Useful pages on the regulator website
- Homepage (English version)
- Charter of the Central Bank of the Argentine Republic (English version)
- Regulations on financial institutions and summaries (English version; note that the content available in English is materially less than the content available in Spanish)
- Consolidated text on foreign trade and exchange (only available in Spanish)
- Regulations on foreign exchange and summaries (English version)
- Claudio Martín Golonbek, Chair of the Superintendencia de Entidades Financieras y Cambiarias (SEFyC): Superintendence of Financial and Foreign Exchange Institutions
The BCRA is the primary regulator of banking and foreign exchange activities in Argentina. Aside from its regulatory function, the BCRA is responsible for the country’s monetary policy.
The division within the BCRA in charge of overseeing and regulating banking and foreign exchange activities is the SEFyC. The SEFyC is chaired by one of the directors of the BCRA.
The BCRA (and more specifically, the SEFyC) oversees, authorises, supervises and monitors financial intermediation and key participants in the banking industry, such as commercial banks, investment banks and financial companies. In Argentina, any person that engages in financial intermediation must obtain a licence from the BCRA. Financial intermediation is defined as engaging on a regular basis in the solicitation of deposits from the general public combined with the granting of credit, or just one of those activities if the volume of transactions and monetary and credit policies justify it. Lending activities funded without involving deposit solicitation are in principle not subject to any prior licence requirement although, under certain circumstances, they may require registration with the BCRA. In addition, activities performed in Argentina by representatives of foreign banks that do not have a licence in Argentina are also under the supervision of the BCRA, and any individual that wishes to act as a representative of a foreign bank must obtain the prior authorisation of the BCRA.
Banking activities in Argentina are primarily governed by Financial Institutions Law No. 21,526 (as amended). The Financial Institutions Law regulates financial institutions’ organisation, authorisation and operational requirements, their obligations and permitted and prohibited activities, and empowers the BCRA to regulate and oversee the banking industry. In addition, Charter of the Central Bank of the Argentine Republic Law No. 24,144 sets forth the mission, functions and attributions of the BCRA and the SEFyC.
Given that the BCRA – through the SEFyC – is the government authority responsible for the regulation, inspection and supervision of financial intermediation and financial institutions, the BCRA has been granted with rulemaking powers and enforcement powers. As part of its rulemaking process, the BCRA has the power to establish the scope of permitted and prohibited activities and determine liquidity, solvency and other prudential requirements (including lending limits, minimum capital requirements, liquidity, bad loan provisions, reserves, net worth requirements and risk concentration, among other things). In furtherance of such powers, the BCRA issues mandatory regulations. The BCRA also has enforcement powers, including the power to bring administrative proceedings and impose sanctions in cases of breaches of the Financial Institutions Law and related BCRA regulations (discussed further below).
Overall, the powers of the BCRA concerning financial institutions include, inter alia:
- issuing mandatory regulations in furtherance of the Financial Institutions Law;
- establishing the required minimum corporate capital, liquidity, solvency and other prudential requirements;
- granting, suspending and revoking licences to act as a financial institution;
- authorising the establishment of branches and representative offices of foreign banks;
- overseeing compliance of the Financial Institutions Law and BCRA mandatory regulations, especially by licensed financial institutions;
- approving mergers, capital increases and the purchase and sale of financial institutions’ shares; and
- conducting inspections, bringing administrative proceedings and imposing sanctions as provided in the Financial Institutions Law.
The BCRA also regulates and oversees the foreign exchange market. In Argentina, as a general rule, all transfers of foreign currency to and from Argentina must be made through the Argentine foreign exchange market and must be made through an Argentine licensed financial institution or foreign exchange institution. Inflows and outflows of funds are, and historically have been, subject to several restrictions and requirements as provided by the applicable foreign exchange regulations. Although such restrictions were lifted for some years (recently between the end of 2015 and 2019), most of such restrictions are in force again now.
The foreign exchange market in Argentina is primarily governed by Law No. 19,539, as ordered by Executive Order 480/95, Executive Order No. 260/02, Executive Order No. 609/19 and BCRA Communication ‘A’ 6844. Since the BCRA is the government authority responsible for regulating the foreign exchange market and overseeing compliance therewith, the BCRA has been granted with rulemaking powers to implement more general laws in specific circumstances. As part of its rulemaking process, the BCRA issues regulations in the form of mandatory regulations, the main one being Communication ‘A’ 6844. The BCRA is also empowered to issue further regulations aimed at restricting any actions intended to circumvent the provisions of foreign exchange laws through transactions with sovereign bonds or other securities.
Reporting and disclosure obligations
To conduct banking activities in Argentina, a licence needs to be obtained from the BCRA. The request for such licence must be filed with the BCRA and includes the filing of documents and information for the BCRA to review and approve prior to granting such licence. Such information and documentation include, among other things:
- a brief description of the financial institution to be set up, such as its name, domicile and minimum corporate capital to be allocated;
- information on the shareholders;
- a management charter;
- a description of the financial budget and activities to be carried out;
- information on the background and credentials of the shareholders, directors and managers; and
- current and historical financial information.
In addition, once the respective licence has been granted by the BCRA, the financial institution must observe certain ongoing reporting requirements. Such requirements include the following:
- Financial reporting. Financial institutions must file periodic consolidated financial statements that reflect the operations of their head office, their branches and their material subsidiaries. The BCRA supervises financial institutions on a consolidated basis.
- Annual business plan. Financial institutions must file an annual business plan for the financial institution by the end of February each year.
- Appointment of key management. The appointment of the key management of financial institutions is subject to the prior approval of the BCRA. Evidence and information on directors’ and key management’s professional background and credentials must be filed with the BCRA prior to their appointment and on an ongoing basis.
- Transfers of shares or banking business. Financial institutions must inform the BCRA and submit information regarding any transaction involving the transfer of shares or capital contributions made by their shareholders. Most share transfer transactions are subject to the BCRA’s discretionary prior approval. When requesting approval, certain information on the transaction, the financial institution whose shares are being transferred and the purchaser will need to be submitted to the BCRA (including, among other things, basic and general identification information about the purchaser, its background and credentials, historical financial information, corporate governance information, and information on proposed changes to the composition of the board of directors and key managers and officers, as well as their backgrounds and credentials). The transfer of a banking business (as a going concern) as well as certain merger transactions are also subject to the BCRA’s discretionary prior approval.
- Other reporting requirements. Periodic reporting requirements also include, inter alia, evidence of compliance with the prudential regulations (including regarding minimum capital requirements, liquidity, bad loan provisions, lending limits), money laundering reports and compliance with IT security requirements.
In addition to supervising compliance with such reporting obligations and reviewing documents filed by financial institutions in furtherance of such obligations, the BCRA also conducts visits and on-site examinations of financial institutions on a regular basis (the frequency of such visits varies depending on the financial condition and systemic relevance of the institution).
The conclusions of the BCRA after having examined and reviewed documents filed by financial institutions, and information gathered during visits to and on-site examinations of financial institutions, are reflected in a final report that includes the rating granted to each financial institution. Such rating addresses capital, adequacy, asset quality, management, earnings and liquidity ratings (CAMEL).
There are also certain information requirements that financial institutions, foreign exchange institutions and Argentine residents in general need to comply with under current foreign exchange laws and regulations. Such requirements include the following:
- Exchange transaction reporting system. Financial institutions and foreign exchange institutions must inform the BCRA on a daily basis of foreign exchange transactions by their clients.
- Foreign assets and liabilities survey. Argentine residents must report their foreign financial and commercial indebtedness according to the schedules provided in BCRA regulations. Such reporting is required to access the foreign exchange market to make principal and interest payments on such indebtedness.
Sanctions and recent behaviour
The BCRA has broad and comprehensive inspection, investigation and enforcement powers, including the power to investigate, bring administrative actions and impose monetary and non-monetary sanctions on any person who is in violation of the Financial Institutions Law and further BCRA regulations (notwithstanding any criminal penalties that may apply).
Monetary sanctions include fines that are objectively determined based on the gravity of the violation. The regulations of the BCRA include a non-exhaustive list of violations, classifying them as very severe, severe, medium, low and minor violations. Maximum amounts of fines are not set in local currency, but in a special kind of unit the value of which, due to Argentina’s high inflation, is set by the BCRA on an annual basis. Fines for very severe violations are up to 800 units, for severe violations up to 300 units, for medium gravity violations up to 80 units and for low gravity violations up to 20 units. Such maximum amounts may be increased up to 40% in cases of recidivism within five years and up to 100% in cases of second-time recidivism. There are no monetary sanctions for minor violations, unless in cases of recidivism.
Non-monetary sanctions include:
- written warnings;
- temporary or permanent disqualification from using a chequing account;
- temporary or permanent disqualification to act as a director, founder, promoter, manager, member of an audit or supervisory committee, external auditor, partner or shareholder of financial institutions; and
- suspension or revocation of a licence to act as a financial institution in cases of licensed financial institutions.
Prior to applying any administrative sanctions, the BCRA must bring administrative proceedings (ie, enforcement actions) against the person or entity that has allegedly violated the Financial Institutions Law or BCRA regulations, or both. The BCRA brings administrative charges for alleged violations, and once the parties being investigated have filed their defence and offered evidence, renders a decision on the matter. Decisions rendered by the BCRA may be appealed to the Federal Court of Appeals on Administrative Matters. Appeals are conditioned on parties complying with any fines.
Typical infractions include lack of compliance with prudential requirements and reporting filings by financial institutions. There have been, however, certain specific cases where the BCRA has investigated and sanctioned the existence of unauthorised financial intermediation. Such was the case, for example, with respect to certain private banking practices in the first decade of the 2000s when the regulations of the BCRA on representatives of foreign financial institutions were modified, and is currently the case for certain online lending platforms and certain FinTech activities (which are now in the process of being regulated).
Moreover, the Financial Institutions Law provides that in cases where the BCRA considers, at its sole discretion, that the liquidity and solvency of a financial institution have been adversely affected and that such situation may not be reversed by means of a restructuring plan, the BCRA is entitled to revoke the banking licence, upon which only judicial liquidation or bankruptcy may generally follow. Prior to terminating a banking licence, the BCRA would request the financial institution in distress to submit a restructuring plan aimed at reversing its liquidity and solvency issues. If the financial institution fails to provide an adequate restructuring plan, once or even twice, the BCRA would usually suspend the operations, in whole or in part, of the financial institution, but the suspension is not a condition precedent for the revocation of a licence. The suspension, which may originally last up to 30 days but may be extended for an additional 90 days, freezes all banking activities of the financial institution save for any specific exceptions made by the BCRA at the time of ordering the suspension, and is aimed at allowing an orderly transfer of the institution’s assets and liabilities to another financial institution.
The BCRA may also refer cases for further prosecution before the relevant criminal courts if the infringements would also qualify as criminal offences. For example, the Argentine Criminal Code provides for possible criminal sanctions for a person who ‘carries out financial intermediation activities under any form’ without having the proper licence. However, in practice, criminal sanctions and convictions for this type of charge are extremely rare and even in the case of conviction, sanctions have generally been mild (eg, fines, which may by law amount to eight times the value of a transaction, have seldom exceeded 1%, and imprisonment has rarely been applied).
Violations of foreign exchange laws and regulations are governed by Foreign Exchange Criminal Law No. 19,359, as amended. Proceedings thereunder have two stages. The first stage consists of an administrative proceeding before the BCRA during which the parties being investigated would file their defence and offer evidence (basically, the BCRA brings charges and the party under investigation files its defence) and the second stage consists of a court proceeding before a criminal court where the criminal court renders a judgment.
Monetary sanctions include fines of up to 10 times the amount of the infringing transaction. Non-monetary sanctions include temporary suspensions, disqualification for up to 10 years preventing the infringing party from acting as an importer, exporter or foreign exchange institution, or even prison in the event of recidivism.
Penalties may be applied not only to a company, but also to its directors, legal representatives, agents, managers, trustees or controlling committee members to the extent that they have been involved in the infringing transactions or might have had sufficient authority or power to make decisions about a local company’s transactions so that, according to the judging authorities, they could or should have been aware of such infringement.
Recent and upcoming developments
Argentine presidential elections were held in October 2019, and were won by the opposing political party. The current administration, in office since December 2019, is of the same political party that used to be in office for more than 10 years (2003–2015) prior to the administration of Mauricio Macri (2015–2019).
In the past, and especially between 2002 and 2015 during the prior administration of the party that is currently in office, the outflow and inflow of funds was highly regulated by the BCRA and subject to specific restrictions. Foreign exchange restrictions were lifted for most of Macri’s term in office, only to be reinstated in September 2019, which the current administration has now confirmed. It is expected that the current administration and the BCRA will keep foreign exchange restrictions in place and even adopt additional measures to strengthen foreign exchange controls and restrictions.
The Congress recently enacted Law No. 27,544, which approves the reorganisation of Argentina’s public debt. The process of this renegotiation will certainly impact the foreign exchange market and the capital markets. Depending on the approach to the renegotiation, Argentina may be at risk of falling into a new default on its public debt. Thus, during this period it will be difficult for new companies to be able to launch an initial public offering, and very few companies will be able to issue bonds to raise money in the international markets.
Interacting with the regulator
Interaction with the regulator is not very formal in Argentina. Many officers may be willing to receive parties with a reasonable interest in a matter following a telephone call to their secretaries or an email. Some officers may request a formal letter asking for an appointment and explaining the purpose of the meeting, but this is not the general practice. In the case of any actions by the BCRA that may require that the rights of any person be defended (eg, investigations, decisions relating to the commencement or resolution of administrative proceedings or the enactment of administrative regulations), legal counsel should always be contacted in advance since there are strict expiration terms to file any relevant defences or adequate claims against such actions.
Notes for foreign investors
Pursuant to the Financial Institutions Law, foreign financial institutions that intend to carry out banking operations in Argentina must apply for a licence from the BCRA, as well as establish a branch or subsidiary in Argentina that must be registered with the local Public Registry of Commerce.
With the BCRA’s prior authorisation, a foreign financial institution may also appoint and register an individual to act as its local representative in a very limited capacity. Activities prohibited to representatives of foreign financial institutions include engaging in financial intermediation and foreign currency transactions, becoming personally obliged in transactions relating to their representative function, and carrying out actions directly or indirectly aimed at soliciting deposits in any manner for themselves, third parties or their principals. In practice, representative offices generally advise on services and promote foreign institutions’ activities regarding credit, project financing, investment opportunities, securities, trade finance, financing analysis and management, warranties, technical assistance and other activities.
There are no restrictions under the current banking laws and regulations limiting the ability of foreign investors from investing in local financial institutions (ie, becoming shareholders of local financial institutions), and there are no distinctions among financial institutions based on the nationality of their controlling shareholders. The Financial Institutions Law currently adopts the principle of equal treatment to financial institutions, irrespective of the nationality of their controlling shareholders. However, there are certain general requirements that apply in the case of an acquisition of shares by a foreign investor in an Argentine company which require that any foreign company that becomes a shareholder in an Argentine company must register as a foreign shareholder with the local Public Registry of Commerce.
Offshore banking activities
The BCRA does not have extraterritorial powers; therefore, banking activities that purely take place offshore are not regulated under Argentina’s banking laws. However, offshore activities directed to Argentine residents could be subject to supervision by the BCRA if those activities can qualify as the soliciting of deposits.
It is important to highlight that the BCRA’s policies regarding international private banking activities (the promotion and opening of foreign international bank accounts) are more restrictive than those of the CNV for the promotion and opening of international investment accounts with foreign broker dealers.
Other regulators it works closely with
- Unidad de Información Financiera (UIF): Financial Information Unit (Argentina); and
- Comisión Nacional de Valores (CNV): Securities and Exchange Commission (Argentina).