Minimum cash and minimum capital

12 Months Ended

Dec. 31, 2023

Minimum Cash And Minimum Capital [Abstract]

44. Minimum cash and minimum capital

a) Minimum cash

The BCRA establishes different regulations to be observed by financial institutions, mainly regarding solvency levels, liquidity and credit assistance levels.

Minimum cash regulations set forth an obligation to keep liquid assets in relation to deposits and other obligations recorded for each period on an individual basis. The items included for the purpose of meeting that requirement are detailed below:


Accounts	December 31, 2023		December 31, 2022
Balances at the BCRA
BCRA – current account - not restricted		358,900,596		502,282,567
BCRA – special guarantee accounts – restricted		96,926,260		43,180,603

S UBTOTAL		455,826,856		545,463,170

Argentine Treasury Bonds in pesos, 0.7% Baldar Private rate. Maturity 11-23-2027		14,771,877		37,662,724
Argentine Treasury Bonds in pesos. Maturity 05-23-2027		32,406,871		100,997,240
Argentine Treasury Bonds in pesos. Maturity 08-23-2025		49,502,692		—
Treasury Bonds adjusted by 4.25% CER in pesos . Maturit y 12-13-2024		218,925,057		—
Treasury Bonds adjusted by 4% CER in pesos . Matur ity 10-14-2024		189,705,541		—
Treasury Bonds adjusted by 4.25% CER in pesos . Maturity 02-14-2025		56,074,420		—
Argentine Treasury Bond in dual currency. Maturity 06-30-2024		216,222,852		—
Others		791,192		57,721,176
Liquidity Bills – BCRA		60,435,133		1,505,491,903

S UBTOTAL		838,835,635		1,701,873,043
TOTAL		1,294,662,491		2,247,336,213

b) Minimum capital

Minimum capital requirements are determined on the basis of the implicit risks to which the Group is exposed (credit risk, market risk and operational risk). The minimum capital will be the higher of the minimum capital fixed by the BCRA and the capital requirements for credit risk, market risk (requirement for daily positions in eligible instruments) and operational risk. These requirements must be complied with on both an individual and a consolidated basis.

For the purposes of calculating capital requirements, there is recognition of certain risk mitigation techniques such as collateralization, personal guarantees and credit derivatives. Provided that certain criteria are met financial institutions may opt for either the simple approach (or risk weighting substitution) or for the comprehensive approach, which allows reducing the exposure amount up to the value ascribed to the collateral.

Off-balance

sheet transactions (including loan commitments) must be converted into credit exposure equivalents through the use of credit conversion factors (CCF). The higher the chance of financing an

off-balance

sheet transaction, the higher the conversion factor will be. Then, the credit exposure equivalent is weighted based on counterparty risk.

Minimum capital must be, at least, the greater of:

•

Minimum basic capital, and

•

The sum of minimum capital required for credit risk, market risk and operational risk.

Minimum capital requirement for credit risk

will be determined as the sum of:

a) 8% of the sum of credit-risk-weighted asset transactions without delivery against payment;

b) failed delivery-against-payment transactions; and

c) requirement for counterpart credit risk in transactions with

over-the-counter

derivatives.

The sum of (a), (b) and (c) is multiplied by a coefficient which varies from 1 to 1.19 based on the rating the Bank is granted by BCRA.

Minimum Capital Requirement for Market Risk:

BCRA imposes additional minimum capital requirements in relation to market risk associated with positions held by financial institutions in “local assets”, “foreign assets”, “foreign currency” and “gold”, including derivatives bought or sold on such positions.

The positions under consideration must be separated according to the currency of issue of each instrument, regardless of the issuer’s residence. In the cases of assets expressed in foreign currency, the Group must consider the risk for two positions: that which corresponds to the assets and the position in foreign currency, the relevant capital requirement being determined on the basis of the latter. The value of all positions will be expressed in pesos by using the reference exchange rate published by the BCRA for the U.S. dollar, after application of the swap rate corresponding to the other currencies.

Minimum Capital Requirement for Operational Risk:

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The definition includes legal risk but excludes strategic and reputational risk. Financial institutions must establish a system for the management of operational risk that includes policies, processes, procedures and the structure for their adequate management.

Any defects of application derived from the requirement of additional capital will not make the financial institution fall into noncompliance with the Minimum Capital Regulations, even if they are not allowed to distribute cash dividends and pay fees, ownership interest or bonuses originated in the bank’s distribution of results.

The breakdown of minimum capital at consolidated level is detailed below:


Minimum capital requirements	December 31, 2023		December 31, 2022
Credit risk		222,092,365		219,153,734
Operational risk		90,508,105		88,131,816
Market risk		6,537,813		4,611,870
Incremental requirement (1)		17,505,613		—
Total capital		1,140,647,877		958,835,096

Excess capital		804,003,981		646,937,676

(1)

The increase observed in the minimum capital requirement for credit risk originates from the failure to comply with the maximum limit established by the BCRA for financing the

non-financial

public sector for 15 days in the month of December 2023, As established by the regulations, this

non-compliance

causes the increase in the minimum capital requirement for credit risk for an amount equivalent to 100% of the excess the relationship, starting from the month in which the breaches are recorded and as long as they remain, In the case of credit relationships, the calculation of the set aside will be carried out on the basis of the monthly average of the daily excesses, As of the date of issuance of these

Consolidated

Financial Statements, the aforementioned situation was regularized