Banking Regulation Comparative Guide

• Published date: 19 August 2020
• Subject Matter: Finance and Banking, Financial Services
• Law Firm: Baker McKenzie Argentina
• Author: Mr Gabriel Gómez Giglio

1 Legal framework

1.1 Which legislative and regulatory provisions govern the banking sector in your jurisdiction?

The Financial Entities Law (21,526) governs the banking sector in Argentina and appoints the Central Bank of the Republic of Argentina as the regulatory authority. As such, the Central Bank regulates the banking sector through different communications that have been incorporated into consolidated regulations.

The Central Bank is regulated by its Organic Charter set forth in Law 21,144. The Organic Charter also empowers the Central Bank to regulate and supervise the foreign exchange regime.

Any violation to the exchange control regulatory framework is subject to the Criminal Exchange Regime Law (19,359).

1.2 Which bilateral and multilateral instruments on banking have effect in your jurisdiction? How is regulatory cooperation and consolidated supervision assured?

The Central Bank has executed many bilateral and multilateral instruments, mainly focused on consolidated supervision. For example, the Central Bank executed agreements with the Bundesaufsichtsamt für das Kreditwesen of Germany, the Federal Reserve and Office of the Comptroller of the Currency of the United States and the Financial Services Authority of the United Kingdom.

At the regional level, Argentina is a member of the Mercosur Common Market, which currently includes Argentina, Bolivia, Brazil, Paraguay, Uruguay and Venezuela. Under Mercosur, different work groups relating to banking supervision and financial matters were created, in which Argentina is represented by the Central Bank's officers.

Argentina has also acceded to the Latin American Association of Integration Agreement on Reciprocal Payments and Credits. This agreement was signed by 12 central banks of the region to pay and offset payments derived from trade member countries depending on the deficit or surplus of imports and exports.

Globally, Argentina is a member of the United Nations, a founding member of the Organization of American States and a member of the World Trade Organization and the International Monetary Fund.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers (including sanctions) do they have?

The responsible body for enforcing the applicable laws and regulations of the banking sector is the Central Bank. However, the Financial Information Unit supervises and regulates money laundering aspects and financing of terrorism, according to the Anti-money Laundering Law (25,246).

The Central Bank has the power to enforce the sanctions established in:

• the Financial Entities Law, which include warnings, monetary fines, temporary or permanent disqualification or suspensions (to act as directors or managers of financial entities) and revocation of banking licences; and
• the Exchange Regime which includes severe monetary fines and even imprisonment for repeat offenders. However, despite these provisions, there are no legal precedents through which individuals have been imprisoned for violation of the exchange control regulations.

Finally, the Anti-money Laundering Law empowers the Financial Information Unit to apply monetary sanctions to both individuals and legal entities involved in money laundering activities, despite other criminal sanctions that could apply under the Criminal Code.

The Criminal Code also punishes with monetary sanctions and imprisonment those who, practise financial intermediation in the banking industry (understood as soliciting funds from the general public and conducting lending activities) without a licence.

1.4 What are the current priorities of regulators and how does the regulator engage with the banking sector?

The Organic Charter requires the Central Bank to publish, before the beginning of each year, its objectives and plans regarding the development of monetary, financial, credit and exchange rate policies. For 2020, those objectives are as follows:

• Reduce the inflation rate through the prudent administration of the supply of money to the economy, while considering the essential needs of Treasury financing.
• Maintain the floating foreign exchange rate regime within the current framework of exchange regulations and increase the accumulation of international reserves.
• Stimulate the supply of credit to the private sector, particularly for micro, small and medium-sized enterprises, to meet the need for working capital and especially in the current context of the economic public emergency declared by Law 27,541.
• Ensure financial stability by strengthening prudential micro and macro regulation on the one hand, while promoting greater financial inclusion on the other - in both cases, considering the regulatory opportunities and challenges provided by technological advances.

The prior Central Bank administration (until December 2019) had the objective of developing electronic payment systems. It is too soon to determine whether the new administration will also focus on electronic payment systems.

2 Form and structure

2.1 What types of banks are typically found in your jurisdiction?

In Argentina, there are private and public financial entities (or mixed capital entities). Within these main categories, there are commercial banks, investment banks, mortgage banks, financial entities and credit cooperatives (cooperativas and cajas de crédito).

Additionally, there are other non-financial suppliers of credit which are legal entities that do not qualify as financial entities according to the Financial Entities Law, but whose main or supplementary activity is to provide credit to the public.

2.2 How are these banks typically structured?

Commercial banks are typically structured as corporations (sociedades anónimas), branches of foreign entities and/or cooperatives.

2.3 Are there any restrictions on foreign ownership of banks?

There are no restrictions on foreign ownership of financial entities, but foreign ownership must be notified to the Central Bank. For example, significant changes in the shareholding composition of foreign legal entities which are direct or indirect controllers of local financial entities must be notified to the Central Bank for its approval within 15 calendar days as of the date of the change.

2.4 Can banks with a foreign headquarters operate in your jurisdiction on the basis of their foreign licence?

No, foreign-headquartered banks cannot operate in Argentina on the basis of their foreign licence. Foreign banks can operate in Argentina either through branches or subsidiaries that have been authorised to operate in advance by the Central Bank.

However, foreign-headquartered banks can also open a representative office in Argentina. The representative office cannot perform any activity, directly or indirectly, that could be construed as financial intermediation or as soliciting funds from local residents. The representative office can only advise and/or arrange credit lines with the intervention of the headquarters as lender and/or issuer of debt securities in capital markets abroad and following specific guidelines.

3 Authorisation

3.1 What licences are required to provide banking services in your jurisdiction? What activities do they cover?

Financial entities require prior authorisation of the Central Bank to provide banking services in Argentina. The most common licence is to act as commercial bank. There are two main types of commercial banks:

• first-grade entities, which may carry out all active, passive and service operations, under the terms of Article 21 of the Financial Entities Law; and
• second-grade entities, which may carry out all activities allowed to first-grade entities, but which can only receive deposits from the country's financial sector and from banks abroad.

The Central Bank also offers other licences to act as credit cooperatives, investment banks, mortgage banks and finance companies. Sections 22 to 26 of the Financial Entities Law regulate the activities that these types of entities can perform.

3.2 What requirements must be satisfied to obtain a licence?

To obtain a licence to act as a financial entity, the applicant must file an application and comply with the following requirements:

• payment of the application fee.
• an indication of
• • the proposed name of the entity;
  • the entity class;
  • its domicile;
  • its initial capital; and
  • the shareholders and their addresses, nationality and participations;
• submission of a list of future members of the board and general managers. The individuals proposed as future directors and general managers must file the information required in the Evaluation of Financial Institutions Authorities application;
• submission of its bylaws (articles of incorporation);
• submission of its money laundering and terrorist financing prevention manual;
• an indication of the IT systems and computer technology to be used;
• an indication of its administrative and functional organisation, and submission of an organisational chart and a description of its functions and how its main activity and passive operations will be conducted; and
• submission of a feasibility study with an economic and financial budget in Excel format, together with a business plan and projections for a five-year period and a report from an independent professional.

In addition to the above requirements, branches must file the following documents/information:

• the bylaws or similar document that governs the operation of the requesting entity in its country of origin and a power of attorney for its representative;
• a note describing the deposit guarantee regime existing in its country of origin;
• a note in which the supervisory bodies of the parent company give a favourable opinion on the timeliness and convenience of the establishment of a branch in Argentina; and
• the main regulations to which the parent company is subject in its country of origin (consolidated supervision, liquidity and solvency, concentration of risk, settlement or bankruptcy regime).

...