Banking

Argentine Central Bank introduces changes to the legal framework for representative offices of foreign banks in Argentina

On October 1, 2009, Argentine Central Bank issued Communiqué “A” 4981, introducing changes to the legal framework for representative offices of foreign banks in Argentina (the “Rep. Offices”).


Below it is a summary of the most relevant features of the revised regulations:

1) Alternate Representative

Under the new regulations, foreign banks should appoint at least one alternate representative, who shall act in the event of absence of the regular Representative.

2) Outsourcing of services by the Representative

Any outsourcing of services or activities by the Representative shall be previously informed to the Central Bank, with 15 days in advance.

3) Permitted Activities

The Rep. Office is allowed to conduct the following activities:

“advice and procure guaranties and/or financings by the foreign institution acting as guarantor, lender or agent in connection with the issuance or underwriting of indebtedness in regulated foreign markets”

Additionally, it is expressly banned for Rep. Offices to perform any activity connected with the financial intermediation and the soliciting of funds, even when it is done for the benefit of the foreign bank.

4) Stationary, letterhead and publicity

All stationary, letterheads and publicity of the Rep. Office shall include the following legend:

“Pursuant to the legislation and regulations in force, the capacity as representative of a foreign financial institution that is not authorized to do business in the country does not confer him/her the authority to raise funds from the public for his/her own nor for the represented foreign financial institution. The representative is not either empowered to enter into or deal in exchange transactions. Any failures related to the undue raising of funds are subject to the application of the penalties set forth in section 41 of the Law of Financial Institutions, while those related to the entering into or dealing with exchange transactions shall result in the application of the Foreign Exchange Criminal regime”.

5) Purpose of the Rep. Office

The request for establishing a new Rep. Office shall include a detailed description of the activities and the organizational structure of the Rep. Office anticipated for the term of one year, as well as the business plan and projections and the estimated cash flow for the representative office for the same period, all of which shall be supported with evidence of approval thereof by the foreign bank.

6) Anti-Money Laundering

The new regulations provide that Rep. Offices shall keep an Anti Money Laundering Manual for purposes of complying with Argentine Central Bank regulations for preventing money laundering and terrorism financing.

7) Special Book

The Representative shall keep a special book with a record, in chronological order, of the activities performed by the Rep. Office. This special book shall include the date on which the alternate representative takes office (indicating his/her name, identity document number and current domicile), as well as the date on which the regular Representative resumes office, and each one of the commitments received and the actions taken, irrespective of the means whereby they may have been made (paper, e-mail, telephone, fax, meetings, etc.), except only for any such communications completely strange to such actions.

Additionally, the new regulation provides that foreign regulations preventing the application of these provisions cannot limit the compliance with these requirements.

8) Annual budget and projections

Before April 30 of each year, the Rep. Office must file with the Argentine Central Bank an outline of its proposed activities and administrative structure for the relevant year.

Additionally, the Rep. Office shall report to the Central Bank any operation performed by the foreign bank with Argentine residents or local companies, even when the Rep. Office did not participate or when it was done by any other branch or subsidiary of the foreign bank.

Finally, the new regulation provides that the existing Rep. Offices shall have 180 days (until March 30, 2010) to comply with these new requirements.


For further information on this topic please contact Jorge I. Mayora