In COVID-19 | Legal Analysis Center

COVID-19 | Legal Analysis Center
June 23rd, 2020
Original Version March 30th, 2020

*Updates added in June 23rd, 2020 are in colour blue

Executive Summary

Financial institutions continue to provide the services that they usually offer remotely, including FX transactions.

As of April 13, 2020, the banking activity with customer service, exclusively under an appointment system, is excempted from complying with the mandatory quarentine.

Financings’ maturity dates during quarantine were extended to April 1, 2020.

Unpaid balances of financing maturing from April 1 until September 30 can only accrue compensatory interest.

The checks clearing is maintained but the application of fines and the disqualification for those who write bad checks are suspended.

Other measures were also taken to mitigate the impact of the coronavirus pandemic (COVID-19).

1. How does the financial system work during quarantine? Is there any bank service?

In the framework of the mandatory quarantine ordered by the National Executive Branch between March 20 and June 28, the Central Bank of the Argentine Republic (the “Central Bank”) resolved the following:

a) Until April 12, the financial institutions cannot open their branches for customer service. However, as of April 3 and until April 9, the foregoing was not applicable to customer service rendered to retirees and pensioners, and must even open on April 4 and 5.

On the other hand, as of April 13, financial institutions must open their branches to the public but without any over-the-counter service –except for (i) extraction and deposit of foreign currency, (ii) as of May 15, deposit of third party checks, and (iii) as of June 1, the provision customer service to people with disabilities and to receive cash payment of loans- to the extent that in none of their operating branches they provide services to reitirees and pensioners. Clients will be served with a prior appointment. Retirees and pensioners will not need to obtain any appointment. This also applies to non-financial companies issuer of credit and/or purchase cards and other non-financial credit providers, except that in these cases retirees and pensioners will need prior appointment.

Furthermore, as of April 13, 2020, Mutual Guarantee Companies (Sociedades de Garantia Reciproca) and Public Guarantee Funds may open to the public.
Extra-banking collection companies are also allowed to provide customer service as of April 20, 2020, subject to the establishment of a mechanism to avoid the agglomeration of clients (e.g. assignment of appointments, attention according to ID number or other criteria).

b) However, financial institutions must continue to provide the services that are usually offered remotely to their customers (e.g. constitution of term deposits, granting of financing and services related to the payment system).

c) Likewise, cash deposits can be made at ATMs, self-service terminals, cash-transport companies, deposit mailboxes and large amount deposits made by clients included in subsections 11, 18 and 23 of article 6 of Decree No. 297/2020 of the National Executive Power.[1] Likewise, financial institutions must enable deposit mailboxes and a system for receiving large amounts deposits in all their branches.

d) Financial institutions must also guarantee the sufficient provision of funds at ATMs and extra-bank withdrawal points.

e) Also, the following shall remain operative: Electronic Clearing Houses, the Electronic Payment System, ATM and electronic funds transfer networks, the credit and debit card administrators, the acquirers and processors of electronic payment methods, the payment services the providers, as well as their connected providers and all other market infrastructure necessary for the normal provision of the services of financial institutions and payment systems.

f) The collection of charges and fees is suspended for operations carried out through all ATMs, without limits on the amount or number of withdrawals. In addtition, financial institutions must allow withdrawals for an amount, that at least, reaches the sum of ARS 15,000 (acummulated daily).
As of april 13, 2020, the banking activity with customer service, exclusively under an appointment system, is exempted from complying with the mandatory quarantine in accordance with the term and conditions that the Central Bank establishes.
On the other hand, mutual and credit unions, through minimum service guards, are exempted from complying with the mandatory quarantine for the sole purpose of guaranteeing the functioning of the credit and/or payment system.

2. What happens to financings maturity dates?

The maturities dates of financing disbursed by financial institutions that fall between March 20 and March 31, 2020 (both inclusive) were extended to April 1, 2020. The regulation does not specify it, but it includes both commercial portfolio financings to companies and consumer loans to individuals.

Likewise, unpaid balances of financing maturing from April 1 until September 30 can only accrue compensatory interest. Said unpaid balances (excluding credit cards) are incorporated as a new installment in the month following the end of the loans’ term. Financings among the financial sector are not included.

In the case of financing granted by financial institutions under credit cards, the maturities of unpaid balances ocurring between April 13 and 30, must be automatically refinanced, at least, for a one (1) year term with a three (3) month  grace period and nine (9) equal and consecutive installments and may only acrrue compensatory interest and no other surcharge. The refinanced balances can be totally or partially pre-canceled by customers, at any time and without any cost, except compensatory interest accrued as of the pre-cancellation date.

3. What happens to mortgage and collateralized loans?

Pursuant to Decree 319/2020, until September 30, it cannot exceed the amount corresponding to the March installment the amount of each future monthly installment of (i) mortgage loans destined to acquire single dwelling and that are occupied with the referred destination by the debtor; and (ii) the collateralized loans updated by the Acquisition Value Unit (in Spanish, Unidad de Valor Adquisitivo – UVA).

The difference -between the sum of money that must be paid pursuant to the loan agreement and the sum of money that must be paid by application of Decree 319/2020- can be paid in at least three (3) monthly, equal, and consecutive installments. The first of them shall expire with the October installment. In no case, it shall be applied compensatory, moratorium or punitive interests, or other penalties.

The debts that could be generated until September 30 due to non-payment, to payments made outside the agreed terms, or to partial payments, can be paid in at least three (3) equal and consecutive monthly installments. The first of them shall expire with the October installment. In addition, financial institutions must notify customers that until June 30, 2020, they may choose to carry over unpaid installments during the period from April 1, 2020 to June 30, 2020 until the end of the credit’s term. Compensatory interest can be applied, though it cannot be applied moratorium or punitive interests, or other penalties.

4. What is the status of check clearing?

During the period from March 20 to 25, there was no electronic check clearing.

However, the compensation sessions resumed on March 26.

On the other hand, it was suspended until December 31, 2020, the obligation of financial institutions to close bank accounts, to apply fines and to dispose of the disqualification established by the Check Law for those who draw checks without available funds or are not authorized to overdraw and when checks do not meet certain requirements. Furthermore, fees due to the rejection of checks shall not be applied. Likewise, during the days when there was no check clearing, said days are not computed for the expiration of the 30-day period for the presentation of checks. Additionally, and while the suspension remains in effect, the term for the presentation of checks expiring during said period is also extended by thirty (30) additional days.

Similarly, it was established that it is allowed a second presentation of those checks that were rejected due to insufficient available funds in the account, except for those generated electronically or ECHEQ.

5. How does the FX market operate?

Financial institutions and exchange house can operate remotely among themselves and with their clients in the FX market.

In addition, the BCRA established that entities authorized to operate in foreign exchange must request from clients who require access to the exchange market to carry out transactions involving the formation of external assets, the remittance of family assistance and the operation of derivatives, an affidavit stating that they are not beneficiaries of “Zero Rate Credits”.

On the other hand, the Central Bank established that in clients transactions corresponding to egresses from the exchange market, in addition to the applicable requirements for each case, institutions must have prior authorization from the Central Bank unless they have an affidavit from the client stating that:

a) on the day in which it requires access to the exchange market and in the previous 90 calendar days, it has not made sales of securities with foreign currency settlement or transfers thereof to foreign depository institutions. (until 07.30.2020, the affidavit included in this item will be deemed to include only the period elapsed since 05.01.2020, inclusive)

b) it commits not to make sales of securities with foreign currency settlement or transfers thereof to foreign depository institutions from the moment the access is required and for the subsequent 90 calendar days.

The following are excempted from the previous requirement: i) institution own operations in its capacity as client, ii) cancellations of financing in foreign currency granted by local financial institutions, including payments for consumptions in foreign currency made by credit or purchase cards; and iii) transfers abroad in the name of natural persons who are beneficiaries of retirements and/or pensions paid by the ANSES, to the extent they are automatically processed by the entity as attorney-in-fact of the non-resident beneficiary.

6. Can stock exchanges and capital markets operate?

Yes, the Central Bank admits the remote operation of the stock exchanges and futures markets authorized by the Argentine Securities Commission (CNV), Caja de Valores S.A. and the capital market agents registered with the CNV.

7. Have measures been taken to mitigate the impact derived from the COVID-19 pandemic?

Yes, the Central Bank adopted a set of rules aimed at mitigating the impact of the economic crisis generated in the productive sector as a consequence of the Coronavirus pandemic (COVID-19).
In this context, financial institutions can offer a special line of credit at an annual nominal interest rate of up to 24% to the following destinations:

a) Micro, Small and Medium Size companies: at least 50% of the amount of these financings must be destined to working capital lines, such as salary payments and deferred check coverage; and

b) Providers of human health services insofar as they provide hospitalization services in the context of the Health Emergency: the funds disbursed have to be used to purchase medical supplies and equipment.

Such financing may not be granted to natural or legal persons, with agricultural activity who maintain a stockpile of soy and/or wheat prodcution for a value greater than 5% of their annual harvesting capacity.

Additionally, it was established that the beneficiaries of these credits will not be able, until its total cancellation, to sell securities with foreign currency settlement or transfer them to other foreign depository institutions.

Furthermore, the obligation on financial institutions to require employers, prior to granting financings, a sworn statement that they do not owe any amount regarding deductions and/ or contributions, or that, having accepted a moratorium, are up-to-date in the fulfillment of the obligations assumed thereunder. A qualification is established for this suspension when the loan is aimed to pay deductions and/ or contributions owed.

The BCRA also adopted favourable measures for savers. In that sense, it established that, in financial institutions included in Group A and/or subsidiaries of foreign banks classified as systematically important not included in said group, the minimum nominal annual rate for time deposits in pesos and non-adjustable in “UVA” or “UVI” in the name of holders of the non-financial sector, must be equivalent to 79% of the monetary policy rate of the BCRA corresponding to the week prior to that in which the time deposit is constituted. In the rest of the financial insitutitions the minimum rate will be equivalent to 70% (although they can also choose to observe the minimum rate equivalent to 79%). As of June 1, 2020, customers who are debtors of the financing at a rate of up to 24% are excluded from the aforementioned rate.

8. What are the conditions for granting “Zero Rate Credits” and what restrictions do they entail?

Regarding the financing in pesos “Zero Rate Credit” foreseen in Decree N°332/2020 (and amendments) for persons enrolled in the Simplified Regime for Small Taxpayers and self-employed workers, the BCRA established that financial institutions must grant such financing to all clients who request it within two bussines days from the submission of the application. The financing will have a six (6) month grace period from the first accreditation and, as of the following month, will be reimbursed in at least twelve (12) equal and consecutive monthly installments.

In order to verify who is qualified, the maximum amount of the financing and the entity, the financial entities must only consult the list of beneficiaries published by the Tax Agency (AFIP).

The requested financing must be credited in three (3) equal and consecutive monthly installments; on the credit card issued by the applicant’s financial institution -with an extension of the available credit limit for the amount credited in each installment- but if the applicant does not have a credit card, the financial institution listed by the AFIP must issue one with a purchase limit at least equal to the financing credited and without issue and maintenance fee, unless the applicant consumes more than the amount credited or decides to keep the card after the financing is cancelled.

On the other hand, the beneficiaries of ” Zero Rate Credits” will not be able, until its total cancellation:

a) To obtain cash advances with the credit card.

b) To access the exchange market to carry out transactions corresponding to the formation of foreign assets of residents, remittance of family assistance and derivatives.

c) To sell securities with foreign currency settlement or transfer them to other depository institutions.

9. Were the debtor classification parameters modified?

Yes, the Central Bank ordered the temporary flexibility of the parameters with which bank debtors are classified.

The current classification system takes into account, among other variables, the number of days in arrears of each debtor.

However, from March 19, 2020, to September 2020, sixty (60) additional days will be added to the allowed delinquency periods for categories 1, 2 and 3 of debtors.

10. Can financial institutions distribute profits?

No, the Central Bank suspended until December 31, 2020, the possibility of the distribution of profits by financial institutions.

11. How do Central Bank proceedings regarding violations to FX and banking regulations continue?

The Central Bank declared as non-working days those occurred during the period from March 16 to June 28 for all Central Bank proceedings regarding violations to FX and banking regulations, without prejudice to the validity of the procedural activities that are carried out in said period where the intervention of the accused party is not necessary.

Likewise, the Central Bank empowered the Superintendency of Financial and Exchange Institutions to decide which cases need to be resolved urgently and to order the corresponding actions.

12. Can fees and charges be collected in connection with ATM’s transactions?

Until September 30, financial institutions cannot collect fees or charges for transactiones (deposits, withdrawals, inquiries, etc.) made through ATMs.

13. What is the status of sight accounts for judicial use?

The BCRA established that as long as the mandatory quarantine remains in effect, financial institutions must accept the notices with transfer orders that the courts order and send through electronic means; and they must in turn establish a system that allows the courts to electronically send the notices and/or any other document signed by a competent judicial authority requesting the opening of such accounts.

If a savings account is to be opened and a debit card issued to beneficiaries of judicial payments who do not have a sight account, these must be sent to the beneficiary’s address by mail or to the branch nearest to the beneficiary’s domicile if the mail carrier used does not reach said domicile.

[1] That is, customers who qualify as Supermarkets, Pharmacies, Veterinarians, and Retail stores; public passenger transportation, transportation of goods, oil, fuels and LPG; and Oil and Gas fields, Oil and gas treatment and / or refining plants, transportation and distribution of electrical energy, liquid fuels, oil and gas, gas stations and electric power generators

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