public expenditure amounting to $ 2,500 million. The new Minister's plan was socially and politically rejected, and this motivated his resignation two weeks thereafter. This rejection directed the government towards a path that was even farther from the so-called “liberal” adjustment, and nearer to the various sectors claiming that it was necessary to decidedly face economic reactivation, which would entail a higher fiscal income and, therefore, a smaller unbalance in public accounts.

(1)

On December 18, 2000, President Fernando de la Rúa announced termination of dealings for the u$s 39.7 billion financial support package through various operations with the IMF, the IDB, the World Bank, Spain, banks that created securities market and Argentina institutional investors. These lines of credit and other commitments (placements of securities and liabilities handling transactions) shall serve to meet the National Budget financial needs. The facilities described above have a multiannual scope, up to December 2003. In the case of exchange of debts, those facilities cover maturity dates during the next five years.

CHAPTER I CONTEXT OF ECONOMIC POLICY DURING THE JANUARY ~ DECEMBER 2001 PERIOD

ABA

Asociación de Bancos de la Argentina

The appointment of Dr. Domingo Cavallo (renowned in financial markets for his success in eliminating the chronic inflation suffered by Argentina) as Economy Minister did not confirm this new path within the government. Nevertheless, the new Minister soon supported the same standpoint and implemented it through the so-called competitiveness agreements. At the same time, he proposed to extend Convertibility incorporating the Euro. This news was interpreted by many as a pre-announcement of the change of the 1 Peso = 1 US Dollar parity, which had been the spinal cord of Argentine economy up to that moment, as of Convertibility effective date (04.01.1991). It is also worth mentioning that, at the end of April, Dr. Pedro Pou resigned as President of the Central Bank, and was replaced by Mr. Roque Maccarone. As a consequence of these events, in March there was an increase of 140 basis points in the country risk (EMBI +, prepared by JPMorgan). Even though Minister Cavallo had said that enlarged Convertibility was to be effective as of the time when the relation 1 US Dollar = 1 Euro was established, the above mentioned distrust based on the fear of devaluation was increased in April upon the enactment of the act approving this new convertibility regime. This was reflected in the evolution of Pesos and US Dollars interest rate spread, which was above 0.7 annual points in February, 4.8 annual points in March, and 5.7 points in April. Accordingly with this uneasiness, the country risk was above 702 basis points in February, 842 in March, 962 in April, and 990 in May. This restlessness environment in markets was also shown in the evolution of total deposits of the financial system, which decreased from an average of $ 84,912 millions in February 2001 to an average of $ 80,109 millions in May. This also provoked a reduction in the lending capacity of institutions to the private sector. (2)

In June, markets experienced a relative calm by virtue of the so-called “megaexchange” . What provoked a new acceleration in the market uncertainty was the fact that the fiscal deficit during the first half of the year ($ 6,500 millions) was similar to the deficit provided for in the agreement entered into with the IMF for the whole year 2001.

CHAPTER I CONTEXT OF ECONOMIC POLICY DURING THE JANUARY ~ DECEMBER 2001 PERIOD

ABA

Asociación de Bancos de la Argentina

As the country risk was near the 1000 basis points threshold at the end of the first half of the year, no foreign financing could be expected to continue with this fiscal unbalance. Considering this situation and, as expressed by the authorities in the letter of intent addressed to the IMF to “give a definitive solution to the fiscal problem, the Government announced in July 11 a new package of economic measures to intensify to a great extent, the fiscal effort, concentrating attention in the rapid elimination of the Federal Government deficit, long before than provided for in the economic program supported by the IMF. A bill was sent to the Congress by virtue of which the Federal Government should limit expenditure to the available income. At the end of July, the Congress approved the zero deficit act, which set that the Secretary of the Treasury shall provide for general reductions of primary expenses (including salaries, pensions and purchases of goods and services) in order to assure the balance of the Federal Government budget on a cash basis. Initially, the Government shall try to balance the budget corresponding to the period August-December 2001”. Not only did the adjustment imposed by the zero deficit imply salary and pension decrease at the national level, but it also implied difficulties in transfers to the provinces, set by the federal coparticipation. This gave rise to the provinces issuing provincial bonds, which operate as means of payment and temporarily allow to maintain a certain degree of liquidity in those provinces. After tough dealings, an agreement was finally reached with almost all the governors, by means of which the national government debt due to the provinces, on account of funds not transferred on account of “coparticipation floor”, shall be paid in Provincial Obligations Cancellation Drafts (Letras de Cancelación de Obligaciones Provinciales (LECOP)). In this respect, it should be remembered that the commitment made by the government was to make minimum monthly transfers of $ 1,364 millions to the provinces, regardless of the effective revenue collection. This is so because when such agreement was signed it was believed that the economy was going to grow, therefore an increase was expected in the revenue collection. This was not the case because the expected growth did not take place, but the provinces put pressure so that the agreement was complied in spite of the circumstances. (2)

“Megaexchange” is the financial transaction made by the Government on June 1, 2001, whereby it voluntarily exchanged public bonds maturing in the short and medium term, for other bonds maturing in the long term. The amount offered reached 32,800 millions, of which the Government accepted 29,500 millions.

CHAPTER I CONTEXT OF ECONOMIC POLICY DURING THE JANUARY ~ DECEMBER 2001 PERIOD

ABA

Asociación de Bancos de la Argentina

In the short term, the zero deficit policy implies a deeper recession, as the decrease of the public expenditure entails the decrease of the aggregate demand. This, in turn, has a negative impact on fiscal revenue collection, which generates a new readjustment of expenditure, which again has a negative incidence, thus creating a cumulative vicious circle that is difficult to handle both socially and politically. The awareness of this negative circle aggravated, as of July, the uncertainty and distrust around the possibilities of the country to meet obligations derived from the public debt. This is reflected in the fact that between June and July the country risk was increased in 439 basis points, while the spread between Pesos and US Dollars interest rates (in fixed term deposits) increased from 3 annual points in June to 11.4 annual points in July. In turn, there was a $ 3,000 million decrease in total deposits between June and July. The deterioration process continued to deepen in the subsequent months with increasing rumors about the country default and a persistent decrease of deposits until almost the end of November, when deposits amounted to approximately $ 69,000 millions. Between July and November, the decrease in deposits amounted to approximately 9,000 millions, while the country risk increased from 1,394 in July to almost 3,000 points at the end of November. In turn, the interest rates showed this increasing demonetization of the economy, experiencing strong increases, by the increase of the spread between Pesos and US Dollars. In effect, rates in Pesos were increased in July to 22.2% and in November they reached around 31.1%. In addition, the spread between Pesos and US Dollars increased from 11.6 points in July to 17.3 in November. In order to overcome this deep trust crisis with respect to the possibility of the country to service the public debt, the National Government implemented the so-called “Exchange of Domestic Public Debt”, through the issue of Decree 1387/01. This exchange of national public bonds and provincial loans reached an amount of $ 50,044 millions, which implies an annual reduction of interests of the public debt amounting to $ 3,545 millions for the year 2002, of which $ 2,357 millions correspond to the National Government debt.

CHAPTER I CONTEXT OF ECONOMIC POLICY DURING THE JANUARY ~ DECEMBER 2001 PERIOD

ABA

Asociaci贸n de Bancos de la Argentina

The banks made a great effort through their active participation in this exchange, considering the fact that such exchange fixes an annual 7% interest rate for the new promissory note, manifestly lower than the rate received by the institutions (both for the national public debt and for the provincial public debt), and this implies a marked decrease of the assets profitability. The official argument to justify this change in the original conditions of the above mentioned loans was that such loans now had a guarantee that ranked senior to the redeemed bonds, as they were backed by the fiscal revenue collection, a not very solid support indeed, by virtue of the fact that this revenue collection is closely related to the economic activity level, and this level was clearly declining due to the above referred recessive implication of the zero deficit policy. Notwithstanding the success of the domestic exchange, the market uneasiness continued and even got worse when the IMF said that the conditions to proceed to the last quarter disbursement, as previously agreed upon, were not met. The reason given was the noncompliance with fiscal goals. In addition, a journal article published in November 30 increased the uneasiness of depositors in relation to the liquidity of the financial system, which provoked a strong fall in deposits. To prevent the collapse of the system (something not related with the soundness of the banks but that is produced in any financial system when there is a bank run, as everything works on the basis of the fractioned reserve), the government decided to provide for a series of restrictive measures affecting the availability of deposits. These measures tended to prevent the flight of the institutions' funds, given the panic affecting depositors. To such end, the forced bankarization provoked many inconveniences that affected the banks' image, notwithstanding the extraordinary efforts made by the banks to comply with demands arising from the new operations imposed by the monetary authorities. The prevailing confusion due to this particular situation suffered by the financial system was even deeper in relation to the Convertibility, as exchange rate controls established upon financial consignments (not upon those related to the foreign commerce) immediately gave rise to a parallel US Dollar, something incompatible with the Convertibility, and this led to believe that devaluation or flotation of the exchange rate was very close. This profound uncertainty environment aggravated the recessive process and the fall of the fiscal revenue collection. These circumstances created an environment of strong social stress, with demonstrations and

CHAPTER I CONTEXT OF ECONOMIC POLICY DURING THE JANUARY ~ DECEMBER 2001 PERIOD

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acts of violence, which led to the resignation of the Ministry of Economy, Dr. Domingo Cavallo and, shortly thereafter of President Dr. Fernando de la Rúa. The Legislative Meeting, summoned by the deputy President, Engineer Ramón Puerta, appointed the Governor of the Province of San Luis, Dr. Adolfo Rodríguez Saa, as President of Argentina until 04.05.2002. It was agreed that presidential elections were to be held on 03.03.2002 and, if necessary, that there would be a second round on 03.17.2002. The new head of the National Executive tried to rapidly decompress the social unrest, and he announced, in the first place, the country's default. With resources thus released, he provided for creation of one million jobs (called Work Plans -Planes Trabajar-) and other release measures for the needy. Likewise, and given the liquidity crisis suffered by the economy (as a result of the fall of deposits in the financial system), the new authorities would propose the creation of a trimonetary system, comprising the US Dollar, the Peso (which would continue officially tied by the one to one parity) and the Argentino, a new non-convertible currency. However, in spite of the praiseworthy goal of decompressing the social unrest, the public opinion reacted negatively to certain aspects of the initial administration of Dr. Adolfo Rodríguez Saa (related to the appointment of questionable ministries and officers, announcements on the amount of Argentinos to be issued, which provoked an inflationary alarm, etc.). This situation determined his resignation in view of the lack of support from most Justicialist governors. The Legislative Meeting appointed Dr. Eduardo Duhalde as President of Argentina to complete the remaining presidential term of office until 2003. Among the first steps taken by this administration, the exchange parity set forth by the Convertibility Act and the Deposit Intangibility Act were repealed, and deposits were rescheduled. The year 2001, with the above referred institutional crisis, showed the great difficulties that the country is suffering. These problems may be solved with technically sustainable policies, having political and international support. Thus, efficiency and social sensitivity could be combined for the benefit of a peaceful life for the Argentineans and, therefore, for the future of the Nation.

CHAPTER I CONTEXT OF ECONOMIC POLICY DURING THE JANUARY ~ DECEMBER 2001 PERIOD

Table 1 Country Risk

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CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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1. The Monetary Evolution during the Year 2001

The facts mentioned in the previous chapter affected the financial system, therefore, the increasing distrust generated deposit withdrawals, increase in interest rates and decrease of the Central Bank reserves. Deposits There was a 20.6% decrease in total deposits during the year 2001, which means a $ 17,200 million decrease, with more marked falls in certain months. Although the year had begun with relatively favorable expectations, reflected in the recovery of deposits that had been withdrawn from the system after the crisis produced by the resignation of the Vice-president in October 2000, of the Ministry of Economy, Dr. José Luis Machinea, on March 2, 2001, the uncertainty provoked again a reduction in deposits. The appointment of Dr. Ricardo López Murphy as Minister of Economy was well received at the international level. However, the intent to reduce the public expenditure was not welcome by the population and this provoked the Minister resignation two weeks after taking office. On March 19, Dr. Domingo Cavallo assumed as Minister of Economy. The creation of the Financial transfer tax and the amendment of the Convertibility Law, increased negative expectations of investors, who continued withdrawing funds from the financial system. At the end of April new expectations began to be envisioned, which, together with an increase of interest rates, caused the stability of deposits that begun at that time. However, some private reports considered that at the beginning of July Argentina would be in default, which again provoked a decrease of deposits that extended until the end of August, when a new agreement with the IMF was announced. In addition, the Government had decided to achieve fiscal balance during the months left until the end of the year, due to the fact that the deteriorated fiscal income had contributed to the fact that the deficit accrued until such time reached an amount similar to the amount agreed upon with the IMF for the whole year. At that time, and until the end of September, a recovery of deposits was observed, which ended two weeks before the congress elections carried out in mid October. From that moment on, deposits continued to decrease until, on November 30, approximately 1,500 millions were withdrawn from the private sector. The consequence of this was the creation of restrictions to the withdrawal of cash from the financial institutions, commonly referred to as “corralito”. These measures set forth restrictions both on cash withdrawals from financial institutions and on fund

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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transfers abroad. On the other hand, funds could be transferred freely within the financial system. In addition, no higher rates for term deposits in Pesos than for deposits in foreign currency could be paid, which, together with the possibility to convert deposits and loans to the foreign currency at the $ 1 US$ 1 parity, produced a transfer from the Peso to the US Dollar. In the evolution observed all throughout the year, deposits in Pesos decreased constantly from March, reflecting the decrease of the general public trust to maintain deposits in Pesos. Throughout the year, deposits in Pesos showed a 41.4% decrease, from $ 31,900 millions in December 2000, to $ 18,700 millions in December 2001, including the 11.5% decrease during that month due to the transfer towards deposits in the foreign currency. The latter showed a 7.8% decrease during 2001, from u$s 51,700 million to 47,700 millions. The Central Bank reserves At the end of the year 2000, the total reserves of the Central Bank amounted to u$s 26,500 million, while twelve months later they amounted to 14,800 millions. This implies a decrease of 11,700 million during the year 2001. The Convertibility Act set forth that the only purpose of the Central Bank reserve was to support the national currency. As a consequence, the counterpart of reserve can be basically simplified in two groups: monetary circulation and banks' reserves. Monetary circulation comprises all the notes and coins issued by the Central Bank, while commonly called banks' reserves include financial institutions deposits in the Central Bank, both in Pesos and in foreign currency, to comply with minimum cash requirements or with minimum liquidity requirements. Therefore, the u$s 11,700 millions decrease in the Central Bank reserves was due to a 4,100 million reduction in the monetary circulation provoked by the acquisition of US Dollars by the general public and 7,300 millions due to the use of reserves by the banks to meet deposit withdrawal demands (including the amount that the Central Bank granted as reverse repos). The interest rates The facts during the year 2001 as regards interest rates can be essentially summarized as follows: a) Increase of rates paid for fixed term deposits to retain depositors. This increase was also reflected in the rates on some loans types.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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b) The increase in the rates paid for fixed term deposits in Pesos was higher than the increase in rates paid for placements in the foreign currency, due to the above referred transfer to deposits denominated in the foreign currency. As regards the interest rates on loans, the ones that increased the most, were the interest rates on short term loans, such as overdraft on current accounts and discounts of promissory notes. There was also an increase, even though lower than the previous one, on rates on pledges and personal loans. We should mention that rates on mortgages were practically constant, around 15% in Pesos and 13% in the foreign currency. These rates correspond to loans granted month to month, and they do not include rates charged for loans granted before. Loans to the private sector The recession of the Argentine economy determined a setback in loans demand, which, together with the decrease observed in deposits and the increase observed in interest loans due to the reduction of loanable funds, provoked a decrease in the private sector loans. From $ 63,500 millions in December 2000, loans to the non-financial private sector were reduced to 51,700 millions in December 2001. The months where the higher decreases were registered coincide with those months where important events provoking uncertainty in the market took place. 32% of the total loans to the private sector corresponds to mortgage loans, which are granted at a longer term and at a lower interest rate. Approximately two thirds of mortgage loans are intended to acquire homes (approximately 10,800 millions) while the rest is intended for other purposes, among which there are various business purposes. In general, they are granted to companies that obtain a mortgage loan furnishing company's real estate as guarantee, such as a factory or a shop. This allows them to have access to longer-term financing at lower interest rates. They are commonly used to make investments, with which future income is improved and that requires longer terms of financing. Personal loans follow in order of importance according to their volume and represent 17% of the private sector loan portfolio. They include credit card financing, which represents 43% of this category, while personal loans per se represent the remaining 57%. Then, discounts of promissory notes, with a 16% share. Most of them are business loans. In order of importance according to their volume, the use of overdrafts on current accounts follows, representing 12% of the private sector loans. This is shorter-term financing and, in

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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general, these loans are used to meet payments during a few days. Pledges represent 7% of the financing portfolio granted to the private sector. In general, the public uses them to purchase automobiles, but they are also used by companies to acquire new automobiles or any other personal property that may be given as guarantee. Pymes loans According to preliminary figures, loans granted to companies of this sector would reach an approximate volume of $ 13,000 millions, which represents 25% of loans granted to the private sector. It is estimated that loans granted to this sector have had a similar behavior as the private sector loan portfolio. It is possible that, during this year, its evolution has been more related to the industry sector and not to the size of each company. Information available allows to suppose that the current economic recession, together with the restriction of resources suffered by the financial sector, provoked a decrease on this type of loans that resulted similar to the one registered for the total loans to the private sector. Loans to the public sector Until November, loans to the public sector amounted to $ 14,700 millions, which represents 29% of the total loan portfolio. Although during this year loans granted to the public sector have been practically constant, during the last years the public sector has used such loans as source of financing for its expenses. It can be observed that, from December 1998, these loans increased 77%, while private sector loans registered a 20% decrease. The increasing financing needs of the public sector during the last years have obliged this sector to resort to the banking system to meet part of its expenses. When taking this position, the Estate was competing with the private sector to obtain credits. If the lower demand in the private sector during the year 2000 is added to this situation, the higher share of the public sector in that year is understood. However, after the “financial shielding” obtained by the government in December 2000, the public sector did not demand funds from the financial system in the same way it did until such time. During the year 2001, the public sector resorted to other sources of financing, among which there is the disbursement of credit lines agreed upon with various international organizations and the placement of bonds in various business sectors, among which the banks had an important share.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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The purpose to eliminate the fiscal deficit as of August allowed to suppose that the Estate needs for financing would have decreased by such time, and this would free resources for the private sector. It is very important to point out that the financial system not only assists the public sector by means of loans, but it also keeps for itself a significant number of public bonds, and this represents another type of loan. Before the public debt exchange carried out at the end of November, the financial system had public bonds representing approximately $ 13,000 millions, which, added to loans granted to the public sector, represented a total of 27,800 millions on account of financial aid granted by banks.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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2. Regulatory Framework

The following are the main provisions applicable to financial institutions issued by the Central Bank during the year 2001: Money laundering In relation to the provisions on “Prevention of Money Laundering” and in order to identify suspicious transactions, it was provided for that financial institutions should pay special attention to communications made by the Superintendence of Financial and Banking Institutions (Superintendencia de Entidades Financieras y Cambiarias), with regard to countries deemed not cooperating or offering a different permeability or vulnerability to maneuvers intended to such end. In July, the ordered text on “Prevention of Money laundering and other illegal activities” was updated, including the list of non-cooperating jurisdictions, by virtue of the decision made by the International Financial Action Group (Grupo de Acción Financiera Internacional -GAFI-) in order that financial institutions pay special attention to transactions to and from these areas. Minimum capital requirements In March, application of the 0% index rate was extended to loans granted to Public National Banks of Argentina whose operations are guaranteed by the National Estate-, as well as the eventual responsibilities undertaken with regard to such banks, in order to determine the minimum capital requirement for credit risk. Effective on the calculation on the computable equity due on 07.31.01, the form of calculation of the minimum capital requirement for credit risk was adapted in order that the potential increase of the risk asset volume from certain financing has no unfavorable effects in terms of the total capital requirement on this account. In order not to affect the institutions soundness, in no event the resulting capital requirement shall be less than the one applicable on 06.30.01. In addition, pledges of up to $15,000 to finance the purchase of automobiles were added to financing with lower risk index interest rates.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Credit regulations At the end of May, the following regulations were amended, which refer to the financial aid to the National Government: 1. “Financing to the non-financial public sector”: financing granted through the issue of promissory notes from the National Government within the framework of the exchange transaction provided for in Decree 648/01. The credit aid affected by such exception shall not be higher than the total amount of promissory notes delivered for exchange by financial institutions included in Resolutions 307/99, 163/00, 177/00, 467/00, and 61/01 of the Central Bank. 2. “Credit risk fractioning”: it was provided for that the sum of the credit aid ascribable to the issue referred to in the previous paragraph, the one corresponding to issues included in Resolutions mentioned in such paragraph and other financing to the National Estate affected by provisions on credit risk fractionating, may be up to 10 percentage points higher than the higher of the following: a) the maximum loan threshold according to the computable equity set forth in subsections 2.2.1. and 3.2. of Annex II to Communication “A” 2140, or b) the proportions represented -for the purposes of such relations- by this aid on 05.24.01 with regard to the above mentioned responsibility. In addition, financing agreed upon by means of bonds received in exchange for financing granted from time to time by means of promissory notes or of bonds subscribed before under the “Financing Program by means of Promissory Notes or Bonds” of the National Government during years 1999/2001 shall be deemed included provided that they are not capable of being computed in order to determine the minimum capital requirement for market risk. In August, it was provided for that exports credit insurance would be deemed preferred guarantee provided certain conditions were met, and therefore, rules about minimum capital requirements for credit risk, rating of debtors, minimum provisions for non-collectibility risk, credit rating and credit risk fractionating were amended. To such effect, exports financing transactions having such coverage will be treated as preferred

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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guarantee “A”, to the extent that eventual loss is suffered within 90 calendar days as of its due date and the intervening insurance company has a certain risk rating. After this term and not exceeding 180 days, they will be treated as preferred guarantee “B”. In September, rules governing “Transfer of credit portfolio” were passed and it was set forth that the sale or assignment of credits with liability to persons other than financial institutions shall be treated, as far as the assignor institution is concerned, as acceptance with regard to “Minimum liquidity requirements”. Among other changes, the prior authorization requirement was eliminated whenever assignors are not financial institutions, financial trusts or foreign banks with international risk rating “A” or above and provided that assignors are financial institutions rated 1, 2 or 3 by the Superintendence of Financial and Banking Institutions, provided that credits assigned by the institutions rated 3 correspond to customers rated 1 or 2. Minimum liquidity requirements and minimum cash requirements In February, it was set forth that additional minimum liquidity requirements could be imposed upon liabilities implying a significant risk of individual liquidity and/or having an impact on system liquidity, provided that a high percentage of liabilities is concentrated on the same owner or owners, its term is short or they represent a significant percentage of the payment of such requirements and/or of its total private deposits, among other factors. The 50% Minimum Liquidity Requirement for demand deposits in Financial Institutions was extended until April 2001 included -whichever the terms of deposit and its fee- which, at a minimum, must constitute the assets of the Common Trust Funds, as provided by the Regulations of the National Securities Commission. Likewise, at the end of March, minimum liquidity requirements were reduced two percentual points for the same month, (except for 50% and 80% requirements) and the minimum daily payment calculation basis was adapted. Effective as of April 2001 “9% National Government Bonds due 2002” were accepted as computable for compliance with minimum liquidity requirements, not higher than the amount equivalent to 18% of the minimum requirement for February 2001. Effective as of 06.01.01, the new Reserves Requirements Regime was reported and regulations governing “Minimum liquidity requirements” and “Minimum cash requirements” were approved.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Taking into account that sight deposits (savings accounts and current accounts) are less susceptible to changes in the perception of the financial system risk, as they show a more stable behavior with regard to term deposits during times of crisis, the system liquidity reserve scheme was amended, setting forth different requirements for savings accounts and current accounts deposits with regard to those made on a long-term basis. In July, special guarantee accounts were added as accepted accounts for compliance with minimum cash requirements and minimum liquidity requirements in favor of Electronic Clearing Houses and for the coverage of transaction settlement with credit cards and automatic teller machines. At the end of July, the rules governing the Minimum Liquidity Requirements and the Minimum Cash Requirements were amended in relation to the two-month position in July/August 2001, according to the following summary: Minimum liquidity requirements were reduced in one percentage point for the twomonth position above, extended then until September 2001. It was admitted that, during the July-September 2001 period, compliance with minimum liquidity requirements was achieved with the balance of current accounts in Pesos opened at the Central Bank, in the following proportions, calculated on the above mentioned requirement:

Period

July/August 2001 September 2001

70 40

Reduction of the minimum daily requirement, from 07.19.01 until 09.30.01, from 75% to 60% of the previous month requirement. Effective as of 07.01.01, the following paragraph was added to Section 2 of rules governing “Minimum Cash Requirements”: “2.1.6. Cash in transit and in companies devoted to transportation of monies and securities: It includes notes and coins in transit within the country from or to another financial institution or between branches of the same institution or in the possession of companies devoted to the transportation of monies and securities based in the country”.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Effective as of July/August 2001, the charge rate on minimum cash requirement deficiencies and minimum liquidity requirement deficiencies was fixed on 120% of the higher rate fixed by the Central Bank for reverse repos, and the interest rate on charges not entered in due time was fixed on 150% of the charge rate. Likewise, effective as of 10.01.01, the minimum cash requirement rate was increased from 15.5% to 18.5%. As of 11.01.01, it was set forth that stand-by letters of credit issued in US Dollars -with a minimum 360 day-term- by foreign banks with minimum international rating “A” or above would not be considered as an account accepted for compliance with Minimum Liquidity Requirements. In November, the rules governing compliance with minimum cash and liquidity requirements were published for the quarter November 2001/January 2002, extending the temporary reduction of the minimum daily requirement until 01.31.02, which had already been extended until 12.31.01. Maximum foreign asset computation thresholds admitted for compliance with minimum liquidity requirements were reduced, as of the quarter November 2001/January 2002. For the quarter November 2001/January 2002, the compliance with minimum cash requirements in Pesos was allowed to be met with the balance from the current account in US Dollars in the Central Bank, not over 70% of the said requirement and it was provided, for the same period, admission of minimum liquidity requirements met with balance from the current account in Pesos in the Central Bank. Among other measures, it was decided that institutions should comply with a minimum cash requirement of 100% on deposits and other sight obligations, whose compensation is higher than a rate for 30 to 59 day fixed term deposits for amounts of up to $100,000. Such rate shall be informed on a week-to-week basis by the Central Bank. As of 12.27.01, a 6 percentual point reduction was set forth upon the minimum cash requirement and upon the minimum liquidity requirements. Funds released by such reduction shall be used to create the Bank Liquidity Fund, created by Decree 32 dated 12.26.01 and managed by SEDESA.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Securities in investment accounts As of 06.01.01, it was provided that holdings of securities incorporated to investment accounts shall be accounted for at their increased cost value, until maturity of each service, as an exponent according to the domestic rate of return and to the time elapsed from their incorporation to such accounts. Likewise, as of the above mentioned date, measures were approved regarding minimum capital requirements on bonds received by financial institutions by reason of the debt exchange transaction referred to in Decree 648/01. In July, suspension of application of subsection “Treatment of valuation differences” of Section 3 of “Rules and Regulations on possession of securities in investment accounts”, on the criterion applicable for accounting books, was extended until 12.31.01 when a difference above 20% is registered. Debtors rating and minimum provisions for non-collectibility risk. In September, a new text referring to commercial portfolio debtors rating was approved. Among the most important changes, it must be mentioned the extension of terms of default admitted for each debtor rating and the division of category 2 into the following subcategories: 2.a) Inadequate observance and compliance: it includes customers who incur in delays of payment of up to 90 days. 2.b) Under negotiation or with refinancing agreements: it incorporates as a new concept customers faithfully showing an intention to refinance their debts before 60 days from the date of default, in compliance with the other indexes of category 2.a). In relation to rules and regulations governing Minimum provisions for non-collectibility risk, the provisioning rules and regulations were amended according to the following list:

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Category

With preferred guarantee

Without preferred guarantee

1. Normal compliance

2. a) Inadequate observance and compliance 2. b) Under negotiation or with refinancing agreements

12%

3. With problems and deficient compliance

12%

25%

4. With high risk of insolvency and difficult to recover

25%

50%

5. Irrecoverable

50%

100%

6. Irrecoverable under technical provision

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Likewise, the creation of provisions for 100% of interests and similar accessories with regard to debts of customers rated in category 2.b) was set forth, provided a noncompliance of more than 90 days in payment of obligations is registered, and the institution shall be able to elect to suspend interest accrual. On the other hand, maximum discrepancies among ratings were amended, and the debtor shall be rated again when there is a discrepancy more than one level higher between the rating given by the financial institution and the ratings granted by at least another two institutions or financial trusts in ratings below the one assigned by such institution, whose debts -in whole- represent 40% or more (the previous rules provided for 20%) of the aggregate amount reported by creditors, according to the last information available in the “Financial System Debtors' Database”. Likewise, changes were introduced with regard to certain provisions related to debtors provisions in category 6 “Irrecoverable under technical provision”. Secured loans received in exchange In order to regulate the provisions of Decree 1387/01 (Exchange of national public debt bonds for Secured Loans) it was set forth, among other provisions, that the positive difference

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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between the accounting value of Secured Loans received in exchange for national public debt bonds and the value at which they are registered on the date of exchange, shall be reflected in an asset regulating account opened to such effect. The balance of such account shall be monthly accounted for as income pro rata to the term of each Secured Loan. Also, special treatments were provided for Secured Loans in order to determine the minimum capital requirements for credit risks and the interest rate and for the application of thresholds on credit risk fractioning. Bank current account Effective as of 04.04.01 and taking into account the provisions of the Competitiveness Act 25,413, the following amendments to the rules and regulations on “Bank current account regulations” were introduced: a) the issue of checks in current accounts opened to legal institutions was considered optional; b) the number of endorsements was limited to one for regular checks and to two for deferred checks; c) rules and regulations governing the system of authorization of current accounts by the Monetary Authority was repealed, empowering financial institutions to set forth opening and causes for closing of current accounts. In such sense, it was provided that the condition set forth by the banks, to be included in the manual of procedures, shall be adopted by the Board of Directors of the institutions or equivalent authority, within 10 (ten) calendar days counted as of the effective date of such rules and regulations. On the other hand, it was determined that the Central Bank shall be in charge of the administration of the “Dishonored checks database”, which shall reside in the Central Bank Web site. The said database shall be daily updated and shall include persons disqualified to operate with Current Accounts under judicial provision, by virtue of section 302 of the Criminal Code and, in addition, it shall contain certain data of individuals and legal institutions having dishonored checks due to lack of sufficient funds and for formal defects or rejectment in registration of

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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deferred checks. At the end of June, it was set forth that checks issued as of 04.03.01, presented for collection -as the case may be- or registration until 12.31.02, shall only contain the following number of endorsements: Regular checks: up to one endorsement. Deferred payment checks: up to 2 (two) endorsements. Endorsements made by financial institutions to obtain financing in favor of other institutions or for the creation of financial trusts, in both cases included in the Financial Institutions Act, and the subsequent transfers in favor of third parties of similar nature, were exempt from such limitations. Savings accounts At the end of March, it was provided that legal entities shall not hold savings accounts. In April, “Special current accounts for legal entities” were incorporated to the rules and regulations governing “Savings, compensation payment and special deposits”. Identification and fiscal condition of the holder were set forth, as well as requirements for opening and operation of accounts; currencies authorized for raising of deposits; everything related to deposits and other credits; everything regarding debits; compensation; agreements to make debits; reversion of automatic debits; account statement and closing; deposit guarantee; recommendations for the use of automatic teller machines and receipt of delivery of information to the customer. Last, it was provided that the opening of these special current accounts “under the name of legal entities holding savings accounts, shall operate automatically, provided conditions originally agreed upon are not altered, save express provision to the contrary made by such persons”. In September, pension savings accounts were authorized to be opened by institutions rendering the service of pension payment and conditions thereupon were set forth. In such sense, provision has been made for the use of an operating mechanism similar to the already regulated mechanisms with regard to special accounts for the payment of

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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compensations, that is, the operations of accounts shall be at no charge for the beneficiaries or for the organization making payment of pension funds. Likewise, in order not to cause inconveniences to beneficiaries collecting their pension through branches, exclusively intended to render certain services -among others, payment of pension funds- the Central Bank has been provided for that, in these cases, pension savings accounts can be opened. Repos and acceptance of assets as security for debts Effective as of July, it was set forth that financial institutions may permanently concentrate repos of publicly offered securities with normal and customary quoting; credit portfolio and certificates of interest and debt instruments of financial trusts, subject to certain conditions. The provisions that, as of 10.11.01, shall govern reverse repos for the Central Bank against delivery of national public bonds in foreign currency normally quoted at institutionalized markets were communicated. The reverse repos operation against US Dollars and application of a $100 penalty for payment noncompliance were eliminated. Terms for conciliation and settlement of renewals and other operations were also established. In the case of conciliations, they shall be carried out on a business day, while the settlement procedure shall be carried out upon obtaining the receipt of counterpart asset transfer, through a credit in favor of the current account of the payee entity opened in the Central Bank in the currency agreed upon. Financial checks In April, a new service for the sale of Financial checks issued by financial institutions was authorized. The checks shall be as follows: They may be offered to the customers or to the general public by banks and other financial institutions. Financial institutions not authorized to receive deposits in current accounts may carry out the transaction through accounts opened in authorized entities.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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It is a regular check, issued by the banks and other financial institutions, in compliance with the features accepted for this type of document. The amount of the check may be paid by the applicant in cash (at the cashier), by means of a transfer in favor of the issuing institution or through debit from his/her account in the case of institution customers. The holder may deposit the check in any institution, in which case the check may be transferred through clearing against the account of the payor bank or financial institution, or he/she may collect it at the cashier in the corresponding branch, subject to the limitations set forth in subsection 2.1. of Section 2 of the rules governing “Prevention of money laundering and other illegal activities”. In addition, rules governing “Rules and regulations on bank current accounts” and “Prevention of money laundering and other illegal activities” were amended. Patacón and LECOP In August and November, rules governing Holding of Treasury Bonds for Payment of Obligations and Obligation Payment Bonds of the Province of Buenos Aires (Patacón) (Tenencias de Letras de Tesorería para Cancelación de Obligaciones y Bonos de Cancelación de Obligaciones de la Provincia de Buenos Aires -Patacón-) and the Provincial Obligations Payment Bonds -LECOP(Letras de Cancelación de Obligaciones Provinciales -LECOP-) were set forth: 1. Holding of Treasury Bonds for Payment of Obligations and Obligation Payment Bonds of the Province of Buenos Aires and of the Provincial Obligation Payment Bonds, shall be excluded from the provisions governing limitations on financing to the non-financial public sector. 2. Holding of such bonds shall not be more than 2.5% of the computable equity within the margin set forth for transactions with customers. 3. Financial institutions may receive “Patacones” and “LECOP” -in the proportions and under the conditions set forth- as payment of personal loans, home mortgage loans and pledges for the acquisition of automobiles -therefore, it shall not apply to the balance owed in credit cards-, provided it is verified that the bond's bearer is an active or passive agent considered in article 9 of Buenos Aires Province Act 12,727 and provided he/she is the original holder of such bonds, but this shall not be a reason

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Asociación de Bancos de la Argentina

to affect the credit rating of such holder. 4. Except in the cases provided for in paragraph 3 above, financial institutions shall only receive such bonds on behalf of third parties in sight custody accounts, therefore, they shall not be part of the assets or liabilities of the income statement thereof. In December, the instrument “Delivery Order for free of charge, nominative, unendorseable public bonds” was authorized to be issued by financial institutions at the request of its depositors in LECOP custody accounts (Decree 1,004/01) and Patacón (Province of Buenos Aires Act 12,727/01), and which shall be set off through the Electronic Clearing Houses. The said instrument shall be in force exclusively during the period of time that the Public Income Federal Administration (Administración Federal de Ingresos Públicos (AFIP)) authorizes collection of national taxes in LECOP and/or Patacón through its system related to its bank network. Compulsory debt issue and placement In June, the application of rules governing “Compulsory debt issue and placement” was suspended, and it was provided that reinstatement thereof shall be communicated by the Monetary Authority at least 180 days in advance to its effective date. In such sense, as of 06.15.01, the following shall not apply: a) Increase of minimum cash requirements and minimum liquidity requirements as of the respective monthly average holdings corresponding to June 2001. b) Increase of minimum capital requirements for credit risk and interest rates as of 06.30.01. Deposit guarantee Effective as of the contribution due on December 2001, the normal contribution to the Deposit Guarantee Fund was increased from 0,015% to 0,03 %, and it was provided that holdings up to $ 100,000 should be considered to determine the maximum rate on deposits affected by the coverage.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Asociaci贸n de Bancos de la Argentina

Assessment of financial institutions In April, various paragraphs of the rules and regulations governing Assessment of Financial Institutions were substituted. The list of corporations registered in the records authorized by the Central Bank was defined: Fitch Ratings Ltd.; Moody's Investors Service; Standard & Poor's International Ratings Ltd.; and Thomson Bankwatch Inc. It was also set forth that the relevant institution, when making the choice, shall file with the Superintendence of Financial and Exchange Institutions (Rating Agencies Control) at least two international rating reports -that is, necessarily taking into account the country risk- with regard to the head office of the branch operating in the country or the foreign bank granting the guarantee. The filing of such reports shall be carried out within 10 calendar days by the head office or by the foreign bank, as applicable. In addition, they shall send a note where they shall inform the name of the rating agency and the date of research, date of the report and date of notice to the head office. Updates shall be filed every time they are realized by the rating agencies, within 10 calendar days of receipt thereof by the head office or foreign bank, as applicable. Ratings and/or their updates shall not be more than a year old; otherwise, the rating agencies shall file a ratification of the effect of the last rating assigned. Together with the reports, a detailed list of rated customers shall be attached. Convergence factor In accordance with what is set forth in Section 3 of the Decree 803/01, the Central Bank has provided that it shall calculate the Convergence Factor on a day-to-day basis and shall report it to the Public Income Federal Administration particularly and to the market generally, through the Exchange Transactions and Open Market Desk (Mesa de Operaciones de Cambio y de Mercado Abierto). The Convergence Factor shall be calculated using the following formula: FC = 1-(1+e)/2, where e = Euro Quoting in US Dollars in London.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Asociaci贸n de Bancos de la Argentina

Micro, small and medium-size companies Taking into account the provisions of Resolution 24/01 of the Small and Medium-Size Company Department, it was set forth that, in order to determine whether a company is a micro, small or medium-size company, the total annual sales volume shall be taken into account, excluding the Value Added Tax and Internal Taxes. In the case of operating companies, the amount shall be determined according to the last three year-period average, counted as of the last balance sheet, included, or as of accounting information appropriately documented. In the case of companies with less than three years of business, the proportional average of annual sales verified as of the commissioning of the company, shall be taken into account. In the case of new companies, forecast values for the first year of business shall be taken into account, which shall be stated in an affidavit. Debt-free and capitalized private sector Under Decrees 1524/01 and 1570/01, and in order to regulate Decree 1387/01, it was set forth that financial institutions and financial trusts debtors comprised in Act 21,526, rated 1, 2, 3, 4 or 5 in August 2001, provided they do not have any fiscal debts enforceable or determined in 09.30.01 in favor of AFIP, may settle, in whole or in part, until 02.28.02, all debts registered until 11.02.01, plus accessories until their effective settlement, with national public securities. Customers rated 1, 2 or 3 shall require the prior consent of the creditor to settle their debts. Debtors of financial trusts created under the framework of section 35 bis of the Financial Institutions Act in an irregular situation, rated category 6 in August 2001, provided they do not have any fiscal debts enforceable or determined on 09.30.01 in favor of AFIP, may settle their debts with the said financial trusts. Debtors in an irregular situation may settle debts of financial trusts with the prior consent of the relevant beneficiaries.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

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Asociaci贸n de Bancos de la Argentina

Charter of the Central Bank Under Decree 439/01, the Charter of the Central Bank was amended, empowering the Bank to pay interests on deposit accounts, not higher than those accrued for placement of the respective funds less the cost of such transactions, excluding the holdings of public securities coming from monetary and exchange regulation transactions within the thresholds to which they are subject and allowing compensation of reserve requirements and their payment in public bonds. Under Decree 1311/01, the Charter was amended reinstating the functions of the Superintendence of Financial and Exchange Institutions. On the other hand, Decrees 1523/01 and 1526/01 also amend the Charter of the Central Bank, empowering it to make advance payments to financial institutions with a collateral, assignment, pledge or special encumbrance upon credits or other financial assets whose debtor or guarantor is the National Estate, or debt instruments or certificates of interest issued by financial trusts whose assets comprises credits or other financial assets whose debtor or guarantor is the National Estate. In these cases, the restrictions set forth in subsections b) and c) of section 17 shall not apply, except for the limit of freely available reserves that back the monetary base.

Convertibility Law Act 25,445, enacted on 06.21.01, provided that the Peso shall be convertible for sale at a relation of one Peso - one US Dollar simple average and one Euro, as of the day following the day on which the quoting for sale at the London market of one Euro is equivalent or higher than one US Dollar.

Intangibility of Deposits Act 25,466, published in the Official Bulletin on 09.25.01, provided for the intangibility of deposits in Pesos and in the foreign currency, in fixed term deposits and in sight deposits, rendering the Estate unable to alter the conditions agreed upon.

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 2 Monetary Position during the Convertibility Plan Percentage change

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 3 Local Currency Deposits Monthly average of daily balances (in millions of pesos)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 4 Foreign Currency Deposits Monthly average of daily balances (in millions of dollars)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Chart 1 Total Deposits (in millions) 55,000

50,000

45,000

40,000

35,000

30,000

25,000

20,000

15,000

1997

1998

1999

Total Deposits in Pesos Total Deposits in Foreign Currency

2000

2001

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 5 Monetary Aggregates (in millions of pesos of December 2001)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Chart 2 Monetary Aggregates (in millions of pesos of December 2001)

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1997

1998

1999

M1 M1 + Foreign Currency Demand Deposits M2 M2 + Total Foreign Currency Deposits

2000

2001

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 6 Monetary Aggregates (annual averages, as a percentage of the GDP)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 7 Monetary Aggregates in Real Terms

(1)

Monthly average of daily balances (in millions of pesos of December 2001)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 8 B.C.R.A. Monetary and Financial Liabilities Monthly average of daily balances (in millions)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 9 B.C.R.A. International Reserves

(1)

Monthly average of daily balances (in millions of dollars)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Chart 3 Reserves and Financial Liabilities of B.C.R.A. (in millions of dollars) 30,000

25,000

20,000

15,000

10,000

5,000

0 1997

1998

1999

Liquid Reserves Total Reserves Financial Liabilities

2000

2001

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 10 Liquidity Components of the Financial System Monthly average of daily balances (in millions of pesos)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 11 Financial System Liquidity Monthly average of daily balances (in millions of pesos)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Chart 4 Financial System Liquidity (in percentages) 40

1994

1995

1996

1997

1998

Liquidity/Deposits Ratio

1999

2000

2001

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 12 Interest Rates (annual nominal, in percentage)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 13 Interest Rates on Loans (annual nominal, in percentage)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Chart 5 Interest Rates (annual nominal, in percentage) 80

0 1997

1998

1999

Time Deposits in Pesos Promissory Notes in Pesos Time Deposits in Foreign Currency Mortgage Loans in Foreign Currency

2000

2001

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 14 Tranches of Time Deposits As of September 30, 2001

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 15 Tranches of Time Deposits As of September 30, 2001

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 16 Bank Loans (in millions of pesos)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 17 Bank Loans by Currency (in millions of pesos)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER II MONETARY EVOLUTION AND REGULATORY FRAMEWORK OF THE ARGENTINE FINANCIAL SYSTEM

Table 18 Bank Loans in Real Terms

(1)

(in millions of pesos of December 2001)

ABA

Asociaci贸n de Bancos de la Argentina

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

AsociaciĂłn de Bancos de la Argentina

1. Introduction

The Argentine financial system comprises 118 institutions, 86 of which are banks. From this total, 73 are private banks, 13 are public banks and 22 are non-banking financial institutions. These institutions have a network of 4,267 branches distributed all over the country, slightly less than the number registered last year. In addition, an important increase is observed in the number of automatic teller machines, which reached a total of almost 5,800 units, while last year there were less than 5,200. In September 2001, the financial system had more than 3 million accounts, 13.3 million savings accounts and almost 2 million fixed term deposits. The number of savings accounts include 4.9 million accounts for the payment of compensation through bank crediting: this system is used by approximately 51,000 companies. It is important to point out that the number of savings accounts must have increased considerably after the application of the so-called â&#x20AC;&#x153;corralitoâ&#x20AC;?, as it implied a bankarization of an important part of business transactions as it established a limit to the withdrawal of cash. In addition, a higher number of accounts allow to obtain a higher amount of cash, which produced the opening of a big number of accounts by the general public. Concentration During the year 2001, a slight increase was registered in the concentration of the financial system. Deposits raised by the 20 most important institutions reached 89.6% of the total in October, while at the end of last year this figure was 88.6%. The concentration of assets registers a similar change, if we observe that the 20 most important banks administer 85.6% of the total assets, while at the end of the year 2000 this value was 85.1%. Productivity, efficiency and profitability The reduction of the volume of deposits during the year 2001 deteriorated some of the financial system performance indexes. In the first place, productivity measures with regard to deposits were reduced due to the fact that deposits per employee decreased from $ 840,000 at the end of 2000 to 690,000 in November 2001. In the same way, deposits per branch were reduced

CHAPTER III FINANCIAL SYSTEM EVOLUTION

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Asociaci贸n de Bancos de la Argentina

from 20,1 millions to 16,4 millions. This implies that, in spite of the decrease in the volume of deposits, the number of branches or of employees was not reduced in the same proportion. On the other hand, there was an improvement in the efficiency, as administrative expenses per employee were reduced from $ 6.7 thousand at the end of 2000 to $ 6.1 thousand in November 2001. It is important to point out that the number of employees per branch was maintained practically constant, reaching an average of 23.8 people per branch, while at the end of last year there were 24.1 employees. With respect to the irregular portfolio, an increase was observed: it amounted to 12.1% of the total financing at the end of November 2001, while it amounted to 11.4% in December of last year. Interest rate on loans composition The interest rate charged by financial institutions for loans granted varies according to the type of loan, the currency, the term or the guarantee. To simplify and approach the subject objectively, an average rate is used. The average rate on loans registered in the first semester of the year 2001 amounted to 14.7% per year. This rate has various components that may be grouped into those that can be controlled by the institutions and those that respond to external factors. The most important component is the cost of funding. This is a factor that cannot be controlled by financial institutions. This value is determined by the cost paid by the financial system for obtaining funds used for loans. The main source of funds is the raising of deposits, followed by the issue of notes and lines of credit from abroad. This factor is the practical reason for half of the value of the interest rate on loans. Then, there is the cost of reserves in general. This includes the minimum cash requirements, the minimum liquidity requirements and the cash holdings. This factor constitutes a fifth part of the interest rate on loans level. Although this is a high cost, its level is justified by the need to face a crisis as the ones suffered this year, giving enough liquidity to the financial system. The non-collectibility cost of the portfolio represents a similar cost, and it comprises the loss registered by the financial system due to customers not paying their debts adequately. Although

CHAPTER III FINANCIAL SYSTEM EVOLUTION

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Asociaci贸n de Bancos de la Argentina

this factor is not directly controlled by financial institutions, the most careful credit policies applied by the banks during the last years have their effects under circumstances like the present ones. At a global level, in any recessive process there is an increase in portfolio default and, in the case of Argentina, the application of the said careful policies when granting loans have made possible that, at present, the increase in default does not constitute a problem for the financial system. The direct impact that administrative costs have on the interest rate on loans is one of the factors that have registered the best performance during the last years. Financial institutions have obtained improvements as regards efficiency, which have allowed them to reduce the impact of their administrative costs on interest rates charged for loans granted. In this sense, the opening to competence with foreign institutions, the increase in productivity and the increase in the economy monetization level, in addition to important investments in new technology, have favored the reduction of these costs. Taxes, contributions and insurance costs follow in order of importance. Within this sector, gross income taxes and contributions made by institutions to the Deposit Guarantee Fund should be highlighted. This Fund is managed by SEDESA and is used to pay deposits of institutions in trouble or to help to absorb non-viable institutions. This factor represents ten per cent of the interest rate on loans. Last, there are the financial institutions' profits. The incidence of this factor is the lowest of all.

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 19 Number of Financial Institutions

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 6 Number of Financial Institutions

350

300

250

200

150

100

0 1985

1987

1989

1991

1993

1995

Private Banks Public Banks Non-Banking Financial Institutions

1997

1999

Oct. 2001

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 20 Number of Accounts

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociación de Bancos de la Argentina

Chart 7 Number of Accounts

16,000,000

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

1989 to 1991

1994

1995

1996

Time Deposits Current Accounts Saving Accounts

1997

1998

1999

Jan ‘00 to Sep ‘ 01

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 21 Number of Branches

(1)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 22 Employees

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 8 Number of Employees

160,000

140,000

120,000

100,000

80,000

60.000 60,000

40,000

20,000

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Sep. 2001 Private Banks Public Banks

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 23 Assets and Liabilities Structure

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 9 Assets Structure (in percentages)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% November 1994

April 1995

Other Assets Bank Premises and Equipment Other Receivables from Financial Transactions Loans Government Securities Cash and Due from Banks

October 2001

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 10 Liabilities and Stockholders' Equity Structure (in percentages)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% November 1994

April 1995

Stockholders' Equity Other Liabilities Other Liabilities for Financial Transactions Deposits

October 2001

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 24 Loans and Deposits (in millions of pesos)

Table 25 Loans and Deposits Share (in percentages)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 26 Information by Type of Institutions As of October 31, 2001 (in millions of pesos)

Table 27 Share by Type of Institutions As of October 31, 2001 (in percentages)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 11 Distribution of Deposits October 2001

Local Private Banks 16%

Foreign Banks 49%

Provincial or Municipal Banks 17%

Federal Banks 16%

Non-Banking Financial Institutions

Cooperative Banks

0,4%

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 28 Performance Ratios As of October 31, 2001 (in percentages)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 29 Concentration of Deposits (in percentages)

Table 30 Concentration of Assets (in percentages)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 31 Loans by Types

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 32 Breakdown of Loans by Currency Monthly average of daily balances (in percentages)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 12 Breakdown of Loans to Private Sector As of December 31, 2001 (in millions)

17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Overdraft

Promissory Notes

Mortgage Loans

In Pesos In Foreign Currency

Pledge Loans

Consumer Loans

Other Loans

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 33 Loans Structure by Tranches As of October 31, 2001

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 34 Concentration of Credit Assistance As of October 31, 2001

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 35 Loans Structure by Tranches As of November 30, 2001 (in thousands of pesos)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 36 Loans Structure by Tranches As of November 30, 2001 (in percentages)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 37 Private Banks: Income Structure (in millions of pesos)

(1)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 38 Performance Ratios of Financial System

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 13 Return on Average Equity (in percentage) 8

-1 1994

1995

1996

1997

1998

1999

2000

2001 (11 months)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 39 Lending Interest Rate Structure (in annual percentages)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Chart 14 Lending Interest Rates and Cost of Funding (annual percentages) 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1994

1995

1996

1997

Cost of Funding Lending Rate Spread

1998

(1)

1999

Eleven months, annualized.

2000

2001

(1)

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 40 Spread Composition As percentage of the lending rate

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 41 Bank Deposits by Political Division Percentage distribution

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 42 Geographical Distribution of Branches

(1)

As of November 30, 2001

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 43 Geographical Distribution of ATMs As of November 30, 2001

Branches ATMs

35 Tucumán

Tierra del Fuego

Santiago del Estero

Santa Fe

Santa Cruz

San Luis

San Juan

Salta

Río Negro

Neuquén

Misiones

Mendoza

La Rioja

La Pampa

Jujuy

Formosa

Entre Ríos

Chubut

Chaco

Corrientes

Córdoba

Catamarca

Buenos Aires

Buenos Aires City

CHAPTER III FINANCIAL SYSTEM EVOLUTION Asociación de Bancos de la Argentina

ABA

Chart 15

Geographical Distribution of Branches and ATMs

(November 2001)

2,500

2,000

1,500

1,000

500

CHAPTER III FINANCIAL SYSTEM EVOLUTION

ABA

Asociaci贸n de Bancos de la Argentina

Table 44 ABA's Share in the Banking System As of October 31, 2001

APPENDIX PRINCIPAL MEASURES OF BANKING, EXCHANGE AND FINANCING POLICIES

ABA

Asociación de Bancos de la Argentina

Communication "A" 3215. RUNOR - 1 - 417. (01.16.01) The Central Bank amended rules and regulations governing “Prevention of money laundering and other illegal transactions”. In relation to provisions governing “Prevention of money laundering”, among transactions to be deemed as “suspicious”, a paragraph was added directing financial institutions to pay special attention to communications made by the Superintendence of Financial and Exchange Institutions, with regard to countries considered non-cooperative and offering a different degree of permeability or vulnerability to money laundering maneuvers. Communication "A" 3217. RUNOR - 1 - 418. (01.17.01) Pursuant to Act 25,345, whereby the new financial instrument called “Payment Check” was created, whose operation was regulated by Communication "A" 3201, and taking into account Act 25,246, which regulated some mechanisms tending to prevent laundering of all type of assets arising from various businesses (among them, money), the Monetary Authority introduced amendments to rules governing prevention of such crimes, in relation to the “Purchase and Sale of payment checks” and to the “Unusual frequency and/or amount in payment check purchase and sale transactions”. Communication "A" 3229. LISOL - 1 - 327. (02.12.01) The Central Bank amended the rules governing the Minimum Liquidity Requirements and it set forth that, whenever an excessive concentration of liabilities is verified, which implies a significant risk with regard to individual liquidity of a financial institution and/or which has an impact on system liquidity, minimum liquidity requirements may be set on such liabilities of such financial institution- and/or those supplementary measures considered convenient may be implemented. Communication "A" 3234. RUNOR - 1 - 425. (02.22.01) Rules governing “Investments with resources from retirement and pension funds”, in relation to national asset ratings, were amended by this Communication. For national public notes, the Central Bank set forth that two ratings will be required. One shall

APPENDIX PRINCIPAL MEASURES OF BANKING, EXCHANGE AND FINANCING POLICIES

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be granted by an international rating agency approved by the Central Bank, rating at least ten (10) countries of which five (5) must be Latin American countries. The other rating shall not be issued by a rating agency that is a branch, directly or indirectly controlled or subsidiary of such agency. Communication "A" 3238. LISOL - 1 - 329. (03.16.01) The Central Bank amended the rules governing Minimum Capital Requirements, in order to unify openings representing similar concepts, subject to the same weighing. In such respect, the Central Bank extended application of the 0% risk index to loans granted to National Official Banks -whose transactions are guaranteed by the National Estate-, as well as the eventual liabilities undertaken with respect to them, in order to determine the minimum capital requirement for credit risk. Communication "A" 3239. LISOL - 1 - 330. (03.23.01) Given the evolution of the main financial variables and taking into account the strong impact on the system liquidity that would be generated by the gradual reinstatement of differential minimum liquidity requirements, until reaching the 100% rate as of October 2000, the Central Bank extended until April 2001, included, the 50% Minimum Liquidity Requirement on sight placements in financial institutions that, at a minimum, shall constitute the assets of the Unit Trusts, in accordance with the provisions of the Rules of the Securities and Exchange Commission. Communication "A" 3244. OPASI - 2 - 251, LISOL - 1 - 331 and RUNOR - 1- 430. (03.30.01) In accordance with the provisions of the Competitiveness Act 25,413, the Monetary Authority approved, effective as of 04.04.01, the rules governing “Rules and regulations governing the bank current account”. Among other things, the following amendments were introduced: a) the use of checks in current accounts opened to legal entities was considered optional; b) the number of endorsements was limited to one in the case of regular checks and to two in the case of deferred checks; c) rules and regulations governing the current account disqualification system issued by the Central Bank were repealed, empowering financial institutions to set forth rules and regulations governing the

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opening and causes for closing of current accounts. Communication "A" 3245. OPASI - 2 - 252. (03.30.01) The Central Bank decided to manage the Database referred to as Rejected Check Center, and reported its location at the Monetary Authority web site. Such database shall be updated on a day to day basis and shall include people disqualified to operate with Current Account by virtue of a judicial order, pursuant to section 302 of the Criminal Code and, additionally, it shall contain certain data of individuals and legal entities having rejected checks for insufficient funds and for formal defects or for rejected registration of deferred checks. Communication "A" 3246. LISOL - 1 - 332. (03.30.01) The Central Bank reduced the minimum liquidity requirements for April, 2001, in two percentual points (from 20% to 18%) for the most representative liabilities. Communication "A" 3247. OPASI - 2 - 253. (03.30.01) The Central Bank amended the rules and regulations governing “Savings deposits, payment of compensation and special deposits”. In that respect, effective as of 04.03.01, the Central Bank provided that legal entities shall not hold savings accounts and that financial institutions shall notify, immediately after taking notice of this resolution, legal entities holding savings accounts, about the impossibility to keep them. Communication "A" 3249. OPASI - 2 - 254 and RUNOR - 1 - 431. (04.04.01) The Monetary Authority approved a new sales service of Financial Payment Checks, which will have the following features: They may be offered to the customers or to the public in general, by the banks and other financial institutions. Financial institutions not authorized to receive deposits in current accounts may carry

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out the transactions through the accounts opened in authorized institutions. It is a regular check, issued by the banks and other financial institutions, with the features allowed for this type of document. The amount of the check may be paid by the applicant in cash (by the cashier), by means of a transfer in favor of the issuing institution or through debit in account in the case of institutional customers. The holder may deposit the check in any institution, in which case it shall be transferable by clearing against the account of the payee bank or institution or collect it at the cashier in the corresponding branch subject to the restrictions set forth by rules and regulations governing “Prevention of money laundering and other illegal businesses”. Communication "A" 3250. OPASI - 2 - 255. (04.06.01) Through this Communication, the Monetary Authority amended rules and regulations governing “Savings deposits, payment of compensation and special deposits”. In such respect, a new system of special current accounts for legal entities was created, without check service, which may be authorized by any financial institution, and whose opening requirements are set forth with features similar to the ones currently set forth for savings accounts.

Communication "A" 3251. LISOL - 1 - 333. (04.09.01) Effective as of April 2001, the Central Bank set forth that “National Government Bonds 9% - due 2002” will be accepted as account computable for the compliance with minimum liquidity requirements, up to the equivalent to 18% of the minimum requirement for February 2001.

Communication "A" 3257. RUNOR - 1 - 435. (04.18.01) By means of this Communication, the Central Bank amended the rules and regulations governing Evaluation of Financial Institutions, with regard to the list of approved rating agencies. Ratings earmarking a “supraindex” with characters IEF were also incorporated, in order to

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identify that the earmarked evaluation corresponds to the regime set forth by the Monetary Authority, thus differentiating them from other local or international ratings. In addition, it was provided that, in relation to the effect of ratings and/or update of institutions comprised in the alternative regime, when they are more than one year old, the rating agencies may file a rating having the effect of the last earmarked evaluation, to prevent them from being in force during periods longer than one year when they do not deserve any changes in that respect.

Communication "A" 3258. LISOL - 1 - 334 and OPASI - 2 - 257. (04.18.01) The Central Bank set forth that, as of 07.01.01, financial institutions may permanently carry out repos, in accordance with the rules governing the “Pledge of assets”, which authorize institutions to pledge securities -including share certificates and financial trust debt issues, foreign currency and credit portfolio-, as security for such transactions, among them or with foreign banks, subject to certain conditions.

Communication "A" 3259. LISOL - 1 - 335. (04.23.01) Rules governing “Guarantees” were amended in relation to financial location assets. In such respect, assets with financial location on real estate and automobiles were included as preferred guarantee “B”, in accordance with the provisions of Act 25,248.

Communication "A" 3261. LISOL - 1 - 336. (04.30.01) The Central Bank extended until May 2001, the effect of reduced minimum liquidity requirements set forth for the month of April 2001.

Communication "A" 3262. LISOL - 1 - 337 and OPRAC - 1 - 492. (04.30.01) When Act 23,758, governing foreign currency deposits and loans, was repealed, rules governing “Application of the lending capacity of foreign currency deposits” were left without effect as of 05.01.01, as well as provisions governing minimum liquidity requirements related with application defects of such lending capacity.

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Communication "A" 3274. LISOL - 1 - 338, RUNOR - 1 - 439, OPASI - 2 - 260 and SERVI - 1 55. (05.24.01) Effective as of 06.01.01, the Central Bank informed a new Reserve Regime and approved rules governing “Minimum Liquidity Requirements” and “Minimum Cash Requirements”. Taking into account that sight deposits (savings accounts and current accounts) are less susceptible to changes in the perception of the financial system risk, as they show a more stable behavior with regard to term deposits in situations of crisis, the Monetary Authority amended the system liquidity reserve schedule, setting forth differential requirements for deposits in savings accounts and current accounts with regard to term deposits. Therefore, a new liquidity system was implemented based on the minimum cash on sight transactions, while the current rules governing “Minimum Liquidity Requirements” shall only apply to term transactions.

Communication "A" 3278. OPRAC - 1 - 496 and LISOL - 1 - 339. (05.29.01) By means of this Communication, the Central Bank decided to amend the rules governing “Holdings of securities in investment accounts”, setting forth that holdings incorporated to investment accounts shall be accounted for at their increased cost value, until maturity of each service, exponentially according to the domestic rate of return and the time elapsed from its incorporation to these accounts. Likewise, as of 06.01.01, measures governing minimum capital requirements affecting notes received by financial institutions by reason of the debt exchange transaction referred to in Decree 648/01 were approved.

Communication "A" 3280. OPRAC - 1 - 497 and LISOL - 1 - 340. (05.31.01) The following rules and regulations were amended, referring to the financial aid to the National Government:

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1. “Financing to the non-financial public sector”: financing instrumented through the issue of promissory notes of the National Government within the framework of the exchange transaction provided for in Decree 648/01 were excluded. The financial aid affected by such exception shall not be more than the total amount of promissory notes delivered in exchange by financial institutions comprised in Resolutions 307/99, 163/00, 177/00, 467/00 and 61/01 of the Central Bank. 2. “Credit risk fractioning”: it was determined that the sum of the financial aid imputable to the issue referred to in the previous paragraph, the aid corresponding to issues comprised in Resolutions mentioned in the previous paragraph and other financing to the National Government affected by the provisions governing credit risk fractionating, may be more than 10 percentual points above the higher of: a) maximum loanable threshold according to the computable equity set forth in paragraphs 2.2.1. and 3.2. of Annex II to the Communication "A" 2140, or b) the proportions that -to the ends of such relations- this aid represents on 05.24.01 with regard to the above mentioned responsibility. In addition, financing agreed upon by means of bonds received in exchange for financing instrumented from time to time by means of promissory notes or by means of holdings of bonds subscribed before under the “Financing Program instrumented by means of Promissory Notes or Bonds” of the National Government of the years 1999/2001, shall be included, provided they are not susceptible of being computed to the ends of determining the minimum capital requirement for market risk. 3. “Financial institutions minimum capital”: applications to be made by the institutions with holdings of bonds and financing instrumented by means of promissory notes received in exchange of bonds/promissory notes previously maintained, delivered by reason of the transaction referred to in Decree 648/01 were determined. Communication "A" 3285. LISOL - 1 - 341 and OPRAC - 1 - 498. (06.15.01) The Central Bank amended the rules governing “Refinancing of debts to customers comprised in Agreements to improve competitiveness and to create employment”, setting forth that financial institutions may agree upon refinancing in favor of companies comprised in competitiveness plans once the respective Agreements are executed, in accordance with Decree 730/2001.

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In such sense, institutions may refinance debts rated in categories 3, 4 and 5, of companies comprised in the above mentioned Conciliations, corresponding to the business portfolio and the business portfolio not above $ 200,000, rated according to the consumption portfolio criteria according to the percentage of repaid debt or elapsed term.

Communication "A" 3286. LISOL - 1 - 342. (06.15.01) The Monetary Authority included the section “Additional credit for companies comprised in competitiveness plans” in the rules governing “Minimum provisions for non-collectibility risk” and amended the rules governing “Minimum capital of financial institutions”. In such regard, a series of specific measures tending to facilitate implementation of the said reactivation plans were approved in order to allow such economic units access to additional sources of financing. To achieve such goal, margins in force regarding additional financing were extended and a lower risk index was set forth for minimum capital requirements, applicable to new financing and to refinancing granted to companies comprised in “Agreements to improve competitiveness and creation of employment”, pursuant to the provisions of the Decree 730/01 and supplementary provisions, within the framework of Act 25,414, and to the extent the interest rate is not above a certain level.

Communication "A" 3287. RUNOR - 1 - 445 and OPASI - 2 - 261. (06.15.01) The Central Bank ordered suspension of application of rules governing “Compulsory issue and placement of debt”, whose re-implementation was ordered by the Monetary Authority at least 180 days in advance to its effective date.

Communication "A" 3289. RUNOR - 1 - 447. (06.19.01) According to the provisions of Section 3 of the Decree 803/01, as of this Communication, the Central Bank provided that it shall calculate the “Convergence Factor” on a daily basis and will inform it to the Federal Administration of Public Income in particular and to the market in general, through the Exchange Transactions and Open Market Desk.

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Communication "A" 3293. OPASI - 2 - 262. (06.29.01) As Act Number 25,445 incorporates the Euro to the convertibility regime, and taking into account the increase of authorization requests to raise fixed term deposits in Euros, the Central Bank decided to accept such currency for fixed term deposit and terms investments raising.

Communication "A" 3294. OPASI - 2 - 263. (06.29.01) The Monetary Authority amended the rules governing “Rules and Regulations of Bank Current Accounts”, in relation to the limits to endorsements. In such sense, it provided that checks issued as of 04.03.01, presented for collection or -as the case may be- for registration until 12.31.02, shall only bear the following number of endorsements: Regular checks: up to 1 (one) endorsement. Deferred checks: up to 2 (two) endorsements. Endorsements of financial institutions carried out to obtain financing in favor of a financial institution or to constitute a financial trust, in both cases comprised in the Financial Institutions Act, and subsequent transfers in favor of other parties of the same nature, are excepted from this provision.

Communication "A" 3296. OPASI - 2 - 264, OPRAC - 1 - 500 and RUNOR - 1 - 449. (07.10.01) The Central Bank updated the ordered text governing “Prevention of money laundering and other illegal businesses”, including the detailed list of non-cooperative jurisdictions, by virtue of the decision made by the International Financial Aid Group (GAFI), in order that financial institutions pay special attention to transactions carried out by and received from such areas.

Communication "A" 3301. LISOL - 1 - 345. (07.13.01) The Central Bank set forth, for the period July/August 2001, the calculation of the minimum liquidity and minimum cash requirements and payment on the average resulting from dividing

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the sum of the daily balances of accounts included and registered during such term by the total number of days of the two month-period. Finally, it determined that during the period July/September 2001 the minimum cash requirement may be paid with balances from the current account in US Dollars opened in the Central Bank, 70% for the two month-period July/August 2001 and 40% for September 2001.

Communication "A" 3302. LISOL - 1 - 346. (07.19.01) From 07.19.01 to 09.30.01, a decrease was set forth in the minimum daily payment of minimum liquidity requirements from 75% to 60% of the requirement of the previous month.

Communication "A" 3303. OPRAC - 1 - 501 and LISOL - 1 - 347. (07.20.01) The Central Bank extended until 12.31.01 the suspension of the application of the section “Treatment of valuation differences”, of the “Regime of securities holdings in investment accounts” on the criteria applicable regarding accounting exposure, when a difference above 20% is registered.

Communication "A" 3304. LISOL - 1 - 348. (07.20.01) The Central Bank amended rules governing “Minimum Liquidity Requirements” and “Minimum Cash Requirements”. In such respect, it expressly incorporated, as accounts accepted for payment of minimum cash and minimum liquidity requirements, guarantee accounts for the coverage of settlement of transactions with credit cards and automatic teller machines. On the other hand, it accepted, at the institutions' option, that minimum cash requirements generated by drafts and transfers pending payment and by the corresponding transactions abroad in foreign currencies other than the Euro and the US Dollar, be paid in the latter currency in the case of insignificant amounts. Such alternative may be applied provided the requirement in the currencies other than the US Dollar or the Euro is not above the higher of: the equivalent of u$s 100,000, or the 1% of the minimum cash requirement of all foreign currencies.

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Communication "A" 3307. LISOL - 1 - 350 and RUNOR - 1 - 453. (07.27.01) Effective for calculation of the computable equity due on 07.31.01, the Central Bank amended the rules governing “Minimum Capital Requirements of financial institutions”. An adaptation of the form of calculation of the minimum capital requirement for credit risk was introduced, in order that the potential increase in the volume of risk assets arising from certain financing does not have an unfavorable effect in terms of the total capital requirement on this account. However, in order not to affect the solvency of the institutions, in no event shall the resulting capital requirement be lower than the one applicable on 06.30.01.

Communication "A" 3311. LISOL - 1 - 351. (07.31.01) The rules governing "Minimum Liquidity Requirements" and "Minimum Cash Requirements" were amended, in relation to the two-month position July/August 2001, according to the following summary: Minimum liquidity requirements were decreased one percentual point for the above mentioned two-month period. It was admitted that, during the period July/September 2001, the payment of minimum liquidity requirements can be made with balances from the current account in Pesos opened in the Central Bank, in the following proportions, calculated on the basis of said requirement: Period % July/August 2001

September 2001

For the minimum daily payment of minimum liquidity requirements, corresponding to the two-month period July/August 2001, the total June requirement was taken and recalculated according to a decrease of two percentual points. Effective as of 07.01.01, the following paragraph was added to the rules governing “Minimum Cash”: “Effective in transit and in companies devoted to transportation of monies and securities”.

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Communication "A" 3314. LISOL - 1 - 352 and OPRAC - 1 - 502. (08.06.01) Taking into account that the development of transactions with credit insurance for exports is a basic element of the exports policy, the Monetary Authority approved terms applied in other countries in line with such criteria, specially used in credits assigned without liability. To such effect, exports financing transactions having such coverage shall be treated as preferred guarantee “A”, to the extent the eventual loss is paid within 90 calendar days of its due date and the intervening insurance company has a certain risk rating. If this term is longer but not exceeding 180 days, they will be treated as preferred guarantee “B”. On the other hand, agricultural, road and industrial machinery were added as property that can be subject to financial lease, in addition to real estate and automobiles. In order to facilitate additional loans or extensions of loans which may be granted in various opportunities with regard to property already pledged with a mortgage, and that due to its operative costs, it should be convenient to instrument them with a mortgage with other preference degrees, the Central Bank specified the criteria to be observed when institutions grant financing secured with a mortgage other than a senior mortgage.

Communication "A" 3321. OPRAC - 1 - 503. (08.17.01) Within the framework of the provisions of Resolution 24/01 issued by the Small and MediumSize Companies Department, the Central Bank amended the rules governing the “Classification of companies into micro, small and medium-size companies”. In such respect, the Monetary Authority set forth that, to such effect, the value of the total turnover shall be taken into account, excluding Value Added Tax and Internal Taxes. In the case of operating companies, the amount shall be determined according to the average turnover during the last three years counted as of the last balance sheet included or to accounting information duly documented. In the case of companies that have been created after such date, the proportional average turnover verified since their commissioning shall be taken into account. In the case of new companies, forecast values for the first year of business shall be taken into account, which will be stated in an affidavit.

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Communication "A" 3325. OPRAC - 1 - 504 and LISOL - 1 - 353. (08.23.01) The Central Bank set forth rules and regulations governing Holding of Treasury Bonds for Payment of Obligations and Obligation Payment Bonds of the Province of Buenos Aires, as follows: 1) Holding of Treasury Bonds for Payment of Obligations and Obligation Payment Bonds of the Province of Buenos Aires “Patacón”, issued under Provincial Act 12,727, shall be excluded from the provisions on limitations on financing to the nonfinancial public sector. 2) Holding of these bonds shall not exceed 2.5% of the computable equity within the margin set forth for customer transactions. 3) Financial institutions may receive “Patacones” -in the proportions and under the conditions determined- in payment for personal loans, house mortgage loans and pledges for the acquisition of automobiles -therefore, they shall not be used to pay the balance due to credit cards-, provided it is verified that the bearer of the obligation is an active or passive agent included in section 9 of Provincial Act 12,727 and provided he/she is the original holder of such bonds, but the assigned credit rating shall not be affected by reason of this. 4) Only financial institutions may receive bonds issued by the Province of Buenos Aires on behalf of third parties in sight custody accounts, therefore, bonds shall not be part of the statement of net assets of such institutions.

Communication "A" 3326. LISOL - 1 - 354. (08.24.01) Effective as of July/August 2001, the Central Bank amended the rules governing “Minimum Liquidity Requirements” and “Minimum Cash Requirements”. In such respect, the charge rate on minimum cash and minimum liquidity requirements deficiency was set forth at 120% of the higher rate set by the Monetary Authority for reverse repos, and the interest rate on charges not paid in due time, at 150% of the charge rate.

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Communication 3328. LISOL - 1 - 355. (08.30.01) The reduction of one percentual point applicable to minimum liquidity requirements is extended until September 2001.

Communication "A" 3336. OPASI - 2 - 267. (09.27.01) The Monetary Authority approved the rules governing the “Pension savings account”. In such sense, the use of an operating mechanism similar to the one already regulated with regard to special accounts for the payment of compensation was set forth, that is, the operation of accounts shall be at no charge for the beneficiaries or for the institution that pays the benefits. Likewise, in order not to create any inconveniences to beneficiaries collecting their pensions through agencies exclusively intended for the rendering of certain services -among others, payment of pensions and pension benefits-, it was provided that, in such cases, pension savings account may be opened.

Communication "A" 3337. LISOL - 1 - 356 and OPRAC - 1 - 506. (09.27.01) By means of this Communication, the Central Bank approved the rules governing the “Assignment of credit portfolio” and set forth that the sale or assignment of credits with liability to individuals or entities other than financial institutions shall have, for the assignor, the same treatment as acceptances as far as the “Minimum liquidity requirements” are concerned. Entities having "CAMELS" ratings 1 and 2 shall operate under the general conditions, meanwhile this will be replaced with information about such transactions to the Superintendence of Financial and Exchange Institutions once the said transactions have been carried out, by assignor entities rated 3, in the case of purchasers not belonging to the financial system. The prior authorization requirement shall be maintained for entities rated 3 assigning a customer portfolio rated in categories 3, 4, 5 or 6, as well as for the remaining assigning entities ("CAMELS" 4 and 5). Even though, if the transaction is carried out as customary, the possibility that a general authorization, subject both to compliance with the obligation to inform about the transactions, where the transaction amount is not less than $1,000,000.-, as well as to

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compliance with the other conditions determined by the Superintendence of Financial and Exchange Institutions as it may be deemed adequate for each institution, is provided for. In case assignors are financial institutions, financial trusts or foreign banks with international risk rating “A” or above, they shall inform about the transactions after such transactions are carried out. Among other amendments, it was accepted that assigning entities having "CAMELS" ratings 1 to 2 be liable for the eventual noncompliance of assigned debtors, whichever their rating at the time of the transfer may be, and that the inflow of funds may be carried out directly at the seller entity, without resorting to transfers to their accounts in the Central Bank or in the Deutsche Bank when the transactions have low amounts, even though in these cases funds must arise from accounts opened in the financial system. Entities rated 3, 4 or 5 shall not assign a portfolio with liability if they are debtors in an irregular situation (categories 3, 4, 5 and 6).

Communication "A" 3338. LISOL - 1 - 357. (09.27.01) The Central Bank extended until 12.31.01 the 1% reduction of rates corresponding to Minimum Liquidity Requirements, as well as the 60% daily minimum requirement. On the other hand, effective as of 10.01.01, the 80% reserve fund was eliminated for sight deposits above the rate published by the Monetary Authority, the minimum cash rate was increased from 15.5% to 18.5% and it was approved that payment up to 20% of the obligations may be made with National Government Treasury Bonds in Pesos, computed at their market value. Communication "A" 3339. LISOL - 1 - 358. (09.28.01) The Monetary Authority amended rules governing. Classification of debtors and Minimum provisions for non-collectibility risk. In the first place, a new text was approved referring to the Classification of debtors of the business portfolio. Among the most important amendments, we can point out the extension of terms of default admitted for each debtor category and the division of category 2 into the following subcategories: 2.a) Inadequate observance and compliance. 2.b) Under negotiation or with refinancing agreements.

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As regards rules governing Minimum provisions for non-collectibility risk, provisions were adapted in accordance with the following table: