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.
3.1 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).
Finally, branches and foreign shareholders must be registered with the Public Registry in accordance with Sections 118 and 123 of the General Companies Law (19,550).
3.3 What is the procedure for obtaining a licence? How long does this typically take?
The applicant must file an online form through the Central Bank's website. Central Bank officials will review the application and, if it includes all information and documentation required, will send a confirmation email to the applicant.
Once the applicant receives this email, the applicant must file a written note signed by the legal representative stating that all documents filed in the application are true copies, and that the originals are available for the Central Bank's review. As of the filing of the note, a file will be opened to process the authorisation request.
When considering the authorisation request, the Central Bank will evaluate:
- the suitability of the initiative;
- the project characteristics;
- general and particular market conditions;
- the background and responsibility of the applicant;
- its experience in financial activities; and
- compliance with the conditions precedent (eg, integration of capital, implementation of IT systems).
As regards timing, this will generally depend on the accuracy and completeness of the documents and information provided, but it should take between six months and one year to obtain authorisation.
4 Regulatory capital and liquidity
4.1 How are banks typically funded in your jurisdiction?
In principle, capital contributions must be in cash. The Central Bank may exceptionally accept contributions in kind, such as certain securities.
4.2 What minimum capital requirements apply to banks in your jurisdiction?
The minimum capital requirement that applies to financial entities is equivalent to the highest value resulting from the comparison between the basic requirement and the sum of the values determined by credit, market and operational risks (according to the formula provided in the consolidated text of the Minimum Capital Requirements issued by the Central Bank). For first and second-grade entities (commercial banks), the basic requirement is ARS 26 million.
4.3 What legal reserve requirements apply to banks in your jurisdiction?
Financial entities must have an adequate stock of high-quality liquid assets free of restrictions, consisting of cash or assets that can be converted into cash (monetised) immediately, with little or no loss of their market value, in order to cover their liquidity needs for a period of 30 days in a financial stress scenario (eg, a bank run). These funds must allow entities to cope with liquidity problems until the 30th day of that period.
The liquidity coverage ratio must at all times be greater than or equal to 1 – that is, the high-quality liquid assets should not be less than the outflows of total net cash.
The Central Bank also requires a leverage ratio that aims to limit the leverage of financial entities, to avoid the adverse consequences of an abrupt reduction in the supply of credit and the economy in general, and to reinforce the minimum capital requirement. The leverage ratio shall be equal to or greater than 3% of the sum resulting from the following formula:
Leverage % =
Capital (basic net worth)
Exposition (securities, derivatives and assets
5 Supervision of banking groups
5.1 What requirements apply with regard to the supervision of banking groups in your jurisdiction?
Banking groups in Argentina are subject to consolidated supervision. Financial entities must file with the Central Bank their financial statements and other information with adjustment to the provisions on consolidation.
For the assessment of solvency and compliance with technical relations relating to credit assistance, the Central Bank will consider the financing granted by the entity directly and/or through its subsidiaries.
Entities that own or acquire shares in foreign subsidiaries must ensure that they can supply the information required by the Central Bank for the purposes of supervision based on the consolidated financial position.
Financial entities may not hold participations in banks or foreign companies, in which case the Central Bank cannot access the information it deems necessary to evaluate the situation of the consolidated financial institution.
5.2 How are systemically important banks supervised in your jurisdiction?
In Argentina, systemically important banks are supervised according to the commitments agreed in the Basel Committee on Banking Supervision. As a result, the Central Bank has developed a methodology to identify financial entities of systemic importance for Argentina.
According to Principle 5 of the scheme prepared by the Basel Committee, the process to define the degree of systemic importance of financial institutions authorised to operate in Argentina begins with an individual evaluation of particular aspects related to:
- size (volume of assets, branches and number of ATMs);
- interconnection with the financial system (loans and deposits to and from other financial entities);
- substitutability (in terms of custody of securities, administration of trusts), including in terms of alternative infrastructure such as concentration in the financial system; and
- complexity (negotiation of derivatives).
In the evaluation, the indicators and their components receive the following weighting:
- volume of assets – 20%;
- number of branches – 15%;
- number of ATMs – 15%;
- interconnection – 20%;
- substitutability – 20%; and
- complexity – 10%.
The composite indicator can adopt values between 1 and 0.
In addition, consistent with the Basel Committee recommendations, in order to classify an entity as a domestic systemically important bank and define a possible additional capital requirement, the structural characteristics of the aggregate financial system in Argentina are weighted – in particular, in terms of depth, concentration and degree of substitution in the role of intermediation and provision of financing.
The Central Bank has stated that the entities that make up the Argentine system are of comparatively small size. The largest entity in terms of assets/GDP is significantly smaller than the main entities in most countries in the region. There is also a moderate degree of market concentration – a situation that allows the Central Bank to estimate that the diversification evidenced in the Argentine financial system will moderate the eventual systemic impact of stress situations, both in the case of group entities and for any entity in particular.
5.3 What is the role of the central bank?
According to the Organic Charter, the role of the Central Bank is to:
- regulate the operation of the financial system and enforce the Financial Entities Law;
- regulate the supply of money, interest rates and credit;
- act as financial agent of the national state and depositary and agent of the country before the international monetary, banking and financial institutions to which the Argentina has acceded;
- concentrate and manage gold reserves, currencies and other external assets;
- contribute to the proper functioning of the capital market;
- execute foreign exchange policy;
- regulate payment systems and other activities relating to financial and exchange activity; and
- protect the rights of users of financial services and antitrust activities in the financial sector together with the antitrust authority.
6.1 What specific regulations apply to the following banking activities in your jurisdiction: (a) Mortgage lending? (b) Consumer credit? (c) Investment services? and (d) Payment services and e-money?
(a) Mortgage lending?
The Central Bank has issued its Manual on Offering and Administrating Mortgage Credits, which establishes certain requirements that must be observed by financial entities when granting mortgages. The manual regulates the required minimum salary, life insurance, solvency evaluation, characteristics of the loan, currency, amortisation, salary-instalment ratio and valuation of the real estate, among other things.
(b) Consumer credit?
Consumer credit and credit card interest are regulated in the Regulation on Interest Rates Applicable to Credit issued by the Central Bank. The general parameters established in this regulation are as follows:
- Lenders must calculate interest on the balances of principal actually lent and for the period for which such principal has been available to consumers.
- Fixed interest rate loans may not contain clauses that provide for their modification in certain circumstances.
- Variable interest rate loans must clearly specify the parameters that will be used to determine the variation.
- General loans must be calculated on a 365-day basis, while mortgage loans must be calculated on a 360-day basis.
- Punitive interest rates in addition to the compensatory interest, to be applied to overdue and unpaid credits, will be freely arranged between financial entities and consumers.
In addition, the regulations set out under the Credit Card Law (25,065) must be complied with. As the name indicates, this law regulates the credit card payment system, including the credit card contract, applicable commissions, interest rates, relationship between the issuer, acquirer and clients, among others.
(c) Investment services?
The Capital Markets Law (26,831) regulates the capital markets and appoints the National Securities Commission (Comisión Nacional de Valores (CNV)) as the regulatory authority. To provide securities investment services, financial entities must also be registered as agents of the capital markets with the CNV.
In this sense, financial entities are usually registered as securities brokers in the category of liquidation and compensation agents, which can offer services relating to the negotiation and custody of securities.
(d) Payment services and e-money?
The Central Bank recently issues a new regulation on payment service providers (PSPs). PSPs are legal entities that do not qualify as financial entities, but which perform at least one function in the retail payment system, such as offering electronic payment accounts.
The funds credited by clients in electronic payment accounts offered by PSPs must be available at all times and with immediate effect upon request by the customer. The internal systems implemented by the PSP must allow for the identification of the funds of each customer.
PSPs must register in a special PSP register of the Central Bank and comply with a special information regime. In addition, PSPs must clarify in every advertisement that:
- they are limited to offering payment services;
- they are not authorised to operate as financial entities; and
- the funds deposited in payment accounts are not guaranteed by the Deposit Insurance Fund.
7 Reporting, organisational requirements, governance and risk management
7.1 What key reporting and disclosure requirements apply to banks in your jurisdiction?
The reporting obligations of financial entities before the Central Bank are extensive. Financial entities must designate two individuals who will be responsible for complying with the information regimes.
Among the key reporting and information regimes, financial entities must file the following documents or information, among others, with the Central Bank:
- financial statements;
- capital adequacy;
- exchange transactions;
- forward transactions;
- consumer credit status;
- rejected cheques;
- import monitoring system;
- liquidity ratio;
- periodic position of treasury bills; and
- net stable funding ratio.
7.2 What key organisational and governance requirements apply to banks in your jurisdiction?
The organisation and governance requirements are mainly divided into two categories:
- Group A, comprising entities with assets whose value is greater than or equal to 1% of the total assets of the financial system; and
- Group B, comprising all other entities.
Group A entities must have a clear separation between their executive and administrative functions, unlike Group B entities.
7.3 What key risk management requirements apply to banks in your jurisdiction?
According to the Risk Management Guidelines issued by the Central Bank, financial entities must have a comprehensive process for risk management that includes oversight by the board and senior management to identify, evaluate, follow up, control and mitigate all significant risks.
This process must be adequate to the size and economic importance of each financial entity, as well as the nature and complexity of its operations. The comprehensive risk management process must be adequate, sufficiently verified, duly documented and periodically reviewed based on changes to the entity's risk profile and in the market.
Additionally, the results of the review should inform the evaluation of the capital adequacy requirements to cover not only unexpected losses arising from exposures to credit, operational and market risks, but also those arising from other risks described in the guidelines. In this sense, financial entities must have an internal capital adequacy assessment process to assess capital adequacy based on their risk profile and a strategy to maintain capital levels over time.
7.4 What are the requirements for internal and external audit in your jurisdiction?
Financial entities must perform an internal and external audit. Internal audits are regulated by the Regulation on Minimum Requirements of Internal Audits issued by the Central Bank.
This regulation defines ‘internal control' as processes carried out by the board or equivalent authority designed to provide reasonable security in terms of achieving the organisation's objectives. The objectives of a financial entity can be classified into the following categories:
- strategic objectives;
- effectiveness and efficiency of operations;
- reliability of the information; and
- compliance with applicable laws and regulations.
On the other hand, external audits are regulated in the Regulation on Minimum Requirements of External Audits. This regulation requires financial entities to inform the Central Bank of the independent registered public accountant appointed to carry out the external audit of the financial statements and other information requested, and to establish certain parameters that must be complied with in relation to the planning of external audits, minimum audit procedures and reporting.
8 Senior management
8.1 What requirements apply with regard to the management structure of banks in your jurisdiction?
The Regulation on Authorities of Financial Entities issued by the Central Bank contains the key requirements that must be complied with by financial entities when appointing authorities. The regulation applies to:
- members of the board (directors or equivalent authorities);
- members of the audit bodies;
- managers; and
- the highest authority of branches of financial entities abroad.
The term ‘manager' is sufficiently broad to include any officer with powers at the entity's operational level to execute the decisions of the shareholders and the internal regulations.
8.2 How are directors and senior executives appointed and removed? What selection criteria apply in this regard?
Financial entities must file with the Central Bank certain background information required from the candidates. The Central Bank will assess their legal capacity, suitability, competition, honesty, experience in financial activity and possibility of functional dedication.
The candidates' suitability and experience relating to financial activity will be considered taking into account the degree of technical and professional training and the hierarchy and importance of their prospective position in the entity.
Within 30 calendar days of receiving the required information, the Central Bank will decide whether to accept the designation.
8.3 What are the legal duties of bank directors and senior executives?
The board of directors and each of its members, as appropriate, must ensure the liquidity and solvency of the financial institution, being ultimately responsible for the operations and approval of the overall business strategy.
For these purposes, the board of directors must, among other duties:
- evaluate annually whether the corporate governance code implemented by the financial entity is appropriate to the profile, complexity and importance of the entity;
- monitor the entity's risk profile;
- avoid conflicts of interest;
- commit the time and dedication necessary to fulfil their responsibilities;
- promote the training and development of executives and define continuous training programmes for senior management; and
- establish performance standards compatible with the entity's objectives and strategies for senior management, and monitor compliance.
In turn, senior management must:
- ensure that the entity's activities are consistent with the business strategy, the policies approved by the board and the risks to be assumed;
- implement the policies, procedures, processes and controls necessary to manage operations and risks in a prudent way to meet the strategic objectives set by the board, ensure that the board receives relevant, complete and timely information that allows for the evaluation of the management and analyse whether the responsibilities assigned are effectively complied with;
- monitor managers in different areas in a manner consistent with policies and procedures established by the board. One of the key roles of senior management is to establish an effective internal control system under the guidance of the board;
- assign responsibilities to the entity's personnel without losing sight of their obligation to monitor the exercise of these and establish a management structure that encourages accountability;
- effectively use the reports of the internal and external audits; and
- understand the operating structure of the entity.
8.4 How is executive compensation in the banking sector regulated in your jurisdiction?
Compensation in the banking sector may be freely determined by each financial entity. However, in any case, the compensation of directors cannot exceed the limits established by the General Companies Law (19,550). According to such law, the maximum compensation that can be paid to directors and supervisory board members, as the case may be – including salary and other remuneration for the performance of permanent technical-administrative functions – may not exceed 25% of the profits of the entity.
This maximum amount will be limited to 5% when dividends are not distributed to the shareholders, and will be increased proportionally to the distribution until the limit when the total profits are distributed is reached.
9 Change of control and transfers of banking business
9.1 How are the assets and liabilities of banks typically transferred in your jurisdiction?
In Argentina, the main methods for transferring assets and liabilities include share transfers, asset/portfolio sales and mergers.
For example, in 2017 Banco Santander Rio SA acquired the retail portfolio of Citibank NA (Argentina).
9.2 What requirements must be met in the event of a change of control?
Mergers and portfolio sales require the prior authorisation of the Central Bank.
Additionally, a transfer of shares or irrevocable capital contributions that is capable of altering the structure of the shareholders' groups must be agreed ‘ad referendum' with the approval of the Central Bank. Certain mandatory information about the transaction must be filed. The Central Bank will issue a resolution authorising or prohibiting the transaction based on the timing and convenience of the transaction.
Financial entities that publicly offer their shares in local or foreign capital markets must inform the Central Bank of those holders that acquire a participation of 2% or more in the equity. When the offering is capable of affecting the structure of the shareholders' groups or changing the classification of the entity, the transaction requires the prior approval of the Central Bank.
Other types of acquisitions may require reporting to the Central Bank (eg, significant changes in the shareholding composition of legal entities with their domicile abroad, which are direct or indirect controllers of a financial entity).
10 Consumer protection
10.1 What requirements must banks comply with to protect consumers in your jurisdiction?
The Civil and Commercial Code and the Consumer Protection Law (24,240) regulate all aspects relating to consumer protection. In general, specific provisions apply to financial entities to ensure that they:
- provide clear information and fair treatment to clients relating to the financial costs, expenses and interest rates applicable to loans, financial products and financial transactions; and
- focus on consumer attention and publicity (ie, avoid providing unclear or deceptive information).
This law authorises the Central Bank to issue specific regulations.
The Central Bank has issued specific Regulations on Protection of Users of Financial Services and launched a new website – www.bcra.gob.ar/BCRAyVos/Usuarios_Financieros.asp – which consolidates all necessary information for users of financial services.
This new communication channel allows inquiries, suggestions, complaints and claims to be processed more quickly and efficiently, since it has been jointly designed with the National Consumer Defence Agency.
If a financial entity does not comply with the Regulations on Protection of Users of Financial Services, it may be subject to monetary fines under the Financial Entities Law.
10.2 How are deposits protected in your jurisdiction?
The Deposit Insurance Fund established in Argentina covers:
- fixed-term deposits;
- sight deposits;
- deposits in saving accounts;
- fixed-term investments; and
- immobilised assets pertaining to the above.
The fund does not cover inter-financial entity deposits.
Sight deposits (checking and saving account deposits) and fixed-term deposits are covered up to ARS 1.5 million. The amount to be covered by the fund is limited to single coverage for all accounts of a single depositor and pro rata among joint depositors. The fund covers deposits of both individuals and legal entities.
Section 16 of Executive Order 214/02 authorised Seguro de Depósitos SA (SEDESA), the special purpose corporation entitled to manage the fund, to issue nominative non-endorsable securities to offer depositors in payment of the above-referred guaranty in case of insufficiency of funds to such effects.
The fund is subsidiary and complementary to the preferences set forth in the Financial Entities Law as described in question 14. The fund will cover the deposits only if the depositor has previously attempted to recover the cash through such preferences.
Furthermore, the fund is not guaranteed by the Central Bank. Financial entities provide the resources of the fund, which is privately managed by SEDESA.
11 Data security and cybersecurity
11.1 What is the applicable data protection regime in your jurisdiction and what specific implications does this have for banks?
The Personal Data Protection Law (25,326) regulates the Argentine data protection regime, which in general is aligned with the previous EU regulations on personal data protection. In this regard, the European Union considers Argentina as a jurisdiction that provides adequate levels of personal data protection. In addition, Argentina has been trying to align its current regulation with the General Data Protection Regulation. The basic rights are as follows:
- Right of information: This entitles individuals to know the existence of personal database, its purpose, who is responsible and its legal address.
- Right of access: This allows individuals to know whether a company, public or professional body has their data, where it obtained the data and what it does with it.
- Right of rectification, update or deletion: If a company or public body has erroneous data, individuals can ask it to update, rectify or delete it and, while the verification process lasts, to block it or report that it is under review.
Consent is required to process personal data. However, financial entities do not need consent to treat financial data of their clients which relates to the transactions carried out by them. In fact, financial entities have an obligation to report to the Central Bank the credit status of their clients, which is publicly published on the Central Bank's website together with a list of rejected cheques.
11.2 What is the applicable cybersecurity regime in your jurisdiction and what specific implications does this have for banks?
The Central Bank has issued the consolidated text on Minimum Operative Requirements for IT Systems, which deals with the main requirements applicable to IT security. In addition, in 2020 the Central Bank issued certain cybersecurity guidelines, which are expected to be adopted by all financial entities:
- Cybersecurity reference framework and strategy: The purpose of having a strategy and a reference framework is to inform how to identify, manage and effectively reduce cyber risks in an integrated manner.
- Evaluation of controls, risk and monitoring: The monitoring process should provide support to maintain the risk levels defined as acceptable by the management of the organisation and allow for corresponding weaknesses to be remedied. Test protocols, cyber exercises and audits are essential.
- Response: As part of their risk and control assessments, entities should implement incident response processes and other controls to facilitate a timely and appropriate response.
- Recovery: Once stability and operational integrity are guaranteed, the quick and effective recovery of operations should be based on the prioritisation of critical processes and the objectives established by the responsible authorities of the entity or organisation.
- Sharing of technical information, such as threat indicators or modalities on how vulnerabilities were exploited, or fraud modalities: This allows entities to stay current on their defences and to learn about the methods that are most commonly used.
- Continuous learning: Cybersecurity strategies and frameworks need regular review and updating, to adapt to changes in the threat and control environment, improve user awareness and deploy resources effectively.
12 Financial crime and banking secrecy
12.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction and what specific implications do these have for banks?
The Financial Information Unit supervises and regulates money laundering aspects and financing of terrorism, according to the Anti-money Laundering Law.
The Financial Information Unit has issued Resolution E 30/2017 applicable to financial entities. Financial entities are obliged subjects under the Anti-Money Laundering Law and therefore have certain know-your-client, supervision and reporting obligations. This resolution adjusted the obligations of financial entities to a risk-based approach according to different risk factors and based on the recommendations of the Financial Action Task Force.
Financial entities must implement an anti-money laundering and terrorist financing (AML/TF) prevention system, which contain all policies, procedures and controls relating to AML/TF risk management. The Anti-money Laundering Law and the resolution also require financial entities to make reports on suspicious activities of their clients.
12.2 Does banking secrecy apply in your jurisdiction?
The Financial Entities Law prohibits financial entities from disclosing information on transactions carried out for, or data received from, their customers. This prohibition is limited to those transactions registered as ‘liabilities' in the financial statements of the financial entity.
However, certain government agencies – including tax authorities, the Central Bank and the Financial Information Unit – may require financial entities to disclose such information, to which the bank secrecy obligations do not apply.
13.1 What specific challenges or concerns does the banking sector present from a competition perspective? Are there any pro-competition measures that are targeted specifically at banks?
The Central Bank has stated that there is a moderate degree of market concentration in Argentina and estimates that the diversification evidenced in the Argentine financial system will moderate the eventual systemic impact of stress situations.
Despite this, Advent International recently acquired a 51% stake in Prisma Medios de Pago, Argentina's leading payments company. This deal represents the first ‘regulatory-driven' transaction agreed with the Argentine Antitrust Authority.
Before this deal, a group of 14 Argentine banks and Visa International owned Prisma. Prisma had the exclusive local licence for Visa and dominated the acquiring and payment processing system.
The Argentine Antitrust Authority determined that this presented significant entry barriers and competition issues, and therefore forced the shareholders of Prisma to sell a majority interest in the company to a third party.
14 Recovery, resolution and liquidation
14.1 What options are available where banks are failing in your jurisdiction?
Under the Financial Entities Law, financial entities facing financial difficulties must submit a regularisation programme to the Central Bank. If the financial entity fails to submit or implement the programme or if the programme is rejected, the Central Bank may revoke the financial entity's licence. While the programme is in force, the Central Bank may appoint inspectors to ensure compliance.
If the financial problems are not resolved through the implementation of the programme, the Central Bank will report revocation of the licence to the appropriate court, which shall thereinafter supervise the financial entity's liquidation process. As an alternative to revoking the licence, the Central Bank may authorise the restructuring of the financial entity to ensure that depositors are duly protected.
In the event of the insolvency/liquidation of a financial entity, under the Financial Entities Law two main courses of action are available:
- court liquidation without bankruptcy or self-liquidation without bankruptcy; and
- bankruptcy and liquidation.
14.2 What insolvency and liquidation regime applies to banks in your jurisdiction?
Financial entities cannot request their own reorganisation (concurso preventivo) or bankruptcy. A court can declare the bankruptcy of a financial entity if the Central Bank revokes the authorisation to operate.
If the Central Bank revokes the authorisation and once the intervening court declares the entity in bankruptcy, the Bankruptcy Law (24,522) (except for certain limited provisions which are not applicable) and the Companies Law (19,550) (in respect of liquidation) will apply.
The judicial liquidation will follow these provisions:
- Upon revocation of the authorisation to operate, no creditor for cause or title prior to revocation may initiate foreclosures or execution of assets, unless it is a secured creditor or its claim derives from an employment relationship.
- The judicial liquidator will determine the totality of callable obligations coming from deposits of sums of money.
- Cash depositors have an exclusive preference over all other creditors of the financial entity (except for employees and labour creditors and creditors secured by mortgage and liens), to be repaid in the following order of priority:
- all deposits made with the financial entity by a single individual or legal entity for an amount of up to ARS 50,000 or its equivalent in foreign currency. Multiple depositors of a single account shall collect under this preference pro rata;
- all deposits made with the financial entity by a single individual or legal entity, for an amount higher than ARS 50,000 or its equivalent in foreign currency; and
- financial loans granted to the financial entity directly related to international trade.
Additionally, depositors may pursue further repayment of outstanding deposits through a subsidiary mechanism established in the Deposit Insurance Fund (see question 10.2).
15 Trends and predictions
15.1 How would you describe the current banking landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
The current banking landscape is complicated. The Argentine peso lost more than 35% of its value with respect to the US dollar in 2015 and depreciated further in 2018 and 2019, losing more than 70% of its value between December 2017 and December 2019. Persistent high inflation during this period, with periods of formal and de facto exchange controls, resulted in an increasingly overvalued real official exchange rate. These circumstances affected the banking landscape in terms of new credits for companies and consumers.
As a result, the Central Bank has issued several regulations exerting more pressure on financial entities. Despite this situation, no legislative reforms are anticipated.
15.2 Does your jurisdiction regulate cryptocurrencies? Are there any legislative developments with respect to cryptocurrencies or fintech in general?
In Argentina, there is still no regulation specifically related to blockchain and/or cryptocurrency transactions. Argentina has adopted a wait-and-see strategy.
However, the National Securities Commission, as the body that enforces the Capital Markets Law (26,831), has warned that, depending on the particularities of each case and how it is structured, an initial coin offering could be considered as the public offering of securities, which requires the commission's prior authorisation.
In general, considering the broad definition of ‘securities' set out in the Capital Markets Law, asset-backed tokens and/or tokens that provide yield to holders, could be considered securities under such law.
Finally, the Financial Information Unit requires obliged subjects, including financial entities, to supervise and report any suspicious activity conducted by their clients regarding cryptocurrency transactions.
16 Tips and traps
16.1 What are your top tips for banking entities operating in your jurisdiction and what potential issues would you highlight?
The Argentine economy has experienced significant volatility in recent decades, including numerous periods of low or negative growth and high and variable levels of inflation and devaluation of its currency.
Since 2008, Argentina has struggled to curb strong inflationary pressures; and since 2012, growth has stagnated due to increased government expenditures and a fiscal deficit.
During the first half of 2018, the Argentine economy entered into an acute economic recession, which deepened in 2019, with a sharp decrease in international reserves and a strong loss in the value of the peso vis-à-vis the US dollar.
Against this economic backdrop, in December 2019 Congress enacted legislation declaring a state of public emergency, which is expected to remain in force until 31 December 2020, in economic, financial, fiscal, administrative, pensions, tariff, energy, health and social matters. Argentina is currently conducting a sovereign debt restructuring process.
Furthermore, exchange controls and restrictions on capital inflows and outflows could have an adverse effect on foreign investment – for example, with restrictions on the transfer of dividends abroad.
Despite this, private banks reported positive results in 2019, according to a report of the Central Bank. Furthermore, the critical situation of the Argentine economy together with the Covid-19 crisis could translate into unique opportunities to purchase distressed entities.
Additionally, the Central Bank has recently approved the license of a fully digital bank in Argentina (the third of this kind). The aim continues to be offering banking products to those sectors of the population to which traditional banks cannot reach.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.