Reports on Observance of Standards and Codes

Argentina and the IMF

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April 15, 1999

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Prepared by a staff team from the Fiscal Affairs, Monetary and Exchange Affairs, Policy Development and Review, Statistics, and Western Hemisphere Departments with the cooperation of the Argentine authorities

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  1. Overview

  2. Data Dissemination
    1. Description of Practice
    2. IMF Staff Commentary

  3. Fiscal Transparency
    1. Description of Practice
    2. IMF Staff Commentary

  4. Transparency of Monetary and Financial Policies
    1. Description of Practice
    2. IMF Staff Commentary on the Monetary Policy Framework
    3. IMF Staff Commentary on the Financial Policy Framework

  5. Banking Supervision Assesses only the authorities' observance of the transparency elements of the Basel Core Principles
    1. Description of Practice
    2. IMF Staff Commentary

  6. Securities Market Regulation This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a Report on Observance of Standards and Codes (ROSC).

  7. Insurance Industry Regulation This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a Report on Observance of Standards and Codes (ROSC).

  8. Accounting Practices This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a Report on Observance of Standards and Codes (ROSC).

  9. Auditing Practices This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a Report on Observance of Standards and Codes (ROSC).


  1. The Special Data Dissemination Standard


This report is one in a series of experimental studies aimed at considering how to present information on an economy's transparency practices and some of the standards that lie behind these practices.

The report has been prepared by IMF staff with the cooperation of the Argentine authorities. In February 1999, the authorities agreed to a staff request that Argentina participate in the first round of experimental case studies. Given the time constraints for the preparation of this report, it was not possible to undertake a dedicated mission to discuss transparency practices in detail. Instead, building on the work already underway in Argentina, the authorities responded rapidly to staff requests for information contained in a series of questionnaires. The authorities also provided comments on an earlier draft of this report.

The objectives of a report on transparency practices are twofold. It can assist authorities in identifying areas where transparency can be enhanced further, with benefits for the accountability of policy makers and for economic performance. Second, by providing information on the extent to which countries observe internationally recognized standards deemed important for the effective functioning of financial systems, a report on transparency practices and other associated standards can contribute to well-founded lending and investment decisions.

It is important to recognize the limitations of this experimental report. It does not attempt to provide an in-depth assessment of the quality of the published information. Rather, it considers transparency practices, focussing on whether the disclosure elements of standards— requirements to make information available to the public—have been satisfied and also goes some way in considering whether the basis on which the information is reported to be compiled is consistent with the definitional or framework elements of the relevant standards.

I.  Overview

1.  Argentina's economic reforms during the 1990s have been significant and wide-ranging, together representing a fundamental shift from past economic structure, institutions and practices—and a marked improvement in transparency.

2.  Most prominent—in light of Argentina's protracted experience with high inflation and episodes of hyperinflation—has been the 1991 Convertibility Plan, reforming the exchange rate system, and the 1992 central bank charter. In the exchange rate reform, the currency was pegged to the U.S. dollar, the stock of monetary liabilities was tied to the stock of foreign exchange held by the central bank, and full convertibility of the peso for both current and capital transactions was established. To support the independence of the central bank, its charter was rewritten tightly to prohibit central bank financing of the non-financial private sector and to limit the scope for providing credit to either the public sector or banks. Thus the Convertibility Plan has had profound implications for the (inherently interrelated) conduct of monetary, financial, and fiscal policies. By establishing an unambiguous nominal anchor and a credible framework to promote its sustainability, these steps have greatly increased the transparency of current policies—and have promised transparency over the long term as well.

3.  Complementing the Convertibility Plan has been a significant trade policy reform, mainly in the early 1990s, virtually eliminating export tariffs, substantially reducing non-tariff barriers, and greatly reducing average import tariffs. Removing such distortions has helped integrate Argentina with world markets and reduced the scope for nontransparent policy practices. A further regime shift involved deregulation: between 1989 and 1992, controls over prices, credit, foreign exchange and payments—some in place for decades—were abolished, and a number of regulatory and marketing bodies were closed down. The emphasis in all these areas is now on clear and well-publicized regulations developed with input from the business community.

4.  Argentina also made significant progress during the 1990s in reducing the scope of public sector involvement in the economy and in making its operations more transparent. Key policy actions included privatizing most of a formerly extensive collection of state enterprises and provincial banks; simplifying the tax system; strengthening the federal budget process, including through the introduction of explicit medium-term objectives for policy; the recent introduction of a multi-year budgetary framework; modernizing the budgetary and accounting system, including moves toward accrual accounting and establishing performance indicators for budget programs; and improving the release of fiscal information.

5.  Since 1992, financial sector reforms have also been prominent, with advances in banking regulation and enforcement of prudential norms (motivated in part by the limits on the central bank's role as a lender-of-last-resort). Measures have included the transformation of a traditional reserve requirement into a stringent, but remunerated, liquidity requirement, tightening of minimum capital requirements, reform of the payments system, and establishment of a contingent line of credit with a group of private foreign creditors. In addition, other steps have sought to improve the information on which both banks and their depositors may act: establishment of a public credit information bureau, monthly publication by the central bank of data on individual banks (including on- and off-balance sheet transactions) and introduction of compulsory quarterly external audits.

6.  In the context of this experimental report, the staff have considered the authorities' practices against a set of internationally accepted standards. In the areas of data dissemination, fiscal transparency and banking supervision, Argentine practices have been considered primarily against the Fund's Special Data Dissemination Standard (SDDS), its Code of Good Practices on Fiscal Transparency, and the transparency aspects of the Basle Committee's Core Principles of Effective Banking Supervision1. The report also considers the transparency practices in the area of monetary and financial policies, using the broad principles underlying the February, 1999, preliminary draft Code of Good Practices on Transparency of Monetary and Financial Policies. In addition, the report provides a summary of the authorities' views on the extent to which domestic practices are consistent with existing international standards in the areas of securities market regulation, insurance regulation, accounting and auditing, and describes how domestic standards are promulgated and enforced. IMF staff have made no attempt to provide its own view of observance of standards in these latter areas.

7.  It is clear that Argentina has made important and highly commendable improvements to its transparency practices in many areas over the last decade. Transparency is generally high in each of the four areas assessed here - data dissemination, fiscal, monetary and financial policy transparency, and the disclosure aspects of banking supervision. The process of policy reform is ongoing, and the authorities are committed to further improvements in transparency practices. A few key areas where further improvements in transparency and the observance of international standards could be made follow:

  • Efforts are underway to simplify intergovernmental fiscal relations and to improve the provision of fiscal information on the general government—in particular timely reporting on the activities of the provinces and municipalities. It will be important that these efforts continue to receive high priority given the important role played by the provincial and municipal governments in Argentina's federal system.

  • Routine assessments of longer-term fiscal policy sustainability, including of social security finances, would provide a useful tool for policy makers while also enhancing public understanding of fiscal policy developments and challenges.

  • Further strengthening of tax regulations, particularly as they relate to the rights and responsibilities of taxpayers, would help to ensure the integrity of the tax system.

  • The independence of the bank supervisory agency is an important element in the integrity of Argentina's overall financial sector supervisory arrangements. Greater independence for other supervisory agencies would complement this, although it would be important to ensure that greater financial independence for supervisors was matched by efforts to ensure that existing levels of transparency and accountability were maintained and further improved.

  • Some transition plans to bring Argentina's data dissemination practices into full observance of the SDDS remain outstanding. It will be important that continued priority is given to ongoing work in these areas if Argentina is to be in observance of the SDDS as the implementation deadlines for individual data categories arise through the course of 1999.

II.  Data Dissemination

8.  Argentina subscribes to the Fund's Special Data Dissemination Standard (SDDS). The SDDS is a "best practice" standard against which a country's dissemination practices can be readily measured. It covers four sectors of the economy (real, fiscal, financial, and external), as well as population, and has four dimensions, i.e., the data dimension (the coverage, periodicity, and timeliness of the data); access by the public to those data; the integrity of the data; and the quality of the data.

A.  Description of Practice

  • Since its subscription to the SDDS was accepted by the Fund on September 17, 1996, Argentina has announced a total of 14 transition plans2, affecting 10 data categories. Three transition plans, affecting central government operations, central government debt and the analytical accounts of the central bank, have been completed. Eight transition plans, affecting national accounts, wages/earnings, general government operations, and the international investment position, remained outstanding on March 24, 1999.

  • Three of the original 14 data transition plans have been replaced with permanent flexibility options. Argentina is taking a permanent flexibility option3 for the periodicity of labor market data (i.e., data on employment and unemployment are treated as one category) and will continue to publish these data three times a year. In addition, a permanent flexibility option is being taken for the timeliness of the data on the analytical accounts of the banking sector, which will continue to be published with a timeliness of six weeks. The authorities have also indicated that while they are working toward publishing data on general government operations with the prescribed coverage by the implementation deadline on June 30, 1999, this may not prove possible. In this case, Argentina will use a temporary flexibility option for that data category and publish the prescribed data by December 31, 1999. The authorities have also advised that, with the possible exception of the data on general government operations, processes are underway to complete the outstanding transition plans in accordance with the implementation schedule.

  • Argentina has completed nine transition plans for the dissemination of advance release calendars that meet the SDDS requirements. Eight plans remain outstanding, although only minor changes are needed to complete five of these. The three substantive plans outstanding relate to wages/earnings data, the analytical accounts of the central bank, and the international investment position. (See attached copies of thSummary of Observance and Advance Release Calendar pages.)

  • Argentina has a national summary data page (NSDP) hyperlinked to the Fund's Dissemination Standards Bulletin Board (DSBB), which shows the latest available data for each prescribed data category and component.4

B.  IMF Staff Commentary

  • Continuous and systematic monitoring of SDDS observance will begin by mid-1999 as evidence of each subscriber's degree of observance becomes available (See Box 1).

  • The existence of Argentina's NSDP—which is not mandatory under the SDDS until end-1999—contributes to enhancing transparency. The periodicity and timeliness of the data shown in the NSDP are consistent with the descriptions in the metadata.

  • The authorities have indicated they expect the analytical accounts of the Central Bank to be consistent with the SDDS in April 1999 and that they expect to meet all other outstanding transition plans in accordance with the implementation schedule, with the possible exception of general government operations. It will be important that continued priority is given to ongoing work in these areas if Argentina is to be in observance of the SDDS as the implementation deadlines for individual data categories arise through the course of 1999.

Box 1. The Special Data Dissemination Standard

Subscription to the SDDS is voluntary. Countries that subscribe to the SDDS undertook to observe the Standard fully by the implementation deadlines which come into effect during 1999.1

  • Staff monitoring of observance of the SDDS is limited to the coverage, periodicity and timeliness of the data and to the dissemination of advance release calendars (ARCs), information about which is given on the Dissemination Standards Bulletin Board (DSBB).

  • In addition, the DSBB provides information (metadata) on a country's practices for the following aspects of transparency: simultaneous release of the data; laws governing the compilation and release of the data; access to the data by other government officials prior to release; ministerial commentary accompanying the release of the data; revision policy; and advance notice of major changes in methodology.

  • Staff have not undertaken an assessment of the quality of the data disseminated under the SDDS. The SDDS was designed to assist users to make their own assessment of data quality by providing information on the DSBB on the dissemination of documentation of methodology and the publication of more detailed data which provide an assurance of the reasonableness of the data. In addition, Summary Methodologies designed to shed light on data quality, and using a standard format for all countries for each data category, will be disseminated on the DSBB in the future.

1 As the implementation deadlines vary for the individual data categories, evidence of countries' degree of observance of these commitments in many cases will not be available until the second half of 1999, or even the end of 1999 for some data categories.

III.  Fiscal Transparency

9.  This section provides an assessment of fiscal management practices in Argentina against the requirements of the IMF Code of Good Practices on Fiscal Transparency— Declaration on Principles. The authorities have completed the fiscal transparency questionnaire prepared by the IMF staff5. The assessment has two parts. The first part is a description of practices, prepared by the IMF staff on the basis of the questionnaire response. The second part is an IMF staff commentary on fiscal transparency in Argentina.

A.  Description of Practice

10.  Clarity of Roles and Responsibilities: The National Constitution sets out a clear separation of responsibilities between the central government, provincial governments, and municipal governments. As a result of extensive deregulation and privatization, government involvement in the rest of the economy is minimal. Remaining regulations are clear and nondiscriminatory. Quasi-fiscal activities are limited. The legal and administrative framework for fiscal management is generally appropriate. There is a comprehensive budget law. However, the regulations governing procedures for tax administration are not always clear, which results in the provisions of the tax law not being implemented in full. Accordingly, the regulations for some taxes (consumption tax and corporate income tax) are being revised. A National Office of Public Ethics was created in 1997 and a civil service code of ethics was issued by decree in 1999.

11.  Public Availability of Information: Argentina is committed to data access as specified in the SDDS. The release of fiscal information has improved markedly in recent years. However, the coverage of general government transactions (i.e., including provincial and municipal government) is limited, and published information on extrabudgetary funds, tax expenditures, and contingent liabilities is partial or unavailable. Detailed debt data are provided (with some information posted on Reuters and Bloomberg pages), but coverage of financial assets (government deposits, credit operations, etc.,) is limited.

12.  Open Budget Preparation, Execution, and Reporting: Argentina has made a substantial effort to modernize the budgetary and accounting system. A multi-year budgeting framework has recently been introduced, there has been a move toward accrual accounting, and efforts are under way to define performance indicators for budget programs. Budget documentation specifies clear fiscal objectives, which are derived and presented within a consistent macroeconomic framework. The classification of budget revenues and expenditures is compatible with the GFS. The Integrated Financial Information System (SIDIF) generates budget data in a timely manner, and central government fiscal reporting is of a high standard. Fiscal policy formulation and implementation focuses mainly on the central government despite the important role played by provincial and municipal levels of government. Under Argentina's federal system of government, the process of generating consolidated fiscal data is not solely at the discretion of the national authorities. Efforts are underway, however, to improve both the quality and timeliness of information on subnational jurisdictions, and to improve publication of data. A medium-term to long-term fiscal perspective is provided only selectively (e.g. a recent assessment of social security finances) and there is no assessment of fiscal risks. Established procedures for procurement and employment are not always followed in practice.

13.  Independent Assurances of Integrity: The Office of National Audit enjoys political and technical independence and is well-staffed. The reports of the Office are not, in themselves, binding. They are provided to Congress through the Joint Parliamentary Audit Committee and Congress may then pass resolutions recommending the audited entities adopt measures to implement the recommendations of the report. While macroeconomic forecasts are the subject of extensive public debate, there is no formal provision for independent scrutiny (although the authorities note that current arrangements with the IMF result in external scrutiny of the forecasts). The national statistics office (INDEC) has technical independence and GDDS standards for data integrity and quality are met.

B.  IMF Staff Commentary

  • Based upon the description of practices provided by the authorities and summarized above, Argentina has achieved a high degree of fiscal transparency. This is a reflection of the significant progress that has been made since the implementation of landmark legislation on financial administration and control in 1992. In certain respects (e.g. with the adoption of multi-year budgeting, accrual accounting, and performance indicators), the requirements of the Code are exceeded.

  • While fiscal management practices currently meet the requirements of the Code in many key respects, there remain some areas where improvement would be beneficial. The rules relating to intergovernmental fiscal relations are complex, and the initiatives under way to simplify arrangements are therefore welcome. Further strengthening of tax regulations, particularly as they relate to the rights and responsibilities of taxpayers, and of tax administration, would help to ensure the integrity of the tax system.

  • Better information on general government, in particular timely reporting on the activities of provinces and municipalities, should continue to be a high priority.

  • The publication of structural fiscal balances would aid in the understanding of the relationship between economic developments and fiscal policy. Measures of the robustness of budget forecasts and projections to economic assumptions, and other elements of a fiscal risk statement would also assist in developing a greater appreciation of the fiscal situation. Routine assessments of longer-term sustainability, including of social security finances, would provide a useful policy tool. They would also enhance transparency and contribute to public appreciation of fiscal policy challenges that might emerge in Argentina.

  • Draft legislation on fiscal responsibility, which proposes the adoption of a number of fiscal rules designed to limit current spending, borrowing and the deficit, is currently before the Congress. These rules constitute a potentially important step in improving transparency although details of the rules have not yet been finalized as debate in Congress is ongoing. It will be important that the final rules are clearly specified and that they allow sufficient flexibility for an appropriate fiscal policy response to changing economic circumstances.

IV.  Transparency Of Monetary and Financial Policies

14.  In the context of strengthening the architecture of the international monetary system, the Interim Committee, in its April and October 1998 communiqus, called on the Fund to develop a code of transparency practices for monetary and financial policies, in cooperation with appropriate institutions. The Fund, in consultation with others, has prepared a draft Code of Good Practices on Transparency in Monetary and Financial Policies6.

15.  The following considers the transparency practices of Argentina's monetary and financial policy frameworks as they relate to the broad principles underlying the Fund's draft Code based on information provided by the authorities.

A.  Description of Practice 7

16.  Clarity of roles and responsibilities: Monetary policy. The Central Bank of the Argentine Republic (BCRA) is responsible for the formulation and conduct of monetary policy. The objectives of the BCRA are defined in the Law on Convertibility (March 1991) and the Charter (September 1992). The Law sets the exchange rate at 1 peso per U.S. dollar, and establishes that the monetary liabilities of the BCRA may not exceed the dollar value of its international reserves. To deal with exceptional circumstances, the law allows the BCRA to grant credit to financial institutions up to the point where the ratio of gross international reserves to the money base drops to two-thirds. As a result, the BCRA acts in a manner similar to a currency board, while monetary policy remains passive. The BCRA is prohibited from making loans to any level of government or the nonfinancial private sector. It may purchase government securities at market prices, provided that the annual increase in its holdings of such government securities does not exceed 10 percent. The BCRA is responsible for the management of international reserves (debt management is the responsibility of the Ministry of Economy and Public Works and Services).

17.  Financial policy. All providers of financial services in Argentina are subject to regulation and supervision by a specialist agency. Bank and non-bank financial intermediaries are supervised by the Superintendency of Financial and Exchange Institutions (SEFyC), part of the BCRA; other institutions are supervised by the Superintendency of Insurance (SNN), the Superintendency of Retirement and Pension Plans (SAFJP) or the National Securities Commission (CNV). The practices of self-regulating organizations (the Securities Market of Buenos Aires and the Open Electronic Market) are audited by the CNV.

18.  Each regulatory agency is autonomous and issues its own rules and regulations. However, in early 1999 a regulatory committee was established to discuss and analyze regulations issued by the various agencies.

19. Open process for formulating and reporting of monetary and financial policies: Given the rules set out in its charter, the BCRA has limited scope for independent monetary policy action. The restraints on monetary policy also limit its capacity to act as lender of last resort. Subject to the requirements of the Law on Convertibility, the BCRA can provide advances or engage in reverse swap operations with the institutions it supervises. To provide a margin of security, particularly in light of the potential role of currency substitution, the BCRA has arranged for a contingent repurchase agreement with a group of foreign banks that would make available additional funding to Argentine banks in the event of a systemic liquidity problem. Use of this funding would be immediately known.

20.  All agencies are required to consult on the development of new rules and regulations. Regulations and policies are generally published.

21.  Public availability of information: Data on the international reserve coverage of monetary liabilities is an important indicator of the BCRA's operations and compliance with the Convertibility Law. The BCRA publishes daily, with a two-day lag, data on total international reserves and the composition of monetary liabilities. Information is also provided on the instruments used to meet minimum liquidity requirements and federal government deposits at the BCRA. A weekly summary statement of assets and liabilities is published. Various market interest rates—the borrowing rate for both peso and dollar deposits, the interbank lending rate, the prime lending rate, and the rate for BCRA swap operations—are published daily. Additional monetary and financial statistics are provided in the monthly Statistical Bulletin while the SEFyC also releases monthly balance sheets, including information on off-balance sheet derivative transactions, and other financial indicators for each financial intermediary under its supervision. The quarterly Bulletin of Financial and Monetary Affairs describes monetary and prudential policy developments while the BCRA's web page includes the latest prudential rules and summarizes the regulatory framework governing financial institutions operating in the Argentine market. The BCRA also prepares a Report to Congress (Informe al Congreso) twice yearly that carries a clear statement of BCRA policies and how they have been implemented during the period covered by each report.

22.  All other regulatory agencies are subject to specific requirements as to what, when and how information is to be disclosed to the public. This information, available on-line in the agencies' respective web pages, includes the objectives and functions of the agency, the rules applied to those institutions it supervises, lists of authorized institutions, and accounting and financial information about the institutions including financial statements and institution or instrument credit ratings.

23.  Accountability and assurance of integrity by the central bank and financial supervisory agencies: The President of the BCRA reports at least once a year to Congress on the Bank's operations (current practice is that the Report to Congress is prepared twice yearly). These reporting arrangements ensure Congress is informed of BCRA policies (including its policies to achieve compliance with convertibility), developments in the financial system, the management of international reserves, and any changes in regulations issued by the Bank. The BCRA's balance sheet is subject to external audit. The President of the BCRA and the heads of the other agencies can all be asked to appear before Congress although there are no standing arrangements requiring their testimony.

B.  IMF Staff Commentary on the Monetary Policy Framework

  • Argentina's institutional arrangements limit the monetary policy flexibility of the BCRA. They have resulted in a high degree of transparency in the formulation and conduct of monetary policy, and lead to effective and timely disclosure (on a daily basis) of international reserves and the composition of monetary liabilities.

  • The view that the central banks of emerging market countries face constraints on their capacity to act as a lender of last resort has led Argentina to establish highly transparent contingent credit lines with foreign banks. The BCRA's capacity to act as lender of last resort will be strengthened under the proposed reforms to its charter (see Section V on Banking Supervision). Included among these is a proposal to increase the capital of the BCRA to allow for the possibility of financial support to temporarily illiquid institutions while continuing to respect the convertibility limits.

C.  IMF Staff Commentary on the Financial Policy Framework

  • The existence of a range of autonomous regulatory agencies, each issuing their own rules and regulations, carries a risk that gaps or duplication can emerge in the regulatory coverage. However, the financial policy framework in Argentina is clear, the policy responsibilities of the individual agencies appear well defined, information sharing and policy coordination arrangements are in place and supervision is carried out in a generally transparent manner.

  • The most important financial intermediaries, the banks, are supervised by a decentralized agency (SEFyC) reporting directly to the Board of the BCRA. The independence of these supervisory arrangements is commendable and should be continued. Greater freedom could be provided to other supervisory agencies, including through independent funding sources. However, efforts to provide greater independence to supervisors would need to be matched by efforts to ensure that existing levels of transparency and accountability are maintained and further improved.

  • While retirement and pension funds are relatively new to the Argentine financial market, they are quickly gaining in size. Looking ahead, it will be important to ensure that the regulatory arrangements for this sector are consistent with emerging developments. The supervisors will need to ensure they have a clear and transparent regulatory framework and sufficient independence and accountability to pursue their responsibilities, if the sector is to make the most effective contribution to the development of the Argentine economy.

V.  Banking Supervision

Assesses only the authorities' observance of the transparency elements of the Basel Core Principles.

24.  The Basle Committee on Banking Supervision (Basle Committee) prepared the Core Principles for Effective Banking Supervision (Core Principles) in order to strengthen national financial market supervision and stability8. Intended to serve as a basic reference and minimum standards for supervisory and other public authorities in countries generally and internationally, the Core Principles address the major dimensions of banking sector supervision: preconditions for effective supervision; licensing process and approval for changes in structure; prudential regulations and requirements; methods of ongoing banking supervision; information requirements; formal powers of supervisors; and cross-border banking.

25.  An assessment of Argentina's practices against the full set of 25 Basle Core Principles is outside the scope of this study. Instead, this section focuses on the transparency aspects of the Core Principles. The staff's commentary is based on consideration of a questionnaire completed by the authorities.

A.  Description of Practice9

26.  The Argentine supervisory framework separates banking regulation from supervision. The Superintendency of Financial and Exchange Institutions (SEFyC) is responsible for banking supervision in Argentina. The SEFyC operates under the Charter of the Central Bank (BCRA); it is attached to the Office of the President of the BCRA and is funded by the BCRA's budget10. SEFyC reports directly to the BCRA's President and the Superintendent and Vice Superintendent are Directors of the BCRA. The Board of Directors of the BCRA, which alone is responsible for prudential regulations, is kept informed of developments in supervision. The Argentine authorities have accepted the Basle Core Principles and have proposed that they be included in memoranda of understanding between Mercosur supervisors. A draft law before the National Congress would give supervisory staff immunity from personal and institutional liability for supervisory actions taken in good faith in the course of performing supervisory duties.

27.  Legal framework: An effective legal basis for banking regulation exists in Argentina; relevant laws and regulations are effectively implemented, and the legal framework does not hinder the conclusion or enforcement of loan contracts. The BCRA, through the SEFyC, is responsible for monitoring regulatory compliance and enforcing the law. Currently the SEFyC may engage in formal and informal actions to meet its objectives. Its actions are directed so that institutions correct the delinquent aspects of their operations, discontinue practices in conflict with current regulations, or take the necessary steps to correct their economic and financial situation. These measures are established by practice, internal rules of the SEFyC, or by the Law on Financial Institutions. Regularization and rehabilitation plans can be requested from an institution by the Superintendent. These plans are sought when the solvency or liquidity of an institution is compromised and/or discrepancies with prudential regulations established by the BCRA exist. The SEFyC is legally authorized to intervene in banks. Intervention can occur through the imposition of inspectors (with or without the right of veto), suspension of activity, and other measures. It does not, however, include the administration, nor the nationalization, of problem financial institutions. The SEFyC provides extensive and detailed information on actions taken as part of bank restructuring to Congress (including through the twice yearly Report to Congress) and the public. A draft revision to the Charter of the BCRA—currently under discussion in the National Congress—would provide the SEFyC with additional tools for early intervention.

28.  Significant proposed changes to the charter of the BCRA include11:

  • Modification of the current preferred creditor scheme for financial institutions, raising the amount of deposits that benefit from protection to $100,000.

  • An expansion in the range of instruments available to the BCRA to intervene in cases where the practices of an institution are considered damaging for depositors and the financial system.

  • Changes in the legal treatment of the actions undertaken by the BCRA, so that actions undertaken in good faith can be overturned only in the event of doubts about their legality.

29.  Accounting and disclosure aspects: Quarterly audited reports must be submitted by all institutions operating within the Argentine financial system. Institutions that consolidate their accounting statements with subsidiaries must submit quarterly consolidated and audited reports.

30.  Financial institutions must require every domestic or foreign shareholder, or groups of shareholders which exercise control over the institution's operations (as defined under the pertinent legislation), to submit semiannual consolidated balance sheets of the group of which they are part. These statements must contain an opinion on the accounts provided by a certified public accountant. These balance sheets must be submitted to the SEFyC within 120 days after the end of each half-year. These requirements are waived when the share holding financial institutions is subject to consolidated supervision in its country of origin. Consolidated accounting statements of foreign groups must be audited by firms of recognized standing.

31.  The appointment of external auditors requires SEFyC's approval, which is given only if the firm fulfills a number of prerequisites regarding its suitability and experience with the auditing of financial institutions. The Audit Control Department (Gerencia de Control de Auditores) oversees and verifies the work of the institution's internal and external auditors. A bank's external auditor is obliged to inform the SEFyC of matters relevant to effective supervision or the auditor's ability to issue a "clean" opinion.

32.  The publication of banks' balance sheets, income statements, notes to the accounts, and auditor's statement is required each quarter. Institutions that consolidate their accounts must also submit quarterly consolidated and audited reports. The BCRA publishes, monthly, individual banks' balance sheets, together with a set of performance indicators. Information is also provided on banks' off-balance sheet transactions on a monthly basis.

33.  Banks are rated by rating agencies and financial institutions are required to provide printed ratings when requested by investors.12

34.  The BCRA is charged with setting accounting and auditing standards for financial institutions. The accounting and auditing norms are, however, consistent with the standards of the Argentine Federation of Expert Councils on Economics (see Section VIII on Accounting Practices) and U.S. generally accepted accounting principles (GAAP). Recently two major international accounting firms have been contracted to carry out a comparative study of accounting and auditing standards for financial institutions in Argentina and the United States.

B.  IMF Staff Commentary

  • Existing supervisory practices outlined above appear consistent with the disclosure aspects of the Basle Core Principles. The authorities are to be commended for the measures they have taken to disseminate information on the performance of individual banks, fostering market-driven monitoring of banks. Increasing public awareness of riskier institutions can be expected to impose market discipline on their management and promote (healthier forms of) competition among banks.

  • The authorities have introduced innovative regulations requiring financial institutions to issue a certain amount of tradable securities, the secondary market prices of which may convey information. The authorities had previously attempted the innovative approach of making mandatory the publication of rating information (rather than the current practice of delivery of information upon request). If it were feasible to reintroduce this innovation, it would make a further contribution to transparency and would complement the intention behind efforts to require the issue of tradeable securities.

VI.  Securities Market Regulation 13

This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a ROSC.

Institutional structure

35.  The National Securities Commission (CNV) is responsible for the regulation of investment business in Argentina. The Commission functions independently in the exercise of its duties and powers, though it is linked to the executive arm of government through the Ministry of Economy and Public Works and Services.

Observance of international standards

36.  The CNV is a member of IOSCO, the International Organization of Securities Commissions.14 The Commission has endorsed IOSCO's Objectives and Principles of Securities Regulation. Current Argentine law is consistent with the majority of IOSCO's 30 principles. A draft Law on Investor Protection, which would allow the full application of these objectives and principles, has been submitted to the National Congress. If this law is approved, the CNV will implement these principles by issuing new regulations and reaffirming existing ones; it will continue to be responsible for monitoring compliance with, and assessing penalties for, non-observance of the regulations.

37.  The third IOSCO Principle is currently not met. While the CNV has adequate powers to exercise its functions—and these should be expanded with the ratification of the draft Law—the Commission relies on funding allocations from the national budget, and it currently considers these funds insufficient to perform adequately the functions vested in it by law.

38.  The Commission has authority to take disciplinary action and issue penalties (these are subject to judicial review in the event of appeals) and the draft Law would reaffirm this. While its punitive powers over entities and persons under its supervision are limited, the CNV has recourse to the criminal justice system if supervised entities refuse to cooperate in the course of exercising its responsibilities.

39.  Disclosure requirements for multinational issuers are governed by CNV regulations. These regulations are broadly consistent with the thrust of IOSCO's Disclosure Standards to Facilitate Cross-Border Offerings and Initial Listings by Foreign Issuers, although they contain less detail. A draft resolution is being prepared with assistance from CENCyA (the Special Committee on Accounting and Auditing Standards—see Section VIII on Accounting Practices) that will follow the IOSCO standards point by point; the CNV expects that it will be able to issue this as a regulation in the second quarter of 1999.

40.  The CNV has the authority to share public and non-public information with counterparts and has signed Memoranda of Understanding with 20 foreign regulators. These powers will be further enhanced with the passage of the draft Law. The CNV has legal power to obtain information on a compulsory basis for foreign regulators, when there is no breach of Argentine regulation or law, subject to some limitations. These limitations are more stringent when bank information is involved.

VII.  Insurance Industry Regulation15

This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a ROSC.

Institutional structure

41.  Three laws16 together establish the framework for regulation of insurance companies in Argentina. Insurance regulation is the responsibility of the Superintendency of Insurance, an autonomous entity operating under the Banking and Insurance Under-Secretariat of the Ministry of Economy and Public Works and Services.

Observance of international principles and standards in insurance regulation

42.  Argentina is a member of the International Association of Insurance Supervisors (IAIS). Along with other IAIS members, in 1998 Argentina conducted a self-assessment (unpublished but available to the public on request to the Superintendency) of its observance of the IAIS' Insurance Supervisory Principles. The authorities advise that several regulatory changes in the first half of 1998 have now moved Argentina's practices closer to IAIS standards. The majority of the IAIS Insurance Supervisory Principles are now satisfied, either through Resolutions issued, monitored, and enforced by the Superintendency of Insurance, or under provisions of Argentine law. In particular, IAIS standards on asset valuation, liability valuation, and filing of financial statements are observed. The authorities reported that Argentina did not fully meet the Principles in two areas: First, while trying to accustom insurers to exposure control, supervision of the insurance risk that can be taken by local insurance companies has remained informal. The Superintendency intends to introduce regulations to formalize supervision in this area in the first half of 1999. Second, most of the Superintendency's on-site inspection capacity is directed at examining assets and liabilities. As a result, only limited capacity is available for on-site supervision to consider the operational aspects of insurance companies' activities.

43.  The authorities indicate that Argentina is in observance of the 1997 Concordat (i.e., the Principles Applicable to the Supervision of International Insurers and Insurance groups and their Cross-Border Establishments) except in two areas: the Superintendency lacks legal power to take over the management of troubled companies; and leading indicators of trouble in insurance companies are still under development.

44.  The IAIS Supervisory Standard on Licensing is observed.17 The Supervisory Standard on On-Site Inspection is only partly observed given the limits in the approach to on-site inspection. However, the Superintendency has in place a work program to address these shortcomings although progress has been limited to date. The Supervisory Standard on Derivatives is not observed but the authorities do not regard this as a significant shortcoming at this stage: they advise that regulation of derivative investments is largely non-existent, partly reflecting the fact that such instruments are not well-developed in Argentina and that little use is made of derivatives by insurance companies. 18 Progress on implementing the IAIS's model Memorandum of Understanding on exchange of information with other countries has been limited although an agreement using this approach has been concluded with Uruguay.19 Argentina has also been playing an active role in encouraging such agreements among Mercosur countries.

VIII.  Accounting Practices20

This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a ROSC.

Setting accounting standards in Argentina

45.  Accounting standards in Argentina are set by the Federaciēn Argentina de Consejos Profesionales de Ciencias Econēmicas (the Argentine Federation of Expert Councils on Economics - FACPCE) through its technical body, the Special Committee on Accounting and Auditing Standards ( CENCyA ). FACPCE, a private, professional association, consists of 24 separate Consejos (one for each province and one for the federal capital) and is charged with developing accounting standards. Known as NCPs, these standards are published by the FACPCE in the Boletn Oficial de la Argentina. If the Consejo of each province accepts a standard, it is then transformed into accounting standards for that province.

46.  Supervisory and regulatory agencies can also require compliance with Legal Accounting Standards (NCL) which may differ from the NCP.21 However, close coordination between CENCyA and the agencies mean there are no material differences between the NCP and the various NCL.

CENCyA's policy towards international accounting standard setting

47.  CENCyA is required to ensure that accounting (and auditing) standards in Argentina generally move in line with international developments. CENCyA considers the IAS to be the main source of accounting standards and, in recent years, has brought its standards substantially closer to IAS.22

48.  In 1997, CENCyA compared the NCP against IAS and determined that most of the remaining differences should be eliminated. Since then, eight amendments to the NCP have been brought into effect. Additionally, CENCyA is seeking final approval to add a number of IASs to the NCP in areas where there are no pre-existing Argentine standards.

49.  CENCyA believes, however, that differences from IASs should remain in nine areas. In two of these it is believed that the NCP deals with issues not addressed by the IAS.

Promulgation and enforcement of accounting standards

50.  Argentina's Commerce Code requires all companies 23 to provide comprehensive annual reports, while publicly traded companies are also required to produce quarterly statements. Both annual and quarterly statements must comply with NCP.

51.  Enforcement of accounting standards is the responsibility of the Consejos and the individual official regulatory agencies responsible for the various sectors (such as the CNV— see Section VI on Securities Market Regulation). Failure to comply with NCP exposes accountants to disciplinary action by the Consejos and companies to penalties by regulatory agencies. The Consejos have established Special Legal Committees which routinely review (randomly selected) accounts for compliance with NCP. They also investigate specific complaints.

IX.  Auditing Practices24

This section is a self assessment on the part of the authorities and was not independently verified by IMF staff. It is not therefore a ROSC.

Setting auditing standards in Argentina

52.  As with accounting standards, auditing standards in Argentina are set by CENCyA, the Special Committee on Accounting and Auditing Standards (see Section VIII). This standard-setting role is recognized in the law governing the activity of the Consejos Profesionales and the Federaciēn de Consejos. The FACPCE, through CENCyA, represents Argentina on the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC).

53.  Financial statements must be issued on an annual basis (more frequent for public companies) and must be accompanied by an audit opinion. The Consejos Profesionales are required to ensure that these opinions are prepared using the NCP as a basis.

CENCyA's policy towards international auditing standards

54.  While auditing standards in Argentina are broadly consistent with IFAC's International Standards on Auditing (ISA)25 , they lack the detail included in the ISA. CENCyA has commenced a program to introduce greater detail into its auditing standards, drawing on the ISA. CENCyA expects that the majority of the 192 separate requirements of the ISA will eventually be introduced.

Promulgation and enforcement of auditing standards

55.   The Consejos Profesionales are responsible for licensing, investigating and disciplining auditors. Licensed auditors are required to abide by CENCyA's auditing standards. Failure to do so can result in civil action by the Consejos, ranging from a warning to the withdrawal of the licence to act as an auditor. The Consejos monitor auditing practices through random compliance checks and also investigate issues brought to their attention.

1An assessment of Argentine practices against the full set of 25 Basle Core Principles is beyond the scope of this report.

2Transition plans are submitted by SDDS subscribers outlining the steps to be taken with respect to statistical practices for a particular data category in order to come into observance of the SDDS requirements for the category.

3A flexibility option allows a subscriber to disseminate data with lower frequency (periodicity) or with greater lag (timeliness), or both, than prescribed for the data category under the SDDS. The SDDS allows all subscribers two flexibility options on an ongoing basis. The Executive Board of the IMF has agreed to provide subscribers with an additional temporary flexibility option to smooth transition to the observance of the SDDS. This temporary option expires at the end of 1999.


5The blank questionnaire, and a self-evaluation report also prepared by IMF staff, are available on the IMF external web site ( ).

6See the preliminary draft Code of Good Practices on Transparency of Monetary and Financial Policies as set out in Making Transparency Transparent: An Australian Assessment ( This draft is in the process of being revised.

7This section has been prepared by Fund staff on the basis of information provided by the authorities.

8For more information, see the BIS web site at

9This section has been prepared by Fund staff on the basis of information provided by the authorities.

10As noted in Section IV, the BCRA is an autonomous agency, not subject to orders from the Executive Branch.

11See also Section IV of this paper on Transparency of Monetary and Financial Policy.

12The original plan for these ratings would have seen them published on bulletin boards and fixed-term deposit slips. It was subsequently decided that these ratings should be made available on request.


14The Chairman of the CNV is the current Chairman of IOSCO's Executive Committee. For more information on IOSCO standards see


16Laws 17.418 (insurance contracts), 20.091 (insurance companies and control), and 22.400 (insurance agents and brokers).

17A gap (with respect to the finances of owners and managers of insurance companies) was detected but has now been corrected with new regulations.

18In the few cases where companies have invested in derivatives, the Superintendency has analyzed these on an ad hoc basis.

19While international conventions are the only possible legal mechanism for the exchange of information under Argentine law, the authorities report that there are significant limitations on the information that can be shared, particularly if a judicial process is underway.


21Representatives of official agencies—including the Central Bank, the National Securities Commission, and the Inspectorate General of Justice—as well as business and academic representatives, are invited to attend CENCyA meetings.

22For more information about IASs see the web site at

23Only individually-owned firms are exempt from this requirement.


25 More information on IFAC, the IAPC and ISAs is available at