BMA 20-F DEF-14A Report Dec. 31, 2010 | Alphaminr
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BMA 20-F Report ended Dec. 31, 2010

Balance Sheet
Cash Flow
Income Statement
Debt
20-F 1 c16508e20vf.htm FORM 20-F Form 20-F
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
o Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
or
þ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2010
or
o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from to
or
o Shell Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of the event requiring this shell company report.
Commission file number: 001-32827
BANCO MACRO S.A.
(Exact Name of Registrant as Specified in its Charter)
Macro Bank, Inc.
(Translation of registrant’s name into English)
Argentina
(Jurisdiction of incorporation or organization)
Sarmiento 447, City of Buenos Aires, Argentina
(Address of registrant’s principal executive offices)
Jorge Scarinci
Financial and Investor Relations Manager
Banco Macro S.A.
401 Sarmiento, 3 th Floor
Buenos Aires—C1041AAI, Argentina
Telephone: (+54-11-5222-6730)
Facsimile: (+54-11-5222-7826)
(Name, telephone, e-mail and/or facsimile member and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
American Depositary Shares New York Stock Exchange
Class B ordinary shares, par value Ps. 1.00 per share New York Stock Exchange(*)
9.75% Fixed/Floating Rate Non-Cumulative Junior
Subordinated Bonds Due 2036
8.50% Notes Due 2017
10.750% Argentine Peso-Linked Notes Due 2012
(*)
Ordinary shares of Banco Macro S.A. are not listed for trading but only in connection with the registration of American Depositary Shares which are evidenced by American Depositary Receipts.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
9.75% Fixed/Floating Rate Non-Cumulative Junior Subordinated Bonds Due 2036
8.50% Notes Due 2017
10.750% Argentine Peso-Linked Notes Due 2012
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
11,235,670 Class A ordinary shares, par value Ps. 1.00 per share
583,249,498 Class B ordinary shares, par value Ps. 1.00 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o
International Financial Reporting o
Other þ
Standards as issued by the International Accounting Standards Board o
If “Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 o Item 18 þ
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 23 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court.
Yes o No o
Please send copies of notices and communications from the Securities and Exchange Commission to:
Hugo N. L. Bruzone Andrés de la Cruz
Bruchou, Fernández Madero & Lombardi Cleary Gottlieb Steen & Hamilton LLP
Ing. Butty 275, 12 th Floor One Liberty Plaza
C1001AFA — Buenos Aires, Argentina New York, New York 10006-1470

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Exhibit 12.1
Exhibit 12.2
Exhibit 13.1
Exhibit 13.2

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Certain defined terms
In this annual report, we use the terms “the registrant,” “we,” “us,” “our” and the “Bank” to refer to Banco Macro S.A. and its subsidiaries, on a consolidated basis. References to “Banco Macro” refer to Banco Macro S.A. on an individual basis. References to “Class B shares ” refer to shares of our Class B common stock and references to “ADSs” refer to American depositary shares representing our Class B shares, except where the context requires otherwise. References to our “2036 Notes” refer to our 9.75% Fixed/Floating Rate Non-Cumulative Junior Subordinated Bonds due 2036. References to our “2017 Notes” refer to our 8.50% Notes due 2017. References to our “2012 Notes” refer to our 10.750% Argentine Peso-Linked Notes due 2012.
The term “Argentina” refers to the Republic of Argentina. The terms “Argentine government” or the “government” refer to the federal government of Argentina, the term “Central Bank” refers to the Banco Central de la República Argentina, or the Argentine Central Bank, the term “Superintendency” refers to the Superintendencia de Entidades Financieras y Cambiarias or the Superintendency of Financial and Exchange Entities, the term “CNV” refers to the Comisión Nacional de Valores, or the Argentine Securities Commission, the term “BCBA” refers to the Bolsa de Comercio de Buenos Aires, or the Buenos Aires Stock Exchange and the term “IGJ” refres to the Inspección General de Justicia, or Public Registry of Commerce.
The terms “U.S. dollar” and “U.S. dollars” and the symbol “US$” refer to the legal currency of the United States. The terms “peso” and “pesos” and the symbol “Ps.” refer to the legal currency of Argentina. “U.S. GAAP” refers to generally accepted accounting principles in the United States, “Argentine GAAP” refers to generally accepted accounting principles in Argentina and “Central Bank Rules” refers to the accounting and other regulations of the Central Bank. The term “GDP” refers to gross domestic product and all references in this annual report to GDP growth are to real GDP growth.
The term “CER”, or benchmark stabilization coefficient, is an index issued by the Argentine government which is used to adjust value of credits and deposits . This index is based on the consumer price index published by the National Institute of Statistics and Census (“INDEC”).
Presentation of certain financial and other information. Accounting practices
We maintain our financial books and records in pesos and prepare and publish our consolidated financial statements in Argentina in conformity with Central Bank Rules, which differ in certain significant respects from U.S. GAAP and, to a certain extent, from Argentine GAAP. Our consolidated financial statements contain a description of the principal differences between Central Bank Rules and Argentine GAAP. Under Central Bank Rules, our financial statements were adjusted to account for the effects of wholesale-price inflation in Argentina for the periods through February 28, 2003. For the periods subsequent to February 28, 2003, the inflation adjustments were no longer applied to our financial statements under Central Bank Rules. Given the instability and regulatory and economic changes that Argentina has experienced since the beginning of the economic crisis in 2001 as well as our acquisitions, the financial information set forth in this annual report may not be fully indicative of our anticipated results of operations or business prospects after the dates indicated. These factors also affect comparability among periods.
Our consolidated financial statements consolidate the financial statements of the following companies:
•
Banco del Tucumán S.A. (“Banco del Tucumán”)
•
Banco Privado de Inversiones S.A. (“Banco Privado”)
•
Macro Bank Limited (an entity organized under the laws of Bahamas)
•
Macro Securities S.A. Sociedad de Bolsa
•
Sud Inversiones & Análisis S.A.
•
Macro Fondos S.G.F.C.I.S.A.
In May 2006 and August 2006 we acquired Banco del Tucumán and Nuevo Banco Bisel S.A. (“Nuevo Banco Bisel”), respectively, which significantly enhanced the size and scope of our business. Due to these acquisitions, our results of operations are not entirely comparable between the periods presented; in particular, the results of operations of Banco del Tucumán and Nuevo Banco Bisel are consolidated with ours from May 5, 2006 and August 11, 2006, respectively, (in the case of Nuevo Banco Bisel through August 18, 2009, date on which it merged with and into us).
On September 20, 2010 we acquired Banco Privado. Our results of operations for the year ended December 31, 2010 consolidate the results of Banco Privado from the date of the acquisition.
Our audited consolidated financial statements as of and for the three years ended December 31, 2010 included in this annual report have been reconciled to U.S. GAAP. See note 32 to our audited consolidated financial statements as of and for the three years ended December 31, 2010 for a reconciliation of our financial statements to U.S. GAAP.

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Our financial statements in conformity with Central Bank Rules are sent on a monthly basis to the Central Bank and are published on its website www.bcra.gov.ar . In addition, we also file quarterly and annual financial statements with the Central Bank, the CNV and the BCBA.
Rounding
Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
Market position
We make statements in this annual report about our competitive position and market share in, and the market size of, the Argentine banking industry. We have made these statements on the basis of statistics and other information from third-party sources that we believe are reliable. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications.
Our internet site is not part of this annual report
We maintain an Internet site at www.macro.com.ar . Information contained in or otherwise accessible through this website is not a part of this annual report. All references in this annual report to this Internet site are inactive textual references to this URL, or “uniform resource locator” and are for your informational reference only.
Cautionary statement concerning forward-looking statements
This annual report contains certain statements that we consider to be “forward-looking statements”. We have based these forward-looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:
•
changes in general economic, business, political, legal, social or other conditions in Argentina and worldwide;
•
effects of the global financial markets and economic crisis;
•
deterioration in regional business and economic conditions;
•
inflation;
•
fluctuations and declines in the exchange rate of the peso;
•
changes in interest rates and the cost of deposits;
•
government regulation;
•
adverse legal or regulatory disputes or proceedings;
•
credit and other risks of lending, such as increases in defaults by borrowers and other delinquencies;
•
increase in the provisions for loan losses;
•
fluctuations and declines in the value of Argentine public debt;
•
decrease in deposits, customers loss and revenue losses;
•
competition in banking, financial services and related industries and the loss of market share;
•
cost and availability of funding;
•
technological changes, changes in consumer spending and saving habits, and inability to implement new technologies; and
•
the risk factors discussed under ‘‘Item 3.D — Risk factors’’.
The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast” and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update publicly or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors. In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and are not guarantees of future performance.

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Sections of this annual report that by their nature contain forward-looking statements include, but are not limited to, Item 3. “Key Information,” Item 4. “Information on the Bank,” Item 5. “Operating and Financial Review and Prospects” and Item 11. “Quantitative and Qualitative Disclosure About Market Risk”.
PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2.
Offer Statistics and Expected Timetable
Not applicable.
Item 3.
Key Information
A. Selected Financial Data
The following tables present summary historical consolidated financial data for each of the periods indicated. You should read this information in conjunction with our consolidated financial statements and related notes, and the information under Item 5 — “Operating and Financial Review and Prospects” included elsewhere in this annual report.
We have derived our selected consolidated financial data for the years ended December 31, 2009 and 2010 from our audited consolidated financial statements included in this annual report. We have derived our selected financial data for the years ended on December 31, 2006, 2007 and 2008 from our audited consolidated financial statements not included in this annual report and it was restated for comparative purposes.
Due to the acquisitions we have made, our results of operations are not entirely comparable between the periods presented; in particular, we acquired Banco del Tucumán in May 2006 and Nuevo Banco Bisel in August 2006. The results of operations of Banco del Tucumán and Nuevo Banco Bisel are consolidated with ours from May 5, 2006 and August 11, 2006, respectively.
On August 18, 2009 Nuevo Banco Bisel merged with and into us and we therefore ceased consolidating its results of operations. As a result of the merger with Nuevo Banco Bisel, we made certain reclassifications in Banco Macro’s consolidated financial statements for the years ended December 31, 2008, 2007 and 2006, in order to make them comparable to Banco Macro’s current consolidated financial statements.
Additionally, during 2010 we acquired Banco Privado and we consolidated our results with the results of operations of this entity from September 20, 2010.
Solely for the convenience of the reader, the reference exchange rate for U.S. dollars for December 31, 2010, as reported by the Central Bank was Ps.3.9758 to US$1.00. See Item 10. “Additional Information — Exchange Controls” for additional information regarding peso/U.S. dollar exchange ratios.
Year Ended December 31,
2006 (1) 2007 2008 (2) 2009 (2) 2010 (3)
(in thousands of pesos, except for number of shares,
net income per share and dividends per share)
Consolidated Income Statement
Central Bank Rules:
Financial income
1,155,207 1,890,422 3,029,860 3,860,452 3,728,438
Financial expense
(394,897 ) (805,265 ) (1,342,062 ) (1,511,607 ) (1,330,170 )
Gross intermediation margin
760,310 1,085,157 1,687,798 2,348,845 2,398,268
Provision for loan losses
(59,773 ) (94,717 ) (297,606 ) (197,512 ) (215,040 )
Service charge income
452,232 662,326 891,700 1,050,275 1,324,541
Service charge expense
(93,323 ) (150,282 ) (172,401 ) (226,599 ) (285,365 )
Administrative expenses
(679,874 ) (997,466 ) (1,270,002 ) (1,522,420 ) (1,917,314 )
Other income
234,807 183,525 188,450 121,977 167,523
Other expense
(109,900 ) (98,915 ) (103,328 ) (158,294 ) (89,540 )
Minority Interest in subsidiaries
(3,178 ) (2,083 ) (3,354 ) (5,092 ) (6,868 )
Income Tax
(76,961 ) (92,345 ) (261,207 ) (659,250 ) (365,775 )
Net income
424,340 495,200 660,050 751,930 1,010,430
Net income per share (4)
0.64 0.72 1.00 1.26 1.70
Dividends per share (5)
0.15 0.25 0.25 0.35 0.85
Dividends per share in US$(5)
0.05 0.08 0.07 0.09 0.21
Number of shares outstanding (in thousands)
683,943 683,979 608,437 594,485 594,485

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Year Ended December 31,
2006 (1) 2007 2008 (2) 2009 (2) 2010 (3)
(in thousands of pesos, except for number of shares,
net income per share and dividends per share)
U.S. GAAP: (6)
Net income before extraordinary items
360,879 385,537 631,171 993,769 865,215
Extraordinary Gain
41,705
Less: Net income attributable to the non-controlling interest
(2,920 ) (1,497 ) (2,928 ) (7,484 ) (5,943 )
Net income attributable to the controlling interest
399,664 384,040 628,243 986,285 859,272
Net income per share before extraordinary item(s)
0.54 0.56 0.95 1.66 1.45
Net income per share for extraordinary gain
0.06
Total net income per share (7)
0.60 0.56 0.95 1.66 1.45
Weighted average number of shares outstanding (in thousands)
666,478 683,952 658,124 595,634 594,485
(1)
The results of operations of Banco del Tucumán and Nuevo Banco Bisel are consolidated with Banco Macro from May 5 and August 11, 2006, respectively (in the case of Nuevo Banco Bisel through August 18, 2009, date on which it merged with and into us).
(2)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(3)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
(4)
Net income in accordance with Central Bank Rules divided by weighted average number of outstanding shares.
(5)
Includes cash dividends approved by the shareholders’ meetings for each of such fiscal years.
(6)
See note 32 to our audited consolidated financial statements for the year ended December 31, 2010 for a summary of significant differences between Central Bank Rules and U.S. GAAP.
(7)
Net income in accordance with U.S. GAAP divided by weighted average number of shares outstanding.
As of December 31,
2006 (1) 2007 2008 (2) 2009 (2) 2010 (3)
(in thousands of pesos)
Consolidated Balance Sheet
Central Bank Rules:
Assets
Cash and due from banks and correspondents
2,626,908 3,117,426 3,523,897 5,016,192 5,202,004
Government and private securities
3,222,955 3,914,536 4,708,649 6,901,041 7,030,074
Loans:
to the non-financial government sector
774,273 732,481 744,507 206,484 336,430
to the financial sector
436,930 161,702 80,423 90,916 155,701
to the non-financial private sector and foreign residents
5,524,483 9,335,656 10,893,376 11,247,452 15,932,882
Allowances for loan losses
(208,581 ) (220,422 ) (438,348 ) (448,045 ) (514,910 )
Other assets
2,106,186 2,682,167 2,917,768 3,845,198 5,382,226
Total assets
14,483,154 19,723,546 22,430,272 26,859,238 33,524,407
Average assets
11,796,936 17,691,769 21,865,952 23,964,067 28,078,290
Liabilities and shareholders’ equity
Deposits:
from the non-financial government sector
1,295,630 1,774,121 3,937,961 3,613,924 5,216,109
from the financial sector
5,078 13,310 22,438 14,052 15,776
from the non-financial private sector and foreign residents
8,770,309 11,803,718 11,867,958 14,964,890 18,175,508
Other liabilities from financial intermediation and other liabilities
1,492,949 2,813,065 3,157,646 4,222,152 5,224,974
Provisions
77,738 101,333 83,004 88,275 105,830
Subordinated corporate bonds
507,844 490,695 521,681 572,473 598,470
Items pending allocation
2,052 1,644 2,105 3,987 7,399
Minority interest in subsidiaries
11,143 12,640 15,568 20,684 27,499
Total liabilities
12,162,743 17,010,526 19,608,361 23,500,437 29,371,565
Shareholders’ equity
2,320,411 2,713,020 2,821,911 3,358,801 4,152,842
Average shareholders’ equity
1,920,559 2,461,668 2,778,572 3,055,736 3,733,181
U.S. GAAP: (4)
Shareholders’ equity attributable to the controlling interest
1,956,242 2,222,361 2,221,199 3,269,875 3,754,434
Non-controlling interests
11,143 12,640 15,568 23,052 28,995
Shareholders’ equity
1,967,385 2,235,001 2,236,767 3,292,927 3,783,429
(1)
The results of operations of Banco del Tucumán and Nuevo Banco Bisel are consolidated with Banco Macro from May 5 and August 11, 2006, respectively (in the case of Nuevo Banco Bisel through August 18, 2009, date on which it merged with and into us).
(2)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(3)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
(4)
See note 32 to our audited consolidated financial statements for the year ended December 31, 2010 for a summary of significant differences between Central Bank Rules and U.S. GAAP.

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As of and for the year ended December 31,
2006 (1) 2007 2008 (2) 2009 (2) 2010 (3)
Selected consolidated ratios:
Profitability and performance
Net interest margin (%) (4)
7.11 6.85 7.93 12.56 11.15
Fee income ratio (%) (5)
37.30 37.90 34.57 30.90 35.58
Efficiency ratio (%) (6)
56.07 57.08 49.23 44.79 51.50
Ratio of earnings to fixed charges (excluding interest on deposits) (7)
6.76 x 4.28 x 6.00 x 10.65 x 11.42 x
Ratio of earnings to fixed charges (including interest on deposits) (8)
2.49 x 1.88 x 1.80 x 2.06 x 2.24 x
Fee income as a percentage of administrative expense (%)
66.52 66.40 70.21 68.99 69.08
Return on average equity (%)
22.09 20.12 23.76 24.61 27.07
Return on average assets (%)
3.60 2.80 3.02 3.14 3.60
Liquidity
Loans as a percentage of total deposits (%)
66.88 75.27 74.03 62.09 70.17
Liquid assets as a percentage of total deposits (%) (9)
61.92 51.25 48.80 53.70 40.71
Capital
Total equity as a percentage of total assets (%)
16.02 13.76 12.58 12.51 12.39
Regulatory capital as a percentage of risk-weighted assets (%)
31.31 26.81 22.95 27.38 24.74
Asset Quality
Non-performing loans as a percentage of total loans (%) (10)
2.01 1.55 2.64 3.25 2.11
Allowances as a percentage of total loans
3.10 2.15 3.74 3.88 3.13
Allowances as a percentage of non-performing loans (%) (10)
154.25 138.77 141.81 119.45 148.90
Differences due to court orders ( Amparos) as a percentage of equity (%)
3.22 3.72 1.26 1.50 1.32
Operations
Number of branches
433 427 416 408 404
Number of employees
7,585 7,914 7,973 7,863 8,209
(1)
The results of operations of Banco del Tucumán and Nuevo Banco Bisel are consolidated with Banco Macro from May 5 and August 11, 2006, respectively (in the case of Nuevo Banco Bisel through August 18, 2009, date on which it merged with and into us).
(2)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(3)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
(4)
Net interest income divided by average interest earning assets.
(5)
Service charge income divided by the sum of gross intermediation margin and service charge income.
(6)
Administrative expenses divided by the sum of gross intermediation margin and service charge income.
(7)
For the purpose of computing the ratio of earnings to fixed charges excluding interest on deposits, earnings consist of income before income taxes plus fixed charges; fixed charges excluding interest on deposits consist of gross interest expense minus interest on deposits.
(8)
For the purpose of computing the ratio of earnings to fixed charges including interest on deposits, earnings consist of income before income taxes plus fixed charges; fixed charges including interest on deposits is equal to gross interest expense.
(9)
Liquid assets include cash, LEBACs and NOBACs (considered cash equivalents under Central Bank Rules), interbanking loans and overnight loans to highly rated companies.
(10)
Non-performing loans include all loans to borrowers classified as “3- troubled/medium risk”, “4-with high risk of insolvency/high risk”, “5-irrecoverable” and “6-irrecoverable according to Central Bank Rules” under the Central Bank loan classification system.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider the risks described below with all of the other information included in the annual report before deciding to invest in our Class B shares or our ADSs or our notes. If any of the following risks actually occurs,it may materially harm our business and our financial condition and results of operations. As a result, the market price of our Class B shares or our ADSs or our notes could decline and you could lose part or all of your investment.
Investors should carefully read this annual report in its entirety. They should also take into account and evaluate, among other things, their own financial circumstances, their investment goals, and the following risk factors.
Risks relating to Argentina
Argentina’s current growth may not be sustainable
The Argentine economy has experienced significant volatility in recent decades, with periods of low or negative growth, high inflation and currency devaluation. During 2001 and 2002, Argentina went through a period of severe political, economic and social crisis. Although the economy has recovered significantly since then, uncertainty remains as to whether the current growth is sustainable, since it has depended, to a significant extent, on favorable exchange rates, high commodity prices and excess capacity.

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The Argentine economy showed a recovery during 2010 with a GDP growth of 9.2%. This trend might be affected by the following reasons:
• incomplete normalization of the financial systems of the main developed economies and recent events in the U.S. and European financial markets;
• abrupt changes in the monetary and fiscal policies of the main economies worldwide;
• reversal of capital flows due to domestic and international uncertainty;
• the payment capacity of the Argentine public sector and the possibilities of procuring international financing;
• increase in inflation affecting competitiveness and economic growth;
• poor development of the credit market
• insufficient levels of investment;
• evolution of the exchange rate;
• increase in public expenditure affecting the economy and the fiscal accounts;
• possible reduction or reversal in the trade balance;
• significant decrease in prices of main commodities exported by Argentina;
• wage and price controls;
• political and social tensions; and
• presidential and congress elections.
Substantially all our operations, properties and customers are located in Argentina. As a result, our business is to a very large extent dependent upon the political, social and economic conditions prevailing in Argentina.
The Argentine economy could be adversely affected by economic developments in the global markets
Financial and securities market in Argentina are influenced, to varying degrees, by economic and market conditions in other global markets.
The crisis in the United States in 2008 and the recession and fiscal deficits in Euro-zone countries have caused a downturn in the world’s main economies. Liquidity restrictions in the financial systems of these countries that started during the second semester of 2008 caused a credit squeeze that resulted in a sharp fall in the global economy. The depth, extension and speed of the credit squeeze generated a rapid response by the countries of the G20 through monetary and fiscal expansive policies designed to avoid a long and violent depression.
In that sense, the recession in the second semester of 2008 and the first semester of 2009 was short but severe. Both the United States economy and the European Union economy recovered, although such recovery was fueled by a bold step-up in public sector spending and expansive monetary policies.
More recently, several European economies have revealed significant macroeconomic imbalances. The financial markets have reacted adversely curtailing the ability of certain of these countries to refinance their outstanding debt. An interruption in the recovery of growth in the principal world economies could threaten the global economy as a whole, affecting the main economies and emergent countries including Argentina.
In addition, the current instability in several Middle East and African countries and the effects of natural disasters in Japan could have a negative impact in the global economy.
Global economic downturns and related instability have had, and may continue to have, a negative effect on economic growth in Argentina. A prolonged slowdown in economic activity in Argentina would adversely affect our financial condition and results of operations.
The financial systems of the main developed economies remain subject of uncertainty and might cause a reversal of the capital flows
Domestic as well as international uncertainty impacts adversely on Argentina’s ability to attract capital. Continued or worsening disruption and volatility in the global financial markets could have a material adverse effect on the Argentine financial market.

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During 2010 Argentina recorded capital inflows, after two years (2008 and 2009) of an average annual outflow of approximately US$8 million. This change in trend was driven by the improved global liquidity resulting from the application of expansionary monetary policies in the United States and Europe and low interest rates, in addition to the predictability as to the payment of the Argentine sovereign debt.
An abrupt change in the economic policies of the developed countries or changes in domestic policy might reverse the flow of capitals towards Argentina. Such changes would negatively impact the liquidity of the local market and the operations of the Bank.
Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and public policies and foster economic growth
In the first half of 2005, Argentina restructured part of its sovereign debt that had been in default since the end of 2001. The Argentine government announced that as a result of the restructuring, it had approximately US$126.6 billion in total outstanding debt remaining. Of this amount, approximately US$19.5 billion are defaulted bonds owned by creditors who did not participate in the restructuring. Some bondholders in the United States, Italy and Germany have filed legal actions against Argentina, and holdout creditors may initiate new suits in the future.
The Argentine government cancelled all of its pending debt with the IMF on January 3, 2006.
On September 2, 2008, by means of Decree No. 1,394, Argentina announced its decision to pay its debt to its creditor nations members of the Paris Club. At the same time, by means of a press release issued on September 18, 2008, the Paris Club announced that it accepted Argentina’s decision. However, negotiations came to a halt due to the international financial crisis affecting economies worldwide at such time and remain delayed. Argentina resumed negotiations in December 2010.
On February 2, 2009, by means of Joint Resolutions 8/2009 and 5/2009 of the Secretariat of Economy and the Secretariat of Finance of the National Ministry of Economy and Public Finances, launched the local tranche of the exchange of certain liabilities due between 2009 and 2012 (See Item 5.A “Operating Results”) for new bonds. The government announced that 97% of the holders had accepted such exchange proposal, representing Ps. 15.1 billion of an aggregate domestic tranche of the debt due in 2009, 2010 and 2011 for a total of Ps. 15.6 billion. The new bonds delivered under the exchange are due as from 2014.
Afterwards, on November 18, 2009, the Argentine Federal Congress approved a suspension of the “lock law” (which was supposed to prevent the government from reopening the defaulted sovereign debt exchange offer), and therefore Argentine government was allowed to reopen the exchange offer to holdouts. On May, 2010, Argentina launched a new exchange offer for the debt that had not been included in the restructuring carried out in 2005. The results of the exchange offer were announced in June 2010 with 67% of the holdouts having accepted.
Argentina’s past default and its failure to completely restructure its remaining sovereign debt and fully negotiate with the holdout creditors may prevent Argentina from re-entering the international capital markets. Furthermore, Argentina’s inability to access the international capital markets in the medium and long term could have an adverse impact on our own ability to access international credit markets.
Litigation initiated by holdout creditors may result in material judgments against the Argentine government and could result in attachments of or injunctions relating to assets of Argentina that the government intended for other uses. As a result, the Argentine government may not have all the necessary financial resources to implement reforms and foster growth, which could have a material adverse effect on the country’s economy, and consequently, our business, results of operations and financial condition.
Argentina is subject to litigation by foreign shareholders of Argentine companies, which have resulted and may result in adverse judgments or injunctions against Argentina’s assets and limit its financial resources
Foreign shareholders of certain Argentine companies have filed claims in excess of US$17 billion in the International Center for the Settlement of Investment Disputes (“ICSID”), alleging that certain Argentine government measures are inconsistent with the fair and equitable treatment standards set forth in various bilateral treaties to which Argentina is a party. To date, the ICSID has rendered decisions adverse to Argentina in several cases, such as: (i) “Aguas del Aconquija S.A.” in which the tribunal ordered Argentina to pay US$105 million to Compañía de Aguas del Aconquija S.A. and Vivendi Universal in relation to the termination of a water concession contract entered into with the Province of Tucumán; an annulment request was rejected on August 10, 2010; (ii) “CMS Gas Transmission Company” in which the tribunal ordered Argentina to pay US$133.2 million plus interest, Argentina appealed the decision which was partly annulled, but the amounts to be paid by Argentina remained unchanged; and (iii) “Azurix Corporation”, in which Argentina was ordered to pay US$165.2 million plus interest. This is one of the few cases not related to the 2002 “pesification” Argentina has brought action for annulment against this decision, which was rejected in September 2009, leaving the award unchanged. The payment of such compensations by Argentina is still pending.
Furthermore, under the United Nations Commission on International Trade Law (“UNCITRAL”) arbitration rules, arbitration tribunals have ordered Argentina (i) in December 2007, to pay US$185 million to British Gas (shareholder of Argentine gas company Metrogas); and (ii) in November 2008, to pay US$53.5 million to National Grid plc (shareholder of Argentine electricity transportation company Transener). Argentina filed with the U.S. District Court for the District of Columbia a petition to vacate both awards. The annulment of both awards was rejected by the District Court.

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Litigation, as well as ICSID and UNCITRAL claims against the Argentine government, have resulted in material judgments and may result in new material judgments against the government, and could result in attachments of or injunctions relating to assets of Argentina that the government intended for other uses. As a result, the government may not have all the necessary financial resources to implement reforms and foster growth, which could have a material adverse effect on the country’s economy, and consequently, our business, results of operations and financial condition.
Exchange controls and restrictions on transfers abroad and capital inflow restrictions have limited, and can be expected to continue to limit, the availability of international credit and may impair our ability to make payments on our obligations
Since 2002, Argentina has imposed exchange controls substantially limiting the ability of companies to retain foreign currency or make payments abroad. The initial restrictions on outflows of funds have been substantially eased, including those requiring the Central Bank’s prior authorization for the transfer of funds abroad in order to pay principal and interest on debt obligations. However, Argentina may re-impose exchange control or transfer restrictions in the future, among other things, in response to capital flight or a significant depreciation of the peso. Such restrictions would have a material adverse effect on the Argentine financial system and our financial condition and results of operations.
In addition, in June 2005, government issued Decree No. 616/05 introducing controls on capital inflows that could result in less availability of international credit. Additional controls could have a negative effect on the economy and our business if imposed in an economic environment where access to local capital is substantially constrained. Moreover, in such event, restrictions on the transfers of funds abroad may impede our ability to make dividend payments to ADS holders and payments on the notes.
A decline in the international prices for Argentina’s main commodity exports could have an adverse effect on Argentina’s economic growth
Argentina’s financial recovery from the 2001-2002 local crisis occurred in a context of price increases for Argentina’s commodity exports, such as soy. High commodity prices have contributed to the increase in the Argentine exports since the third quarter of 2002 as well as in tax revenues from export withholdings.
The prices of commodities that Argentina exports decreased during the 2008 global economic crisis and may decline in the future. This would have a negative impact on the levels of government revenues and the government’s ability to service its sovereign debt, and could either generate recessionary or inflationary pressures, depending on the Government’s reaction. Either of these results would adversely impact Argentina’s economy and, therefore, our business, financial condition and results of operations.
High inflation may adversely affect the Argentine long-term credit markets as well as the Argentine economy in general
Since 2007 the inflation index has been extensively discussed in the Argentine economy. The intervention of the Argentine government in the INDEC and the change in the way the aforementioned inflation index is measured has resulted in disagreements between the government and private consultants as to the actual annual inflation rate.
The inflation rates according to the INDEC were 7.2% , 7.7% and 10.9% for 2008, 2009 and 2010, respectively. In the first quarter of 2011 the INDEC reported an inflation rate of 2.3%. Uncertainty surrounding future inflation rates has slowed the rebound in the long-term credit market. Private estimates, on average, refer to annual rates of inflation in excess of those published by INDEC.
In the past, inflation has materially undermined the Argentine economy and the government’s ability to create conditions that would permit stable growth. High inflation may also undermine Argentina’s foreign competitiveness in international markets, with the same negative effects on the level of economic activity and employment. In addition, high inflation may undermine the confidence in Argentina’s banking system in general, which would negatively and materially affect our business volumes and potentially affect our lending activities.
Significant devaluation of the peso against the U.S. dollar may adversely affect the Argentine economy as well as our financial performance
Despite the positive effects of the real depreciation of the peso on the competitiveness of certain sectors of the Argentine economy, it has also had a far-reaching negative impact on the Argentine economy and on the financial condition of businesses and individuals. The devaluation of the peso has had a negative impact on the ability of Argentine businesses to honor their foreign currency-denominated debt, has led to very high inflation initially, significantly reduced real wages, had a negative impact on businesses whose success is dependent on domestic market demand, such as utilities and the financial industry, and adversely affected the government’s ability to honor its foreign debt obligations.
If the peso devalues significantly, all of the negative effects on the Argentine economy related to such devaluation could recur, with adverse consequences to our business. In addition, such devaluation could affect client’s confidence, as well as loan demand.
In particular, our results of operations are sensitive to changes in the Ps./US$ exchange rate because our primary assets and revenues are denominated in pesos while around 15% of our loan portfolio and 17% of our total deposits are denominated in foreign currencies.

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Significant appreciation of the peso against the U.S. dollar may adversely affect the Argentine economy
A substantial increase in the value of the peso against the U.S. dollar also presents risks for the Argentine economy. The appreciation of the peso against the U.S. dollar negatively impacts the financial condition of entities whose foreign currency-denominated assets exceed their foreign currency-denominated liabilities.
In addition, in the short term, a significant real appreciation of the peso would adversely affect exports. This could have a negative effect on GDP growth and employment as well as reduce the Argentine public sector’s revenues by reducing tax collection in real terms, given its current heavy reliance on taxes on exports. This may have a material adverse effect in our financial condition and results of operations.
High public expenditure could result in long lasting adverse consequences for the Argentine economy
The current Argentine macroeconomic model consists in maximizing the rate of economic growth through the end of 2011, maintaining a policy of sharp increase in public expenditure. In this regard, in 2010, the Argentine government strengthened its expansionary fiscal policy, increasing primary expenses by 34%.
In the past, the government resorted to the international capital markets to source part of its funding requirements. Other sources of liquidity have included local financial institutions. We cannot assure you that the government will not seek to finance its deficit by gaining access to the liquidity available in the local financial institutions. Government initiatives that increase our exposure to the public sector would affect our liquidity and assets and impact negatively on clients’ confidence.
A further deterioration in fiscal accounts could negatively affect the government’s ability to access the international financing markets.
Argentine government measures to preempt, or in response to, social unrest may adversely affect the Argentine economy
Despite Argentina’s ongoing economic recovery and relative stabilization, the social and political tensions and high levels of poverty and unemployment continue. Future Argentine government policies to preempt, or in response to, social unrest may include expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of creditors’ rights, new taxation policies, including royalty and tax increases and retroactive tax claims and changes in laws and policies affecting foreign trade and investment. Such policies could destabilize the country and adversely and materially affect the economy, and thereby our business.
Increased uncertainty due to the upcoming Presidential and Congress elections could have an adverse effect on the Argentine economy
Presidential and Congress elections in Argentina are scheduled to take place on October 23, 2011. There is a general uncertainty as to who will win the elections and what impact the outcome could produce on the Argentine economy. The aforementioned uncertainty, the probable outcomes of the general elections and the measures taken in its aftermath could have an adverse effect on financial institutions and the Argentine economy as a whole.
Risks relating to the Argentine financial system
The health of Argentina’s financial system depends on a return of the long-term credit market, which is currently recovering at a relatively slow pace
As a consequence of the 2008 global economic crisis, the banking industry in Argentina suffered a significant slowdown. This trend was reversed by the end of 2009.
Although private sector financing increased by the end of 2009, the year ended with lower expansion. In 2010, the loan portfolio growth rate increased significantly year over year. Loans to the private sector grew by approximately 20% in 2008, 9% in 2009 and 37% in 2010.
In spite of the recovery of the credit activity, the recovery of the long-term loans market (pledged loans and mortgage loans) is recovering at a slower pace.
If longer-term financial intermediation activity fails to resume at substantial levels, the ability of financial institutions, including us, to generate profits will be negatively affected. Even though deposits in the financial system and with us are having increased since mid-2002, most of these new deposits are either sight or very short-term time deposits, creating a liquidity risk for banks engaged in long-term lending, like us, and increasing their need to depend on the Central Bank as a potential liquidity backstop.
The health of the financial system depends upon the ability of financial institutions, including us, to retain the confidence of depositors
The average total deposits of the financial system grew 20% in 2008, averaging Ps. 229,089 million. Despite the international crisis, total deposits with the financial system increased by 11% during 2009, with an average balance of Ps. 253,985 million. In 2010 the total deposits for the financial system increased by 28%, with an average balance of Ps. 325,502 million.
The average total deposits in terms of GDP represented 22.6% during 2010, compared with 20.7% and 20.8% in average during 2009 and 2008.

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In spite of the increasing trend showed during previous years, the deposit base of the Argentine financial system, including ours, may be affected in the future by adverse economic, social and political events. If depositors once again withdraw significant holdings from banks (as they did in late 2001 and early 2002 as a result of the measures then implemented by the Argentine government), there will be a substantial negative impact on the manner in which financial institutions, including us, conduct their business and on their ability to operate as financial intermediaries. International loss of confidence in the financial institutions may also affect sensibility of Argentine depositors.
The asset quality of financial institutions, including us, is still affected by the exposure to public sector debt
Financial institutions have a significant portfolio of bonds of, and loans to, the Argentine federal and provincial governments. Exposure to public sector of the financial system has decreased year after year, from a level of 48.9% in 2002 to 12.2% in 2010. Exposure to public sector debt as of December 31, 2010 represented aproximately one third of financings granted by the financial system to the private sector.
To some extent, the value of the assets held by Argentine banks, as well as their income generation capacity, is dependent on the Argentine public sector’s creditworthiness, which is in turn dependent on the government’s ability to promote sustainable economic growth in the long run, generate tax revenues and control public spending.
As of December 31, 2010, our exposure to the public sector, not including LEBACs ( Letras del Banco Central ) and NOBACs ( Notas del Banco Central ), totaled approximately Ps. 833 million, representing 2.5% of our total assets.
Our asset quality and that of other financial institutions may deteriorate if the Argentine private sector is affected by the international financial crisis
The capacity of many Argentine private sector debtors to repay their loans has deteriorated as a result of the international economic crisis, materially affecting the asset quality of financial institutions, including us. As of the end of 2008, we have consistently established large allowances for loan losses to cover the risks inherent to our private loan portfolio.
As anticipated by the Bank at the end of 2008, and following the trend of the entire financial system, financing to the private sector was affected negatively throughout 2009, closing with a portfolio quality ratio of 3.2% with a coverage ratio of 116.06%.
The financial system showed during the last months of 2009 a decline in the performance of the private sector credit portfolio, mainly due to the consumer loans and to a slight upturn of the coverage indicator.
During 2010, the ratio of the non-performing private sector lending showed a great decline from the levels reported for 2009, with a record minimum ratio of 2.1% for the financial system as a whole. Such improvement was reflected in both the consumer loan portfolio and the commercial portfolio.
The Bank’s portfolio quality ratio and coverage ratio followed the financial system’s trend standing at 2.1% and 147.2% ratios, respectively, as of December 31, 2010.
However, the current improvement may not continue, and we will likely not succeed in recovering substantial portions of loans that were provisioned. If Argentina’s recovery does not continue and the financial condition of the private sector deteriorates, we will experience an increase in our incidence of non-performing loans.
Class actions against financial entities for an indeterminate amount may adversely affect the profitability of the financial system
Certain public and private organizations have initiated class actions against financial institutions in Argentina. The Argentine National Constitution and the Consumer Protection Law contain certain provisions regarding class actions. However, their guidance with respect to procedural rules for instituting and trying class action cases is limited. Nonetheless, by means of an ad hoc doctrine construction, Argentine courts have admitted class actions in some cases, including various lawsuits against financial entities related to “collective interests” such as alleged overcharging on products, applied interest rates, advice in the sale of public securities, etc. If class action plaintiffs were to prevail against financial institutions, their success could have an adverse effect on the financial industry and on our business.
Limitations on enforcement of creditors’ rights in Argentina may adversely affect financial institutions
To protect debtors affected by the economic crisis, beginning in 2002 the Argentine government adopted measures that temporarily suspended proceedings to enforce creditors’ rights, including mortgage foreclosures and bankruptcy petitions. Most of these measures have been rescinded; however, we cannot assure you that in an adverse economic environment the government will not adopt additional measures in the future, which could have a material adverse effect on the financial system and our business.
The application of the Consumer Protection Law may prevent or limit the collection of payments with respect to services rendered by us
Argentine Law No. 24,240 (the “Consumer Protection Law”) sets forth certain rules and principles designed to protect consumers, which include our customers. The Consumer Protection Law was amended on March 12, 2008 by Law No. 26.361 to expand its applicability and the penalties associated with violations thereof.

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Additionally, Law No. 25,065 (as amended by Law No. 26,010 and Law No. 26,361, the “Credit Card Law”) also sets forth several mandatory regulations designed to protect credit card holders.
Both the involvement of the applicable administrative authorities at the federal, provincial and local levels, and the enforcement of the Consumer Protection Law and the Credit Card Law by the courts are increasing. This trend has increased general consumer protection levels. In the event that we are found to be in violation of any provision of the Consumer Protection Law or the Credit Card Law, certain penalties and remedies could prevent or limit the collection of payments due from services and financing provided by us and materially adversely affect our financial results and ability to meet our payment obligations. We cannot provide any assurance that judicial and administrative rulings based on the newly enacted regulation, or measures adopted by the enforcement authorities, will not increase the consumer protection given to debtors and other clients in the future, or that they will not favor the claims initiated by consumer groups or associations.
Future governmental measures and/or regulations may adversely affect the economy and the operations of financial institutions
The Argentine government has historically exercised significant influence over the economy, and financial institutions, in particular, have operated in a highly regulated environment. We cannot assure that laws and regulations currently governing the economy or the banking sector will not continue to change in the future, or that any changes will not adversely affect our business, financial condition and results of operations.
As of the date of this report, three different bills to amend the Financial Institutions Law No. 21,526 as amended (the “Financial Institution Law”) have been put forth for review in the Argentine Congress, seeking to amend different aspects of the Financial Institutions Law. A thorough amendment of the Financial Institutions Law would have a substantial effect on the banking system as a whole. If any such bill is passed, or any other amendment to the Financial Institutions Law is made, we cannot foresee what effects the subsequent changes in banking regulations could have on financial institutions in general, and on our business, financial conditions and/or results of operations.
Argentina’s insufficient or incorrect implementation of certain anti-money laundering recommendations may result in difficulties to obtain financing and attract direct foreign investments.
In October 2010, the Financial Action Task Force (“FATF”) issued a report on Anti-Money Laundering and Combating the Financing of Terrorism in Argentina, including the evaluation of Argentina as of the time of the on-site visit (November 2009). This report states that since the latest evaluation, finalized in June 2004, Argentina had not made adequate progress in addressing a number of deficiencies identified at the time.
Moreover, in February 2011, Argentina, represented by the Minister of Justice, attended the FATF Plenary in Paris, in order to present a preliminary action plan. FATF has granted an extension to implement changes and will carry out a new evaluation in June 2011.
Therefore, the outcome of the new evaluation process in June 2011 could adversely affect Argentina’s ability to obtain financing from international markets and attract foreign investments.
Risks relating to us
Our target market may be the most adversely affected by economic recessions
Our business strategy is to increase fee income and loan origination in our target market, low- and middle-income individuals and small and medium-sized businesses.
This target market is particularly vulnerable to economic recessions and, in the event of such a recession, growth in our target market may slow and consequently adversely affect our business. The Argentine economy as a whole, and our target market in particular, have not stabilized enough for us to be certain that demand will continue to grow. Therefore, we cannot assure you that our business strategy will in fact be successful.
Our controlling shareholders have the ability to direct our business and their interests could conflict with yours
As of March 31, 2011, our controlling shareholders directly or beneficially owned 10,258,305 Class A shares and 220,352,737 Class B shares in the aggregate. Although currently there is no formal agreement among them, together our controlling shareholders control virtually all decisions with respect to our company made by shareholders. They may, without the concurrence of the remaining shareholders, elect a majority of our directors, effect or prevent a merger, sale of assets or other business acquisition or disposition, cause us to issue additional equity securities, effect a related party transaction and determine the timing and amounts of dividends, if any. Their interests may conflict with your interests as a holder of class B shares, ADSs or notes, and they may take actions that might be desirable to the controlling shareholders but not to other shareholders or holders of our notes.

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We will continue to consider acquisition opportunities, which may not be successful
We have expanded our business primarily through acquisitions. We will continue to consider attractive acquisition opportunities that we believe offer additional value and are consistent with our business strategy. We cannot assure you, however, that we will be able to identify suitable acquisition candidates or that we will be able to acquire promising target financial institutions on favorable terms. Although to date all acquisitions have been authorized by the Central Bank and other relevant authorities, we can not assure you that any future acquisition will also be authorized by these authorities. Additionally, our ability to obtain the desired effects of such acquisitions will depend in part on our ability to successfully complete the integration of those businesses. The integration of acquired businesses entails significant risks, including:
•
unforeseen difficulties in integrating operations and systems;
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problems assimilating or retaining the employees of acquired businesses;
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challenges retaining customers of acquired businesses;
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unexpected liabilities or contingencies relating to the acquired businesses; and
•
the possibility that management may be distracted from day-to-day business concerns by integration activities and related problem solving.
We depend on key personnel for our current and future performance
Our current and future performance depends to a significant degree on the continued contributions of our senior management team and other key personnel, in particular Jorge Horacio Brito and Delfín Jorge Ezequiel Carballo. Our performance could be significantly harmed if we fail to staff and retain key senior management or if we lose their services and we are not able to locate or employ qualified replacements on acceptable terms. Should this occur our business, financial condition and results of operations may be adversely affected.
Increased competition and consolidation in the banking industry may adversely affect our operations
We expect trends of increased competition in the banking sector, as banks continue to recover from the 2008 global economic crisis. Additionally, if the trend towards decreasing spreads is not offset by increases in lending volumes, then resulting losses could lead to consolidation in the industry. We expect trends of increased consolidation to continue. Consolidation can result in the creation of larger and stronger banks, which may have greater resources than we do.
We expect that competition with respect to small and medium-sized businesses is likely to increase. As a result, even if the demand for financial products and services from these markets continues to grow, competition may adversely affect our results of operations by decreasing the net margins we are able to generate.
Reduced spreads between interest rates received on loans and those paid on deposits without corresponding increases in lending volumes could adversely affect our profitability
The spread for Argentina’s financial system between the interest rates on loans and deposits could be affected as a result of increased competition in the banking sector and the government’s tightening of monetary policy in response to inflation concerns.
Since 2009, the interest rate spreads throughout the financial system have increased. This increase was sustained by a steady demand for consumer loans in recent years
However, we cannot guarantee that this trend will continue unless increases in lending or additional cost-cuttings take place. A reverse of this trend in such terms could adversely affect our profitability.
Our estimates and established reserves for credit risk and potential credit losses may prove to be inaccurate and/or insufficient, which may materially and adversely affect our financial condition and results of operations
A number of our products expose us to credit risk, including consumer loans, commercial loans and other receivables. Changes in the income levels of our borrowers, increases in the inflation rate or an increase in interest rates could have a negative effect on the quality of our loan portfolio, causing us to increase provisions for loan losses and resulting in reduced profits or in losses.
We estimate and establish reserves for credit risk and potential credit losses. This process involves subjective and complex judgments, including projections of economic conditions and assumptions on the ability of our borrowers to repay their loans. We may not be able to timely detect these risks before they occur, or due to limited resources or available tools, our employees may not be able to effectively implement our credit risk management system, which may increase our exposure to credit risk.
Overall, if we are unable to effectively control the level of non-performing or poor credit quality loans in the future, or if our loan loss reserves are insufficient to cover future loan losses, our financial condition and results of operations may be materially and adversely affected.

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Changes in market conditions, and any risks associated therewith, could materially and adversely affect our financial condition and results of operations
We are directly and indirectly affected by changes in market conditions. Market risk, or the risk that values of assets and liabilities or revenues will be adversely affected by variation in market conditions, is inherent in the products and instruments associated with our operations, including loans, deposits, securities, bonds, long-term debt and short-term borrowings. Changes in market conditions that may affect our financial condition and results of operations include fluctuations in interest and currency exchange rates, securities prices, changes in the implied volatility of interest rates and foreign exchange rates, among others.
Differences in the accounting standards between Argentina and certain countries with highly developed capital markets, such as the United States, may make it difficult to compare our financial statements and reported earnings with companies in other countries and the United States
Publicly available corporate information about us in Argentina is different from and may be more difficult to obtain than the information available for registered public companies in certain countries with highly developed capital markets, such as the United States. Except as otherwise described herein, we prepare our financial statements in accordance with Central Bank Rules, which differ in certain significant respects from U.S. GAAP and, to a certain extent, from Argentine GAAP. As a result, our financial statements and reported earnings are not directly comparable to those of banks in the United States.
Risks relating to our Class B shares and the ADSs
Holders of our Class B shares and the ADSs may not receive any dividends
In 2003, the Central Bank prohibited financial institutions from distributing dividends. In 2004, the Central Bank amended the restriction to require the Central Bank’s prior authorization for the distribution of dividends. We have consistently obtained authorization from the Central Bank to distribute dividends corresponding to fiscal years 2003 through 2010. Nevertheless, no assurance can be given that the Central Bank will continue to grant us the authorization to distribute dividends approved by our shareholders at the annual ordinary shareholders’ meeting or that such authorization shall be for the full amount of approved dividends.
Additional regulatory and contractual restrictions exist which could affect the distribution of earnings and are included in note 15 of our consolidated financial statements as of December 31, 2010.
Holders of our Class B shares and the ADSs located in the United States may not be able to exercise preemptive rights
Under Argentine corporate law, if we issue new shares as part of a capital increase, our shareholders may have the right to subscribe to a proportional number of shares to maintain their existing ownership percentage. Rights to subscribe for shares in these circumstances are known as preemptive rights. In addition, shareholders are entitled to the right to subscribe for the unsubscribed shares remaining at the end of a preemptive rights offering on a pro rata basis, known as accretion rights. Upon the occurrence of any future increase in our capital stock, United States holders of Class B shares or ADSs will not be able to exercise the preemptive and related accretion rights for such Class B shares or ADSs unless a registration statement under the Securities Act is effective with respect to such Class B shares or ADSs or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to those Class B shares or ADSs. We cannot assure you that we will file such a registration statement or that an exemption from registration will be available. Unless those Class B shares or ADSs are registered or an exemption from registration applies, a U.S. holder of our Class B shares or ADSs may receive only the net proceeds from those preemptive rights and accretion rights if those rights can be sold by the depositary; if they cannot be sold, they will be allowed to lapse. Furthermore, the equity interest of holders of Class B shares or ADSs located in the United States may be diluted proportionately upon future capital increases.
Non-Argentine companies that own our Class B shares directly and not as ADSs may not be able to exercise their rights as shareholders unless they are registered in Argentina
Under Argentine law, foreign companies that own shares in an Argentine corporation are required to register with IGJ, in order to exercise certain shareholder rights, including voting rights. If you own Class B shares directly (rather than in the form of ADSs) and you are a non-Argentine company and you fail to register with IGJ, your ability to exercise your rights as a holder of our Class B shares may be limited.
You may not be able to sell your ADSs at the time or the price you desire because an active or liquid market may not develop
Prior to March 24, 2006, there has not been a public market for the ADSs or, in the case of our Class B shares, a market outside of Argentina. We cannot assure you that any market for our Class B shares or for the ADSs will be available or liquid or the price at which the Class B shares or the ADSs may be sold in that market.
The relative volatility and illiquidity of the Argentine securities markets may substantially limit your ability to sell Class B shares underlying the ADSs at the price and time you desire
Investing in securities that trade in emerging markets, such as Argentina, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature. The Argentine securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States, and is not as highly regulated or supervised as some of these other markets. There is also significantly greater concentration in the Argentine securities market than in major securities markets in the United States. The ten largest companies in terms of market capitalization represented approximately 93% of the aggregate market capitalization of the BCBA as of December 31, 2010. Accordingly, although you are entitled to withdraw the Class B shares underlying the ADSs from the depositary at any time, your ability to sell such shares at a price and time at which you wish to do so may be substantially limited. Furthermore, new capital controls imposed by the Central Bank could have the effect of further impairing the liquidity of the BCBA by making it unattractive for non-Argentines to buy shares in the secondary market in Argentina.

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Our shareholders may be subject to liability for certain votes of their securities
Our shareholders are not liable for our obligations. Instead, shareholders are generally liable only for the payment of the shares they subscribe. However, shareholders who have a conflict of interest with us and who do not abstain from voting may be held liable for damages to us, but only if the transaction would not have been approved without such shareholders’ votes. Furthermore, shareholders who willfully or negligently vote in favor of a resolution that is subsequently declared void by a court as contrary to Argentine corporate law or our bylaws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders.
Our Class B shares or the ADSs might be characterized as stock in a ‘‘passive foreign investment company’’ for U.S. federal income tax purposes
The application of the “passive foreign investment company” rules to equity interests in banks such as us is unclear under current U.S. federal income tax law. It is therefore possible that our Class B shares or the ADSs could be characterized as stock in a “passive foreign investment company” for U.S. federal income tax purposes, which could have adverse tax consequences to U.S. holders in some circumstances. In particular, U.S. holders of our Class B shares or the ADSs generally would be subject to special rules and adverse tax consequences with respect to certain distributions made by us and on any gain recognized on the sale or other disposition of our Class B shares or the ADSs. Such U.S. holders might be subject to a greater U.S. tax liability than might otherwise apply and incur tax on amounts in advance of when U.S. federal income tax would otherwise be imposed. A U.S. holder of our Class B shares or the ADSs might be able to avoid these rules and consequences by making an election to mark such shares to market (although it is not clear if this election is available for the Class B shares). U.S. holders should carefully read “Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Companies” and consult their tax advisors regarding the “passive foreign investment company” rules.
Risks relating to our notes
The notes are effectively subordinated to our secured creditors and our depositors
Unless otherwise specified, the notes rank at least pari passu in right of payment with all of our existing and future unsecured and unsubordinated indebtedness, other than obligations preferred by statute or by operation of law, including, without limitation, tax and labor-related claims and our obligations to depositors.
In particular, under Financial Institutions Law, all of our existing and future depositors will have a general priority right over holders of notes issued under our medium-term note program. The Financial Institutions Law provides that in the event of judicial liquidation or insolvency, all depositors would have priority over all of our other creditors (including holders of notes), except certain labor creditors and secured creditors. Moreover, depositors would have priority over all other creditors, with the exception of certain labor creditors, to funds held by the Central Bank as reserves, any other funds at the time of any revocation of our banking license and proceeds from any mandatory transfer of our assets by the Central Bank.
We have issued and may also issue additional subordinated notes. In that case, in addition to the priority of certain other creditors described in the preceding paragraphs, subordinated notes will also rank at all times junior in right of payment to certain of our unsecured and unsubordinated indebtedness.
Exchange controls and restrictions on transfers abroad may impair your ability to receive payments on the notes
In 2001 and 2002, Argentina imposed exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad. Since then, these restrictions have been substantially eased, including those requiring the Central Bank’s prior authorization for the transfer of funds abroad in order to pay principal and interest on debt obligations. However, Argentina may re-impose exchange controls and transfer restrictions in the future, among other things, in response to capital flight or a significant depreciation of the peso.
In such event, your ability to receive payments on the notes may be impaired.
We may redeem the notes prior to maturity
The notes are redeemable at our option in the event of certain changes in Argentine taxes and, if so specified, the notes may also be redeemable at our option for any other reason. We may choose to redeem those notes at times when prevailing interest rates may be relatively low. Accordingly, an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the notes.
As a financial institution, any bankruptcy proceeding against us would be subject to intervention by the Central Bank, which may limit remedies otherwise available and extend the duration of proceedings
If we are unable to pay our debts as they come due, the Central Bank would typically intervene by appointing a reviewer, request us to file a reorganization plan, transfer certain of our assets and liabilities and possibly revoke our banking license and file a liquidation petition before a local court. Upon any such intervention, noteholders’ remedies may be restricted and the claims and interests of our depositors and other creditors may be prioritized over those of noteholders. As a result, the noteholders may realize substantially less on their claims than they would in a bankruptcy proceeding in Argentina, the United States or any other country.

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Holders of notes may find it difficult to enforce civil liabilities against us or our directors, officers and controlling persons
We are organized under the laws of Argentina and our principal place of business ( domicilio social ) is in the City of Buenos Aires, Argentina. Most of our directors, officers and controlling persons reside outside the United States. In addition, all or a substantial portion of our assets and their assets are located outside of the United States. As a result, it may be difficult for holders of notes to effect service of process within the United States on such persons or to enforce judgments against them, including any action based on civil liabilities under the U.S. federal securities laws. Based on the opinion of our Argentine counsel, there is doubt as to the enforceability against such persons in Argentina, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws.
The ratings of the notes may be lowered or withdrawn depending on various factors, including the rating agency’s assessment of our financial strength and Argentine sovereign risk
Independent credit rating agencies may assign credit ratings to the notes. The ratings of the notes reflect the relevant rating agency’s assessment of our ability to make timely payment of principal and interest on the notes. Moreover, the methods of assigning ratings used by Argentine rating agencies may differ in important aspects from those used by the rating agencies in the United States or other countries. The ratings of the notes are not a recommendation to buy, sell or hold the notes, and the ratings do not comment on market prices or suitability for a particular investor. We cannot assure you that the ratings of the notes will remain for any given period of time or that the ratings will not be lowered or withdrawn. A downgrade in ratings will not be an event of default with respect to the notes. The assigned ratings may be raised or lowered depending, among other things, on the rating agency’s assessment of our financial strength as well as its assessment of Argentine sovereign risk generally, and any change to these may affect the market price or liquidity of the notes.
Risks relating to our 2036 Notes
Interest on the 2036 Notes may be limited to the extent we do not have sufficient Distributable Amounts
No interest on the 2036 Notes will be due and payable in the event that the payment of such interest, together with any other payments or distributions (other than payments in respect of redemptions or repurchases) on or in respect of our Parity Obligations (including the notes) previously made or scheduled to be made during the Distribution Period in which such Interest Payment Date falls, would exceed our Distributable Amounts for such Distribution Period. Interest payments on the notes are non-cumulative such that if an interest payment is not made in full as a result of the limitation described in the preceding sentence, such unpaid interest will not accrue or be due and payable at any time and, accordingly, holders of 2036 Notes will not have any claim thereon, whether or not interest is paid with respect to any other interest period.
The Distributable Amounts available for payment of interest on the 2036 Notes on an interest payment date is based principally on our unappropriated retained earnings from the prior year. Subject to certain limited exceptions, Argentine law does not restrict our shareholders from approving the payment of dividends to themselves out of our unappropriated retained earnings, and the indenture relating to the notes does not restrict our ability to pay dividends unless interest on the notes has not been paid in full as scheduled. In addition, Distributable Amounts available for payment of interest on the 2036 Notes depends on the amount of payments or other distributions on or in respect of our Parity Obligations previously made or schedule to be made during the relevant Distribution Period. Although we do not currently have any Parity Obligations outstanding, the indenture relating to the notes will not restrict our ability to issue Parity Obligations in the future. Accordingly, we cannot assure you that we will have sufficient Distributable Amounts to make interest payments on the 2036 Notes.
We may be prevented by the Central Bank or Argentine banking regulations from making interest or other payments on or in respect of the 2036 Notes
No interest on the 2036 Notes will be due and payable on an Interest Payment Date in the event that we would be prevented from paying interest on the notes on such Interest Payment Date as a result of (X) a general prohibition by the Central Bank on paying interest or making other payments or distributions on or in respect of our Parity Obligations (including the notes) or (Y) as provided in Communications “A” 4589 and “A” 4591 of the Central Bank or any successor regulations thereto, (a) we are subject to a liquidation procedure or the mandatory transfer of our assets by the Central Bank in accordance with Sections 34 or 35 bis of the Financial Institutions Law or successors thereto; (b) we are receiving financial assistance from the Central Bank (except liquidity assistance under the pesification rules pursuant to Decree No. 739/2003); (c) we are not in compliance with or have failed to comply on a timely basis with our reporting obligations to the Central Bank; or (d) we are not in compliance with minimum capital requirements (both on an individual and consolidated basis) or with minimum cash reserves (on average).
As a result of the 2001 Argentine crisis, all banks were prohibited by the Central Bank from paying dividends in 2002 and 2003. As the economy recovered, the Central Bank eased the prohibition but still requires prior authorization for the distribution of dividends by banks. Although the prohibition is no longer in effect, we cannot assure you that, if confronted with a similar crisis, the Central Bank will not prevent banks from making interest payments on Parity Obligations, including the 2036 Notes.

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The 2036 Notes are unsecured and subordinated and, in the event of our bankruptcy, the 2036 Notes will rank junior to our unsubordinated obligations and certain of our subordinated obligations
The 2036 Notes constitute our unsecured and subordinated obligations. In the event of our bankruptcy, the 2036 Notes will rank junior to all claims of our unsubordinated creditors and certain of our subordinated creditors. By reason of the subordination of the notes, in the case of our bankruptcy, although the notes would become immediately due and payable at their principal amount together with accrued interest thereon, our assets would be available to pay such amounts only after all such creditors have been paid in full. We expect to incur from time to time additional obligations that rank senior to the notes, and the indenture relating to the notes does not prohibit or limit the incurrence of such obligations.
Under Argentine law, our obligations under the 2036 Notes will also be subordinated to certain statutory preferences such as tax and labor-related claims and our obligations to depositors. In particular, under the Financial Institutions Law, all of our existing and future depositors will have a general priority right over holders of notes. The Financial Institutions Law provides that in the event of our bankruptcy or insolvency, all depositors would have priority over all of our other creditors (including holders of notes), except certain labor creditors and secured creditors. Moreover, depositors would have priority over all other creditors, with the exception of certain labor creditors, to funds held by the Central Bank as reserves, any other funds at the time of any revocation of our banking license and proceeds from any mandatory transfer of our assets by the Central Bank.
If we do not satisfy our obligations under the 2036 Notes, your remedies will be limited
Payment of principal on the 2036 Notes may be accelerated only in certain events involving our bankruptcy. There is no right of acceleration in the case of a default in the performance of any of our covenants, including a default in the payment of principal, premium or interest.
The U.S. federal income tax treatment of the 2036 Notes is unclear
Because of certain features of the 2036 Notes, the U.S. federal income tax treatment applicable to the 2036 Notes is uncertain. While we do not intend to treat the 2036 Notes as subject to the “contingent payment debt instrument” rules under U.S. federal income tax regulations, it is possible that the U.S. Internal Revenue Service (“IRS”) could assert such treatment. If this assertion were successful, U.S. Holders (as defined in “Taxation—Material U.S. Federal Income Tax Considerations”) generally would be required to include interest income on a constant yield basis at a rate that could differ from, and could at certain times be in excess of, the stated interest on the 2036 Notes. In addition, any gain on the sale of 2036 Notes derived by a U.S. holder would be treated as ordinary income rather than capital gain.
It is also possible that the IRS could assert that the 2036 Notes should be treated as equity for U.S. federal income tax purposes. If this assertion were successful, U.S. holders could also be subject to adverse tax rules (including an interest charge on and ordinary income treatment of any gain derived with respect to the notes) if it were also determined that we are a “passive foreign investment company” for U.S. federal income tax purposes. While we do not believe that we are currently a passive foreign investment company, the test for determining “passive foreign investment company” status is a factual one based upon a periodic evaluation of our assets and income and is unclear when applied to banking businesses such as our own. Thus we cannot provide any assurance that we will not be determined to be a “passive foreign investment company” as of the issuance of the 2036 Notes or in any future period.
Risks relating to our 2012 Notes
A devaluation of the Argentine peso will result in a loss of principal and interest in U.S. dollar terms, which could affect the value of our 2012 Notes
Payments of principal, interest, additional amounts and any other amounts in respect of the notes are determined based on the Argentine peso equivalent (based on an initial exchange rate of Ps. 3.0794 = US$1.00) of the aggregate principal amount of the 2012 Notes then outstanding and converted into U.S. dollars based on an exchange rate on the second business day prior the applicable payment date. As a result, a devaluation of the Argentine peso will result in a loss of principal and a reduction in the effective interest rate in U.S. dollar terms.
In circumstances where we can satisfy our payment obligations in respect of the 2012 Notes by transferring Argentine pesos to accounts located in Argentina, you may not be able to obtain U.S. dollars or transfer funds outside Argentina
If we are unable either to purchase U.S. dollars or to transfer funds outside Argentina in order to make a payment in respect of the notes, because of any legal or regulatory restriction or due to any other reason beyond our control, then we will be able to satisfy such payment obligation in Argentine pesos and with transfers to accounts located in Argentina. In such event, you may not be able to obtain U.S. dollars at the applicable exchange rate under the notes or at all, and you may not be able to freely transfer funds outside Argentina.
Certain definitions
“Parity Obligations” means (i) all claims in respect of our obligations, or our guarantees of liabilities, that are eligible to be computed as part of our Tier 1 capital under Argentine banking regulations (without taking into account any limitation placed on the amount of such capital); and (ii) all claims in respect of any of our other obligations (including guarantees) that rank, or are expressed to rank, pari passu with the 2036 Notes.

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“Distribution Period” means, with respect to an Interest Payment Date, the period from and including the date of our annual ordinary shareholders’ meeting immediately preceding such Interest Payment Date to but excluding the date of our annual ordinary shareholders’ meeting immediately following such Interest Payment Date.
“Distributable Amounts” for a Distribution Period means the aggregate amount, as set out in our audited financial statements for our fiscal year immediately preceding the beginning of such Distribution Period, prepared in accordance with Central Bank Rules and approved by our shareholders, of our unappropriated retained earnings minus: (i) required legal and statutory reserves; (ii) asset valuation adjustments as determined and notified by the Superintendency, whether or not agreed to by us, and the asset valuation adjustments indicated by our external auditor, in each case to the extent not recorded in such financial statements; and (iii) any amounts resulting from loan loss or other asset valuation allowances permitted by the Superintendency including adjustments arising from the failure to put into effect an agreed upon compliance plan. For the avoidance of doubt, the calculation of Distributable Amounts in respect of a particular Distribution Period shall be made prior to the appropriation or allocation of any amounts to any voluntary or contingent reserves and any dividends or distributions on any Junior Obligations or Parity Obligations during such Distribution Period.
Item 4.
Information on the Bank
A. History and development of the Bank
Our legal and commercial name is Banco Macro S.A. We are a financial institution incorporated on November 21, 1966 as a sociedad anónima , a stock corporation, duly incorporated under the laws of Argentina for a 99-year period and registered on March 8, 1967 with the Public Registry of Commerce of the City of Bahía Blanca, in the Province of Buenos Aires, Argentina under No. 1154 of Book 2, Volume 75 of Estatutos . We subsequently changed our legal address to the City of Buenos Aires and registered it with the IGJ on October 8, 1996 under No. 9777 of Book 119, Volume A of Sociedades Anónimas .
Our principal executive offices are located at Sarmiento 447, Buenos Aires, Argentina, and our telephone number is (+ 54-11-5222-6500). We have appointed CT Corporation System as our agent for service of process in the United States, located at 111 Eight Avenue, New York, New York, 10011.
Our history — Banco Macro S.A.
Macro Compañía Financiera S.A. was created in 1977 as a non-banking financial institution. In May 1988, it received the authorization to operate as a commercial bank and it was incorporated as Banco Macro S.A. Subsequently, as a result of the merger process with other entities, it adopted other names (among them, Banco Macro Bansud S.A.) and since August 2006, the name of “Banco Macro S.A.”
Our shares have been publicly listed on the BCBA since November 1994, and since March 24, 2006, on the New York Stock Exchange (“NYSE”).
Since 1994 we have been focused on the regional areas outside the City of Buenos Aires. Following this strategy, in 1996, we started to acquire entities as well as assets and liabilities resulting from the privatization of provincial and other banks.
In December 2001, 2004 and 2006, Banco Macro acquired the control of Banco Bansud S.A., Nuevo Banco Suquía S.A. (“Nuevo Banco Suquía”) and Nuevo Banco Bisel, respectively. Such entities merged with us on December 2003, October 2007 and August 2009, respectively.
During the fiscal year ended December 31, 2006, we acquired 79.84% of the capital stock of Banco del Tucumán and increased our participation to 89.93% of its capital stock during fiscal year 2007.
Additionally, on September 20, 2010, Banco Macro acquired 100% of the capital stock of Banco Privado. On December 20, 2010, Banco Macro sold 1% of the shares of Banco Privado to Sud Inversiones & Análisis S.A. and another 1% to Macro Securities S.A. Sociedad de Bolsa.
The Bank currently offers traditional bank products and services to companies, including those operating in regional economies, as well as to individuals, thus reinforcing the Bank’s objective to be a multi-services bank.
In addition, Banco Macro performs certain transactions through its subsidiaries, including mainly Banco del Tucumán, Banco Privado, Macro Bank Limited, Macro Securities S.A. Sociedad de Bolsa, Sud Inversiones & Análisis S.A. and Macro Fondos S.G.F.C.I.S.A.
Nuevo Banco Bisel
In 2001, the run on bank deposits as a result of the economic crisis caused a liquidity crisis for the former Banco Bisel S.A. (“Banco Bisel”). Its controlling shareholder at the time decided not to make additional contributions. As a result, the Central Bank suspended and then restructured Banco Bisel’s operations, creating the Nuevo Banco Bisel with certain of Banco Bisel’s assets and liabilities. The Central Bank then passed a resolution providing for the sale of Nuevo Banco Bisel and requiring that the purchaser committe to capitalize the bank.

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In August 2006, we acquired 100% of the voting rights and 92.73% of the capital stock of Nuevo Banco Bisel for Ps.19.5 million pursuant to an auction conducted by Banco de la Nación Argentina. In addition, as purchaser of Nuevo Banco Bisel, we were required to enter into a “Put and Call Options Agreement” with Seguro de Depósitos S.A. (SEDESA) regarding Nuevo Banco Bisel’s preferred shares.
The acquisition transaction was approved by the Central Bank in August 2006 and by the antitrust authorities in September 2006.
On May 28, 2007, we exercised our option to acquire Nuevo Banco Bisel’s preferred shares at an exercise price of Ps. 66,240,000 plus an annual nominal 4% interest to be capitalized annually until payment thereof. Such price will be paid on the 15 th anniversary of the acquisition of Nuevo Banco Bisel (i.e., August 11, 2021).
Nuevo Banco Bisel has a strong presence in the central region of Argentina, especially in the province of Santa Fe, and the acquisition has added 158 branches to our branch network.
On March 19, 2009, we entered into a “Preliminary Merger Agreement” for the merger of Nuevo Banco Bisel into us, retroactively effective as of January 1, 2009. On May 27, 2009, our shareholders and those of Nuevo Banco Bisel approved the merger of the latter into Banco Macro, which was subsequently approved by the BCBA, the CNV and the Central Bank, and registered with the IGJ on August 8, 2009.
Sud Inversiones & Análisis S.A. and Macro Securities S.A. Sociedad de Bolsa received 1,147,887 common registered Class B shares of Banco Macro in exchange for their equity interest in the merged entity. The CNV and the BCBA authorized the public offering of such shares on July 29, 2009 and, during October 2009, such entities proceeded to sell those shares to unrelated parties.
Banco Privado
On March 30, 2010, we signed a share purchase agreement with the shareholders of Banco Privado, to purchase 100% of the shares of such entity. On September 9, 2010 the Central Bank issued Resolution 198/2010 stating that there were not objections for Banco Macro to acquire 100% of Banco Privado’s capital stock and to transfer 1% to Sud Inversiones & Análisis S.A. and 1% to Macro Securities S.A Sociedad de Bolsa.
On September 20, 2010, 100% of the capital stock of Banco Privado was transferred to the Banco Macro, which paid US$23.3 million, out of which, US$10.4 million is related to a guaranteed amount, as provided in the purchase agreement. As of such date, Banco Privado’s assets and liabilities amounted to Ps. 403.7 million and Ps. 368.0 million respectively.
On September 22, 2010, we made an irrevocable capital contribution of Ps.50 million to Banco Privado as provided in Resolution No. 443 of the Superintendency dated September 15, 2010.
On December 20, 2010, the Bank sold 1% of Banco Privado’s shares to Sud Inversiones & Análisis S.A. and another 1% to Macro Securities S.A. Sociedad de Bolsa for a total aggregate amount of Ps.0.7 million. Consequently, as of December 31, 2010, Banco Macro held 98% of the capital stock and votes of Banco Privado.
Banco Privado’s integration will enable us to serve a greater number of customers with our current structure, to complement lines of business, to expand our credit card business, in particular in the city of Buenos Aires, and to achieve greater economies of scale by additionally providing Banco Privado with a more efficient financing structure and permitting its clients access to a network with a greater geographical coverage.
At the date of this annual report, this acquisition remains subject to the approval of the National Commission of Competition Defense (the Argentine antitrust authority).
For more information on Banco Privado, see note 3.7 to our audited consolidated financial statements as of and for the three years ended December 31, 2010.
B. Business Overview
We are one of the leading banks in Argentina. With the most extensive private-sector branch network in the country, we provide standard banking products and services to a nationwide customer base. We distinguish ourselves from our competitors by our strong financial position and by our focus on low- and middle-income individuals and small and medium-sized businesses, generally located outside of the City of Buenos Aires. We believe this strategy offers significant opportunity for continued growth in our banking business. According to the Central Bank, as of December 31, 2010, we were ranked second in terms of equity and fourth in terms of loans to private sector and in terms of deposits among banks.
As of December 31, 2010, on a consolidated basis, we had:
•
Ps.33,524.4 million (US$8,432.1 million) in total assets;
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Ps.15,932.9 million (US$4,007.5 million) in loans to the non-financial private sector;
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Ps.23,407.4 million (US$5,887.5 million) in total deposits;

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•
approximately 2.7 million retail customers and 0.08 million corporate customers that provide us with approximately 2.8 million clients; and
•
approximately 1.0 million employee payroll accounts for private sector customers and provincial governments.
Our consolidated net income for the year ended December 31, 2010 was Ps1,010.4 million (US$254.1 million), representing a return on average equity of 27.1% and a return on average assets of 3.6%.
In general, given the relatively low level of banking intermediation in Argentina currently, there are limited products and services being offered. We are focusing on the overall growth of our loan portfolio by expanding our customer base and encouraging them to make use of our lending products. We have a holistic approach to our banking business; we do not manage the Bank by segments or divisions or by customer categories, by products and services, by regions, or by any other segmentation for the purpose of allocating resources and assessing profitability. We offer savings and checking accounts, credit and debit cards, consumer finance loans and other credit-related products and transactional services available to our individual customers and small and medium-sized businesses through our branch network. We also offer Plan Sueldo payroll services, lending, corporate credit cards, mortgage finance, transaction processing and foreign exchange. In addition, our Plan Sueldo payroll processing services for private companies and the public sector give us a large and stable customer deposit base.
Our competitive strengths
We believe we are well positioned to benefit from the opportunities created by the improving economic and business environment in Argentina. Our competitive strengths include the following:
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Strong financial position. As of December 31, 2010 we had excess capital of Ps.2,562.3 million (24.7% capitalization ratio). Our excess capital is aimed at supporting growth, and consequently, a higher leverage of our balance sheet.
• Consistent profitability. As of December 31, 2010, we had obtained profitability for the last 36 consecutive quarters, being the only bank in Argentina to do so, with a return on average equity of 23.8%, 24.6% and 27.1% for 2008, 2009 and 2010, compared to 13.7%, 19.6% and 24.3% respectively, for the Argentine banking system as a whole.
• Our shareholders’ equity as of December 31, 2008, 2009 and 2010, as calculated under Central Bank Rules, was Ps.2,821.9 million, Ps.3,358.8 million and Ps.4,152.8 million, respectively, and our shareholders’ equity under U.S. GAAP at December 31, 2008, 2009 and 2010 was Ps. 2,236.8 million, Ps. 3,292.9 million and Ps.3,783.4 million, respectively.
•
Strong presence in fast-growing target customer market. We have achieved a leading position with low- and middle-income individuals and among small and medium-sized businesses, generally located outside of the City of Buenos Aires, which have been relatively underserved by the banking system. Based on our experience, this target market offers significant growth opportunities and a stable base of depositors.
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High exposure to export-led growth. Given the geographical location of the customers we target, we have acquired banks with a large number of branches outside of the City of Buenos Aires with the aim of completing our national coverage. The Bank’s focus is particulary in some export oriented provinces. Most of these provinces engage in economic activities primarily concentrated in areas such as agriculture, mining, cargo transportation, edible oils, ranching and tourism, which have been benefiting from the export-driven growth in the Argentine economy.
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Largest private-sector branch network in Argentina. With 404 branches, we have the most extensive branch network among private-sector banks in Argentina. We consider our branch network to be our key distribution channel for marketing our products and services to our entire customer base with a personalized approach. In line with our strategy, approximately 94% of these branches are located outside of the City of Buenos Aires, whereas 81% of the total branches for the Argentine financial system as a whole are located outside this area, which we believe better positions us to focus on our target market.
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Loyal customer base. We have a loyal customer base, as evidenced in part by the quick recovery of our deposit base after the 2001-2002 local crisis. We believe that our customers are loyal to us due to our presence in traditionally underserved markets and to our Plan Sueldo payroll services. We have benefited from Argentine regulations that require all employees to maintain Plan Sueldo accounts for the direct deposit of their wages. In addition, we emphasize face-to-face relationships with our customers and offer them personalized advice.
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Exclusive financial agent for four Argentine provinces. We perform financial agency services for the governments of the provinces of Salta, Jujuy, Misiones and Tucumán in northern Argentina. As a result, each provincial government’s bank accounts are held in our bank and we provide all their employees with Plan Sueldo accounts, giving us access to substantial low cost funding and a large number of loyal customers.
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Strong and experienced management team and committed shareholders. We are led by a committed group of shareholders who have transformed our bank from a small wholesale bank to one of the strongest and largest banks in Argentina. Jorge Horacio Brito and Delfín Jorge Ezequiel Carballo have active senior executive roles in our management and each possesses more than 20 years of experience in the banking industry.

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Our strategy
Our strengths position us to better participate in the coming years development of the financial system, which we believe will be stronger in our target market of low- and middle-income individuals, small and medium-sized businesses and in the provinces outside the City of Buenos Aires, where we have a leading presence.
Our goal is to promote the overall growth of the Bank by increasing our customer base, expanding our loan portfolio and generating more fee income from transactional services. We achieve this goal by managing the Bank on a holistic basis, focusing our growth strategy on the marketing and promotion of our standard banking products and services. We have pursued our growth strategy by acquiring banks throughout Argentina, which has enabled us to significantly expand our branch network and customer base. We make acquisition decisions in the context of our long-term strategy of focusing on low- and middle-income individuals, small and medium-sized businesses and to complete our national coverage of Argentina, especially in provinces outside of the City of Buenos Aires. We have taken advantage of the opportunities presented by the Argentine financial system to move into new locations by acquiring banks or absorbing branches from banks liquidated by the Central Bank. Our growth has been fueled by these acquisitions as well as organic growth, without the need to open or move branches.
We intend to continue enhancing our position as a leading Argentine bank. The key elements of our strategy include:
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Focus on underserved markets with strong growth potential. We intend to continue focusing on both low- and middle-income individuals and small and medium-sized businesses, most of which have traditionally been underserved by the Argentine banking system and are generally located outside of the City of Buenos Aires, where competition is relatively weaker and where we have achieved a leading presence. We believe that these markets offer attractive opportunities given the low penetration of banking services and limited competition. We believe the provinces outside of the City of Buenos Aires that we serve are likely to grow faster than the Argentine economy as a whole because their export-driven economies have benefited from the devaluation of the peso and higher prices for agricultural products and commodities.
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Further expand our customer base. We intend to continue growing our customer base, which is essential to increasing interest and fee-based revenues. To attract new customers we intend to:
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Utilize our extensive branch network. We intend to utilize our extensive branch network, which we consider our key distribution channel, to market our products and services to our entire customer base. We utilize a personalized approach to attract new customers by providing convenient and personalized banking services close to their homes and facilities.
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Offer medium- and long-term credit. We intend to capitalize on the increased demand for long-term credit that we believe will accompany the expected economic growth in Argentina. We intend to use our strong liquidity and our capital base to offer a more readily available range of medium- and long-term credit products than our competitors.
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Focus on corporate banking customers, strengthening financing to the small business segment.
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Expand our share in the agricultural and livestock industry and those export-related activities, introducing a product specially designed for this sector (Campo XXI).
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Expand Plan Sueldo payroll services. We will continue to actively market our Plan Sueldo payroll services, emphasizing the benefits of our extensive network for companies with nationwide or regional needs.
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Offer personalized service. We offer our clients a menu of products and personalized, face-to-face advice to help them select the banking services that best respond to their needs.
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Expand the customer base in the City of Buenos Aires through the acquisition and maintenance of Banco Privado’ cards and clients portfolio and by opening new branches in this region.
•
Focus on efficiency and cost control. We intend to increase our efficiency creating new economies of scale, and reducing costs in connection with the integration of merged entities (Banco Macro, Nuevo Banco Suquía and Nuevo Banco Bisel). We have been working on upgrading our information systems and other technology in order to further reduce our operating costs and to support larger transaction volumes nationally. We have completed the integration of Nuevo Banco Suquía during the second half of 2007 and the integration of Nuevo Banco Bisel during the second half of 2009.
•
Extend existing corporate relationships to their distributors and suppliers. We have established relationships with major corporations in Argentina and will focus our marketing efforts on providing services to their distributors, suppliers, customers and employees, including providing working capital financing and Plan Sueldo payroll services.
•
Increase cross-selling. We plan to increase cross-selling of products and services to our existing clients. Since almost all of our clients have a checking and savings account, we have a significant opportunity to expand our relationships with them through other products such as credit cards, loans and insurance. For example, strong cross-selling opportunities lie with our retail clients, of whom only 23.5% currently have personal loans from us.

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Our products and services
We provide our customers with a combination of standard products and services that is designed to suit individual needs. We have two broad categories of customers: retail customers which include individuals and entrepreneurs; and corporate customers, which include small, medium and large companies and major corporations. In addition, we provide services to four provincial governments. We offer a relatively narrow range of standard products, which are generally available to both our retail and corporate customers. We have a holistic approach to our banking business with a single commercial division responsible for all of our customers and our branch network; we do not manage the Bank by segments or divisions or by customer categories, by products and services, by regions, or by any other segmentation for the purpose of allocating resources or assessing profitability. Our strategy is to grow our business, as demand for credit in Argentina increases, by focusing on cross-selling opportunities among our broad customer base. The following discussion of our business follows the broad customer categories of retail and corporate as a way to understand who our customers are and the products and services that we provide.
Retail customers
Overview
Retail customers are individuals and entrepreneurs. We provide services to them throughout Argentina, in particular outside of the City of Buenos Aires, which has higher concentrations of low- and middle-income individuals who are traditionally underserved by large private banks. We serve our retail customers through our extensive, nationwide branch network. Approximately 94% of our branches are located outside of the City of Buenos Aires.
We offer our retail customers traditional banking products and services such as savings and checking accounts, time deposits, credit and debit cards, consumer finance loans (including personal loans), mortgage loans, automobile loans, overdrafts, credit-related services, home and car insurance coverage, tax collection, utility payments, automatic teller machines (“ATMs”) and money transfers.
Our retail customers provide us with a key source of funding as well as a significant interest and fee income. We believe that our large retail customer client base provides us with an excellent opportunity to expand the volume of our lending business. For example, of our retail customers, only 23.5% currently have a personal loan from us and only 37% currently have a credit card, and we believe there is strong potential to increase these percentages.
Our efforts were aimed at strengthening relationships with our customers by offering them the products that are best suited to their needs and circumstances, based on our individualized, professional advice, which we believe is an important feature that distinguishes us in serving our target markets.
The year 2009 presented an adverse perspective for market growth and for the growth of the different businesses this segment involves, generating a number of challenges for us. During 2010, we defined as our main goals: to increase our leading position in personal loans, to consolidate our position in the credit card market, to improve credit quality ratios, to promote an atomized time deposit portfolio and to generate a strong and stable fee base.
In 2010 market conditions improved and the demand for financing, mainly consumer loans, increased, allowing us to attain our strategic goals.
Savings and checking accounts and time deposits
We generate fees from providing savings and checking account maintenance, account statements, check processing and other direct banking transactions, direct debits, fund transfers, payment orders and bank debit cards. In addition, our time deposits provide us with a strong and stable funding base.
During 2009, we intended to achieve an atomized growth in order to reduce volatility from our liabilities. This goal was achieved by adequately compensating our small and medium savers and attracting new clients, which generated a 26% growth in this segment.
During 2010 we continued fostering the atomized development of funding sources and established a solid commission base. Our commercial and customer bonding actions enabled us to achieve growth in the deposit portfolio, above market levels, mainly due to an increase in time deposits of retail customers (less than 1 million) which intensified funding atomization.
We have incorporated statistical tools and models which will step up and make more effective commercial actions during 2011, for the purpose of improving the utilization of our customers’ information.

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The following table reflects the number of retail accounts as of December 31, 2008, 2009 and 2010:
Approximate number
of retail accounts
(as of December 31, of each year)
Product 2008 2009 2010
Savings
Total savings accounts
1,550,151 1,903,566 1,759,448
Plan Sueldo (private sector)
577,734 559,051 534,267
Plan Sueldo (public sector)
296,973 572,675 510,589
Retirees
329,287 400,114 382,872
Open market
346,157 371,726 331,720
Checking
Checking accounts
129,370 174,046 258,678
Electronic account access
Debit cards
1,401,639 1,420,971 1,550,806
Lending products and services
We offer personal loans, document discounts, (housing) mortgages, overdrafts, pledged loans and credit card loans to our retail customers.
As of December 31, 2010, we had a 15% market share for personal loans, which ranked us first in the Argentine banking system in the provision of consumer loans. We are also one of the major credit card issuers, with approximately 1.3 million credit cards in circulation as of December 31, 2010. One of our initiatives to expand lending is to encourage low- and middle-income customers to use credit cards for larger purchases.
We intend to continue to increase our retail lending by focusing our marketing efforts on underserved target markets such as the low- and middle-income individuals and to cross-sell our retail lending products to our existing customers, particularly those who have savings and checking accounts with us because we provide payroll and pension services to their employers.
As of December 31, 2008, 2009 and 2010, our retail loan portfolio (which we define here as loans to individuals and loans to very small companies in an amount up to Ps.20,000) was as follows:
Retail loan portfolio
(as of December 31, of each year)
(in millions of pesos and as percentage of retail loan portfolio)
2008 2009 2010
Overdrafts
186.1 3.1 % 188.8 3.0 % 214.8 2.4 %
Documents (1)
347.7 5.8 % 393.1 6.3 % 545.1 6.0 %
Pledged loans (2)
212.6 3.6 % 151.3 2.4 % 141.5 1.6 %
Mortgage loans
431.3 7.3 % 395.7 6.3 % 433.0 4.8 %
Personal loans
3,849.1 64.7 % 4,052.6 64.7 % 5,865.6 64.9 %
Credit card loans
815.1 13.7 % 897.0 14.3 % 1,489.5 16.5 %
Other
104.3 1.8 % 184.1 2.9 % 349.9 3.9 %
Total
5,946.1 100.0 % 6,262.6 100.0 % 9,039.3 100.0 %
(1)
Factoring, check cashing advances and loans with promissory notes.
(2)
Primarily secured automobile loans.
The main increases during 2009 were in personal loans and credit card loans, which increased by 5% and 9%, respectively, in each case on a year on year basis. The increase in credit card financing was partially explained by the Bank’s strategy of incorporating additional cards to existing credit card customers, reducing the requirements for issuing additional credit cards and allowing the use of our Customer Service Call Center or Home Banking services.
Led by our marketing efforts, the retail banking portfolio grew by 44% in 2010, mainly due to an increase in the personal loans portfolio (45%) and in the credit cards portfolio (66%, including as of December 31, 2010 Banco Privado’s portfolio).
As to personal loans, the Bank is the market leader with a 15% market share. The growth of this portfolio was accompanied by a substantial increase in profitability.
As to credit cards, during 2010 the Bank increased its marketing efforts to develop this business, intensifying benefits offered to its clients, developing new channels for the issuance of cards and creating alliances for the issuance and launching of new products aimed at different segments. As a result of the acquisition of Banco Privado, 150,000 active credit cards were transferred to the Bank.
The table below sets forth additional information related to our retail loan portfolio (which we define here as loans to individuals and loans to very small companies in an amount up to Ps.20,000) as of December 31, 2010:
Retail loan portfolio (in pesos except where noted)
(as of December 31, 2010)
Personal Documents Mortgage Pledged Credit card
loans (1) loans Overdrafts loans (2) loans Others
Total customers with outstanding loans
602,508 9,650 6,767 214,162 1,758 657,353 8,523
Average gross loan amount
7,074 5,807 62,558 798 76,720 2,027 35,172
(1)
Factoring, check cashing advances and loans with promissory notes.
(2)
Primarily secured automobile loans.

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Personal loans, the most representative share of our portfolio, carried as of December 31, 2010 an annual average interest rate of 25.75% and an average maturity of 52.2 months, with lower rates and extended average term year over year. Interest rates and maturities vary across products.
Plan Sueldo payroll services
Since 2001, Argentine labor law has provided for the mandatory payment of wages through accounts opened by employers in the name of each employee at financial institutions within two kilometers of the workplace, in the case of urban areas, and ten kilometers of the workplace, in the case of rural areas. There are similar requirements in place for pension payments. We handle payroll processing for private sector companies and the public sector, or Macrosueldos, which require employers to maintain an account with us for the direct deposit of employee wages. Currently, we provide payroll services for the governments of the Argentine provinces of Misiones, Salta, Jujuy and Tucumán and for the private sector, for a total aggregate of 1.4 million retail clients (including retirees). Our payroll services provide us with a large and diversified deposit base with significant cross-selling potential.
Corporate customers
Overview
We provide our corporate customers with traditional banking products and services such as deposits, lending (including overdraft facilities), check cashing advances and factoring, guaranteed loans and credit lines for financing foreign trade and cash management services. We also provide them trust, payroll and financial agency services, corporate credit cards and other specialty products.
The corporate business is focused on the classification by sizes and sectors. We have four categories for our corporate customers: small companies, which register up to Ps.52 million in sales per year; medium companies, which register more than Ps.52 million and less than Ps.150 million in sales per year; major companies, which register more than Ps.150 million in sales per year; and agro companies, which operate in agriculture or in the commerce of its products.
In 2009, in the medium companies and major companies segments, we focused on applying more selective business criteria, prioritizing customer loyalty strategy. As to agricultural business, we launched a product specially designed for this sector that was highly accepted, since it provide easy access to credit. The agro companies segment has recently risen as a relevant axis in the Bank’s long-term strategy. It is clear that we have a competitive advantage, through our branch network, in different regional economies.
During 2010, the Bank continued developing its descentralized segment-specific service strategy aiming at improving customer service. At present, the Bank has 12 Corporate Banking Centers and a network of branches with business officials specialized in each category offering a wide range of products including working capital facilities, investment projects, leasings and foreign trade transactions.
Our corporate customer base also acts as a source of demand for our excess liquidity through overnight and short-term loans to major corporate customers. See “Item 5 — Operating and Financial Review and Prospects — liquidity and capital resources”.
Lending products and services
Our lending activities to the corporate sector (defined here as firms with loans outstanding in excess of Ps.20,000) totaled Ps.6,893.6 million as of December 31, 2010. Most of our current lending activity consists of working capital loans to small and medium-sized businesses. Our historic focus on small and medium-sized businesses has enabled us to diversify our credit risk exposure, by granting smaller-sized loans to clients in diverse business sectors. As of December 31, 2010, the average principal amount of our corporate loans was Ps. 0.3 million and our 20 largest private sector loans accounted for 19% of our total corporate loans.
We offer short-term and medium- to long-term corporate lending products.
Short-term: Products include credit lines for up to 180 days and consist mainly of overdraft facilities, corporate credit and debit cards and factoring, as well as foreign trade related financing, such as pre-export, post-shipment and import financing. These products also include contingency lines, such as short-term guarantees (performance guarantees and bid bonds) and import letters of credit. The credit risk assigned to these kinds of transactions is the debtor rating described below, unless increased as a result of a pledge or a guarantee.
Medium- to long-term: Products include credit lines and specific lending facilities of more than 180 days. Credits are usually asset-based, such as leasing, whereby a credit enhancement is achieved by means of the underlying asset.
Medium- to long-term facilities risks are mitigated through different mechanisms that range from pledges and mortgages to structured deals through financial trusts whereby the debtor pledges the underlying asset, mostly future income flows. Regardless of the term and based on the fact that these credit lines are devoted to small to medium-size companies, our policy is to require personal guarantees from the owners, although the underlying debtor rating remains unchanged.

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As of December 31, 2008, 2009 and 2010, our loans to corporate customers were as follows:
Loans to companies in excess of Ps. 20,000
(as of December 31, of each year)
(in millions of pesos and as percentage of corporate loan portfolio)
2008 2009 2010
Overdrafts
1,409.8 28.5 % 1,273.7 25.6 % 1,857.2 26.9 %
Documents (1)
1,010.6 20.4 % 1,030.7 20.7 % 1,256.9 18.2 %
Pledged loans (2)
142.1 2.9 % 121.9 2.4 % 215.7 3.1 %
Mortgage loans
328.8 6.6 % 371.7 7.5 % 490.9 7.1 %
Other (3)
2,056.0 41.6 % 2,186.9 43.8 % 3,072.9 44.7 %
Total
4,947.3 100.0 % 4,984.9 100.0 % 6,893.6 100.0 %
(1)
Factoring, check cashing advances and promissory notes.
(2)
Primarily securing cargo transportation equipment.
(3)
Mostly structured loans (medium- and long-term).
Transaction services
We offer transaction services to our corporate customers, such as cash management, customer collections, payments to suppliers, payroll administration, foreign exchange transactions, foreign trade services, corporate credit cards, and information services, such as our Datanet and Interpymes services. There are usually no credit risks involved in these transactions, except for intra-day gapping (payments done against incoming collections) as well as settlement and pre-settlement related to foreign exchange transactions which, in general, are approved following the debtor rating process explained above.
Payments to suppliers. Our payments to suppliers services enable our customers to meet their payment obligations to their suppliers on a timely basis through a simple and efficient system. This service also provides payment liquidations, tax payment receipts, invoices and any other documents required by the payer.
Collection services. Our collection services include cash or check deposits at our 404 branches, automatic and direct debits from checking or savings accounts and the transportation of funds collected from corporate customers to our branches for deposit. Our extensive branch network enables us to offer fast and efficient collection services throughout Argentina, which is of critical importance to both regional and nationwide companies.
Datanet and Interpymes. We provide our corporate clients with access to the Datanet service, which is an electronic banking network linking member banks in Argentina. These services permit our clients to obtain reliable on-line information on a real-time basis from their bank accounts in Datanet as well as perform certain transactions.
Interpymes is an electronic banking system designed to meet the needs of small businesses. It does not require special installation procedures and is easily accessible through the Internet, helping to simplify day-to-day operations for our customers.
Tax collection and financial agency services. We also have exclusive, long-term arrangements to provide tax collection and financial agency services to four provinces.
Payroll services. We provide payroll services to four provinces and the private sector. See “Our products and services — Retail customers”.
Our distribution network
We have the largest private sector branch network in the country with 404 branches spread throughout Argentina. In particular, in line with our strategy of expanding nationally, we have extensive coverage of the provinces of Argentina with 94% of our branches located outside of the City of Buenos Aires. Furthermore, we have 40 service points used for social security benefit payments and servicing of checking and savings accounts; 872 ATMs, 732 self-service terminals (“SSTs”); and an internet banking service (home banking).

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The following table breaks down the current distribution of our branches per province and sets forth our market share for all banks in those provinces:
As of December 31, 2010
Market Share of
% of total branches in
Province Branches Total each province
City of Buenos Aires
24 5.9 % 3.1 %
Buenos Aires (rest)
52 12.9 % 4.1 %
Catamarca
1 0.2 % 4.5 %
Chaco
1 0.2 % 1.7 %
Chubut
5 1.2 % 5.4 %
Córdoba
61 15.1 % 15.1 %
Corrientes
3 0.7 % 4.8 %
Entre Ríos
6 1.5 % 5.0 %
Formosa
— — —
Jujuy
15 3.7 % 48.4 %
La Pampa
2 0.5 % 1.9 %
La Rioja
2 0.5 % 7.7 %
Mendoza
13 3.2 % 8.8 %
Misiones
35 8.7 % 54.7 %
Neuquén
4 1.0 % 6.0 %
Río Negro
7 1.7 % 10.3 %
Salta
25 6.2 % 48.1 %
San Juan
1 0.2 % 2.8 %
San Luis
1 0.2 % 2.2 %
Santa Cruz
2 0.5 % 5.3 %
Santa Fe
113 28.0 % 26.3 %
Santiago del Estero
1 0.2 % 2.0 %
Tierra del Fuego
2 0.5 % 11.8 %
Tucumán
28 6.9 % 44.4 %
TOTAL
404 100.0 % 9.9 %
Source:Central Bank
The Bank’s technological development is continuous and the number of alternative methods to perform banking transactions is increasing. Automated channels allow our clients to perform banking transactions with enhanced speed, comfort and safety, offering a wide variety of available transactions. During 2010, the use of automated channels continued expanding, in terms of volume of transactions and number of users. The transactions performed through these channels increased by 39% in 2010 and the number of active users grew by 19% during 2010. The significant and sustained increase in the number of users and transactions evidences the effectiveness and level of acceptance of these services in the market.
Credit risk management
Credit policy
Our Board of Directors approves our credit policy and credit analysis based on the following guidelines:
•
we seek to maintain a high quality portfolio that is diversified among customers;
•
decisions regarding loan amounts are made following conservative parameters based upon the customer’s capital, cash flow and profitability, in the case of companies, and the customer’s income and asset base, in the case of individuals;
•
the term of the loans offered to meet the customer’s needs must be appropriate for the purpose of the loan and the customer’s ability to repay the loan;
•
transactions must be appropriately secured according to the loan’s term and the level of risk involved, and in the case of lending to small and medium-sized companies, we request personal guarantees from the company’s owners; and
•
we continuously monitor credit portfolios and customer payment performance.
Loan application process
We establish contact with loan applicants through an officer, who is in charge of gathering the applicant’s information and documentation, visiting the applicant, if necessary, obtaining the reasons for the loan request and making an initial assessment of the application. The loan proposal is then reviewed by a banking manager and, if it complies with our credit policy, it is referred to our credit risk assessment management division, which prepares a risk report. The risk report is then provided to a committee in charge of reviewing and granting the loan. Depending upon the amount and type of loan involved, the responsible committee will be one of four committees acting under the supervision of our Board of Directors and responsible for reviewing and determining whether to approve the loan: a senior committee, a junior committee, a national committee, a regional committee. The senior committee consists of members of senior management, including our chairman and vice chairman, and considers loan proposals in excess of Ps.10 million.
We also have in place circuits that allow decentralization of credit decisions, such as scoring models for individuals and small business, or delegation on senior-officers of credit-related decisions regarding the approval of short-term loans, and loans for small amounts, or with certain guarantees.
Our credit policies for individuals are based upon the applicable product lines, including credit cards, current account overdrafts, personal loans, pledged loans and real estate mortgage loans, and stipulate the permitted terms, maximum amounts available and interest rates. The amount of the customer’s indebtedness, loan repayment capability based on current income, and credit history are key tools used in assessing each application.

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Credit risk rating
In order to determine credit risk, our Credit Risk Department qualifies each client by means of a risk rating model, assigning a rating to each debtor taking into consideration quantitative as well as qualitative concepts.
During 2009, the Credit Risk Department continued with its actions aimed at increasing the quality and efficiency of the credit risk rating process for corporate banking customers. We undertook several measures in order to expedite the approval of transactions, including the implementation of a new Credit File Management System, which derived in an improvement in customer response times.
As to our policy regarding individuals, during 2009 we implemented some changes in our financing origination process, including the startup of a new evaluation system for the Plan Sueldo segment, which evaluates companies and employees through credit point tables. These changes generated a significant reduction in delinquency ratios.
During 2010 we developed a new Credit Prequalification Model which allowed us both to reduce processing times and homogenize the analysis and evaluation criteria.
The above mentioned actions allowed us to improve our portfolio quality, which was in turn favored by bad-debt provisions coverage, derived from the provisioning policy applied by the Bank.
Based on the banking regulations in force (Basel II) and economic volatility and competitive pressures, we are in the process of implementing higher standards and more thorough assessments.
The use of quantitative tools such as Credit Scoring models in retail banking or Credit Ratings for corporate banking increases efficiency in decision making processes. In addition, these tools may also be used for other purposes such as:
•
estimating and providing for losses (one of the most important credit risk management activities);
•
determining risk adjusted rates; and
•
performing Stress Tests.
The Bank is currently working on the application of these models in order to implement the methods necessary to estimate the DP (Default Probability), LGD (Loss Given Default) and EAD (Exposure at Default) parameters for its retail and corporate loans portfolios as well as for the above mentioned purposes.
Credit monitoring and review process
Credit monitoring involves carefully monitoring the use of the loan proceeds by the customer, as well as the customer’s loan repayment performance with the objective of pre-empting problems relating to the timely repayment of the loan. The credit monitoring and review process also aims to take all steps necessary to keep delinquent loans within the parameters established by our credit policy for the purpose of curing the delinquency. If this objective is not accomplished, our credit management division will direct the collection of the loan to our pre-legal or legal collection unit. We standardize the early stages of the collection process by different measures (including contact by telephone and letter), beginning five days after maturity.
The year 2010 was marked by an important improvement in all management indicators within the Pre-Legal Recovery department. We completed the implementation of the new recovery system and differentiated collection strategies per customer segment, which resulted in management actions of increased quality, achieving also higher debt regularization and collection ratios in our arrears portfolio.
Technology
During the year 2010, in response to the Bank’s growth and for the purpose of maintaining an oustanding internal service level, the structures of the Systems and IT, and Production Management Departments were adapted. Furthermore, we increased the data storage capacity by 65%, to meet the business demands and projects.
We continued to increase the technology fleet in our branches, by acquiring and installing new ATMs and SSTs. The Group’s technology fleet reached at the end of 2010 872 ATMs and 732 SSTs, which constitutes one of the widest networks in the country.
During year 2011, we plan to continue with the integration of the different channels, through the administration of customer relationships, and the implementation of a differential service model.
Furthermore, we will move forward in the management of business processes, by selecting and implementing a BPM ((Business Process Management) solution, for the purpose of improving efficiency and flexibility for change.
The total amount that we plan to incurr in respect of such improvements and projected investments for 2011 is approximately US$18.7 million.
Banking industry
The Argentine banking industry has been affected both by the 2001-2002 local crisis and the 2008 global financial crisis. In both cases, the sector showed an upward trend in terms of scale, profitability, solvency and asset quality.

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Scale
The volume of intermediation recovered after the 2001-2002 local crisis and there was an annual uninterrupted growth of deposits and loans until the 2008 international crisis. Deposits grew by an average of 20% in 2008. During the same period, private sector loans increased to an average of 33%.
During 2009, and as a consequence of the 2008 international crisis and its impact on our economy, there was a significant slowdown in the activity of the financial sector. Financing intermediation by banks with the private sector recovered towards year-end, albeit with an expansion slower than that of previous years. The average of deposits from and loans to the private sector grew by 9% and 11% respectively during 2009.
Following the improved economic and financial outlook in Argentina, the financial intermediation activities of banks with the private sector expanded during 2010. Deposits from private sector increased by 23% and loans to the private sector increased by 22% in average during 2010, reinforcing the upturn recorded in the last quarter of 2009. Total deposits grew by 28% in average compared to 2009.
The level of private sector loans and deposits over GDP was still low as of December 31, 2010, at 13.8% for private sector loans/GDP and 26.1% for total deposits/GDP. These levels in terms of GDP allow to forecast a considerable potential growth in upcoming years.
2008 2009 2010
(in million of pesos)
Total Assets (1)
333,723 368,091 450,179
Total Deposits (1)
229,090 253,985 325,502
Gross Private Sector Loans (1)
123,964 137,559 167,213
Private Sector Deposits (1)
166,359 181,959 223,891
Source: Central Bank
(1)
Twelve-month average.
Profitability
The Argentine financial system and the profitability of banks were deeply affected by the 2001-2002 local crisis. Since 2003, the financial system has steadily been on its path to recovery, with a growing number of profit-making entities each year.
The Argentine financial system continues its consolidation process after reaching a stage of more stable profits, and accumulating positive results for 6 years now, which underscores the sector’s solvency.
In 2010 the profitability of the financial system increased by 45% to Ps. 11,780 million in 2010 from Ps.8,103 million in 2009, signaling a recovery in the intermediation activity and generating an improvement of profitability ratios.
2008 2009 2010
Net income (in millions of pesos) (1)
5,357 8,103 11,780
Return on average equity
13.7 % 18.0 % 24.3 %
Return on average assets
1.6 % 2.2 % 2.8 %
Source: Central Bank
(1)
Data is available to calculate the consolidated results of the financial system as from January 2008. This indicator excludes results and asset accounts related to permanent interests in domestic financial institutions.
Asset Quality
Both the 2001-2002 local crisis and the 2008 global financial crisis have taken their toll on the quality of bank portfolios. From 2004 through 2008, ratios have gradually improved.
The credit quality of the Argentine financial system showed a marginal decline as a consequence of the 2008 global financial crisis due to a slowdown in the placement of credit to the public sector and the increase in delinquency rates. The growth in delinquency rates following the 2008 crisis, mainly in the consumer credit portfolio, started to reverse during mid-2009. During 2010, the credit quality improved substantially, both for private and public sectors.
Financial entities continue to offer extensive coverage ratios for non-perfoming portfolio. As of December 31, 2010, the non-performing credit portfolio level reached 1.9% of the total credit portfolio, whereas the coverage ratio level reached 164.2%.
The following table shows the percentages of non-performing portfolios in the Argentine financial system:
2008 2009 2010
Non-performing Credit Portfolio
2.7 % 3.0 % 1.9 %
Non-performing Credit Portfolio — Private Sector
3.1 % 3.5 % 2.1 %
Coverage ratio
131.4 % 125.7 % 164.2 %
Source:
Central Bank
Competition
We believe that we have an important advantage over our competitors in providing banking products and services to small communities in the provinces of Argentina as a result of the close community relationships and strong loyalty we have developed over time with our customers in these areas.
We consider Banco Santander Río S.A., Banco de Galicia y Buenos Aires S.A., BBVA Banco Francés S.A., HSBC Bank Argentina S.A. and Banco Patagonia S.A. to be our main competitors. We also compete with regional banks.

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In the future, we expect competition to increase in corporate transactions products, long-term lending, mortgage lending and other secured financings, credit cards, specialized credit packages, payroll services and investment management services.
Competitive landscape
There are eight institutions that rank among the top ten in Argentina, based on private sector loans, equity, total deposits and net income: Banco de la Nación Argentina, Banco de la Provincia de Buenos Aires and Banco de la Ciudad de Buenos Aires, which are public banks, the Bank and Banco de Galicia y Buenos Aires S.A. which are both domestic banks, and Banco Santander Río S.A., HSBC Bank Argentina S.A. and BBVA Banco Francés S.A. which are foreign-owned banks. Below are the rankings of these banks across these metrics:
Market Share
(% share of total private
sector loans for the
Private Sector Loans Ps. Argentine
(As of December 31, 2010) Million financial system)
1 BANCO DE LA NACION ARGENTINA (1 )
26,710 13.4 %
2 BANCO SANTANDER RIO S.A.
19,661 9.9 %
3 BANCO DE GALICIA Y BUENOS AIRES S.A.
16,586 8.3 %
4 BANCO MACRO S.A. (2)
15,933 8.0 %
5 BBVA BANCO FRANCES S.A
14,285 7.2 %
6 BANCO DE LA PROVINCIA DE BUENOS AIRES (1)
11,821 5.9 %
7 HSBC BANK ARGENTINA S.A.
10,429 5.2 %
8 BANCO DE LA CIUDAD DE BUENOS AIRES (1)
7,849 3.9 %
9 BANCO CREDICOOP COOPERATIVO LIMITADO
7,765 3.9 %
10 CITIBANK N.A
7,195 3.6 %
OTHERS
60,962 30.6 %
TOTAL
199,196 100.0 %
Source: Central Bank
(1)
Public sector banks.
(2)
Based on our consolidated financial statements.
Market Share
(% share of equity for the
Equity Ps. Argentine financial
(As of December 31, 2010) Million system)
1 BANCO DE LA NACION ARGENTINA(1 )
11,375 19.8 %
2 BANCO MACRO S.A. (2)
4,153 7.2 %
3 BANCO SANTANDER RIO S.A.
3,862 6.7 %
4 BBVA BANCO FRANCES S.A.
3,747 6.5 %
5 BANCO HIPOTECARIO S.A.
2,974 5.2 %
6 HSBC BANK ARGENTINA S.A
2,612 4.5 %
7 BANCO DE GALICIA Y DE BUENOS AIRES S.A.
2,596 4.5 %
8 CITIBANK S.A
2,361 4.1 %
9 BANCO DE LA CIUDAD DE BUENOS AIRES (1)
2,224 3.9 %
10 BANCO DE LA PROVINCIA DE BUENOS AIRES (1)
2,163 3.8 %
OTHERS
19,516 33.9 %
TOTAL
57,582 100.0 %
Source: Central Bank
(1)    Public sector banks.
(2)    Based on our consolidated financial statements.
Market Share
(% share of total
deposits for the
Total Deposits Ps. Argentine financial
(As of December 31, 2010) Million system)
1 BANCO DE LA NACION ARGENTINA(1)
110,363 29.3 %
2 BANCO DE LA PROVINCIA DE BUENOS AIRES (1)
32,362 8.6 %
3 BANCO SANTANDER RIO S.A.
26,235 7.0 %
4 BANCO MACRO S.A. (2)
23,407 6.2 %
5 BBVA BANCO FRANCES S.A.
22,543 6.0 %
6 BANCO DE GALICIA Y DE BUENOS AIRES S.A.
21,916 5.8 %
7 HSBC BANK ARGENTINA S.A.
16,100 4.3 %
8 BANCO DE LA CIUDAD DE BUENOS AIRES(1)
14,460 3.8 %
9 BANCO CREDICOOP COOPERATIVO LIMITADO
14,449 3.8 %
10 BANCO PATAGONIA S.A
10,299 2.7 %
OTHERS
84,131 22.4. %
TOTAL
376,264 100.0 %
Source: Central Bank
(1)
Public sector banks.
(2)
Based on our consolidated financial statements.

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Market Share
(% share of total
net income for
Net Income Ps. the Argentine
(12 months ended December 31, 2010) Million financial system)
1 BANCO DE LA NACION ARGENTINA S.A. (1)
2,333 19.8 %
2 BANCO SANTANDER RIO S.A.
1,601 13.6 %
3 BBVA BANCO FRANCES S.A
1,198 10.2 %
4 BANCO MACRO S.A. (2)
1,010 8.6 %
5 BANCO DE LA CIUDAD DE BUENOS AIRES (1)
639 5.4 %
6 HSBC BANK ARGENTINA S.A
617 5.2 %
7 CITIBANK
546 4.6 %
8 BANCO DE LA PROVINCIA DE BUENOS AIRES (1)
539 4.6 %
9 BANCO PATAGONIA
481 4.1 %
10 BANCO DE GALICIA Y DE BUENOS AIRES
469 4.0 %
OTHERS
2,346 19.9 %
TOTAL
11,780 100.0 %
Source: Central Bank
(1)
Public sector banks.
(2)
Based on our consolidated financial statements.
As of December 31, 2010, our return annualized on average equity was 27.1% compared to the 24.4% for private-sector banks and 24.3% for the banking system as a whole.
There is a large concentration of branches in the City and province of Buenos Aires, as shown by the following table. We have the most extensive private-sector branch network in Argentina, and a leading regional presence in eight provinces including Santa Fe, Córdoba, Río Negro, and Tierra del Fuego, in addition to Misiones, Salta, Tucumán and Jujuy, where we are the largest bank in terms of branches.
As of December 31, 2010
Banking System Banco Macro
Market Share
(% share of
total of
% of % of branches in
Province Branches Total Branches Total each province)
CITY OF BUENOS AIRES
783 19.3 % 24 5.9 % 3.1 %
BUENOS AIRES (PROVINCE)
1,265 31.1 % 52 12.9 % 4.1 %
CATAMARCA
22 0.5 % 1 0.2 % 4.5 %
CHACO
60 1.5 % 1 0.2 % 1.7 %
CHUBUT
92 2.3 % 5 1.2 % 5.4 %
CORDOBA
404 9.9 % 61 15.1 % 15.1 %
CORRIENTES
62 1.5 % 3 0.7 % 4.8 %
ENTRE RIOS
120 3.0 % 6 1.5 % 5.0 %
FORMOSA
18 0.4 % 0 0.0 % 0.0 %
JUJUY
31 0.8 % 15 3.7 % 48.4 %
LA PAMPA
103 2.5 % 2 0.5 % 1.9 %
LA RIOJA
26 0.6 % 2 0.5 % 7.7 %
MENDOZA
147 3.6 % 13 3.2 % 8.8 %
MISIONES
64 1.6 % 35 8.7 % 54.7 %
NEUQUÉN
67 1.6 % 4 1.0 % 6.0 %
RIO NEGRO
68 1.7 % 7 1.7 % 10.3 %
SALTA
52 1.3 % 25 6.2 % 48.1 %
SAN JUAN
36 0.9 % 1 0.2 % 2.8 %
SAN LUIS
45 1.1 % 1 0.2 % 2.2 %
SANTA CRUZ
38 0.9 % 2 0.5 % 5.3 %
SANTA FE
430 10.6 % 113 28.0 % 26.3 %
SANTIAGO DEL ESTERO
51 1.3 % 1 0.2 % 2.0 %
TIERRA DEL FUEGO
17 0.4 % 2 0.5 % 11.8 %
TUCUMAN
63 1.6 % 28 6.9 % 44.4 %
TOTAL
4,064 100.0 % 404 100.0 % 9.9 %
Source:
Central Bank

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Approximately 81% of the branches in the Argentine financial system are located outside the City of Buenos Aires; in our case, approximately 94% of our branches are outside the City of Buenos Aires. The ten largest banks, in terms of branches, account for 61% of the total amount of the system. We are second to Banco de la Nación Argentina in terms of market share outside the City of Buenos Aires, with a market share of 12%. The following ranking is based on financial institutions with 50 or more branches and with presence in 15 or more provinces.
Market
Share of Market
Market Branches Branches Share of % of
Number of Total Share of in City of in City of Branches in Branches in Branches
provinces Number of Branches in Buenos Buenos the Rest of Rest of in the Rest
Served Branches Argentina Aires Aires Country Country of Country
1 BANCO MACRO S.A. (2)
23 404 10 % 24 3 % 380 12 % 94 %
2 BANCO DE LA NACION ARGENTINA (1)
24 626 15 % 63 8 % 563 17 % 90 %
3 BANCO CREDICOOP COOPERATIVO LIMITADO
19 250 6 % 40 5 % 210 6 % 84 %
4 BANCO PATAGONIA S.A.
24 141 3 % 38 5 % 103 3 % 73 %
5 STANDARD BANK ARGENTINA S.A.
18 99 2 % 32 4 % 67 2 % 68 %
6 BANCO DE GALICIA Y BUENOS AIRES S.A.
24 240 6 % 78 10 % 162 5 % 68 %
7 BBVA BANCO FRANCES
24 242 6 % 82 10 % 160 5 % 66 %
8 BANCO SANTANDER RIO S.A.
21 285 7 % 97 12 % 188 6 % 66 %
9 HSBC
19 118 3 % 42 5 % 76 2 % 64 %
10 CITIBANK
16 65 2 % 27 3 % 38 1 % 58 %
OTHER
24 1,594 39 % 260 33 % 1,334 41 % 78 %
TOTAL
24 4,064 100.0 % 783 100.0 % 3,281 100.0 % 81 %
Source: Central Bank
(1)
Public sector banks.
(2)
Includes the branches of Banco Macro, Banco del Tucumán and Banco Privado.
Argentine banking regulation
Overview
Founded in 1935, the Central Bank is the principal monetary and financial authority in Argentina. It is responsible for maintaining stability in the value of the domestic currency, establishing and implementing monetary policy and regulating the financial sector. It operates pursuant to its charter and the provisions of the Financial Institutions Law. Under the terms of its charter, the Central Bank must operate independently from the Argentine government.
Since 1977, banking activities in Argentina have been regulated primarily by the Financial Institutions Law, which empowers the Central Bank to regulate the financial sector. The Central Bank regulates and supervises the Argentine banking system through the Superintendency.
The Superintendency is responsible for enforcing Argentina’s banking laws, establishing accounting and financial reporting requirements for the banking sector, monitoring and regulating the lending practices of financial institutions and establishing rules for participation of financial institutions in the foreign exchange market and the issuance of bonds and other securities, among other functions.
The powers of the Central Bank include the authority to fix minimum capital, liquidity and solvency requirements, approve bank mergers, approve certain capital increases and transfers of stock, grant and revoke banking licenses, and to authorize the establishment of branches of foreign financial institutions in Argentina and the extension of financial assistance to financial institutions in cases of temporary liquidity or solvency problems.
The Central Bank establishes different “technical ratios” that must be observed by financial entities with respect to levels of solvency, liquidity, the maximum credits that may be granted per customer and foreign exchange assets and liability positions.
In addition, financial entities need the authorization of the Central Bank for the disposition of their assets, such as opening or changing branches or ATMs, acquiring share interests in other financial or non-financial corporations and establishing liens over their assets, among others.
As supervisor of the financial system, the Central Bank requires financial institutions to submit information on a daily, monthly, quarterly, semi-annual and annual basis. These reports, which include balance sheets and income statements, information relating to reserve funds, use of deposits, classifications of portfolio quality (including details on principal debtors and any allowances for loan losses), compliance with capital requirements and any other relevant information, allow the Central Bank to monitor the business practices of financial entities. In order to confirm the accuracy of the information provided, the Central Bank is authorized to carry out inspections.
If the Central Bank’s rules are not complied with, various sanctions may be imposed by the Superintendency, depending on the level of infringement. These sanctions range from a notice of non-compliance to the imposition of fines or, in extreme cases, the revocation of the financial entity’s operating license. Additionally, non-compliance with certain rules may result in the compulsory filing of specific adequacy or restructuring plans with the Central Bank. These plans must be approved by the Central Bank in order to permit the financial institution to remain in business.

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The Central Bank fulfills the function of lender of last resort and is allowed to provide financial assistance to financial institutions with liquidity or solvency problems.
Banking regulation and supervision
Central Bank supervision
Since September 1994, the Central Bank has supervised the Argentine financial entities on a consolidated basis. Such entities must file periodic consolidated financial statements that reflect the operations of head offices or headquarters as well as those of their branches in Argentina and abroad, and of their significant subsidiaries, whether domestic or foreign. Accordingly, requirements in relation to liquidity and solvency, minimum capital, risk concentration and loan loss provisions, among others, should be calculated on a consolidated basis.
Permitted activities and investments
The Financial Institutions Law governs any individuals and entities that perform habitual financial intermediation and, as such, are part of the financial system, including commercial banks, investment banks, mortgage banks, financial companies, savings and loan companies for residential purposes and credit unions. Except for commercial banks, which are authorized to conduct all financial activities and services that are specifically established by law or by regulations of the Central Bank, the activities that may be carried out by Argentine financial entities are set forth in the Financial Institutions Law and related Central Bank regulations. Commercial banks are allowed to perform any and all financial activities inasmuch as such activities are not forbidden by law. Some of the activities permitted for commercial banks include the ability to (i) receive deposits from the public in both local and foreign currency; (ii) underwrite, acquire, place or negotiate debt securities, including government securities, in both exchange and over-the-counter markets (subject to prior approval by the CNV, if applicable); (iii) grant and receive loans; (iv) guarantee customers’ debts; (v) conduct foreign currency exchange transactions; (vi) issue credit cards; (vii) act, subject to certain conditions, as brokers in real estate transactions; (viii) carry out commercial financing transactions; (ix) act as registrars of mortgage bonds and (x) act as fiduciary in financial trusts. In addition, pursuant to the Financial Institutions Law and Central Bank Communication “A” 3086, commercial banks are authorized to operate commercial, industrial, agricultural and other types of companies that do not provide supplemental services to the banking services (as defined by applicable Central Bank regulations) to the extent that the commercial bank’s interest in such companies does not exceed 12.5% of its voting stock or 12.5% of its capital stock. Nonetheless, if the aforementioned limits were to be exceeded, the bank should (i) request Central Bank’s authorization; or (ii) give notice of such situation to the Central Bank, as the case may be. However, even when commercial banks’ interests do not reach such percentages, they are not allowed to operate such companies if (i) such interest allows them to control a majority of votes at a shareholders’ or board of directors’ meeting, or (ii) the Central Bank does not authorize the acquisition.
Under Central Bank regulations, the total amount of the investments of a commercial bank in the capital stock of third parties, including interests in Argentine mutual funds, may not exceed 50% of such bank’s regulatory capital ( Responsabilidad Patrimonial Computable , or “RPC”). In addition, the total amount of a commercial bank’s investments in the following: (i) unlisted stock, excluding interests in companies that provide services that are supplementary to the finance business and interests in state-owned companies that provide public services, (ii) listed stock and interests in mutual funds that do not give rise to minimum capital requirements on the basis of market risk, and (iii) listed stock that does not have a “largely publicly available market price,” taken as a whole, is limited to 15% of such bank’s RPC. To this effect, a given stock’s market price is considered to be “largely publicly available” when daily quotations of significant transactions are available, and the sale of such stock held by the bank would not significantly affect the stock’s quotation.
Operations and activities that banks are not permitted to perform
The Financial Institutions Law prohibits commercial banks from: (a) creating liens on their assets without prior approval from the Central Bank, (b) accepting their own shares as security, (c) conducting transactions with their own directors or managers and with companies or persons related thereto under terms that are more favorable than those regularly offered in transactions with other clients, and (d) carrying out commercial, industrial, agricultural or other activities without prior approval of the Central Bank, except those considered financially related activities under Central Bank regulations. Notwithstanding the foregoing, banks may own shares in other financial institutions with the prior approval of the Central Bank, and in public services companies, if necessary to obtain those services.
Liquidity and solvency requirements
Legal reserve
According to the Financial Institutions Law and Central Bank regulations, financial institutions are required to maintain a legal reserve of 20% of their yearly income plus or minus prior-year adjustments and minus the accumulated loss for the previous year closing period. This reserve can only be used during periods in which a financial institution has incurred losses and has exhausted all other reserves.
Non-liquid assets
Since February 2004, non-liquid assets (computed on the basis of their closing balance at the end of each month, and net of those assets that are deducted to compute the regulatory capital, such as equity investments in financial institutions and goodwill) plus the financings granted to a financial institution’s related persons (computed on the basis of the highest balance during each month for each customer) cannot exceed 100% of the Argentine regulatory capital of the financial institution, except for certain particular cases in which it may reach up to 150%.

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Non-liquid assets consist of miscellaneous receivables, bank property and equipment, miscellaneous assets, assets securing obligations, except for swap, futures and derivative transactions, certain intangible assets and equity investments in unlisted companies or listed shares, if the holding exceeds 2.5% of the issuing company’s equity.
Non-compliance with the ratio produces an increase in the minimum capital requirements equal to 100% of the excess on the ratio.
Differences arising from the fulfillment of court injunctions (“amparos”) ordering the repayment of deposits in their original foreign currency was not computed for this ratio up to December 31, 2008.
Minimum capital requirements
The Central Bank requires that financial institutions maintain minimum capital amounts measured as of each month’s closing, which are defined as a ratio of the counterparty risk and interest rate risk of the financial institution’s assets. Such requirement should be compared to the basic requirement, which is explained below, taking into account the one with the highest value. The basic requirement varies depending on the type of institution and the jurisdiction in which the relevant institution is registered, from Ps. 10 million to Ps. 25 million for banks, and from Ps. 5 million to Ps. 10 million for other institutions. In addition, financial institutions must comply with a market risk requirement that is calculated on a daily basis. Financial institutions (together with their branches in Argentina and abroad) must comply with minimum capital requirements both on an individual and a consolidated basis.
Basic minimum capital
Pursuant to Central Bank Communication “A” 5183, dated February 16, 2011 the Central Bank classifies the minimum capital requirements for financial entities by type and category. The categories were established in accordance with the jurisdiction in which the respective financial entity is located:
Category Jurisdiction Banks Other Entities (*)
I
City of Buenos Aires. Ps.25 million Ps.10 million
II
Comodoro Rivadavia — Rada Tilli, Rawson — Trelew, Greater Córdoba, Río Cuarto, Greater Buenos Aires (1) , Bahía Blanca — Cerri, Mar del Plata — Batán, San Nicolás — Villa Constitución, Greater Mendoza, Neuquén — Plottier, Viedma — Carmen de Patagones — Greater Rosario, Biedma, General San Martín, San Justo, Tercero Arriba, Campana, Chivilcoy, Junín, Necochea, Olavarría, Pergamino, Pilar, Tandil, Tres Arroyos, Zárate, Bariloche, Castellanos, General López, San Martín, Santa Cruz Province and Tierra del Fuego Province Ps.14 million Ps.8 million
III
Cities of Greater Catamarca, Greater Resistencia, Greater Corrientes, Concordia, Jujuy - Palpalá, La Rioja, Posadas, Salta, Greater San Juán, San Luis — El Chorrillo, Santiago del Estero - La Banda, Greater Tucumán — Tafí Viejo, Colón, Federación, Gualeguay, Gualeguaychú, Paraná, Uruguay, General Pedernera, the Province of La Pampa and the remaining towns of the provinces of Buenos Aires (2) , Córdoba (3) , Chubut, Mendoza, Neuquén, Río Negro and Santa Fé (4) Ps.12.5 million Ps.6.5 million
IV
The rest of Argentina. Ps.10 million Ps.5 million
(*)
Except credit entities.
(1)
Excluding the City of Buenos Aires.
(2)
Excluding Marcos Paz, Presidente Perón and San Vicente departments.
(3)
Excluding Cruz del Eje department.
(4)
Excluding Vera department.
Notwithstanding the foregoing, the basic minimum capital requirement for banks that were operating on June 30, 2005 cannot exceed Ps.15 million.
Description of Argentine Tier 1 and Tier 2 capital regulations
Argentine financial institutions must comply with guidelines similar to those adopted by the Basel Committee on Banking Regulations and Supervisory Practices, as amended in 1995 (the “Basel Rules”). In certain respects, however, Argentine banking regulations require higher ratios than those set forth under the Basel Rules.
The Central Bank takes into consideration a financial institution’s regulatory capital ( Responsabilidad Patrimonial Computable , or “RPC”) in order to determine compliance with capital requirements. RPC consists of Tier 1 capital (Basic Net Worth) and Tier 2 capital (Complementary Net Worth) minus certain deducted items.
Tier 1 capital consists of (i) capital stock as defined by Argentine Business Companies Law, (ii) irrevocable contributions on account of future capital increases, (iii) adjustments to shareholders’ equity, (iv) savings reserves, (v) retained earnings, and (vi) subordinated debt securities and their reserve funds, provided they meet certain conditions and requirements. In the case of consolidation, minority interests are also included.

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Tier 2 capital consists of (i) liabilities (including debt securities) contractually subordinated to all other liabilities not computable as Tier 1 capital, with an average initial maturity of at least five years and issued under certain conditions and requirements, plus (ii) amounts of reserve funds applied to the payment of interest on subordinated debt securities before December 31, 2012 and as from such date also those amounts which have not been used, provided they exceed certain limits, plus or minus (iii) with respect to results at prior fiscal years, 100% of net earnings or losses recorded through the most recent audited quarterly financial statements in the event the yearly financials are not audited, plus or minus (iv) 100% of net earnings or losses for the current year as of the date of the most recent audited quarterly financial statement, plus or minus (v) 50% of profits or 100% of losses, from the most recent audited quarterly or annual financial statements, minus (vi) 100% of losses not shown in the financial statements, arising from quantification of any facts and circumstances reported by the auditor and plus (vii) 50% of loan loss provisions on the loan portfolio classified as “in normal situation” or “performing”.
Items to be deducted include, among others: (a) demand deposits maintained with foreign financial institutions that are not rated as “investment grade”; (b) securities not held by the relevant financial institutions, except where the Central Bank (CRYL), Caja de Valores S.A., Clearstream, Euroclear, Depository Trust Company or Deutsche Bank, New York, are in charge of their registration or custody; (c) securities issued by foreign governments whose risk rating is lower than that assigned to Argentine government securities; (d) subordinated debt instruments issued by other financial institutions acquired prior to September 30, 2006; (e) equity interests in other Argentine or foreign financial institutions; (f) equity interests relating to the application of tax deferrals until February 19, 1999, or after such date provided they relate to irrevocable capital contributions made until such date, as from the month following expiration of the legal term of unavailability or loss of the tax benefits, as set forth in applicable regulations; (g) shareholders; (h) real property added to the assets of the financial entity and with respect to which the title deed is not duly recorded with the pertinent Argentine real property registry, except where such assets shall have been acquired in a court-ordered auction sale; (i) goodwill; (j) organization and development costs; (k) items pending allocation, debtor balances and others; (l) certain assets, as required by the Superintendency resulting from differences between accounting registrations and the real value of the assets; (m) any deficiency relating to the minimum loan loss provisions required by the Superintendency; (n) equity interests in companies that have (i) financial assistance through leasing or factoring agreements or (ii) transitory equity acquisitions in other companies in order to further their development to the extent the ultimate purpose is selling such interest after development is accomplished; (o) excess in the granting of asset-backed guaranties, according to Central Bank’s regulations; and (p) the highest balance of that month’s financial assistance, when certain conditions are met.
Requirements for subordinated debt to be computed as Tier 1 Capital
In general, debt securities can account for up to 20% of a financial institution’s Tier 1 capital up to December 31, 2012 and to 15% from January 2013.
In order for debt securities to be computed as Tier 1 capital, the issuance must previously be approved by: (i) the shareholders, (ii) the Superintendency and, (iii) the CNV and (iv) a stock exchange or over-the-counter market (whether local or foreign).
In addition, debt securities must have certain characteristics. Tier 1 capital must have a maturity of at least thirty years, and may permit optional redemption by the issuer only if, (i) at least five years have elapsed since issuance, (ii) prior authorization of the Superintendency has been obtained, and (iii) funds used for redemption are raised through the issuance of capital stock or other Tier 1 capital.
Interest on Tier 1 capital debt securities may only accrue and be payable to the extent the interest does not exceed available distributable amounts based on the prior year’s audited financial statements. Accordingly, interest payments are non-cumulative such that if an interest payment is not made in full as a result of such limitation, the unpaid interest shall not accrue or be due and payable at any time. The available distributable amounts under Tier 1 capital debt instruments for an Argentine financial institution are determined by calculating the amount of its retained earnings minus (i) required legal and statutory reserves; (ii) asset valuation adjustments as determined and notified by the Superintendency, whether or not agreed to by such financial institution, and the asset valuation adjustments indicated by its external auditor, in each case to the extent not recorded in its respective financial statements; and (iii) any amounts resulting from allowances permitted by the Superintendency, including adjustments arising from the failure to put into effect an agreed upon compliance plan.
In order to make interest payments under Tier 1 capital debt instruments, the shareholders of the financial institution must, at their annual ordinary meeting that considers the allocation of the results available for distribution, approve the creation of a special reserve for such payments. Accrued interest shall not exceed the amount of such reserve, except for changes in exchange rates (for instruments issued in foreign currencies) or variable rates (in the case of instruments with floating rates). The creation of the reserve and any adjustments to the reserve amount must be approved by the Superintendency. Ordinary shareholders’ meetings to consider the allocation of results available for distribution must be held within four months of the end of each fiscal year.
No prior approval from the Superintendency is required in order to make interest payments under Tier 1 capital debt instruments to the extent that the reserve fund has been properly created and the Superintendency has approved such reserve according to the preceding paragraph.
Non-payment of principal or interest under Tier 1 capital debt instruments shall not be considered under applicable Central Bank Rules as a cause for forfeiture of banking license if: (i) all of the other non-subordinated obligations are paid when due; (ii) no cash dividends are distributed to shareholders; and (iii) no fees are paid to directors and members of the supervisory committee, except for certain cases.
Only one interest rate step-up is permitted during the life of the securities and it may occur only after ten years have elapsed since issuance Tier 1 capital debt securities may not be accelerated, nor have cross-acceleration provisions, except upon bankruptcy.

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In the event of bankruptcy, Tier 1 capital debt securities rank before capital stock but after all senior debt and Tier 2 capital obligations (all Tier 1 capital debt securities rank pari passu among themselves). Tier 1 subordinated instruments cannot be secured or guaranteed by the issuer or subsidiaries affecting the above described ranking of priority rights in payments.
If at any time Tier 1 capital debt securities exceed the established percentage computable as Tier 1 capital, or if it is established that unpaid interest thereon will be cumulative, or when their residual maturity is less than ten years, then thereafter they will be computed as Tier 2 capital.
Argentine financial institutions cannot acquire Tier 1 capital debt securities issued by other Argentine financial institutions, nor can they purchase for subsequent resale their own Tier 1 capital debt securities.
In accordance with current Central Bank regulations, financial institutions would not be permitted to pay interest or make other payments on Tier 1 capital debt securities in the event that, as provided in Communications “A” 4589 and “A” 5072 of the Central Bank or any successor regulations thereto, (a) they are subject to a liquidation procedure or the mandatory transfer of their assets by the Central Bank in accordance with Sections 34 or 35 bis of the Financial Institutions Law or successors thereto; (b) they are receiving financial assistance from the Central Bank (except liquidity assistance under the pesification rules pursuant to Decree No. 739/2003); or (c) they are not in compliance with minimum capital requirements (both on an individual and consolidated basis) or with minimum cash reserves (on average).
Requirements for subordinated debt to be computed as Tier 2 Capital
Debt securities issued by a financial institution and its corresponding reserves computed as Tier 2 capital can account for up to 50% of such financial institution’s Tier 1 capital. Five years before the maturity date of Tier 2 capital debt securities, the amount to be computed as Tier 2 capital must be reduced by 20% of the outstanding principal amount (nominal issued amount minus the paid amortizations) per year. Notwithstanding the requirements described above, the amount to be computed as Tier 2 capital for each of those years cannot be higher than the amount equal to applying such percentage to the outstanding amount at the end of each such year.
In order for debt securities to be computed as Tier 2 capital, the issuance of Tier 2 capital debt securities must be approved by: (i) the shareholders, (ii) the Superintendency, and when applicable, (iii) the CNV and (iv) a stock exchange, if the debt securities are to be admitted for listing.
Central Bank regulations require Tier 2 capital debt securities to have an average life of no less than 5 years. If the securities allow optional redemption by the issuer, such redemption is only effective (i) with the prior authorization of the Superintendency, and (ii) if the RPC, after redemption, is equal or higher than the minimum capital required by the Central Bank.
Interest payments under Tier 2 capital debt securities can be cumulative, and the interest coupon may be linked to the income of the financial entity.
Tier 2 capital debt securities cannot be accelerated, nor have cross-acceleration provisions, except upon the bankruptcy of the issuer. In the event of bankruptcy, Tier 2 capital debt securities rank senior to capital stock and Tier 1 capital debt securities, but junior to all senior debt. In addition, distributions among holders of subordinated securities will be done pro rata based upon their acknowledged claims.
Non-payment of principal or interest under Tier 2 capital debt securities shall not be considered under applicable Central Bank Rules as a cause for forfeiture of the banking license if (i) within one year from the original due date of such unpaid obligations, the bank and the noteholders agree on the manner in which payments of the amounts due in respect of the debt securities shall be made; (ii) all of the other non-subordinated obligations are paid when due; (iii) no cash dividends are distributed to the shareholders; (iv) no fees are paid to directors and members of the supervisory committee, except for those cases in which they carry out executive tasks; and (v) in case they have interest coupons related to the bank’s results, the bank does not have distributable results, calculated in accordance with the general procedure set forth by the applicable Central Bank regulations.
Non-compliance by the bank with these requirements shall not result in any Central Bank liability.
Argentine financial institutions cannot acquire Tier 2 capital debt securities issued by other Argentine financial institutions, nor can they purchase for subsequent resale their own Tier 2 capital debt securities.
Other Tier 1 capital debt securities may be computed as Tier 2 capital even if those securities do not comply with all the requirements set forth in the requirements for Tier 2 capital described above: (i) if they allow unpaid interest to be cumulative, (ii) if their residual maturity is less than ten years, or (iii) if outstanding Tier 1 capital debt securities exceed the established percentage computable as Tier 1 capital, in which case the excess amount of such debt securities should be computed as Tier 2.

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Counterparty risk
The capital requirement for counterparty risk is defined as:
Cer = k* [a* Ais + c* Fsp + r* (Vrf + Vrani)] + INC + IP.
The required capital to assets-at-risk ratio is 10% (“a”) for fixed assets (“Ais”) and 8% (“r”) for loans (“Vrf”), other claims from financial intermediation and other financing (“Vrani”). The same ratio (“c”) is applied to claims on the public-sector loans (“Fsp”). The “INC” variable refers to incremental minimum capital requirements originated in excesses in other technical ratios (fixed assets, credit risk diversification and rating and limitations on transactions with related clients). The variable “IP” refers to the incremental originated in the general limit extension of the negative foreign currency net global position.
Each type of asset is weighted according to the level of risk assumed to be associated with it. In broad terms, the weights assigned to the different types of assets are:
Type of Asset Weighting
Cash and cash equivalents
0-20 %
Government Bonds
With market risk capital requirements and Central Bank monetary control instruments including those registered as “available of sale” and “investment accounts”
0 %
Other domestic bonds (without Central Government collateral)
100 %
OECD Central Government bonds—rated AA or higher
20 %
Loans
To the non-financial private sector
With preferred collateral under the form of:
Cash, term deposit certificates issued by the creditor entity and given as security
0 %
A guarantee by Reciprocal Guarantee Companies authorized by the Central Bank, export credit insurance, documentary credits
50 %
Mortgages
50%-100 %
Pledges
50%-100 %
To the non-financial public sector
100 %
To the financial sector
Public financial institutions with the collection of federal taxes as collateral
50 %
To foreign financial institutions or to financial institutions backed by them (rated AA or higher)
0%-20 %
Other credits from financial intermediation
0%-100 %
Assets subject to financial leasing
50%-100 %
Other assets
0%-100 %
Guarantees and contingent liabilities
0%-100 %
Minimum capital requirements also depend on the CAMELBIG rating (1 strongest, 5 weakest) assigned by the Superintendency, which also determines the “k” value. This rating system complies with international standards and provides a broad definition of the performance, risks and perspectives of financial entities. Financial entities have to adjust their capital requirements according to the following “k” factors:
CAMELBIG Rating K Factor
1
0.97
2
1.00
3
1.05
4
1.10
5
1.15
Excluded items include: (a) securities granted for the benefit of the Central Bank for direct obligations; (b) deductible assets pursuant to RPC regulations; and (c) finance and securities granted by branches or local subsidiaries of foreign financial entities by order and on account of their headquarters or foreign branches or the foreign controlling entity, to the extent (i) the foreign entity has an investment grade rating, (ii) the foreign entity is subject to regulations that entail consolidated fiscalization, (iii) in case of finance operations, they shall be repaid by the local branch or subsidiary exclusively with funds received from the aforementioned foreign intermediaries and (iv), in case of guarantees granted locally, they are in turn guaranteed by their headquarters or foreign branches or the foreign controlling entity and foreclosure on such guaranty may be carried out immediately and at the sole requirement of the local entity.
Interest rate risk
Financial entities must also comply with minimum capital requirements regarding interest rate risk. These minimum capital requirements capture the risk arising from the different sensitivity of assets and liabilities adversely affected by adverse or unexpected changes in interest rates (“duration approach”). This effect is immediately evident in the case of secondary market, as a change in the interest rate leads to a change in the price of such assets, and therefore in the entity’s balance sheet. This regulation governs all the assets and liabilities derived from financial intermediation not subject to the minimum capital requirements covering market risk (including securities held at investment accounts).
Minimum capital requirements measure the value risk (“VaR”) or maximum potential loss due to interest rate risk increases, considering a 3-month horizon and with a confidence level of 99%.

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In case of transactions with fixed interest rates, when calculating the requirements, the cash flows of the financial entity’s transactions are assigned to different time bands taking into account their maturity. Financial entities with 1-3 CAMELBIG ratings may treat 50% of sight deposits as long-term maturities (in the case of financial entities with a 1 or 2 CAMELBIG rating, the entity may choose the assigned maturity, whereas in the case of financial entities with a 3 CAMELBIG rating, the assigned maturity cannot exceed 3 years). All entities may assign to the “zero” time band (i) 100% of the contingent credit lines with a fixed or variable interest rate based on a foreign indicator and usable at the entity’s mere requirement (without need for prior notice), irrevocably granted by foreign banks with an international “A” credit rating and that do not control, or are controlled by, the local entity, or by local banks with a 1 or 2 CAMELBIG rating; and (ii) 100% of the contingent credit lines irrevocably granted to other financial entities, whether at a fixed or variable rate based on a foreign indicator, and usable at the entity’s mere requirement (without need for prior notice).
Transactions with variable interest rates related to a foreign index are treated as if they had fixed interest rates. The risk arising from liabilities with variable rates related to a domestic index is considered up to the first rate adjustment date. Financings to the non-financial public sector are treated in the same way as liabilities with variable rates related to a domestic index, provided that any such financings adjusted by CER shall be assigned to the time band relating to the first month. The remaining assets shall be assigned on an individual basis or grouped by kind of financing (i.e., mortgage loans, loans secured with a pledge, personal loans, etc.), as determined by each entity.
Market risk
Minimum capital requirements for market risks are added to previous requirements. Minimum capital requirements are computed as a function of the market risk of financial entities’ portfolios, measured as their VaR. The regulation includes those assets traded on a regular basis in open markets and excludes those assets held at investment accounts, which must meet counterparty and interest rate risk minimum capital requirements.
There are five categories of assets. Domestic assets are divided into equity and public bonds/Central Bank’s debt instruments, the latter being classified in two categories according to whether their modified duration is less than or more than 2.5 years. Foreign equity and foreign bonds make up another two categories that are classified according to their duration as well, the latter also comprising two separate categories, defined as for domestic assets. The fifth category is comprised of foreign exchange positions, differentiated according to currency involved.
Overall capital requirements in relation to market risk are the sum of the five amounts of capital necessary to cover the risks arising from each category.
Market risk minimum capital requirements must be met daily. Information must be reported to the Central Bank on a monthly basis. As from May 2003, the U.S. dollar has been included as a foreign currency risk factor for the calculation of the market risk requirement, considering all assets and liabilities in that currency.
Bonds held in portfolio by banks that were originally subject to market risk requirements, which at present do not quote regularly, are not subject to these requirements. As long as the Central Bank does not publish the corresponding volatility, they must be treated as assets without quotation.
Temporary regulations
Minimum capital requirements for counterpart risk have been temporarily reduced (via “Alpha coefficient”) for non-financial public sector financing granted before May 31, 2003. Minimum capital requirements for interest rate risk have also been temporarily reduced (via “Alpha2 coefficient”). The reduction coefficients to be applied converge to the unit according to an established schedule. These allowances have been introduced in order to reduce the impact on minimum capital requirements of those components that: (i) showed the biggest growth as a consequence of the 2002 crisis and (ii) are not present in international standards.
Period Alpha1 (applied to public sector financing) Alpha2 (applied to interest rate risk)
January/December 2004
0.05 0.20
January/December 2005
0.15 0.40
January/December 2006
0.30 0.70
January/December 2007
0.50 1.00
January/December 2008
0.75 1.00
As from January 2009
1.00 1.00
The capitalization derived from the difference between the equivalent in pesos as if the judicial deposits were recorded in their original currency and the book value of those deposits in foreign currency that on January 5, 2002 were affected by Law No. 25,561 and Decree 214/02, was a deductible item for the computing of the Regulatory Capital, until June 2009.
Consequences of a failure to meet minimum capital requirements
In the event of non-compliance with capital requirements by an existing financial institution, Central Bank Communication “A” 3171 provides the following:
(i)
non-compliance reported by the institutions : the institution must meet the required capital no later than in the second month after non-compliance was incurred or submit a restructuring plan within 30 calendar days following the last day of the month in which such non-compliance occurred.

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In addition, non-compliance with minimum capital requirements will entail a number of consequences for the financial institution, including prohibition from opening branches in Argentina or in other countries, establishing representative offices abroad, or owning equity in foreign financial institutions, as well as a prohibition from paying cash dividends. Also, the Superintendency may appoint a delegate, who shall have the powers set forth by the Financial Institutions Law.
(ii)
non-compliance detected by the Superintendency : the institution must file its defense within 30 calendar days after being served notice by the Superintendency. If no defense is filed, or if the defense is disallowed, the non-compliance will be deemed to be final, and the procedure described in item (i) will apply.
Requirements applicable to dividend distribution
The Central Bank has imposed restrictions on the payment of dividends, substantially limiting the ability of financial institutions to distribute such dividends without its prior consent.
By means of Communication “A” 5072, the Central Bank amended and restated its regulations regarding dividend distribution by financial institutions. According to such regulation, the Superintendency will review the ability of a bank to distribute dividends upon the bank’s request for its approval. The request must be filed within 30 business days prior to the shareholders’ meeting that will approve the institution’s annual financial statements. The Superintendency will authorize the distribution of dividends when none of the following circumstances are verified during the month preceding the request:
(i)
the financial institution is subject to a liquidation procedure or the mandatory transfer of assets by the Central Bank in accordance with section 34 or 35 bis of the Financial Institutions Law;
(ii)
the institution is receiving financial assistance from the Central Bank;
(iii)
the institution is not in compliance or has failed to comply on a timely basis with its reporting obligations to the Central Bank; or
(iv)
the institution is not in compliance with minimum capital requirements (both on an individual and consolidated basis and excluding any individual franchise granted by the Superintendency) and with minimum cash reserves (on average), whether in pesos, foreign currency or securities issued by the public sector.
Any distribution of dividends will be authorized only to the extent the financial institution complies with the minimum capital and minimum cash requirements calculated considering the proposed distribution and any applicable adjustment established by the regulations in force.
Operational risk
The regulation on operational risk (“OR”) recognizes the management of OR as a comprehensive practice, separated from that of other risks given its importance. OR 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 OR that includes policies, processes, procedures and the structure for their adequate management.
Seven OR event types are defined, according to internationally accepted criteria:
•
internal fraud;
•
external fraud;
•
employment practices and workplace safety;
•
clients, products and business practices;
•
damage to physical assets;
•
business disruption and system failures, and
•
execution, delivery and process management.
A solid system for risk management must have a clear assignment of responsibilities within the organization of financial entities. Thus, the regulation describes the roles of each level of the organization for the management of OR (such as the roles of the Board of Directors, senior management and the business units of the financial institution).

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An “OR unit” is required, adjusted to the financial institutions’ size and sophistication and the nature and complexity of its products and processes, and the extent of the transaction. For small institutions, this unit may even consist of a single person. This unit may functionally respond to the senior management (or similar) or a functional level with risk management decision capacity that reports to that senior management.
An effective risk management will contribute to prevent future losses derived from operational events. Consequently, financial entities must manage the inherent OR in their products, activities, processes and systems. The OR management process comprises:
a) Identification and assessment: the identification process should consider both internal and external factors that could adversely affect the development of the processes and projections done according to the business strategies defined by the financial institution. Financial entities should use internal data, establishing a process to register frequency, severity, categories and other relevant aspects of the OR loss events. This should be complemented with other tools, such as self-risk assessments, risk mapping and key risk indicators.
b) Monitoring: an effective monitoring process is required, for quickly detecting and correcting deficiencies in the policies, processes and procedures for managing OR. In addition to monitoring operational loss events, banks should identify forward-looking indicators that enable them to act upon these risks appropriately.
c) Control and mitigation: financial entities must have an appropriate control system for ensuring compliance with a documented set of internal policies, which involves periodic reviews (at least annually) of control strategies and risk mitigation, and should adjust them if necessary.
The determination of minimum capital requirements for operational risk complies with Basel II Accord and it enables entities to calculate the aforementioned requirements by applying basic or standardized approaches to calculation.
The schedule for the complete implementation of the OR management system ended on December 2009. The Central Bank has not established minimum capital requirements for operational risk yet.
Minimum cash reserve requirements
The minimum cash reserve requirement requires that a financial institution keep a portion of its deposits or obligations readily available and not allocated to lending transactions.
Minimum cash requirements are applicable to demand and time deposits and other liabilities arising from financial intermediation denominated in pesos, foreign currency, or government and corporate securities, and any unused balances of advances in checking accounts under formal agreements not containing any clauses that permit the bank to discretionally and unilaterally revoke the possibility of using such balances.
Minimum cash reserve obligations exclude amounts owed (i) to the Central Bank, (ii) to domestic financial institutions, (iii) to foreign banks (including their head offices, entities controlling domestic institutions and their branches), in connection with foreign trade financing facilities, (iv) cash purchases pending settlement and forward purchases, (v) cash sales pending settlement and forward sales (whether or not related to repurchase agreements), (vi) overseas correspondent banking operations and (vii) demand obligations for money orders and transfers from abroad pending settlement, to the extent they do not exceed a 72 business hour term as from their deposit.
The liabilities subject to these requirements are computed on the basis of the effective principal amount of the transactions, excluding interest accrued, past due, or to become due on the aforementioned liabilities, provided they were not credited to the account of, or made available to, third parties, and, where available, the amount accruing upon the adjustment rate (CER) is applied.
The basis on which the minimum cash reserve requirement is calculated is the monthly average of the daily balances of the liabilities at the end of each day during each calendar month, except for the period ranging from December of a year to February of the next, period in which it shall be applied on a quarterly average. Such requirement shall be complied with on a separate basis for each currency in which the liabilities are denominated.

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The table below shows the percentage rates that should be applied to determine the required minimum cash reserve requirement:
Rate Rate (%)
(%) (foreign
Item (pesos) currency)
1-Checking account deposits
19 —
2-Savings account, basic account, and free universal account
19 20
3-Legal custody accounts, special accounts for savings clubs, “Unemployment Fund for Construction Industry Workers” (Fondo de Desempleo para los trabajadores de la Industria de la Construcción) and “Salary payment,” special checking accounts for legal entities and social security savings accounts
19 20
4-Other demand deposits and liabilities, pension and social security benefits credited by ANSES (Government Social Security Agency) pending collection and immobilized reserve funds for liabilities covered by these regulations
19 20
5-Unused balances of advances in checking accounts under executed overdraft agreements
19 —
6-Deposits in checking accounts of non-bank financial institutions, computed for purposes of meeting their required minimum cash reserve
100 —
7-Time deposits, liabilities under acceptances, repurchase agreements (including responsibilities for sale or transfer of credits to agents different from financial institutions), stock-exchange repos (cautions and stock exchange passive repos), constant-term investments, with an option for early termination or for renewal for a specified term and variable income, and other fixed-term liabilities, except rescheduled deposits included in the following items 11, 12, 13 and 15 of this table:
(i) Up to 29 days
14 20
(ii) From 30 days to 59 days
11 15
(iii) From 60 days to 89 days
7 10
(iv) From 90 days to 179 days
2 5
(v) From 180 days to 365
— 2
(vi) More than 365 days
— —
8-Liabilities owed due to foreign facilities (not executed by means of time deposits or debt securities)
— —
9-Securities (including Negotiable Obligations)
a- Debt issued from 01/01/02, including restructured liabilities
(i) Up to 29 days
14 20
(ii) From 30 days to 59 days
11 15
(iii) From 60 days to 89 days
7 10
(iv) From 90 days to 179 days
2 5
(v) From 180 days to 365 days
— 2
(vi) More than 365 days
— —
b- Others
— —
10-Liabilities owing to the Trust Fund for Assistance to Financial and Insurance Institutions
—
11-Demand and time deposits made upon a court order with funds arising from cases pending before the court, and the related immobilized balances
10 10
12- Deposits as assets of a mutual fund
19 20
13-Special deposits related to inflows of funds. Decree 616/2005
— 100
14-Deposits and other liabilities in pesos (excluding the “Unemployment Fund for Construction Industry Workers” ( Fondo de Desempleo para los trabajadores de la Industria de la Construcción )) which return is higher than 15% of BADLAR rates average, corresponding to the preceding month
100 —
15-Time deposits in nominative, non-transferable peso-denominated certificates, belonging to public sector holders, with the right to demand early withdrawal in less than 30 days from its setting up.
16 —
In addition to the abovementioned requirements, the reserve for any defect in the application of resources in foreign currency for any given month shall be applied for an amount equal to the minimum cash requirement of the corresponding currency for such month.
The minimum cash reserve must be set up in the same currency to which the requirement applies, and eligible items include the following:
(i)
Cash (in treasury, cash in custody at other financial institutions and cash in transit and value carriers).
(ii)
Accounts maintained by financial institutions with the Central Bank in pesos.
(iii)
Accounts of minimum cash maintained by financial institutions with the Central Bank in U.S. dollars, or other foreign currency.
(iv)
Special guarantee accounts for the benefit of electronic clearing houses and to cover settlement of credit card and ATM transactions.
(v)
Checking accounts maintained by non-bank financial institutions with commercial banks for the purpose of meeting the minimum reserve requirement.
(vi)
Special accounts maintained with the Central Bank for transactions involving social security payments by the ANSES.
(vii)
Minimum cash sub-account 60, authorized in the Registration and Settlement Central for Public Debt and Financial Trusts — CRYL (“ Central de Registro y Liquidación de Pasivos Públicos y Fideicomisos Financieros — CRYL ”) for public securities and securities issued by the Central Bank, at their market value.
These eligible items are subject to review by the Central Bank and may be changed in the future.
The Central Bank makes interest payments on reserve requirements up to the legal cash requirement level established for term transactions. Reserves in excess of that requirement will not be remunerated.
Compliance on public bonds and time deposits must be done with holdings marked to market and of the same type, only in terms of monthly status. Holdings must be deposited on special accounts at the Central Bank.
Compliance with the minimum cash reserve requirement will be measured on the basis of the monthly average of the daily balances of eligible items maintained during the month to which the minimum cash reserve refers by dividing the aggregate of such balances by the total number of days in the relevant period.
The aggregate balances of the eligible items referred to from items (ii) to (vi) above, maintained as of each daily closing, may not, on any one day during the month, be less than 50% of the total required cash reserve, excluding the requirement for incremental deposits, determined for the next preceding month, recalculated on the basis of the requirements and items in force in the month to which the cash reserves relate. Notwithstanding the foregoing, according to Central Bank Communication “A” 5152, as amended and supplemented by Communication “A” 5179 and Communication “A” 5182, this requirement is reduced to the 30% of the total required cash reserve from December 6, 2010 to April 30, 2011. As of the date of this report, the aforementioned term has not been renewed or updated.

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The daily minimum required is 70% when a deficit occurs in the previous month.
Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve in foreign currency are subject to a penalty equal to twice the private banks’ BADLAR rate for deposits in U.S. dollars or twice the 30-day US dollar LIBO rate for the last business day of the month (whichever is higher).
Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve in Argentine pesos are subject to a penalty equal to twice the private banks’ BADLAR rate for deposits in Argentine pesos for the last business day of the month.
Internal liquidity policies of financial institutions
The regulations designed to limit liquidity risk provide that financial institutions should adopt management and control policies that ensure the maintenance of reasonable liquidity levels to efficiently manage their deposits and other financial commitments. Such policies should establish procedures for evaluating the liquidity of the institutions in the framework of prevailing market conditions to allow them to revise projections, take steps to eliminate liquidity constraints and obtain sufficient funds, at market terms, to maintain a reasonable level of assets over the long term. Such policies should also address (i) the concentration of assets and liabilities in specific customers, (ii) the overall economic situation, likely trends and the impact on credit availability, and (iii) the ability to obtain funds by selling government debt securities and/or assets.
Credit risk regulation
The regulations on credit risk prescribe standards in order to reduce such risk without significantly eroding average profitability. There are three types of ratios that limit a lender’s risk exposure, namely: risk concentration limits, limits on transactions with customers on the basis of the institution’s capital and credit limits on the basis of the customer’s net worth.
Risk concentration : means the aggregate amount of relevant transactions executed with companies, individuals or groups of companies—whether affiliated or not—where such transactions, measured for each one of such customers, are at any time equal to or higher than 10% of the institution’s RPC on the last day of the month prior to the relevant month. Total operations may not exceed, at any time:
• three times the institution’s RPC for the previous month, without considering the operations involving local financial institutions (domestic or foreign headquarters or branches);
• five times the institution’s RPC for the previous month if operations involving local financial institutions are considered; or
• ten times the institution’s RPC, in the case of second tier financial institutions (i.e., financial institutions that only lend to other financial institutions and do not receive deposits from the general public), considering the loans to other domestic financial institutions.
Diversification of risk : limitations are established for operations with clients, which may not exceed certain percentages applied on top of the institution’s RPC for the previous month. These percentages vary in function depending upon the type of client, the type of operation and the collateral involved. The regulation sets forth a number of transactions that are excluded from the credit risk diversification rules.
Degree of risk : In the case of credit limits based on the customers’ net worth, as a general rule the financial assistance cannot exceed 100% of the customer’s net worth. The basic margin may be increased by an additional 200%, provided such additional margin does not exceed 2.5% of the financial institution’s RPC and the increase is approved by the Board of Directors of the relevant financial institution.
Limits for affiliated individuals
Central Bank regulations regarding risk management determine certain limits to the transactions that financial institutions may carry out with parties related to them (whether individuals or corporate entities).
A person is “related” to a financial institution based on different criteria including whether the financial institution directly or indirectly controls, is controlled by, or is under common control with, such person; whether this person has a participation on the financial institution; whether the financial institution or the person that controls the financial institution and such person have or may have common directors to the extent such common directors represent a majority of the board in either the person or the financial institutions; or, exceptionally, whenever the Central Bank board of directors determines — pursuant to Superintendency proposal — that a person maintains a relationship with the financial entity (or its controlling person) that may result in monetary damages for the financial institution.
Control by one person of another is defined under such regulations as:
(i)
holding or controlling, directly or indirectly, 25% or more of the total voting stock of the other person;
(ii)
having held 50% or more of the total voting stock of the other person at the time of the last election of directors or managers;
(iii)
holding, directly or indirectly, any other kind of participation in the other person (even if it represents a participating interest below the above mentioned percentages) so as to be able to prevail in the institution’s decision making; or
(iv)
when the Central Bank board of directors — pursuant to a proposal from the Superintendency — determines that a person is exercising a controlling influence over the financial institution.
The transactions taken into account for the purpose of this title include, among others, capital stock holdings, loans and securities issued by a local financial institution or its foreign branches or any foreign financial institution controlled by the local financial institution.

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The limits for transactions with affiliated individuals depend on the financial institution’s RPC and its CAMELBIG rating:
A. In case of local financial institutions with a 1 to 3 CAMELBIG rating:
(i) General:
(a)
Guaranteed operations: 10% of the RPC.
(b)
Non-guaranteed operations: 5% of the RPC.
(ii) Related financial institutions which transactions are subject to consolidation:
Additional
Lender rating Borrower rating General Tranche I (*) Tranche II (**) Tranche III (***)
1, 2 or 3
1 100 % 25 % 25 % —
2 20 % 25 % 25 % 55 %
3 10 % 20 % 20 % —
4 or 5 10 % — — —
4 or 5
1 to 5 0 % — — —
(iii) Related companies that provide complementary services:
Controlling financial Additional
Complementary services entity General Tranche I (***) Tranche II Tranche III
Stock exchange agent, financial assistance based on leasing and factoring, temporal adquisition of shares
1 100 % — — —
2 10 % 90 % — —
3 10 % — — —
4 o 5 0 % — — —
Controlling financial Additional
Complementary services entity General Tranche I (*) Tranche II (**) Tranche III (***)
Credit and debit card issuers or similar services
1 100 % 25 % 25 % —
2 20 % 25 % 25 % 55 %
3 10 % 20 % 20 % —
4 o 5 0 % — — —
(*)
Subject to certain conditions.
(**)
Only for guaranteed financings that comply with the conditions for Tranche I.
(***)
Only for financings with an inicial term up to 180 days.
(iv) Related foreign banks:
(a)
rated “investment grade”: 10% of the RPC.
(b)
with a lower rating:
•
5% for unsecured transactions
•
10% for secured transactions
The aggregate amount of financial assistance provided to affiliated parties cannot exceed 20% of the institution’s RPC (except those provided to financial entities and complementary services corporations subject to consolidation).
B. In case of local financial institutions with a 4 to 5 CAMELBIG rating cannot grant financial assistance to related parties, except in case of financial assistance to (including participation in the share capital of): (a) foreign branches of local financial entities subject to consolidation; (b) foreign bank that controls local financial institutions or their branches in other countries; or (c) companies that provide “complementary services” and that are subject to consolidation.

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Transactions not subject to the limits described above for all financial institutions include: (i) financial assistance to the foreign bank that controls the financial institution and to its foreign branches, provided under certain conditions are met, and (ii) financial assistance secured by preferred guarantees rated “A”. Additionally, the Superintendency may exceptionally grant especial or additional exclusions to this regime for particular cases.
According to Central Bank regulations, financial institutions are not allowed to refinance, extend or renew financial assistance granted to related parties with a credit rating that is not “normal” or whose notes are rated below “BB” by a local rating agency.
The following parties must provide a sworn statement as to whether they qualify as “affiliated parties” or whether they have a controlling influence on the financial institution if (a) their debt exceeds the lower of Ps. 1,000,000 or 2.5% of the RPC; or (b) they directly or indirectly hold 5% or more of the voting rights or capital stock of the financial institution.
Foreign exchange system
During the first quarter of 2002, the Argentine government established certain foreign exchange controls and restrictions.
On February 8, 2002, Decree No. 260 was issued, establishing as of February 11, 2002 a Local Foreign Exchange Market (“ Mercado Único y Libre de Cambios ”) system through which all transactions involving the exchange of foreign currency are to be traded at exchange rates to be freely agreed upon.
On such date, the Central Bank issued Communications “A” 3471 and “A” 3473, which stated that the sale and purchase of foreign currency can only be performed with entities authorized by the Central Bank to operate in foreign exchange. Item 4 of Central Bank Communication “A” 3471 stated that the sale of foreign currency in the local exchange market shall in all cases be against peso bills.
Since January 2, 2003, there have been further modifications to the restrictions imposed by the Central Bank. See Item 10.D — “Additional Information”.
Foreign currency lending capacity
The Regulations on the allocation of deposits in foreign currencies establish that the lending capacity from foreign currency deposits, including U.S. dollar-denominated deposits to be settled in pesos, must fall under one of the following categories: (a) pre-financing and financing of exports to be made directly or through principals, trustees or other brokers, acting on behalf of the owner of the merchandise; (b) financing for manufacturers, processors or collectors of goods, provided they refer to non-revocable sales agreements with exporters for foreign currency-denominated prices (irrespective of the currency in which such transaction is settled), and they refer to exchangeable foreign-currency denominated goods listed in local or foreign markets, broadly advertised and easily available to the general public; (c) financing for manufacturers of goods to be exported, as final products or as part of other goods, by third-party purchasers, provided that such transactions are secured or collateralized in foreign currency by third-party purchasers; (d) financing of investment projects, working capital or purchase of any kind of goods —including temporary imports of commodities- that increase or are related to the production of goods to be exported; (e) financing for commercial clients or commercial loans considered as consumer loans, with the purpose of importing capital goods, whenever they help to increase goods production for the domestic market; (f) debt securities or financial trust participation certificates whose underlying assets are loans made by the financial entities in the manners set forth in (a) to (d) above; (g) foreign currency debt securities or financial trust participation certificates, publicly listed under an authorization by the CNV, whose underlying assets are securities bought by the fiduciary and guaranteed by reciprocal guarantee companies, in order to finance export transactions; (h) financings for purposes other than those mentioned in (a) to (d) above, included under the IDB credit program (“ Préstamos BID N° 119/OC-AR ”), not exceeding 10% of the lending capacity; and (i) inter-financing loans (any inter-financing loans granted with such resources must be identified).
The lending capacity shall be determined for each foreign currency raised, such determination being made on the basis of the monthly average of daily balances recorded during each calendar month. Any defect in the application shall give rise to an increase in the minimum cash requirement in the relevant foreign currency.
General exchange position
The general exchange position includes all the liquid external assets of the institution, such as gold, currency and foreign currency notes reserves, sight deposits in foreign banks, investments in securities issued by OECD member governments with a sovereign debt rating not below “AA”), certificates of time deposits in foreign institutions (rated not less than “AA”) and correspondents’ debit and credit balances. It also includes purchases and sales of these assets already arranged and pending settlement involving foreign exchange purchases and sales performed with customers within a term not exceeding two business days and correspondent balances for third-party transfers pending settlement. It does not include, however, foreign currency notes held in custody, term sales and purchases of foreign currency or securities nor direct investments abroad.
The GEP ceiling is calculated every month and, therefore, updated the first business day of the month. Pursuant to the relevant reporting system regulations this ceiling is set at 15% of the amount equivalent in U.S. dollars to the computable equity at the end of the month immediately preceding the last month when filing with the Central Bank has already expired. It will be increased by an amount equivalent in U.S. dollars to 5% of the total amount traded by the institution on account of the purchases and sales of foreign currency in the calendar month prior to the immediately preceding month, and by 2% of the total demand and time deposits locally held and payable in foreign bills, excluding deposits held in custody, recorded by the institution at the end of the calendar month prior to the immediately preceding month. If the ceiling does not exceed US$8.0 million, this figure will be considered its floor.

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Institutions authorized to trade in foreign currency failing to comply with the GEP ceilings or the exchange reporting regulations should refrain from trading in foreign currency until they are in compliance with the above.
Although certain exceptions are admitted, institutions authorized to trade in foreign currency require the Central Bank’s prior consent to perform their own purchases when payment is made against delivery of foreign currency or other foreign assets comprising the GEP.
Foreign currency net global position
All assets and liabilities from financial intermediation in foreign currency and securities in foreign currency (deriving from cash and term transactions) are included in the net global position (for ongoing and completed operations).
In addition, forward transactions under master agreements entered within domestic self-regulated markets paid by settlement of the net amount without delivery of the underlying asset are also included. Deductible assets for determining RPC are excluded from the ratio.
Two ratios are considered in the Foreign Currency Net Global Position:
• Negative foreign currency net global position (liabilities exceeding assets): as from January 1, 2007 (Communications “A” 4577 and 4598) the limit is 15%, but it can be extended up to 15 p.p. provided the entity records at the same time: a) medium and long-term financing in pesos to non-financial private sector (mid and long-term financings are those exceeding 4 years, weighting capital maturity without considering CER) under certain conditions for an amount equivalent to the increase of said limit; and b) an increase in the minimum capital requirement equivalent to the increase of the general limit of the negative foreign currency net global position.
• Positive net global position (assets exceeding liabilities): this limit cannot exceed the lesser of:
1. 30% of the Computable Net Worth.

2. Own liquid funds (which refer to the RPC minus “fixed assets” and loans to related clients).
By Communication “A” 4350, the Central Bank suspended as of May 1, 2005 the limits for the positive net global position.
The excesses of these ratios are subject to a charge equal to the greater of twice the nominal interest rate of the U.S. dollar denominated LEBAC (Central Bank bill) or twice the 30-day U.S. dollar LIBO rate for the last business day of the month. Charges not paid when due are subject to the charge established for excesses, increased by 50%.
Debt classification and loan loss provisions
Credit portfolio
The regulations on debt classification are designed to establish clear guidelines for identifying and classifying the quality of assets, as well as evaluating the actual or potential risk of a lender sustaining losses on principal and/or interest, in order to determine, taking into account any loan security, whether the provisions against such contingencies are adequate. Banks must classify their loan portfolios into two different categories: (i) consumer or housing loans and (ii) commercial loans. Consumer and housing loans include housing loans, consumer loans, credit-card financings and other types of installment credits to individuals. All other loans are considered commercial loans. Consumer or housing loans in excess of Ps.750,000 the repayment of which is linked to its projected cash flows are classified as commercial loans. Central Bank regulations allow financial institutions to apply the consumer and housing loan classification criteria to commercial loans of up to Ps.750,000, given with or without guarantees. If a customer has both kinds of loans (commercial and consumer and housing loans), the consumer or housing loans will be added to the commercial portfolio to determine under which portfolio they should be classified based on the amount indicated. In these cases, the loans secured by preferred guarantees shall be considered to be at 50% of its face value.
Under the current debt classification system, each customer, as well as the customer’s outstanding debts, are included within one of six sub-categories. The debt classification criteria applied to the consumer loan portfolio are primarily based on objective factors related to customers’ performance on their obligations or their legal standing, while the key criterion for classifying the commercial loan portfolio is each borrower’s paying ability based on its future cash flow.

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Commercial loans classification
The principal criterion to evaluate a loan pertaining to the commercial portfolio is its borrower’s ability to repay it, whose ability is mainly measured by such borrower’s future cash flow. Pursuant to Central Bank regulations, commercial loans are classified as follows:
Classification Criteria
In normal situation
Borrowers for whom there is no doubt as to their ability to comply with their payment obligations.
Subject to special monitoring/Under observation
Borrowers that, among other criteria, are up to 90 days past due and, although considered to be able to meet all their financial obligations, are sensitive to changes that could compromise their ability to honor debts absent timely corrective measures.
Subject to special monitoring / Under negotiation or refinancing agreement
Borrowers who are unable to comply with their obligations as agreed with the bank and, therefore, formally state, within 60 calendar days after the maturity date, their intention to refinance such debts. The borrower must enter into a refinancing agreement with the bank within 90 calendar days (if up to two lenders are involved) or 180 calendar days (if more than two lenders are involved) after the payment default date. If no agreement has been reached within the established deadline, the borrower must be reclassified to the next category according to the indicators established for each level.
Troubled
Borrowers with difficulties honoring their financial obligations under the loan on a regular basis, which, if uncorrected, may result in losses to the bank.
With high risk of insolvency
Borrowers who are highly unlikely to honor their financial obligations under the loan.
Irrecoverable
Loans classified as irrecoverable at the time they are reviewed (although the possibility might exist that such loans might be collected in the future). The borrower will not meet its financial obligations with the financial institution.
Irrecoverable according to Central Bank’s Rules
(a) Borrower has defaulted on its payment obligations under a loan for more than 180 calendar days according to the corresponding report provided by the Central Bank, which report includes (1) financial institutions liquidated by the Central Bank, (2) residual entities created as a result of the privatization of public financial institutions, or in the privatization or dissolution process, (3) financial institutions whose licenses have been revoked by the Central Bank and find themselves subject to judicial liquidation or bankruptcy proceedings and (4) trusts in which Seguro de Depósitos S.A. (SEDESA) is a beneficiary, and/or (b) certain kinds of foreign borrowers (including banks or other financial institutions that are not subject to the supervision of the Central Bank or similar authority of the country in which they are incorporated) that are not classified as “investment grade” by any of the rating agencies approved by the Central Bank.
Consumer and housing loans classification
The principal criterion applied to loans in the consumer and housing portfolio is the length of the period for which such loans remain overdue. Under the Central Bank regulations, consumer and housing borrowers are classified as follows:
Classification Criteria
Performing
If all payments on loans are current or less than 31 calendar days overdue and, in the case of checking account overdrafts, less than 61 calendar days overdue.
Low Risk
Loans upon which payment obligations are overdue for a period of more than 31 and up to 90 calendar days.
Medium Risk
Loans upon which payment obligations are overdue for a period of more than 90 and up to 180 calendar days.
High Risk
Loans in respect of which a legal action seeking collection has been filed or loans having payment obligations overdue for more than 180 calendar days, but less than 365 calendar days.
Irrecoverable
Loans in which payment obligations are more than one year overdue or the debtor is insolvent or in bankruptcy or liquidation.
Irrecoverable according to Central Bank’s Rules
Same criteria as for commercial loans in the Irrecoverable according to Central Bank Rules.

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Minimum credit provisions
The following minimum credit provisions are required to be made by Argentine banks in relation to the credit portfolio category:
With Preferred Without Preferred
Category Guarantees Guarantees
“In normal situation” and “Performing”
1 % 1 %
“Under observation” and “Low risk”
3 % 5 %
“Under negotiation or refinancing agreement”
6 % 12 %
“Troubled” and “Medium Risk”
12 % 25 %
“With high risk of insolvency” and “High Risk”
25 % 50 %
“Irrecoverable”
50 % 100 %
“Irrecoverable according to Central Bank Rules”
100 % 100 %
The Superintendency may require additional provisioning if it determines that the current level is inadequate.
Financial institutions are entitled to record allowances for loan losses in amounts larger than those required by the Central Bank Rules. In such cases and despite the existence of certain exceptions, recording a larger allowance for a commercial loan, to the extent the recorded allowance amount falls into the next credit portfolio category set forth by Central Bank Rules, shall automatically result in the corresponding debtor being recategorized accordingly.
Minimum frequency for classification review
Financial institutions are required to classify loans at least once a year in accordance with the Central Bank Rules. Nevertheless, a quarterly review is required for credits that amount to 5% or more of our RPC and mid-year review for credits that amount to the lower of: (i) Ps.1 million or (ii) the range between 1% and 5% of our RPC. In addition, financial institutions have to review the rating assigned to a debtor when another financial institution reduces the debtor classification in the “Credit Information Database” and grants 10% or more of the debtor’s total financing in the financial system. Only one-level discrepancy is allowed in relation to the information submitted by financial institutions to the “Credit Information Database” and the lower classification awarded by at least two other banks and total lending from such banks account for 40% or more of the total informed; if there is a greater discrepancy, the financial institution will be required to reclassify the debtor.
Allowances for loan losses
The allowance for loan losses is maintained in accordance with applicable regulatory requirements of the Central Bank. Increases in the allowance are based on the level of growth of the loan portfolio, as well as on the deterioration of the quality of existing loans, while decreases in the allowance are based on regulations requiring the write-off of non-performing loans classified as irrecoverable after a certain period of time and on decisions of the management to write off non-performing loans evidencing a very low probability of recovery.
Priority rights of depositors
Under Section 49 of the Financial Institutions Law, in the event of judicial liquidation or bankruptcy of a bank, depositors have a general and absolute priority right to collect their claims over all other creditors, except claims secured by pledges or mortgages and certain employee liens. Additionally, the holders of any type of deposit have a special priority right over all other creditors of the bank, except certain employee creditors, to be paid out of (i) any funds of the branch that may be in the possession of the Central Bank as Minimum Cash Reserve, (ii) any other funds of the bank existing as of the date on which the bank’s license is revoked, or (iii) any proceeds resulting from the mandatory transfer of certain assets of the financial institution to another as determined by the Central Bank pursuant to Section 35 of the Financial Institutions Law, according to the following order of priority: (a) deposits of up to Ps.50,000 per person (including all amounts such person deposited in one financial entity), or its equivalent in foreign currency, (b) all deposits of an amount higher than Ps.50,000, or its equivalent in foreign currency for the amount in excess thereof, and (c) the liabilities originated in commercial lines granted to the financial institution and which directly affect international commerce.
Mandatory deposit insurance system
Law No. 24,485 passed on April 12, 1995, as amended by Law No. 25,089 and Decrees No. 538/95 and No. 540/95, created a Deposit Insurance System, or “SSGD”, which is mandatory for bank deposits, and delegated the responsibility for organizing and implementing the system to the Central Bank. The SSGD is a supplemental protection to the privilege granted to depositors by means of Section 49 of the Financial Institutions Law, as mentioned above.
The SSGD has been implemented through the establishment of a Deposit Guarantee Fund, or “FGD”, managed by a private-sector corporation called Seguro de Depósitos Sociedad Anónima , (Deposit Insurance Corporation, or “SEDESA”). According to Decree No. 1292/96, the shareholders of SEDESA are the Argentine government through the Central Bank and a trust set up by the participating financial institutions. These institutions must pay into the FGD a monthly contribution determined by Central Bank regulations. The SSGD is financed through regular and additional contributions made by financial institutions, as provided for in Central Bank Communication “A” 4271, dated December 30, 2004.
The SSGD covers deposits made by individuals and legal entities in Argentine or foreign currency and maintained in accounts with the participating financial institutions, including checking accounts, savings accounts, and time deposits up to the amount of Ps. 120,000, as set forth by Central Bank Communication “A” 5170, dated January 11, 2011.
Effective payment on this guarantee will be made within 30 business days after revocation of the license of the financial institution in which the funds are held; such payment is subject to the exercise of the depositor’s priority rights described above.

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In view of the circumstances affecting the financial system, Decree No. 214/2002 provided that SEDESA may issue registered securities for the purpose of offering them to depositors in payment of the guarantee in the event it should not have sufficient funds available.
The SSGD does not cover: (i) deposits maintained by financial institutions in other financial institutions, including certificates of deposit bought in the secondary market, (ii) deposits made by persons directly or indirectly affiliated with the institution, (iii) time deposits of securities, acceptances or guarantees, (iv) any transferable time deposits that have been transferred by endorsement, (v) any deposits benefiting from some incentive (e.g., car raffles) in addition to the agreed upon interest rate, and (vi) any deposits in which the agreed-upon interest rate is higher than the reference interest rates periodically released by the Central Bank for time deposits and demand deposit account balances and available amounts from overdue deposits or closed accounts.
Pursuant to Central Bank Communication “A” 4271, every financial institution is required to contribute to the FGD a monthly amount of 0.015% of the monthly average of daily balances of deposits in local and foreign currency, as determined by the Central Bank. Prompt contribution of such amounts is a condition precedent to the continuing operation of the financial institution. The first contribution was made on May 24, 1995. The Central Bank may require financial institutions to advance the payment of up to the equivalent of two years of monthly contributions and debit the past due contributions from funds of the financial institutions deposited with the Central Bank. The Central Bank may require additional contributions by certain institutions, depending on its evaluation of the financial condition of those institutions.
When the contributions to the FGD reach the greater of Ps.2.0 billion or 5.0% of the total deposits of the system, the Central Bank may suspend or reduce the monthly contributions, and reinstate them when the contributions subsequently fall below that level.
Capital markets
Commercial banks are authorized to subscribe for and sell shares and debt securities. At present, there are no statutory limitations as to the amount of securities for which a bank may undertake to subscribe. However, under Central Bank regulations, underwriting of debt securities by a bank would be treated as “financial assistance” and, accordingly, until the securities are sold to third parties, such underwriting would be subject to limitations.
In 1990, the Buenos Aires securities market authorized firms organized as brokerage houses, or sociedades de bolsa , to operate as brokers on the BCBA in addition to individual stockbrokers. There are currently no restrictions on ownership of a sociedad de bolsa by a commercial bank, and, in fact, most of the main commercial banks operating in Argentina have established their own sociedad de bolsa . All brokers, whether individuals or firms, are required to own at least one share of Mercado de Valores S.A. to be allowed to operate as brokers on the BCBA.
An agreement between the BCBA and representatives of the “Mercado Abierto Electronico S.A” (MAE) dealers provides that trading in shares and other equity securities will be conducted exclusively on the BCBA and that all debt securities listed on the BCBA may also be traded on the MAE. Trading in Argentine government securities, which are not covered by the agreement, is conducted mainly on the MAE. The agreement does not extend to other Argentine exchanges.
Commercial banks may operate as both managers and custodians of Argentine fondos comunes de inversión , or mutual funds; provided, however, that a bank may not act simultaneously as manager and custodian for the same fund.
Financial institutions in economic difficulties
The Financial Institutions Law provides that any financial institution, including a commercial bank, operating at less than certain required technical ratios and minimum net worth levels, in the judgment of the Central Bank adopted by members representing the majority of the board of directors, with impaired solvency or liquidity or in any of the other circumstances listed in Section 44 of the Financial Institutions Law, must (upon request from the Central Bank and in order to avoid the revocation of its license) prepare a plan de regularización y saneamiento , or a restructuring plan. The plan must be submitted to the Central Bank on a specified date, not later than 30 calendar days from the date on which a request to that effect is made by the Central Bank. Upon the institution’s failure to submit, secure regulatory approval of, or comply with, a restructuring plan, the Central Bank will be empowered to revoke the institution’s license to operate as such.
Furthermore, the Central Bank’s charter authorizes the Central Bank Superintendency to fully or partially suspend, exclusively subject to the approval of the President of the Central Bank, the operations of a financial institution for a term of 30 days if the liquidity or solvency thereof are adversely affected. Such term could be renewed for up to 90 additional days, with the approval of the Central Bank’s board of directors. During such suspension term an automatic stay of claims, enforcement actions and precautionary measures is triggered, any commitment increasing the financial institution’s obligations shall be null and void, and debt acceleration and interest accrual shall be suspended.
If per the Central Bank’s criteria a financial institution is undergoing a situation which, under the Financial Institutions Law, would authorize the Central Bank to revoke its license to operate as such, the Central Bank may, before considering such revocation, order a restructuring plan that may consist on among others, the following measures:
•
adoption of list measures to capitalize or increase the capital of the financial institution;
•
revoke the approval granted to the shareholders of the financial institution to hold interests therein;

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•
restructure and/or transfer assets and liabilities;
•
grant temporary exemptions to compliance with technical regulations and/or payment of charges and penalties arising from such flawed compliance; or
•
appoint a delegate or auditor (“ interventor ”) that may prospectively replace the board of directors of the financial institution.
Revocation of the license to operate as financial institution
The Central Bank may revoke the license to operate as a financial institution in case a restructuring plan has failed or is not deemed feasible, or violations of local laws and regulations have been incurred, or solvency or liquidity of the financial institution has been affected, or significant changes have occurred in the institution’s condition since the original authorization was granted, or if any decision by the financial institution’s legal or corporate authorities concerning its dissolution has been adopted, among other circumstances set forth in the Financial Institutions Law.
Once the license to operate as a financial institution has been revoked, the financial institution shall be liquidated.
Liquidation of financial institutions
As provided in the Financial Institutions Law, the Central Bank must notify the revocation decision to a competent court, which will then determine who will liquidate the entity: the corporate authorities (extrajudicial liquidation) or an independent liquidator appointed by the court for that purpose (judicial liquidation). The court’s decision will be based on whether or not there is sufficient assurance that the corporate authorities are capable of carrying out such liquidation properly.
Bankruptcy of financial institutions
According to the Financial Institutions Law, financial institutions are not allowed to file their own bankruptcy petitions. In addition, the bankruptcy shall not be adjudged until the license to operate as financial institution has been revoked.
Once the license to operate as a financial institution has been revoked, a court of competent jurisdiction may adjudge the former financial institution in bankruptcy, or a petition in bankruptcy may be filed by the Central Bank or by any creditor of the bank, in this case after a period of 60 calendar days has elapsed since the license was revoked.
Once the bankruptcy of a financial institution has been adjudged, provisions of the Bankruptcy Law No. 24,522 and the Financial Institutions Law shall be applicable; provided however that in certain cases, specific provisions of the Financial Institutions Law shall supersede the provisions of the Bankruptcy Law (i.e. priority rights of depositors).
Money laundering
The concept of money laundering is generally used to denote transactions intended to introduce criminal proceeds into the institutional system and thus to transform profits from illegal activities into assets of a seemingly legitimate origin.
On April 13, 2000, the Argentine Congress passed Law No. 25,246 amended by Laws No. 26,087, 26,119 and 26,268 (the “Anti-Money Laundering Law”), which defines money laundering as a type of crime. In addition, the law, which supersedes several sections of the Argentine criminal code established severe penalties for anyone participating in any such criminal activity and created the UIF, establishing an administrative criminal system.
Money laundering is defined as a crime under Section 278 of the Argentine penal code, committed whenever a person converts, transfers, manages, sells, encumbers, or otherwise uses money, or any other assets, stemming from a crime in which that person has not participated, with the possible result that the original or substituted assets may appear to be of a legitimate origin, provided the value of the assets exceeds Ps.50,000, whether such amount results from one or more transactions.
The main purpose of the Anti-Money Laundering Law is to prevent money laundering. In line with internationally accepted practice, it does not attribute responsibility for controlling these criminal transactions only to government agencies, but also assigns certain duties to diverse private sector entities such as banks, stockbrokers, brokerage houses and insurance companies. These duties consist basically in information-capturing functions.
In addition, Argentine financial institutions are required to report to the UIF any suspicious or unusual transaction, as well as any transaction that lacks economic or legal justification, or is unnecessarily complex, whether performed on isolated occasions or repeatedly.
Central Bank regulations require Argentine banks to take certain minimum precautions to prevent money laundering. Each institution must have an Anti-Money Laundering Committee, formed by a member of the board of directors, the officer responsible for Anti-Money Laundering matters ( Oficial de Cumplimiento ) and an upper-level officer regarding financial intermediation and/or foreign exchange matters (i.e., with sufficient experience and knowledge on such matters and decision-making responsibilities). Additionally, as mentioned, each financial institution must appoint a member of the board of directors as the person responsible for money laundering prevention, in charge of centralizing any information the Central Bank may require on its own initiative or at the request of any competent authority and reporting any suspicious transactions to the UIF .

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Argentine financial institutions must comply with all applicable anti-money laundering regulations as provided by the Central Bank and the UIF; in particular with Resolution No. 37/2011 of the UIF, dated February 8, 2011, which regulates Section 21 paragraphs (a) and (b) of Law 25,246 that provides for the gathering of information regarding suspicious operations and its report to the authorities as well as with the anti-money laundering regime set forth by the Central Bank (the most recent restatement of which dates as of December 23, 2010, by means of Communication “A” 5162) and, when acting as placement agents in public offerings of securities, applicable CNV regulations.
The Central Bank itself must also comply with anti-money laundering regulations set forth by the UIF, including reporting suspicious or unusual transactions. In particular, the Central Bank must comply with recently enacted Resolution 12/2011, which, among other things, lists a few examples of what constitute “suspicious or unusual transactions”. The listed transactions must be particularly scrutinized by the Central Bank and include, among others, any transaction involving financial institutions, regular transactions involving securities (specially daily purchases and sales of the same amount of securities), capital contributions into financial institutions that have been paid-in in cash (or means other than bank transfers), and capital contributions by companies incorporated or domiciled in jurisdictions that do not allow for information relating to family relations of its shareholders, board members or members of its supervisory committee, Deposits or withdrawals in cash for unusual amounts by entities or individuals that normally use checks or other financial instruments and/or whose declared business does not correspond with the type or amount of the transaction; subsequent cash deposits for small amounts that, in the aggregate, add up to a relevant sum; a single client holding numerous accounts that, in the aggregate, hold relevant sums inconsistent with such client’s declared business; transfers of funds for amounts inconsistent with the client’s business or usual kind of transaction; accounts with several authorized signatories that hold no apparent relation (in particular when domiciled or acting off-shore or in tax havens); clients that unexpectedly cancel loans; frequent cash deposits or withdrawals for relevant amounts without commercial justification.
In addition, CNV rules provide that Argentine intermediaries of any kind, including placement agents in the issuance of securities, may only perform transactions made or ordered by persons incorporated, domiciled or residing in jurisdictions or territories not deemed “tax haven jurisdictions” as set forth in Argentine Decree No. 1,344/98. Also, in case the transaction is made or ordered by persons incorporated, domiciled or residing in jurisdictions or territories not deemed “tax haven jurisdictions”, but that are intermediaries registered with or in a self-regulated market subject to the control of an authority similar to the Argentine CNV, such transaction may only be performed in case the CNV has entered into a memorandum of understanding, cooperation and exchange of information with such foreign regulatory authority.
Merger, consolidation and transfer of goodwill
Merger, consolidation and transfer of goodwill may be arranged between entities of the same or different type and will be subject to the prior approval of the Central Bank. The new entity must submit a financial-economic structure profile supporting the project in order to obtain authorization from the Central Bank.
Financial system restructuring unit
The Financial System Restructuring Unit was created to oversee the implementation of a strategic approach for those banks benefiting from assistance provided by the Central Bank. This unit is in charge of rescheduling maturities, determining restructuring strategies and action plans, approving transformation plans, and accelerating repayment of the facilities granted by the Central Bank.
C. Organizational Structure
Subsidiaries
We have six subsidiaries: (i) Banco del Tucumán, our acquired retail and commercial banking subsidiary in the province of Tucumán; (ii) Banco Privado, our recently acquired retail banking subsidiary (iii) Macro Bank Limited, our subsidiary in the Bahamas through which we provide primarily private banking services; (iv) Macro Securities S.A. Sociedad de Bolsa, which is a member of the BCBA, and through which we provide investment research, securities trading and custodial services to our customers; (v) Sud Inversiones & Análisis S.A., a subsidiary that acts as trustee and provides financial advisory and analysis services; and (vi) Macro Fondos S.G.F.C.I.S.A., an asset management subsidiary.
Banco Macro S.A.’s
direct and indirect equity interest
Subsidiary Percentage of Capital Stock and possible votes
Banco del Tucumán S.A. (1)
89.932 %
Banco Privado de Inversiones S.A. (1)
99.985 %
Macro Bank Limited (2)(3)
99.999 %
Macro Securities S.A. Sociedad de Bolsa (1)
99.921 %
Sud Inversiones & Análisis S.A. (1)
98.605 %
Macro Fondos S.G.F.C.I. S.A. (1)
99.936 %
(1)
Country of residence: Argentina
(2)
Country of residence: Bahamas
(3)
Consolidates with Sud Asesores (ROU) S.A. (100% of capital stock and voting rights)

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D. Property, plants and equipment
Property
We own 23,746 square meters of office space at Sarmiento 341-355, 401-447, 731-735 and Suipacha 555, in Buenos Aires, Argentina, where the headquarters for our management, accounting, administrative and investor relations personnel are located. As of December 31, 2010 our branch network consisted of 404 branches in Argentina, of which 189 are leased properties.
On November 17, 2010 we executed a purchase agreement with the Government of the City of Buenos Aires for the acquisition of the real property located at Av. Eduardo Madero No. 1180, in the City of Buenos Aires, for an aggregate amount of Ps. 110 million. The relevant conveyance deed was executed on February 22, 2011.
The Bank intends to build its new corporate offices on that site. Works are expected to begin in 2012, and the estimated completion term is four years. The new corporate tower will be designed taking full advantage of natural light, using materials that do not adversely affect the native forests and with an efficient use of the available energy. It will be built in compliance with the Leed International Sustainability Standards of the “US Green Building Council”.
The building will have an area of 35,500 square meters and the Bank estimates that its construction will require an investment of US $80.0 million, plus US $20.0 million in equipment and fixtures.
Selected Statistical Information
The following information is included for analytical purposes and should be read in conjunction with the consolidated financial statements as well as item 5- “Operating and Financial Review and Prospects”. This information has been prepared from our financial records, which are maintained in accordance with the regulations established by the Central Bank and do not reflect adjustments necessary to state the information in accordance with U.S. GAAP. See Note 32 to the consolidated financial statements for the three years ended on December 31, 2010 for a summary of the significant differences between Central Bank Rules and U.S. GAAP.
Average balance sheets, interest earned on interest-earning assets and interest paid on interest-bearing liabilities
The following tables show average balances, interest amounts and nominal rates for our interest-earning assets and interest-bearing liabilities for the years ended December 31, 2008, 2009 and 2010.
Years ended December 31,
2008 2009 2010
Average Average Average
Average Interest Nominal Average Interest Nominal Average Interest Nominal
Balance Earned/(Paid) Rate Balance Earned/(Paid) Rate Balance Earned/(Paid) Rate
(in thousands of pesos, except percentages)
ASSETS
Interest-earning assets
Government securities (1)
Pesos
4,346,565 540,302 12.43 % 5,124,739 785,628 15.33 % 5,366,274 853,997 15.91 %
Dollars
215,732 (5,785 ) (2.68 %) 486,811 420,898 86,46 % 378,908 72,942 19.25 %
Total
4,562,297 534,517 11.72 % 5,611,550 1,206,526 21.50 % 5,745,182 926,939 16.13 %
Loans
Private and financial Sector
Pesos
8,552,950 1,786,608 20.89 % 8,633,930 2,008,428 23.26 % 10,589,164 2,256,182 21.31 %
Dollars
1,821,403 143,916 7.90 % 2,225,961 189,730 8.52 % 2,062,237 113,549 5.51 %
Total
10,374,353 1,930,524 18.61 % 10,859,891 2,198,158 20.24 % 12,651,401 2,369,731 18.73 %
Public Sector
Pesos
755,364 38,058 5.04 % 302,441 24,197 8.00 % 289,576 118,618 40.96 %
Total
755,364 38,058 5.04 % 302,441 24,197 8.00 % 289,576 118,618 40.96 %
Deposits with the Central Bank
Pesos
1,677,710 9,386 0.56 % — — — — — —
Dollars
598,344 4,998 0.84 % — — — — — —
Total
2,276,054 14,384 0.63 % — — — — — —
Other assets
Pesos
1,078,256 174,081 16.14 % 1,075,212 194,537 18.09 % 763,631 82,886 10.85 %
Dollars
539,237 46,871 8.69 % 1,118,378 87,515 7.83 % 2,475,530 57,598 2.33 %
Total
1,617,493 220,952 13.66 % 2,193,590 282,052 12.86 % 3,239,161 140,484 4.34 %

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Years ended December 31,
2008 2009 2010
Average Average Average
Average Interest Nominal Average Interest Nominal Average Interest Nominal
Balance Earned/(Paid) Rate Balance Earned/(Paid) Rate Balance Earned/(Paid) Rate
(in thousands of pesos, except percentages)
Total interest-earning assets
Pesos
16,410,845 2,548,435 15.53 % 15,136,322 3,012,790 19.90 % 17,008,645 3,311,683 19.47 %
Dollars
3,174,716 190,000 5.98 % 3,831,150 698,143 18.22 % 4,916,675 244,089 4.96 %
Total
19,585,561 2,738,435 13.98 % 18,967,472 3,710,933 19.56 % 21,925,320 3,555,772 16.22 %
Non interest-earning assets
Cash and due from banks
Pesos
539,344 687,021 996,459
Dollars
286,879 513,818 617,398
Euros
8,589 11,312 25,449
Other
1,405 1,045 1,697
Total
836,217 1,213,196 1,641,003
Investments in other companies
Pesos
16,911 9,755 9,295
Dollars
1,275 1,015 1,170
Total
18,186 10,770 10,465
Property and equipment and miscellaneous and intangible assets and items pending of allocation
Pesos
801,674 763,325 798,390
Total
801,674 763,325 798,390
Allowance for loan losses
Pesos
(203,344 ) (367,163 ) (368,458 )
Dollars
(39,776 ) (59,278 ) (60,874 )
Total
(243,120 ) (426,441 ) (429,332 )
Other assets
Pesos
578,682 1,942,877 2,440,742
Dollars
288,686 1,492,830 1,625,358
Euros
66 38 66,344
Total
867,434 3,435,745 4,132,444
Total non interest-earning assets
Pesos
1,733,267 3,035,815 3,876,428
Dollars
537,064 1,948,385 2,183,052
Euros
8,655 11,350 91,793
Other
1,405 1,045 1,697
Total
2,280,391 4,996,595 6,152,970
TOTAL ASSETS
Pesos
18,144,112 18,172,137 20,885,073
Dollars
3,711,780 5,779,535 7,099,727
Euros
8,655 11,350 91,793
Other
1,405 1,045 1,697
Total
21,865,952 23,964,067 28,078,290
LIABILITIES
Interest-bearing liabilities
Savings accounts
Pesos
2,822,961 29,508 1.05 % 2,842,075 31,500 1.11 % 2,969,340 22,594 0.76 %
Dollars
451,892 2,734 0.61 % 863,593 2,017 0.23 % 908,486 1,118 0.12 %
Total
3,274,853 32,242 0.98 % 3,705,668 33,517 0.90 % 3,877,826 23,712 0.61 %
Time deposits
Pesos
6,556,086 873,787 13.33 % 7,446,052 1,079,924 14.50 % 8,944,481 929,682 10.39 %
Dollars
1,717,511 63,970 3.72 % 2,648,975 68,260 2.58 % 2,646,095 26,803 1.01 %
Total
8,273,597 937,757 11.33 % 10,095,027 1,148,184 11.37 % 11,590,576 956,485 8.25 %
Borrowing from the Central Bank
Pesos
330,532 33,713 10.20 % 31,942 1,856 5,81 % — — 0.00 %
Total
330,532 33,713 10.20 % 31,942 1,856 5.81 % — — 0.00 %

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Years ended December 31,
2008 2009 2010
Average Average Average
Average Interest Nominal Average Interest Nominal Average Interest Nominal
Balance Earned/(Paid) Rate Balance Earned/(Paid) Rate Balance Earned/(Paid) Rate
(in thousands of pesos, except percentages)
Borrowings from other financial institutions
Pesos
121,897 11,847 9.72 % 99,791 9,269 9.29 % 139,226 15,888 11.41 %
Dollars
287,667 19,539 6.79 % 217,477 17,190 7.90 % 50,060 1,837 3.67 %
Total
409,564 31,386 7.66 % 317,268 26,459 8.34 % 189,286 17,725 9.36 %
Corporate Bonds
Pesos
309,263 34,055 11.01 % 238,250 25,631 10.76 % 197,392 21,236 10.76 %
Dollars
915,000 83,911 9.17 % 965,017 89,439 9.27 % 1,003,112 92,843 9.26 %
Total
1,224,263 117,966 9.64 % 1,203,267 115,070 9.56 % 1,200,504 114,079 9.50 %
Other liabilities
Pesos
450,926 29,528 6.55 % 72,774 2,911 4.00 % — — 0.00 %
Dollars
31,530 3,183 10.10 % — — 0.00 % — — 0.00 %
Total
482,456 32,711 6.78 % 72,774 2,911 4.00 % — — 0.00 %
Total Interest-bearing liabilities
Pesos
10,591,665 1,012,438 9.56 % 10,730,884 1,151,091 10.73 % 12,250,439 989,400 8.08 %
Dollars
3,403,600 173,337 5.09 % 4,695,062 176,906 3.77 % 4,607,753 122,601 2.66 %
Total
13,995,265 1,185,775 8.47 % 15,425,946 1,327,997 8.61 % 16,858,192 1,112,001 6.60 %
Non-interest bearing liabilities and Shareholders’ equity
Demand deposits
Pesos
3,665,895 3,930,465 5,606,430
Dollars
8,059 17,092 213,440
Total
3,673,954 3,947,557 5,819,870
Other liabilities
Pesos
906,424 1,041,313 1,113,739
Dollars
490,452 464,579 452,516
Euros
6,916 10,944 76,209
Other
75 61 294
Total
1,403,867 1,516,897 1,642,758
Minority Interest
Pesos
14,294 17,931 24,289
Total
14,294 17,931 24,289
Shareholders’ equity
Pesos
2,778,572 3,055,736 3,733,181
Total
2,778,572 3,055,736 3,733,181
Total non—interest bearing liabilities and shareholders’ equity
Pesos
7,365,185 8,045,445 10,477,639
Dollars
498,511 481,671 665,956
Euros
6,916 10,944 76,209
Other
75 61 294
Total
7,870,687 8,538,121 11,220,098
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
Pesos
17,956,850 18,776,329 22,728,078
Dollars
3,902,111 5,176,733 5,273,709
Euros
6,916 10,944 76,209
Other
75 61 294
Total
21,865,952 23,964,067 28,078,290
(1)
Includes instruments issued by the Central Bank. The interest earned/paid includes changes due to mark-to-market of those securities.

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Changes in interest income and interest expense; volume and rate analysis
The following tables allocate, by currency of denomination, changes in our interest income and interest expense segregated for each major category of interest-earning assets and interest-bearing liabilities into amounts attributable to changes in their average volume and their respective nominal interest rates for the fiscal year ended December 31, 2008 compared to the fiscal year ended December 31, 2007; for the fiscal year ended December 31, 2009 compared to the fiscal year ended December 31, 2008; and for the fiscal year ended December 31, 2010 compared to the fiscal year ended December 31, 2009.
December 2008/December 2007 December 2009/December 2008 December 2010/December 2009
Increase (Decrease) Due to Changes in Increase (Decrease) Due to Changes in Increase (Decrease) Due to Changes in
Volume Rate Net Change Volume Rate Net Change Volume Rate Net Change
(in thousands of pesos)
ASSETS
Interest-earning assets
Government securities
Pesos
52,542 66,283 118,825 119,295 126,031 245,326 38,438 29,931 68,369
Dollars
(929 ) (20,454 ) (21,383 ) 234,376 192,307 426,683 (20,772 ) (327,184 ) (347,956 )
Total
51,613 45,829 97,442 353,671 318,338 672,009 17,666 (297,253 ) (279,587 )
Loans
Private and financial sector
Pesos
499,276 245,687 744,963 18,838 202,982 221,820 416,592 (168,838 ) 247,754
Dollars
46,822 18,279 65,101 34,483 11,331 45,814 (9,015 ) (67,166 ) (76,181 )
Total
546,098 263,966 810,064 53,321 214,313 267,634 407,577 (236,004 ) 171,573
Public sector
Pesos
(635 ) (12,882 ) (13,517 ) (36,236 ) 22,375 (13,861 ) (5,270 ) 99,691 94,421
Dollars
Total
(635 ) (12,882 ) (13,517 ) (36,236 ) 22,375 (13,861 ) (5,270 ) 99,691 94,421
Deposits with the Central Bank
Pesos
1,678 (3,200 ) (1,522 ) — (9,386 ) (9,386 ) — — —
Dollars
247 (2,723 ) (2,476 ) — (4,998 ) (4,998 ) — — —
Total
1,925 (5,923 ) (3,998 ) — (14,384 ) (14,384 ) — — —
Other assets
Pesos
(34,064 ) 70,104 36,040 (551 ) 21,007 20,456 (33,820 ) (77,831 ) (111,651 )
Dollars
10,615 12,593 23,208 45,319 (4,675 ) 40,644 31,577 (61,494 ) (29,917 )
Total
(23,449 ) 82,697 59,248 44,768 16,332 61,100 (2,243 ) (139,325 ) (141,568 )
Total interest-earning assets
Pesos
518,797 365,992 884,789 101,346 363,009 464,355 415,940 (117,047 ) 298,893
Dollars
56,755 7,695 64,450 314,178 193,965 508,143 1,790 (455,844 ) (454,054 )
Total
575,552 373,687 949,239 415,524 556,974 972,498 417,730 (572,891 ) (155,161 )
LIABILITIES
Interest-bearing liabilities
Savings accounts
Pesos
3,513 (1,318 ) 2,195 212 1,780 1,992 968 (9,874 ) (8,906 )
Dollars
442 (778 ) (336 ) 962 (1,679 ) (717 ) 55 (954 ) (899 )
Total
3,955 (2,096 ) 1,859 1,174 101 1,275 1,023 (10,828 ) (9,805 )
Time deposits
Pesos
262,038 189,926 451,964 129,075 77,062 206,137 155,745 (305,987 ) (150,242 )
Dollars
10,417 5,630 16,047 24,002 (19,712 ) 4,290 (29 ) (41,428 ) (41,457 )
Total
272,455 195,556 468,011 153,077 57,350 210,427 155,716 (347,415 ) (191,699 )
Borrowings from the Central Bank
Pesos
(4,044 ) 413 (3,631 ) (17,350 ) (14,507 ) (31,857 ) — (1,856 ) (1,856 )
Dollars
— — — — — —
Total
(4,044 ) 413 (3,631 ) (17,350 ) (14,507 ) (31,857 ) — (1,856 ) (1,856 )
Borrowings from other financial institutions
Pesos
(9,908 ) 1,361 (8,547 ) (2.053 ) (525 ) (2,578 ) 4,500 2,119 6,619
Dollars
5,801 (229 ) 5,572 (5,548 ) 3,199 (2,349 ) (6,144 ) (9,209 ) (15,353 )
Total
(4,107 ) 1,132 (2,975 ) (7,601 ) 2,674 (4,927 ) (1,644 ) (7,090 ) (8,734 )
Corporate Bonds
Pesos
14,443 530 14,973 (7,640 ) (784 ) (8,424 ) (4,396 ) 1 (4,395 )
Dollars
(280 ) (2,253 ) (2,533 ) 4,636 892 5,528 3,526 (122 ) 3,404
Total
14,163 (1,723 ) 12,440 (3,004 ) 108 (2,896 ) (870 ) (121 ) (991 )
Other liabilities
Pesos
2,492 5,940 8,432 (15,126 ) (11,491 ) (26,617 ) — (2,911 ) (2,911 )
Dollars
(18,757 ) 19,470 713 (3,183 ) (3,183 ) — — —
Total
(16,265 ) 25,410 9,145 (15,126 ) (14,674 ) (29,800 ) — (2,911 ) (2,911 )
Total interest-bearing liabilities
Pesos
268,534 196,852 465,386 87,118 51,535 138,653 156,817 (318,508 ) (161,691 )
Dollars
(2,377 ) 21,840 19,463 24,052 (20,483 ) 3,569 (2,592 ) (51,713 ) (54,305 )
Total
266,157 218,692 484,849 111,170 31,052 142,222 154,225 (370,221 ) (215,996 )

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Interest-earning assets: net interest margin and spread
The following table analyzes, by currency of denomination, our levels of average interest-earning assets and net interest income, and illustrates the comparative margins and spreads for each of the years indicated.
Year Ended December 31,
2008 2009 2010
(in thousands of pesos, except percentages)
Average interest-earning assets
Pesos
16,410,845 15,136,322 17,008,645
Dollars
3,174,716 3,831,150 4,916,675
Total
19,585,561 18,967,472 21,925,320
Net interest income (1)
Pesos
1,535,997 1,861,699 2,322,283
Dollars
16,663 521,237 121,488
Total
1,552,660 2,382,936 2,443,771
Net interest margin (2)
Pesos
9.36 % 12.30 % 13.65 %
Dollars
0.52 % 13.61 % 2.47 %
Weighted average rate
7.93 % 12.56 % 11.15 %
Yield spread nominal basis (3)
Pesos
5.97 % 9.18 % 11.39 %
Dollars
0.90 % 14.45 % 2.30 %
Weighted average rate
5.51 % 10.96 % 9.62 %
(1)
Defined as interest earned less interest paid. Trading results from our portfolio of government and private securities and from foreign exchange transactions are included in interest.
(2)
Net interest income (including income from government and private securities and from foreign exchange transactions) divided by average interest-earning assets.
(3)
Defined as the difference between the average nominal rate on interest-earning assets and the average nominal rate on interest- bearing liabilities.
Investment portfolio: government and private securities
We own, manage and trade a portfolio of securities issued by the Argentine and other governments and private issuers. The following table analyzes, by currency of denomination, our investments in Argentine and other governments and private securities as of December 31, 2008, 2009 and 2010. Securities are stated before deduction of allowances.
As of December 31,
2008 2009 2010
(in thousands of pesos)
Government Securities
In Pesos:
Holdings in Special Investment Accounts
Federal Government bonds at 2% — Maturity 2014
3,582 222,169 —
Federal Government bonds at Badlar + 2.75% — Maturity 2014
— 191,384 —
Secured bonds Decree No. 1,579/02 at 2% — Maturity 2018
23,769 178,979 —
Discount bonds at 5.83% — Maturity 2033
22,201 18,207 —
Consolidation bonds at 2% — Sixth series — Maturity 2024
4,122 5,350 —
Consolidation bonds of social security payables at 2% — Maturity 2010 and 2014
83,847 — —
Subtotal Holdings in Special Investment Accounts
137,521 616,089 —
Holdings for Trading or Financial Intermediation
Federal Government bonds at Badlar +2.75% —Maturity 2014
— 1,464 200,925
Secured bonds Decree. 1,579/02 at 2% Maturity 2018
652 1,433 40,988
Consolidation bonds of social security payables at 2% — Maturity: 2014
1,324 7,525 7,029
Discount bonds at 5.83% — Maturity 2033
5,697 9,752 6,956
Federal Government bonds at 2% — Maturity 2014
— 6,579 3,674
Federal Government bonds at 10.50% — Maturity 2012
— 189 1,059
Federal Government bonds at Badlar + 3% — Maturity 2015
— 1,064 901
Consolidation bonds at 2% — Sixt Series — Maturity 2024
12 382 645
Par bonds at variable rate — Maturity 2038
181 261 519

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As of December 31,
2008 2009 2010
(in thousands of pesos)
GDP — Related securities — Maturity 2035
96 325 54
Others
10,827 943 279
Subtotal Holdings for Trading or Intermediation
18,789 29,917 263,029
Unlisted Government Securities
Province of Buenos Aires treasury bills at 168 days — Maturity: 2011
— — 50,084
Province of Buenos Aires treasury bills at 84 days — Maturity 2011
— — 49,575
Federal Government bonds at Badlar + 3.50% —Maturity 2013
51,864 44,541 46,350
Federal Government bonds at variable rate —Maturity 2013
10,385 9,738 7,523
Province of Tucuman bonds at 2% — Maturity: 2018
2,290 1,984 1,565
Others
— 206 3
Subtotal Unlisted Government Securities
64,539 56,469 155,100
Instruments Issued by Central Bank
Listed Central Bank bills and notes (Lebacs/Nobacs)
772,496 264,485 681,949
Unlisted Central Bank bills and notes (Lebacs/Nobacs)
2,640,452 4,371,284 3,167,344
Subtotal Instruments Issued by Central Bank
3,412,948 4,635,769 3,849,293
Securities under repurchase agreement
Unlisted Central Bank bills and notes (Lebacs/Nobacs)
425,963 14,652 148,959
Consolidation bonds at 2% — Sixth series — Maturity 2024
— — 18,518
Listed Central Bank bills and notes (Lebacs/Nobacs)
— — 7,514
Discount bonds denominated at 5.83% — Maturity 2033
203,580 — 4,797
Federal Government bonds at Badlar + 2.75% — Maturity 2014
— — 990
GDP — Related Securities — Maturity 2035
— — 149
Subtotal Securities under repurchase agreement
629,543 14,652 180,927
Total Government Securities in pesos
4,263,340 5,352,896 4,448,349
In Foreign Currency:
Holdings in Special Investment Accounts
Federal Government bonds at 7% — Maturity 2015
49,590 38,881 —
Federal Government bonds at Libor — Maturity 2012
235,546 1,784 —
Federal Government bonds at Libor— Maturity 2013
564 562 —
Par bonds at variable rate — Maturity 2038 (governed by Argentina legislation)
1,450 1,594 —
Par bonds at variable rate — Maturity 2038 (Governed by New York State legislation)
382 461 —
Federal Government bonds at 7% — Maturity 2017
23,252 — —
Subtotal Holdings in Special Investment Accounts
310,784 43,282 —
Holding for Trading or Financial Intermediation
Treasury Bills — Maturity: 2011
— — 198,790
Federal Government bonds al Libor — Maturity 2012
96,415 52,874 42,466
Federal Government bonds at 7% — Maturity 2015
9,627 1,544 1,640
Federal government bonds at Libor — Maturity 2013
2,304 345 1,113
Federal Government bonds at 7% — Maturity 2017
1,633 — 1,026
Treasury Bills — Maturity 2010
— 379,666 —
Others
12,119 505 64
Subtotal Holding for Trading or Intermediation
122,098 434,934 245,099
Unlisted Government Securities
Province of Córdoba Debt Securities at 12%— Maturity 2017
— 19,160 17,498
Province of Tucuman bonds at Libor — Maturity 2015
5,419 3,820 2,455
Subtotal Unlisted Government Securities
5,419 22,980 19,953
Securities under repurchase agreement
Federal Government bonds at 7% — Maturity 2013
— — 2,299,088
Federal Government bonds at 7% — Maturity 2017
— 1,046,220 —
Subtotal Securities under repurchase agreement
— 1,046,220 2,299,088
Total Government Securities in foreign currency
438,301 1,547,416 2,564,140
Total Government Securities
4,701,641 6,900,312 7,012,489
Investments in Listed Private Securities
In Pesos:
Mutual Funds
5,544 31,469 19,886
Shares
378 — —
Others
1 1 —

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As of December 31,
2008 2009 2010
(in thousands of pesos)
In Foreign Currency:
Corporate Bonds
63,629 43,047 —
Mutual Funds
8,133 6,359 9,553
Shares
— — 17,588
Subtotal Investments in Listed Private Securities
77,685 80,876 47,027
Investments in Unlisted Private Securities
In Pesos:
Certificates of Participation in Financial Trusts (1)
304,660 343,070 247,341
Debt Securities in Financial Trusts
185,381 123,862 148,226
Corporate Bonds (2) (3)
22,390 9,099 6,194
In Foreign Currency:
Certificates of Participation in Financial Trusts (1)
33,149 47,094 104,342
Debt Securities in Financial Trust
41,766 82,925 112,233
Corporate Bonds (2) (3)
60,104 71,647 273,112
Subtotal Investments in Unlisted Private Securities
647,450 677,697 891,448
Total Government and Private Securities
5,426,776 7,658,885 7,950,964
(1)
The Bank booked allowances for impairment in value amounting to Ps.231,184 thousand, Ps.224,193 thousand and Ps.223,893 thousand as of December 31, 2010, 2009 and 2008, respectively.
(2)
The Bank booked allowances for impairment in value amounting to Ps.3,003 thousand, Ps.1,017 thousand and Ps.4,637 thousand as of December 31, 2010, 2009 and 2008, respectively.
(3)
Includes Repurchased Corporate Bonds for Ps. 9,051 thousand and US $20,054 thousand as of December 31, 2008.
Remaining maturity of government and private securities
The following table analyzes the remaining maturities of our investment portfolio as of December 31, 2010 in accordance with issuance terms (before allowances).
Maturing 1
After After
1 year 5 years
Within but within but within After 10 Without
1 year 5 years 10 years years due date Total
Book value (in thousands of pesos)
In Pesos:
Holdings for Trading or Financial Intermediation
Federal Government bonds at Badlar Private+2.75% — Maturity 2014
— 200,925 — — — 200,925
Secured Bonds Decree 1,579/02 at 2% — Maturity 2018
4,216 21,759 15,013 — — 40,988
Consolidation bonds at 2%. Sixth Series — Maturity 2024
112 322 211 — 645
Discount bonds at 5.83% — Maturity 2033
— — — 6,956 — 6,956
Consolidation bonds of social security payables at 2% — Maturity 2014
2,054 4,975 — — — 7,029
Federal Government bonds at 2% — Maturity 2014
919 2,755 — — — 3,674
Federal Government bonds at 10.50% — Maturity 2012
— 1,059 — — — 1,059
Federal Government bonds at Badlar +3% — Maturity 2015
— 901 — — — 901
Par bonds at variable rate — Maturity 2038
— — — 519 — 519
GDP — Related Securities — Maturity 2035
— — — 54 — 54
Others
37 145 — 97 — 279
Unlisted Government Securities
—
Province of Buenos Aires treasury bills at 168 days — Maturity: 2011
50,084 — — — — 50,084
Province of Buenos Aires treasury bills at 84 days — Maturity 2011
49,575 — — — — 49,575
Federal Government bonds at Badlar +3.50% — Maturity 2013
— 46,350 46,350
Federal Government bonds at variable rate- Maturity 2013
2,508 5,015 — — — 7,523
Province of Tucuman bonds at 2% — Maturity: 2018
161 831 573 — — 1,565
Others
— — — — 3 3
Instruments issued by Central Bank (1)
Listed Central Bank bills and notes (Lebacs/Nobacs)
681,949 — — — — 681,949
Unlisted Central Bank bills and notes (Lebacs/Nobacs)
3,167,344 — — — — 3,167,344

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Maturing 1
After After
1 year 5 years
Within but within but within After 10 Without
1 year 5 years 10 years years due date Total
Book value (in thousands of pesos)
Securities under repurchase agreement
Unlisted Central Bank bills and notes (Lebacs/Nobacs)
148,959 — — — — 148,959
Consolidation bonds at 2% — Sixth series — Maturity 2024
18,518 — — — — 18,518
Listed Central Bank bills and notes (Lebacs/Nobacs)
7,514 — — — — 7,514
Discount bonds at 5.83% — Maturity 2033
4,797 — — — — 4,797
Federal Government bonds at Badlar + 2.75% — Maturity 2014
990 — — — — 990
GDP — Related Securities — Maturity 2035
149 — — — — 149
Total Government Securities in pesos
4,139,774 284,827 15,908 7,837 3 4,448,349
In Foreign Currency:
Holding for Trading or Financial Intermediation
Treasury bills- Maturity: 2011
198,790 — — — — 198,790
Federal Government bonds at Libor — Maturity 2012
21,233 21,233 — 42,466
Federal Government bonds at 7% — Maturity 2015
— 1,640 — — — 1,640
Federal Government bonds at Libor — Maturity 2013
371 742 — — — 1,113
Federal Government bonds at 7% — Maturity 2017
— — 1,026 — — 1,026
Others
10 1 32 21 — 64
Unlisted Government Securities
Province of Córdoba Debt Securities at 12% — Maturity 2017
2,500 9,999 4,999 — — 17,498
Province of Tucuman at Libor- Maturity 2015
491 1,964 — — — 2,455
Securities under repurchase agreement
Federal Government bonds at 7% — Maturity 2013
2,299,088 — — — — 2,299,088
Total Government Securities in foreign currency
2,522,483 35,579 6,057 21 — 2,564,140
Total Government Securities
6,662,257 320,406 21,965 7,858 3 7,012,489
Private Securities
Investment in Listed Private Sector
In pesos:
Mutual Funds
19,732 154 — — 19,886
In Foreign Currency
Mutual Funds
9,553 — — — — 9,553
Shares
— — — — 17,588 17,588
Investments in Unlisted Private Securities
In Pesos:
Certificates of participation in financial Trusts (2)
4,395 10,008 — 8,851 224,087 247,341
Debt Securities in Financial Trust
66,243 80,671 1,312 — — 148,226
Corporate Bonds (3)
3,996 2,007 — — 191 6,194
In foreign currency:
Certificates of participation in financial Trusts (2)
— 104,342 — — — 104,342
Debt Securities in Financial Trust
88,596 10,805 12,832 — — 112,233
Corporate Bonds (3)
3,348 222,531 47,233 — — 273,112
Total Private Securities
195,863 430,518 61,377 8,851 241,866 938,475
(1)
As of December 31, 2010, “Instruments Issued by the Central Bank” included Ps. 1,420,605 thousand to fall due in 30 days, Ps. 554,462 thousand to fall due in 60 days, Ps. 238,098 thousand to fall due in 90 days, Ps. 1,332,692 thousand to fall due in 120 days and Ps 303,436 thousand to fall in 180 days
(2)
The Bank booked allowances for impairment in value amounting toPs. 231,184 thousand as of December 31, 2010.
(3)
The Bank booked allowances for impairment in value amounting to Ps.3,003 thousand as of December 31, 2010.

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Loan portfolio
The following table analyzes our loan portfolio (without considering leasing agreements) by type as of December 31, 2006, 2007, 2008, 2009 and 2010.
As of December 31,
2006 2007 2008 2009 2010
(in thousands of pesos)
To the non-financial government sector
774,273 732,481 744,507 206,484 336,430
To the financial sector (1)
436,930 161,702 80,423 90,916 155,701
To the non-financial private sector and foreign residents
Overdrafts (2)
1,029,679 1,375,075 1,556,433 1,436,292 2,032,986
Documents (3)
618,739 1,213,669 1,348,585 1,412,551 1,805,226
Mortgages loans
426,138 619,781 738,592 746,762 902,734
Pledged loans (4)
300,949 347,989 339,895 262,508 347,321
Consumer loans (5)
1,928,977 3,929,579 4,675,543 4,956,690 7,355,625
Other loans
1,131,315 1,718,978 2,071,927 2,271,756 3,302,223
Accrued Interest, adjustments, foreign exchange and quoted price differences receivables
101,744 153,902 195,026 182,168 216,888
Less: Unposted payments
(139 ) (69 ) (29 ) (29 ) —
Less: Unearned discounts
(12,919 ) (23,248 ) (32,596 ) (21,246 ) (30,121 )
Less: Allowances
(208,581 ) (220,422 ) (438,348 ) (448,045 ) (514,910 )
Total Loans
6,527,105 10,009,417 11,279,958 11,096,807 15,910,103
(1)
Includes loans to financial institutions, interfinancing (granted call) and other financing to Argentine financial institutions.
(2)
Includes overdraft lines of credit resulting from checking accounts.
(3)
Includes the face values of drafts, promissory notes and other bills transferred to us by endorsement for which the assignor is liable, whenever the latter is an Argentine resident within the non- financial private sector.
(4)
Includes the principal amounts actually lent of automobile and other collateral granted, for which the obligator is part of the non-financial private sector.
(5)
Includes credit card loans and other consumer loans. Overdrafts to individuals are included under “Overdrafts”.
Maturity composition of the loan portfolio
The following table analyzes our loan portfolio as of December 31, 2010 by type and by the time remaining to maturity. Loans are stated before deduction of the allowance for loan losses. We expect most loans to be repaid at maturity in cash or through refinancing at market terms.
Maturing
After
1 Year but
Amount as of Within Within After
December 31, 2010 1 Year 5 Years 5 Years
(in thousands of pesos, except percentages)
To the non-financial government sector
336,430 42,895 15,671 277,864
To the financial sector (1)
155,701 149,765 5,936 —
To the non-financial private sector and foreign residents
Overdrafts (2)
2,072,052 2,072,043 9 —
Documents (3)
1,802,007 1,783,554 18,216 237
Mortgages loans
923,867 250,962 490,040 182,865
Pledged loans (4)
357,153 166,424 190,729 —
Consumer loans (5)
7,418,790 3,418,973 3,764,875 234,942
Other loans
3,359,013 2,734,426 550,597 73,990
Total Loans
16,425,013 10,619,042 5,036,073 769,898
Percentage of total loan portfolio
100 % 64 % 31 % 5 %
(1)
Includes loans to financial institutions, interfinancing (granted call) and other financing to Argentine financial institutions.
(2)
Includes overdrafts lines of credit resulting from checking accounts.
(3)
Includes the face value of drafts, promissory notes and other bills transferred to us by endorsement for which the assignor is liable, whenever the latter is an Argentine resident within the non- financial private sector.
(4)
Includes the principal amount actually lent of automobile and other collateral granted, for which the obligor is part of the non- financial private sector.
(5)
Includes credit card loans and other consumer loans. Overdrafts to individuals are included under “Overdrafts”.
Loans—portfolio classification
The following table presents our loan portfolio, before deduction of the allowance for loan losses, using the classification system of the Central Bank in effect at the end of each year:
As of December 31,
Loan Portfolio 2006 2007 2008 2009 2010
(in thousands of pesos, except percentages)
Categories
1 — In normal situation/ Performing
6,550,389 97.25 % 9,927,876 97.05 % 11,292,176 96.36 % 10,963,274 94.96 % 15,946,416 97.09 %
2 — Subject to special monitoring —in observation- in negotiation or with rollover agreement/ Low risk
50,077 0.74 % 143,128 1.40 % 117,023 1.00 % 206,477 1.79 % 132,797 0.81 %
3 — Troubled/Medium risk
45,603 0.68 % 52,059 0.51 % 86,288 0.74 % 130,649 1.13 % 73,403 0.45 %
4 — With high risk of insolvency/ High risk
34,503 0.51 % 62,856 0.61 % 172,950 1.48 % 188,058 1.63 % 161,072 0.98 %
5 — Irrecoverable
51,086 0.76 % 36,526 0.36 % 48,434 0.41 % 55,996 0.49 % 110,914 0.67 %
6 — Irrecoverable according to Central Bank’s Rules
4,028 0.06 % 7,394 0.07 % 1,435 0.01 % 398 0.00 % 411 0.00 %
Total Loans
6,735,686 100.00 % 10,229,839 100.00 % 11,718,306 100.00 % 11,544,852 100.00 % 16,425,013 100.00 %

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For the explanation of each category please see “Argentine Banking Regulation — Debt classification and loan loss provisions”.
Non-performing Loans
The following table presents our non-performing loan portfolio, before deduction of the allowance for loan losses, using the loan classification criteria of the Central Bank in effect, at the end of each year:
As of December 31,
Non-performing loans 2006 2007 2008 2009 2010
(in thousands of pesos)
With preferred guarantees
44,563 27,657 31,627 42,904 43,221
Unsecured
90,657 131,178 277,480 332,197 302,579
Total non-performing loans
135,220 158,835 309,107 375,101 345,800
For additional information on non-accrual loans and past due loans please see note 32.4.d) to our audited consolidated financial statement for the year ended December 31, 2010.
Analysis of the allowance for loan losses
The table below sets forth the activity in the allowance for loan losses for the years ended December 31, 2006, 2007, 2008, 2009 and 2010:
Year Ended December 31,
2006 2007 2008 2009 2010
(in thousands of pesos)
Balance at the beginning of the year
247,532 208,581 220,422 438,348 448,045
Provisions for loan losses
102,538 (2) 93,498 314,532 187,648 254,010 (3)
Charge off (1)
(141,489 ) (81,657 ) (96,606 ) (177,951 ) (187,145 )
Overdrafts
(31,584 ) (13,889 ) (9,314 ) (32,519 ) (14,857 )
Personal loans
(4,411 ) (10,929 ) (47,527 ) (99,192 ) (98,305 )
Credit Cards
(2,184 ) (5,751 ) (12,134 ) (16,892 ) (35,756 )
Mortgage loans
(25,825 ) (8,071 ) (5,087 ) (5,096 ) (4,337 )
Pledged loans
(4,323 ) (674 ) (2,686 ) (1,341 ) (911 )
Documents
(39,974 ) (6,931 ) (5,296 ) (14,171 ) (7,523 )
Other
(33,188 ) (35,412 ) (14,562 ) (8,740 ) (25,456 )
Balance at the end of year
208,581 220,422 438,348 448,045 514,910
Charge-off/average loans (1)
2.72 % 1.18 % 0.87 % 1.59 % 1.45 %
(1)
Charge-off includes reversals.
(2)
Includes Ps. 13,933 thousand and Ps. 28,443 thousand for the incorporation of Banco del Tucumán and Nuevo Banco Bisel respectively.
(3)
Includes Ps. 15,066 thousand for the incorporations of Banco Privado.
Under Central Bank Rules, non-performing loans must be charged-off when their recovery is considered unlikely, within seven months after such loans were classified as “irrecoverable without preferred guaranties” and fully provisioned. Pursuant to the current regulations, we charge-off non-performing loans on the next month following the date on which such circumstances are verified. Such debts are registered in off-balance accounts.
Allocation of the allowances for loan losses
The following table allocates the allowance for loan losses by each category of loans and sets forth the percentage distribution of the total allowance for each of the years ended December 31, 2006, 2007, 2008, 2009 and 2010.
As of December 31,
2006 2007 2008 2009 2010
(in thousands of pesos, except percentages)
Overdrafts
24,987 11.98 % 25,510 11.57 % 64,107 14.62 % 37,242 8.31 % 37,757 7.33 %
Documents
20,326 9.75 % 23,215 10.53 % 42,003 9.58 % 32,825 7.33 % 31,403 6.10 %
Mortgage loans
22,640 10.86 % 20,210 9.17 % 26,378 6.02 % 24,422 5.45 % 24,016 4.66 %
Pledged loans
8,433 4.04 % 8,608 3.91 % 9,512 2.17 % 9,664 2.16 % 10,971 2.13 %
Personal loans
40,364 19.35 % 70,375 31.93 % 174,398 39.79 % 195,643 43.67 % 215,530 41.86 %
Credit cards
12,752 6.11 % 17,658 8.01 % 34,281 7.82 % 33,915 7.57 % 53,751 10.44 %
Other loans
79,079 37.91 % 54,846 24.88 % 87,669 20.00 % 114,334 25.52 % 141,482 27.48 %
TOTAL
208,581 100.00 % 220,422 100.00 % 438,348 100.00 % 448,045 100.00 % 514,910 100.00 %

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Loans by economic activities
The table below analyzes our loan portfolio according to the borrowers’ main economic activity as of December 31,2006, 2007, 2008, 2009 and 2010.
As of December 31,
2006 2007 2008 2009 2010
(in thousands of pesos, except percentages)
% of % of % of % of % of
Loan Loan Loan Loan Loan Loan Loan Loan Loan Loan
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Retail Loans
1,719,736 25.53 % 3,410,359 33.34 % 4,023,725 34.34 % 4,403,933 38.15 % 6,512,629 39.65 %
Agricultural livestock- Forestry- Fishing- Mining- Hunting
650,405 9.66 % 1,050,102 10.27 % 1,538,027 13.12 % 1,910,164 16.55 % 2,286,297 13.92 %
Construction
320,484 4.76 % 411,725 4.02 % 563,526 4.81 % 1,112,702 9.64 % 1,009,744 6.15 %
Other services
474,325 7.04 % 970,585 9.49 % 852,658 7.28 % 858,936 7.44 % 1,281,916 7.80 %
Retail and consumer products
550,359 8.17 % 703,063 6.87 % 831,741 7.10 % 747,897 6.48 % 1,140,019 6.94 %
Foodstuff and beverages
537,905 7.99 % 700,917 6.85 % 521,849 4.45 % 637,814 5.52 % 917,874 5.59 %
Financial Services
593,423 8.81 % 408,002 3.99 % 289,450 2.47 % 290,331 2.51 % 387,074 2.36 %
Governmental services
844,814 12.54 % 861,852 8.42 % 886,749 7.57 % 258,784 2.24 % 418,026 2.55 %
Real estate, business and leases
39,087 0.58 % 59,512 0.58 % 267,604 2.28 % 236,555 2.05 % 357,865 2.18 %
Transportation, storage and communications
195,094 2.90 % 181,646 1.78 % 263,999 2.25 % 190,796 1.65 % 488,356 2.97 %
Manufacturing and wholesales
147,127 2.18 % 166,169 1.62 % 283,555 2.42 % 140,620 1.22 % 302,927 1.84 %
Chemicals
300,429 4.46 % 340,450 3.33 % 608,157 5.19 % 129,145 1.12 % 455,313 2.77 %
Electricity, oil, water
31,061 0.46 % 74,256 0.73 % 170,950 1.46 % 75,095 0.65 % 92,475 0.56 %
Hotels and restaurants
43,196 0.64 % 39,365 0.38 % 32,325 0.28 % 29,949 0.26 % 27,866 0.17 %
Other
288,241 4.28 % 851,836 8.33 % 583,991 4.98 % 522,131 4.52 % 746,632 4.55 %
Total Loans
6,735,686 100.00 % 10,229,839 100.00 % 11,718,306 100.00 % 11,544,852 100.00 % 16,425,013 100.00 %
Deposits
The following table sets out the composition of each category of deposits that exceeded 10% of average total deposits in each of the years ended December 31, 2008, 2009 and 2010.
Year ended December 31,
2008 2009 2010
(in thousands of pesos)
Deposits in Domestic Bank Offices
Non-interest-bearing Demand Deposits (1)
Average
Pesos
3,665,382 3,929,402 5,606,395
Dollars
8,044 13,179 205,684
Total
3,673,426 3,942,581 5,812,079
Saving Accounts
Average
Pesos
2,822,961 2,842,075 2,969,340
Dollars
361,324 542,740 520,772
Total
3,184,285 3,384,815 3,490,112
Average nominal rate
Pesos
1.05 % 1.11 % 0.76 %
Dollars
0.46 % 0.34 % 0.17 %
Total
0.98 % 0.99 % 0.67 %
Time Deposits
Average
Pesos
6,556,086 7,446,052 8,944,481
Dollars
1,490,885 2,337,132 2,343,123
Total
8,046,971 9,783,184 11,287,604

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Year ended December 31,
2008 2009 2010
(in thousands of pesos)
Average nominal rate
Pesos
13.33 % 14.50 % 10.39 %
Dollars
3.78 % 2.75 % 1.00 %
Total
11.56 % 11.70 % 8.44 %
Deposits in Foreign Bank Offices
Non-interest-bearing Demand Deposits
Average
Pesos
513 1,063 35
Dollars
15 3,913 7,756
Total
528 4,976 7,791
Saving Accounts
Average
Dollars
90,568 320,853 387,714
Total
90,568 320,853 387,714
Average nominal rate
Dollars
1.20 % 0.05 % 0.06 %
Total
1.20 % 0.05 % 0.06 %
Time Deposits
Average
Dollars
226,626 311,843 302,972
Total
226,626 311,843 302,972
Average nominal rate
Dollars
3.35 % 1.28 % 1.09 %
Total
3.35 % 1.28 % 1.09 %
(1)
Non-interest-bearing demand deposits consist of checking accounts.
Maturity of deposits at December 31, 2010
The following table sets forth information regarding the maturity of our deposits at December 31, 2010.
Maturing
After 3 After 6
Within 3 but Within but Within After 12
Total Months 6 Months 12 Months Months
(in thousands of pesos)
Checking accounts
5,439,564 5,439,564 — — —
Savings accounts
4,757,144 4,757,144 — — —
Time deposits
11,732,876 9,843,063 837,657 368,532 683,624
Investment accounts
900,780 779,979 57,146 63,610 45
Other
577,029 572,475 94 4,460 —
Total Deposits
23,407,393 21,392,225 894,897 436,602 683,669
Maturity of deposits at December 31, 2010 of outstanding time deposits and investment accounts
The following table sets forth information regarding the maturity of our time deposits and investment accounts in denominations of Ps.100,000 or more at December 31, 2010.
Maturing
After 3 After 6
Within 3 but Within but Within After 12
Total Months 6 Months 12 Months Months
(in thousands of pesos)
Domestic bank offices
8,579,301 6,899,110 758,256 419,114 682,821
Foreign bank offices
276,745 255,537 21,208 — —
Total
9,036,046 7,154,647 779,464 419,114 682,821

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Return on equity and assets
The following table presents certain selected financial information and ratios for the years indicated.
Year Ended December 31,
2008 2009 2010
(in thousands of pesos, except percentages)
Net income
660,050 751,930 1,010,430
Average total assets
21,865,952 23,964,067 28,078,290
Average shareholders’ equity
2,778,572 3,055,736 3,733,181
Shareholders’ equity at the end of the fiscal year
2,821,911 3,358,801 4,152,842
Net income as a percentage of:
Average total assets
3.02 % 3.14 % 3.60 %
Average shareholders’ equity
23.76 % 24.61 % 27.07 %
Declared cash dividends (2)
149,870 208,070 505,312
Dividend payout ratio (1)
22.71 % 27.67 % 50.01 %
Average shareholders’ equity as a percentage of Average Total Assets
12.71 % 12.75 % 13.30 %
(1)
Declared cash dividends stated as percentage of net income.
(2)
For the fiscal year ended December 31, 2008, the dividends paid in cash were Ps.148,335 thousand, based on the number of shares outstanding on such payment dates.
Short-term borrowings
Our short-term borrowings totaled approximately of Ps. 735.0 million, Ps. 1,048.7 million and Ps. 1,193.8 million for the years ended December 31, 2008, 2009 and 2010, respectively. The table below shows the breakdown of those amounts at the end of each year.
Year Ended December 31,
2008 2009 2010
Annualized Annualized Annualized
Amount Rate Amount Rate Amount Rate
(in thousands of pesos, except percentages)
Central Bank of the Argentine Republic:
Total amount outstanding at the end of the reported period
78,939 1.95 % 1,363 0.00 % 1,452 0.01 %
Average during year (1)
76,023 1.96 % 1,590 0.00 % 1,328 0.00 %
Maximum month-end balance
78,939 2,168 1,452
Banks and international organizations:
Total amount outstanding at the end of the reported period
59,737 4.92 % 227,214 7.78 % 45,697 1.89 %
Average during year (1)
55,054 4.38 % 121,662 8.06 % 40,378 2.17 %
Maximum month-end balance
86,762 227,214 53,640
Corporate Bonds
Total amount outstanding at the end of the reported period
16,518 9.46 % 15,719 9.24 % 16,393 9.22 %
Average during year (1)
16,612 9.45 % 14,797 9.30 % 14,384 9.22 %
Maximum month-end balance
17,063 15,897 16,393
Financing received from Argentine financial institutions:
Total amount outstanding at the end of the reported period
31,846 10.33 % 149,122 9.45 % 34,893 9.14 %
Average during year (1)
96,294 5.47 % 64,430 9.11 % 53,410 8.67 %
Maximum month-end balance
166,146 149,122 66,661
Other
Total amount outstanding at the end of the reported period
545,183 0.02 % 652,330 0.02 % 1,093,308 0.01 %
Average during year (1)
524,019 0.02 % 620,873 0.02 % 743,456 0.02 %
Maximum month-end balance
599,063 652,330 1,093,308
Subordinated corporate bonds:
Total amount outstanding at the end of the reported period
2,740 4.00 % 2,968 4.00 % 2,100 4.00 %
Average during year (1)
21,056 7.02 % 9,762 4.00 % 9,413 4.00 %
Maximum month-end balance
36,987 16,854 16,711
Total Short Term
734,963 1,048,716 1,193,843
(1)
Average balances are calculated from quarterly-end balances.
Interest rate sensitivity
The interest rate sensitivity measures the impact on the gross intermediation margin in response to a change in market interest rates. For any given period, the pricing structure is matched when an equal amount of assets and liabilities reprice. Any mismatch of interest-earning assets and interest-bearing liabilities is known as a gap position and is shown in the following tables. A negative gap denotes liability sensitivity and normally means that a decline in interest rates would have a positive effect on net interest income while an increase in interest rates would have a negative effect on interest income.
The following table shows the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities based on contractual maturities. Variations in interest rate sensitivity may also arise within the repricing periods presented.

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Figures are in thousands of pesos, except percentages.
Remaining Maturity at December 31, 2010
Without
0-1 Year 1-5 Years 5-10 Years Over 10 years due date Total
Interest-earning assets:
Interest-bearing deposits in other banks
269,155 — — — — 269,155
Government Securities (2)
6,662,257 320,406 21,965 7,858 3 7,012,489
Receivables from financial leases
110,305 136,662 6,453 — — 253,420
Loans to non-financial government sector (1)
42,895 15,671 254,532 23,332 — 336,430
Loans to the private and financial sector (1)
10,576,147 5,020,402 403,010 89,024 — 16,088,583
Other assets
166,578 430,364 61,377 8,851 224,278 891,448
Total Interest-Earning Assets
17,827,337 5,923,505 747,337 129,065 224,281 24,851,525
Interest-bearing liabilities:
Checking
208,782 — — — — 208,782
Savings accounts
4,757,144 — — — — 4,757,144
Time deposits
11,049,252 683,624 — — — 11,732,876
Investment accounts
900,735 45 — — — 900,780
Corporate Bonds
16,393 197,066 423,005 — — 636,464
Subordinated corporate bonds
2,100 — — 596,370 — 598,470
Liabilities with Central Bank
109 — 215 210 — 534
Liabilities with local financial institutions
34,893 24,108 16,636 — — 75,637
Liabilities with bank and international Organizations
45,697 — — — — 45,697
Other liabilities
95,198 3,084 — 78,714 — 176,996
Total Interest-Bearing Liabilities
17,110,303 907,927 439,856 675,294 — 19,133,380
Asset (Liability) Gap
717,034 5,015,578 307,481 (546,229 ) 224,281 5,718,145
Cumulative Asset/Liability Gap
717,034 5,732,612 6,040,093 5,493,864 5,718,145
Cumulative sensitivity gap as a percentage of total interest-earning assets
2.89 % 23.07 % 24.30 % 22.11 % 23.01 %
Remaining Maturity at December 31, 2010
0-1 Year 1-5 Years 5-10 Years Over 10 years Without due date Total
Interest-earning assets in Pesos:
Government securities (2)
4,139,774 284,827 15,908 7,837 3 4,448,349
Receivables from financial leases
90,674 102,760 28 — — 193,462
Loans to non-financial government sector (1)
42,895 15,671 254,532 23,332 — 336,430
Loans to the private and financial sector (1)
8,391,301 4,874,572 373,035 89,024 — 13,727,932
Other assets
74,634 92,686 1,312 8,851 224,278 401,761
Total Interest-Earning Assets in Pesos
12,739,278 5,370,516 644,815 129,044 224,281 19,107,934
Interest-bearing liabilities in Pesos:
Saving accounts
3,906,588 — — — 3,906,588
Time deposits
8,406,686 683,414 — — — 9,090,100
Investment accounts
888,416 45 — — — 888,461
Corporate bonds
1,412 197,066 — — — 198,478
Subordinated corporate bonds
— — — — — —
Liabilities with Central Bank
109 — 215 210 — 534
Liabilities with local financial institutions
34,825 24,108 16,636 — — 75,569
Other liabilities
95,198 3,084 — 78,714 — 176,996
Total Interest-Bearing Liabilities in Pesos
13,333,234 907,717 16,851 78,924 — 14,336,726
Asset(Liability) Gap
(593,956 ) 4,462,799 627,964 50,120 224,281 4,771,208
Cumulative Asset/Liability Gap
(593,956 ) 3,868,843 4,496,807 4,546,927 4,771,208
Cumulative sensitivity gap as a percentage of total interest-earning assets
(3.11 )% 20.25 % 23.53 % 23.80 % 24.97 %
Remaining Maturity at December 31, 2010
Without due
0-1 Year 1-5 Years 5-10 Years Over 10 years date Total
Interest-earning assets in foreign currency
Interest-bearing deposits in other banks
269,155 — 269,155
Government securities (2)
2,522,483 35,579 6,057 21 — 2,564,140
Receivables from financial leases
19,631 33,902 6,425 — — 59,958
Loans to the private and financial sector (1)
2,184,846 145,830 29,975 — — 2,360,651
Other assets
91,944 337,678 60,065 — — 489,687
Total Interest-Earning Assets
5,088,059 552,989 102,522 21 — 5,743,591
Interest-bearing liabilities in foreign currency:
Checking
208,782 — — — — 208,782
Saving accounts
850,556 — — — — 850,556
Time deposits
2,642,566 210 — — — 2,642,776
Investment accounts
12,319 — — — — 12,319
Corporate bonds
14,981 — 423,005 — — 437,986
Subordinated corporate bonds
2,100 — — 596,370 — 598,470
Liabilities with local financial
68 — — — — 68
Liabilities with banks and international organizations
45,697 — — — — 45,697
Total Interest-Bearing Liabilities
3,777,069 210 423,005 596,370 — 4,796,654
Asset (Liability) Gap
1,310,990 552,779 (320,483 ) (596,349 ) — 946,937
Cumulative Asset/Liability Gap
1,310,990 1,863,769 1,543,286 946,937 946,937
Cumulative sensitivity gap as a percentage of total interest-earning assets
22.83 % 32.45 % 26.87 % 16.49 % 16.49 %
(1)
Loan amounts are stated before deducting the allowance for loan losses. Non-accrual loans are included with loans as interest- earning asset.
(2)
Includes instruments issued by the Central Bank.

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Item 4A.
Unresolved Staff Comments
None.
Item 5.
Operating and Financial Review and Prospects
This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Cautionary statement concerning forward-looking statements”, “Risk Factors”, and the matters set forth in this annual report in general.
The following discussion is based on, and should be read in conjunction with, our consolidated financial statements and related notes contained elsewhere in this annual report, as well as “Selected Financial Data” and the other financial information appearing elsewhere in this annual report in general.
A. Operating results
FINANCIAL PRESENTATION
Our audited consolidated financial statements as of and for the three years ended December 31, 2010, 2009 and 2008, included elsewhere in this annual report, have been prepared in accordance with Central Bank Rules. Central Bank Rules differ in certain significant respects from U.S. GAAP. (See note 32 to our audited consolidated financial statements as of and for the three years ended December 31, 2010).
Under Central Bank Rules, our financial statements were adjusted to account for the effects of wholesale-price inflation in Argentina for the periods through February 28, 2003. For the periods subsequent to February 28, 2003, the inflation adjustments were no longer applied to our financial statements under Central Bank Rules.
COMPARABILITY
On August 18, 2009, we merged with Nuevo Banco Bisel. As a result of the merger, the Bank’s financial statements and supplementary information as of December 31, 2009 and 2008, included in this annual report, were restated for comparative purposes. Under Central Bank Rules, the accounting of the merger did not have a significant impact on the consolidated financial statements of the Bank.
On September 20, 2010 we acquired Banco Privado. As a result, our results of operations for the year ended December 31, 2010 consolidate the results of Banco Privado from the date of the acquisition.
Given the instability, and regulatory and economic changes that Argentina has experienced since the beginning of the economic crisis in 2001, as well as our mergers and acquisitions, the financial information set forth in this annual report may not be fully indicative of our anticipated results of operations or business prospects after the dates indicated.
MACROECONOMIC CONTEXT
During the year 2008, Argentina was subject to strong internal and external volatilities that generated a deceleration of the growth registered in the 2003-2007 period. The global financial and economic conditions changed. Developed markets went from a dynamic economic context to sudden credit unavailability in the U.S. and European markets that led the way to an unprecedented economic depression, only comparable to the 1929 world depression.
The international adverse economic context and the preexisting problems in Argentina (such as nationalization of pension funds and conflicts due to the proposed export tax regime) resulted in an evident contraction of the economy throughout 2008. Although the year closed with a 7% expansion of the GDP, the last quarter showed a strong deterioration in the level of activity. The Argentine government maintained an expansive fiscal policy, aimed at satisfying domestic demand. Public expenditure grew to Ps.186.6 billion, registering an annual increase of 35%. Still, Argentine economic figures improved significantly with respect to the previous year, reaching a primary surplus of Ps. 30.8 billion, representing 3% of the GDP.
The year 2009 was characterized by a slow improvement in the international context, after the strong impact the international financial crisis had on both the financial markets and the real economy worldwide. Two different stages could be identified: in the first half of the year, recession in developed economies in addition to a deteriorated domestic environment due to uncertainty regarding the government’s capacity to meet its public debt obligations and uncertainty resulting from the legislative elections being moved forward, combined to generate a massive outflow of capital. In the second semester, external and local tensions slowed down. The international arena showed a material recovery of the principal markets in general, and of our main commercial partners in particular. In the local arena, the result of the legislative elections and payment of US$2.2 billion’s worth of Boden 2012 notes in August 2009 encouraged the return of inflows of capital, which was evidenced in the last quarter of 2009. In this scenario, the growth level of Argentina experienced different stages throughout 2009: slow increase in the first quarter, contraction in the second and third quarters and a new increase in the last quarter. Consequently, GDP grew only by 0.9%.

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In addition, during 2009, Argentina continued with its expansive economic policy. Commercial surplus consolidated, based on import restrictions, while primary fiscal surplus decreased. Primary expenses grew 30% reaching Ps. 243 billion, in similar terms as average verified in 2007. Primary surplus (Ps. 17.3 billion) decreased 47% as a consequence of an increase in the expense to resources ratio. On the other hand, interest payments grew by 37%, reaching Ps. 24.5 billion due to the exchange rate impact and an increase in the peso rates adjusting part of the debt. Consequently, and for the first time since 2002, the Argentine government registered a Ps. 7.2 billion financial deficit, representing 0.6% of GDP.
During the first half of 2010, there was new global financial distress, mainly as a consequence of the uncertainties about the financial capacity of the Eurozone countries. Within this context, the weakness of the world economy, especially in the US, was a major concern. As a consequence, most developed countries delayed the termination of the incentive policies implemented during previous years. At the local level, the economic activity improved, reaching growth rates similar to those recorded before the 2008 crisis. This significant improvement was due to both internal and external factors, such as the increase of the prices of agricultural products, the recovery of the Brazilian economy and the strong world liquidity, coupled with higher harvest volumes, the revenues policy in place, the significant increase in public expense and the successful debt swap completed in June 2010.
In this way, during 2010 GDP had an annual growth of 9.2%. Primary expenses grew 34%., The Argentine government achieved a primary surplus of Ps. 25 billion, equivalent to 1.7% of the GDP. Inflation reached a rate of 10.9% per annum according to the INDEC, while at the same time the argentine peso depreciated 4.7% against the U.S. dollar.
Although there are numerous risks that may result in the economic performance being lower than expected, the Central Bank’s survey of independent forecasting firms indicates a consensus GDP growth estimate of approximately 6.0% for 2011. For more information, see Item 3D—Risk Factors.
In this context, the financial system is regaining depositors’ and borrowers’ confidence, while benefiting from improved conditions, favorable growth opportunities and increasing demand for financial services and products.
RESULTS OF OPERATIONS
The following discussion of our results of operations is for the Bank as a whole and without reference to any operating segments. We do not manage the Bank by segments or divisions or by customer categories, by products and services, by regions, or by any other segmentation for the purpose of allocating resources or assessing profitability.
We consider loans to the private sector and the level of deposits to be key measures of our core business.
As a consequence of the 2008 global financial crisis, loan growth decelerated in 2008 and 2009, but recovered in 2010. The international crisis impacted in our activity level and also in our credit quality, following the trend of the financial system.
Our loan portfolio to the private sector grew to Ps. 10,893 million as of December 31, 2008, increasing 17%, to Ps. 11,248 million as of December 31, 2009, increasing 3%, and to Ps. 15,933 million as of December 31, 2010, increasing 42%.
During 2008, 2009 and 2010 the credit lines with major performance were the consumer loans (personal loans and credit card loans), increasing 19%, 5% and 45%, respectively.
In 2010, within a context of increased prices and reduced rates, the financial system, as well as the Bank, benefited from a continuous demand of consumer loans, the main growth driver of our portfolio in this year.
During 2009 we reduced our public sector loans by the pre-cancellation of Ps.300.6 million of debt with guaranteed loans secured by the Argentine government (“Préstamos Garantizados” or “PGNs”) and by the exchange of PGNs into BONAR 2014 by Ps. 277.8 million. In 2010 the Bank reduced its position in securities issued by the Central Bank and other government securities, recording a public sector exposure to total assets ratio of 2.5% (not including LEBACs and NOBACs).
The level of our total deposits increased 16%, 17% and 26% during 2008, 2009 and 2010, respectively. During 2008, the deposits from AFJP (Argentine pension funds) included as private sector deposits were transferred to the public sector, as a consequence deposits from public sector increased 122% from December 2007 to December 2008 and deposits from private sector only showed a 1% increase. During 2009, private sector deposits were the main source of the increase in total deposits, mainly due to the growth in time deposits. In 2010 private sector and public sector deposits increased 21% and 44% respectively, totaling Ps.23,407.4 million.
The Bank maintains a high liquidity ratio. The ratio was 48.8%, 53.7% and 40.7% as of December 31, 2008, 2009 and 2010, respectively, above the average of the financial system as a whole.

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YEAR ENDED DECEMBER 31, 2010 COMPARED TO YEAR ENDED DECEMBER 31, 2009 AND YEAR ENDED DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008
Net income
The following table sets forth certain components of our income statement for the years ended December 31, 2008, 2009 and 2010.
Year Ended December 31,
2008 (1) 2009 (1) 2010 (2)
(in thousands of pesos)
Financial income
3,029,860 3,860,452 3,728,438
Financial expenses
(1,342,062 ) (1,511,607 ) (1,330,170 )
Gross intermediation margin
1,687,798 2,348,845 2,398,268
Provision for loan losses
(297,606 ) (197,512 ) (215,040 )
Service charge income
891,700 1,050,275 1,324,541
Service charge expenses
(172,401 ) (226,599 ) (285,365 )
Administrative expenses
(1,270,002 ) (1,522,420 ) (1,917,314 )
Net other income (expense)
85,122 (36,317 ) 77,983
Minority interest
(3,354 ) (5,092 ) (6,868 )
Net income before income tax
921,257 1,411,180 1,376,205
Income tax
(261,207 ) (659,250 ) (365,775 )
Net income
660,050 751,930 1,010,430
(1)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(2)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
Our consolidated net income for 2010 increased 34% to Ps.1,010.4 million from Ps. 751.9 million in 2009. Our consolidated net income for 2009 increased 14% to Ps. 751.9 million from Ps. 660.0 million for 2008.
Financial income
The components of our financial income for the years ended December 31, 2008, 2009 and 2010 were as follows:
Year Ended December 31,
2008 (1) 2009 (1) 2010 (2)
(in thousands of pesos)
Interest on cash and due from banks
7,010 363 275
Interest on loans to the financial sector
15,584 7,491 13,668
Interest on overdrafts
357,215 340,275 278,851
Interest on documents (3)
184,852 195,069 146,321
Interest on mortgage loans
97,057 104,016 112,498
Interest on pledged loans (4)
64,499 55,081 51,258
Interest on credit card loans
117,952 183,369 210,058
Interest on other loans (5)
1,032,837 1,243,788 1,538,828
Interest on other receivables from financial intermediation
14,416 74 966
Interest on financial leases
73,481 49,433 42,991
Income from government and private securities, net
641,299 1,370,981 988,707
Income from guaranteed loans (6)
37,043 7,232 62,053
Net income from options
261 — 616
CER (Indexation by benchmark stabilization coefficient) adjustment (7)
70,477 18,652 46,176
CVS (Indexation by salary variation coefficient) adjustment
818 728 688
Difference in quoted prices of gold and foreign currency
143,094 133,731 160,209
Other (8)
171,965 150,169 74,275
Total financial income
3,029,860 3,860,452 3,728,438
(1)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(2)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
(3)
Includes income on factoring, check cashing advances and loans with promissory notes.
(4)
Includes primarily income on secured automobile loans.
(5)
Includes interest on loans not classified under prior headings , including interest on personal loans.
(6)
Includes income on loans to the Argentine government that were issued in exchange for federal and provincial government bonds.
(7)
Includes CER accrued for all the assets subject to adjustment by CER.
(8)
Principally results from pre-financing and financing export transactions and premiums on repos.
2010 and 2009 — Our financial income decreased 3% as compared to 2009, driven primarily by a lower income from government and private securities.

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Income from government and private securities decreased by 28% compared to 2009, due to lower realized gains from government securities holding in investment accounts and, at the same time, lower unrealized gains during 2010 as a consequence of the performance of Central Bank notes during both years. The average rate gained from government securities was 16% for 2010 (nominal rate).
Interest on loans (i.e., for all loans in the aggregate, excluding guaranteed loans) grew 10% as a result of an increase in the financial intermediation activities and the average portfolio volume (the average loan portfolio to private and financial sector grew by 16.5% as compared to 2009) This increase in volume was affected by interest rate decreases (average rate for private sector loans in 2010 was 18.7% compared to 20.2% in 2009).
The main variances of total interest on loans were from interest on other loans (including personal loans and other loans) that increased 24% and interest on credit card loans that increased 15% year on year. These are the lines with more improvement. The average volume of personal loans increased by 24% and the average volume of credit card loans grew by 30% as compared to 2009.
Other income decreased 51% during 2010 or Ps. 75.9 million compared to 2009. This decrease was principally due to lower income from export pre-financing and financing and less premiums on reverse repurchase agreements.
2009 and 2008 — Our financial income increased 27% as compared to 2008 driven by a higher income from government and private securities and interest on loans.
Income from government and private securities increased by 114% compared to 2008, as a result of an increase in the Bank’s bond portfolio price and on higher realized gains from the sale of part of this portfolio (main gains were from government securities holding in investment accounts). On the other hand, during 2009, the average portfolio of government and private securities increased by 45% compared to 2008’s average balance.
Interest on loans (i.e., for all loans in the aggregate, excluding guaranteed loans) grew 14% mainly as a result of an increase in interest rates (private sector average rate in 2009 was 20.24% compared to 18.61% in 2008). The main variances of total interest on loans were from interest on other loans that increased 20% (including personal loans and other loans) and interest on credit card loans that increased 55%.
Thus, the share of our total financial income from private sector loans decreased from 62% in 2008 to 55% in 2009 the same level than 2007. In the other hand the share from government and private securities increased from 21% in 2008 to 36% in 2009.
On the other hand, CER adjustments fell 74% compared to 2008, due to the use of PGN for the pre-cancellation of Central Bank debt.
The following tables set forth the changes in financial income due to increases (decreases) in volume and increases (decreases) in nominal rates of average interest-earning assets. Such financial income excludes exchange differences and premiums on forward sales of foreign exchange:
Changes in financial income
December 31 2008 December 31 2009 December 31 2010
vs. vs. vs.
December 31 2007 December 31 2008 December 31 2009
Increase (Decrease) Increase (Decrease) Increase (Decrease)
(in thousands of pesos)
Due to changes in the volume of interest-earning assets
575,552 415,524 417,730
Due to changes in average nominal rates of interest-earning assets
373,687 556,974 (572,891 )
Net change
949,239 972,498 (155,161 )
Changes in financial income due to changes in volume
December 31 2008 December 31 2009 December 31 2010
vs. vs. vs.
December 31 2007 December 31 2008 December 31 2009
Increase (Decrease) Increase (Decrease) Increase (Decrease)
(in thousands of pesos)
Government securities
51,613 353,671 17,666
Loans to private and financial sector
546,098 53,321 407,577
Loans to public sector
(635 ) (36,236 ) (5,270 )
Other assets
(21,524 ) 44,768 (2,243 )
Net change
575,552 415,524 417,730

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Changes in financial income due to changes in nominal rates
December 31 2008 December 31 2009 December 31 2010
vs. vs. vs.
December 31 2007 December 31 2008 December 31 2009
Increase (Decrease) Increase (Decrease) Increase (Decrease)
(in thousands of pesos)
Government securities
45,829 318,338 (297,253 )
Loans to private and financial sector
263,966 214,313 (236,004 )
Loans to public sector
(12,882 ) 22,375 99,691
Other assets
76,774 1,948 (139,325 )
Net change
373,687 556,974 (572,891 )
Financial expenses
The components of our financial expenses for the years ended December 31, 2008, 2009 and 2010 were as follows:
Year Ended December 31,
2008 2009 (1) 2010 (2)
(in thousands of pesos)
Interest on checking accounts
17,708 16,423 4,073
Interest on savings accounts
14,534 17,094 19,639
Interest on time deposits
933,881 1,146,013 954,465
Interest on interfinancing received loans (received call)
3,909 2,679 4,444
Interest on other financing from the financial institutions
28 62 6
Interest on other liabilities from financial intermediation (3)
91,083 81,510 62,889
Interest on subordinated corporate bonds
47,523 54,874 57,381
Other interest
8,762 2,692 1,961
Net loss from options
— 1 —
CER adjustment (4)
32,946 4,341 4,890
Contribution to Deposit Guarantee Fund
25,945 30,038 35,151
Other (5)
165,743 155,880 185,271
Total financial expenses
1,342,062 1,511,607 1,330,170
(1)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(2)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
(3)
Includes lines of credit from other banks, repurchase agreements and liquidity assistance from the Central Bank.
(4)
Includes CER accrued for all the liabilities subject to adjustment by CER.
(5)
Mainly resulting from turnover tax.
2010 and 2009 - Financial expenses decreased 12% as compared to 2009.
The decrease of financial expenses is mainly explained by a decrease in interest on deposits by 17%, primarily based on the decrease of interest on time deposits. This reduction was due to a decline in interest rates, which had an adverse effect on the Argentine financial system as a whole during 2010, and were not set off by the increase in the volume of deposits.
The highest average increase in volume corresponds to demand deposits (non interest bearing) that grew 47% as compared to the average volume recorded in 2009. Time deposits increased by 15% as compared to the average volume recorded in 2009, while the average rate on such deposits fell from an average 11.4% in 2009 to an average 8.3% in 2010.
During 2010, other expenses increased by 19%, mainly due to an increase on turnover tax as a result of our higher computable financial income.
2009 and 2008 - Financial expenses increased 13% as compared to 2008.
The increase of financial expenses is mainly explained by interest on deposits, which grew 23%, based on the growth of interest on time deposits. This growth was originated mainly by the increasing volume of deposits which grew 20% in average during 2009 while the average interest rates were at similar levels than the average of 2008. The main driver of this increase was the growth in public sector deposits as a consequence of the nationalization of deposits held in the accounts of pension fund administrators as of December 2008.
In 2009, CER adjustments fell sharply, by 87%, explained by the pre-cancellation of Central Bank debt.

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The following tables set forth the changes in financial expense due to increases (decreases) in volume and increases (decreases) in nominal rates of average interest-bearing liabilities. Such financial expense excludes exchange rate variations and premiums on forward purchases of foreign exchange, contributions to Deposit Guarantee Fund, mandatory contributions and taxes on interest income:
Changes in financial expense
December 31 2008 December 31 2009 December 31 2010
vs. vs. vs.
December 31 2007 December 31 2008 December 31 2009
Increase (Decrease) Increase (Decrease) Increase (Decrease)
(in thousands of pesos)
Financial Expense due to changes in the volume of interest-bearing liabilities
266,157 111,170 154,225
Financial Expense due to changes in average nominal rates of interest-bearing liabilities
218,692 31,052 (370,221 )
Net change
484,849 142,222 (215,996 )
Changes in financial expense due to changes in volume
December 31 2008 December 31 2009 December 31 2010
vs. vs. vs.
December 31 2007 December 31 2008 December 31 2009
Increase (Decrease) Increase (Decrease) Increase (Decrease)
(in thousands of pesos)
Deposits
276,410 154,251 156,739
Borrowings from Central Bank and other financial institutions
(8,151 ) (24,951 ) (1,644 )
Corporate Bonds
14,163 (3,004 ) (870 )
Other liabilities
(16,265 ) (15,126 ) —
Net change
266,157 111,170 154,225
Changes in financial expense due to changes in nominal rates
December 31 2008 December 31 2009 December 31 2010
vs. vs. vs.
December 31 2007 December 31 2008 December 31 2009
Increase (Decrease) Increase (Decrease) Increase (Decrease)
(in thousands of pesos)
Deposits
193,460 57,451 (358,243 )
Borrowings from Central Bank and other financial institutions
1,545 (11,833 ) (8,946 )
Corporate Bonds
(1,723 ) 108 (121 )
Other liabilities
25,410 (14,674 ) (2,911 )
Net change
218,692 31,052 (370,221 )
Provision for loan losses
2010 and 2009 - Provision for loan losses increased 9% in 2010 mainly as result of the growth in lending activity, which increased 39% as a consequence of the recovery of the economic activity. This increase was partially offset by a decrease in the provisions we created in addition to those required by the Central Bank Rules, from Ps.86 million in 2009 to Ps.65 million in 2010.
2009 and 2008 - Provision for loan losses decreased 34% compared to 2008. At the end of 2009, although the economic activity was experiencing certain recovery, it was considered necessary to keep an additional provision that would allow the Bank to manage changes in the economic cycle. Therefore, a decision was made to continue with the provision strategy adopted back in December 2008, adapting its volume to actual delinquency charges during the fiscal year. As a result of such decision, the Executive Committee ordered an increase in provisions for loan losses in the amount of Ps.86 million, to be added to the amount currently required by regulators.
Service charge income
The following table provides a breakdown of our service charge income by category for the years ended December 31, 2008, 2009 and 2010:
Year Ended December 31,
2008 (1) 2009 (1) 2010 (2)
(in thousands of pesos)
Service charges on deposit accounts
587,259 669,564 816,100
Debit and credit card income
153,210 171,746 222,537
Other fees related to foreign trade
19,428 26,786 28,358
Credit-related fees
63,669 60,741 96,574
Capital markets and securities activities
2,517 1,721 2,079

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Year Ended December 31,
2008 (1) 2009 (1) 2010 (2)
(in thousands of pesos)
Lease of safe-deposit boxes
16,282 21,015 32,053
Fees related to guarantees
1,750 629 647
Other (3)
47,585 98,073 126,193
Total service charge income
891,700 1,050,275 1,324,541
(1)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(2)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
(3)
Includes insurance income.
2010 and 2009 - Service charge income increased 26% in 2010 compared to 2009, mainly due to higher fees charged on deposits accounts (22%), debit and credit card fee income (30%), credit related fees (59%) and other fees related to insurance, fees from collection agreements and others (28%).
2009 and 2008 : Service charge income increased 18% as compared to 2008 mainly due to higher fees charged on deposits accounts (14%), debit and credit card fee income (12%) and other fees related to insurance, fees from collection agreements and others (106%).
Service charge expenses
Service charge expense increased 26% in 2010 from Ps.226.6 million in 2009 to Ps.285.4 million in 2010, mainly due to higher loan origination fees and debit and credit card processing fees, linked with the volume of activity.
During 2009 service charge expenses increased 31% compared to 2008 with an increase of 43% on other service charge expenses mainly due to the increase of collections agreements costs.
Administrative expenses
The components of our administrative expenses for the years ended December 31, 2008, 2009 and 2010 are reflected in the following table:
Year Ended December 31,
2008 (1) 2009 (1) 2010 (2)
(in thousands of pesos)
Personnel expenses
798,236 966,963 1,233,898
Directors and statutory auditors fees
26,941 36,413 59,391
Other professional fees
55,012 65,533 81,169
Advertising and publicity
53,178 46,861 63,437
Taxes
70,994 79,784 102,547
Depreciation of equipment
50,543 53,993 58,285
Amortization of organization costs
25,557 33,317 43,273
Maintenance, conservation and repair expenses
48,251 68,620 78,032
Security services
42,241 47,668 61,102
Electric power and communications
37,240 46,054 48,529
Lease payments
21,769 34,638 40,526
Insurance
6,090 7,331 9,902
Stationery and office supplies
15,335 11,817 10,339
Other
18,615 23,428 26,884
Total administrative expenses
1,270,002 1,522,420 1,917,314
(1)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(2)
The results of operations of Banco Privado are consolidated with Banco Macro from September 20, 2010.
2010 and 2009 - Administrative expenses increased 26% in 2010 when compared to 2009, mainly due to higher personnel expenses. The 28% increase in personnel expenses is attributed to salary adjustments of 23.5% agreed with the labor unions in April 2010 and higher bonus provisions for the year.
Directors and statutory audit fees increased 63% as compared to 2009.
Advertising and publicity increased 35% due to higher promotion and advertising expenses during the year.
2009 and 2008 - Administrative expenses increased 20% as compared to 2008, mainly due to higher personnel expenses. The 21% increase in personnel expenses is attributed to the salary adjustments of 19% agreed with the labor unions in April 2009 and higher compensation provisions for the year.
Net other income (expense)
Net other income for 2010 was Ps. 78 million. Other income increased by 37%, or Ps. 45.5 million in 2010 when compared to 2009 due to higher recovery on loans and allowances reversed. Other expenses decreased by 43%, or Ps. 68.8 million, mainly as a result of non-recurrent tax expenses during 2009 as explained below.

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For the year 2009, the Bank accounted a Ps. 36 million loss for net other income. As compared to 2008, the other income fell by 35% (Ps. 66 million) mainly due to lower recovery on loans and allowances reversed. In addition, other expenses rose by 53% (Ps. 55 million) as compared to 2008, as a result of a non-recurrent tax expense of Ps.40.2 million made to enter into the debt regularization system established by means of a Resolution of the Buenos Aires City Tax Authorities (DGR CABA).
Income tax
During 2010, we had income tax expenses of Ps. 365.8 million, compared to Ps. 659.3 million recorded in 2009 and Ps. 261.2 million recorded in 2008. The decrease as compared to 2009 was due to the higher tax impact during 2009.
Tax effective rate for fiscal year 2010 was 26% while the tax rate was 35%.
The income tax expense for 2009 was Ps. 659.3 million, increasing 152% when compared to 2008. Such increase is due to a higher net income before income tax, an increase in market value of the Bank’s bond portfolio in 2009 that caused an increase in income tax to be paid as a consequence of the tax treatment of this portfolio as marked to market, and as a result of the tax impact of the pre-cancellation of Central Bank debt with PGN.
B. Liquidity and Capital Resources
Our main source of liquidity consists of deposits, which totaled Ps. 23,407.4 million as of December 31, 2010, Ps. 18,592.9 million as of December 31, 2009 and Ps. 15,828.4 million as of December 31, 2008. These deposits include deposits generated by our branch network, from institutional, very large corporate clients and from provincial governments for whom we act as financial agent. We consider the deposits generated by our branch network and the provincial deposits to be stable.
Approximately 22% of the Bank’s total deposits derives from the non-financial government sector, in particular as a consequence of the Bank’s role as financial agent of several provinces. This is an important source of low-cost funding.
Funding continued increasing during 2010 driven mainly by the increase in total deposits, which grew 26% year over year, representing 80% of our total funding as of December 31, 2010. These deposits were used primarily for financing the growth in credit for the private sector and the remainder, being invested in profitable liquid assets. This approach has enabled us to maintain a high liquidity to deposits ratio of 40.71% as of December 31, 2010 while we await a return to stronger demand for private sector loans.
During 2008 and 2009, Banco Macro repurchased and cancelled non-subordinated 8.50% Notes Due 2017 for a face value amount of US$43,605,000 and Argentine Peso-Linked 10.75% Notes Due 2012 for a face value amount of US$36,005,000. As of December 31, 2009, the outstanding principal amount of 8.50% Notes Due 2017 was US$106,395,000 and of 10.75% Notes Due 2012 was US$63,995,000. During 2010 we repaid the loan from Credit Suisse First Boston International for an aggregate principal amount of US$50 million.
On January 8, 2008, Banco Macro’s Board of Directors decided to establish the terms and conditions for the acquisition of its own shares. Based on the established conditions, up to April 12, 2009 the Bank had repurchased an aggregate amount of 90,641,692 of its own shares.
On October 1, 2008, Banco Macro’s Board of Directors requested the BCBA’s prior authorization to reduce its subscribed and paid-in capital stock by an amount of up to Ps. 60 million, representing 60,000,000 Class B shares (with a face value of Ps. 1 each and entitled to 1 vote per share), which were included in the Bank’s portfolio and were acquired under section 68, Law No. 17,811 in accordance with the share buy-back program. On April 21, 2009, and after BCBA authorization, Banco Macro’s general ordinary and extraordinary shareholders’ meeting approved the abovementioned capital reduction. During July 2009, the CNV authorized, the IGJ registered, and the Central Bank consented to the capital stock reduction.
On May 8, 2009, Banco Macro’s Board of Directors requested the BCBA’s prior authorization to reduce its subscribed and paid-in capital stock by an amount of up to Ps. 30,641,692, representing 30,641,692 Class B shares (with a face value of Ps. 1 each and entitled to 1 vote per share), which is treasury stock and which was purchased under section 68, Law No. 17,811. On September 10, 2009, Banco Macro’s shareholders’ meeting approved the abovementioned capital reduction subject to the BCBA’s consent. Subsequently, the BCBA and the CNV approved such capital reduction, the IGJ recorded it and the Central Bank acknowledged it.
Additionally, the Bank currently has access to uncommitted lines of credit with foreign banks and to letters of credit.
On April 26, 2011 our shareholders’ meeting approved the increase of the maximum aggregate principal amount of our Global Medium-Term Note Program from U$S 700 million up to U$S 1,000 million (or its equivalent in other currencies).
The CFO manages the excess liquidity by analyzing interest rates from a limited number of liquid and short-term assets including Central Bank Bills, deposits with the Central Bank and overnight loans to highly rated companies. The amount allocated to overnight loans is determined by the amount of deposits received from institutional investors, and as such, there is a high degree of volatility in our overnight allocations.
We believe that we have adequate working capital to meet our current and reasonably foreseeable needs. As of December 31, 2010, we had excess capital of Ps. 2,562 million (145% of minimum capital requirement). The Bank’s excess capital is aimed at supporting growth, and consequently, a higher leverage of the Bank’s balance sheet.

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For further information regarding management and administration guidelines in relation to liquidity risk please note 17 “Risk management policies” to our audited consolidated financial statements for the year ended December 31, 2010. Additionally for further information regarding our restricted assets, assets in custody and trust agreements please see notes 7 “Restricted and pledged assets”, 11 “Items in custody” and 13 “Trust agreements” to our audited consolidated financial statements, for the year ended December 31, 2010.
Minimum capital requirements
Our excess capital (representing the amount in excess of minimum reserve requirements of the Central Bank) is as set forth in the table:
As of December 31,
2008 2009 2010
(in thousands of pesos, except
ratios and percentages)
Calculation of excess capital:
Allocated to assets at risk
939,296 970,578 1,261,695
Allocated to Bank premises and equipment, intangible assets and equity investment assets
87,113 95,705 122,669
Market risk(1)
49,899 39,764 55,857
Interest rate risk
204,510 201,451 283,150
Government sector and securities in investment account
60,780 36,544 38,476
Required minimum capital under Central Bank Rules
1,341,598 1,344,042 1,761,847
Basic net worth
2,688,679 3,193,973 3,621,564
Complementary net worth
625,756 691,107 959,851
Deductions
(200,610 ) (176,784 ) (257,277 )
Total capital under Central Bank Rules
3,113,825 3,708,296 4,324,138
Excess capital
1,772,227 2,364,254 2,562,291
Selected capital and liquidity ratios:
Regulatory capital/risk weighted assets
22.95 % 27.38 % 24.74 %
Average shareholders’ equity as a percentage of average total assets
12.71 % 12.75 % 13.30 %
Total liabilities as a multiple of total shareholders’ equity
6.95 x 7.00 x 7.07 x
Cash as a percentage of total deposits
22.26 % 26.98 % 22.22 %
Liquid assets as a percentage of total deposits (2)
48.80 % 53.70 % 40.71 %
Loans as a percentage of total assets
50.29 % 41.31 % 47.46 %
(1)
Average Var for December.
(2)
Liquid assets include cash, LEBACs, NOBACs, interbanking loans and overnight loans to highly rated companies.
We believe that our capital resources are sufficient for our present requirements on an individual and a consolidated basis.
Funding
Our principal source of funding is deposits from individuals and businesses located in Argentina. Deposits include checking accounts, savings accounts and time deposits. The following table sets forth our sources of funding as of December 31, 2008, 2009 and 2010.
As of December 31
2008 (1) 2009 (1) 2010
(in thousands of pesos)
Deposits
From the non-financial government sector
3,937,961 3,613,924 5,216,109
From the financial sector
22,438 14,052 15,776
From the non-financial private sector and foreign residents
Checking accounts
2,581,060 3,275,826 4,178,758
Savings accounts
2,716,913 3,445,577 4,526,697
Time deposits
6,031,882 7,711,471 8,714,101
Investment accounts (2)
155,936 52,286 178,010
Other (3)
321,020 416,503 518,807
Accrued interest, adjustments, foreign exchange and quoted price differences payable
61,147 63,227 59,135
Borrowing from Central Bank and financial institutions
Central Bank
302,760 1,897 1,877
Banks and international institutions
232,422 227,214 45,697
Financing received from Argentine financial institutions
73,806 189,971 76,870
Other
627,140 733,943 1,173,873
Minority interest in subsidiaries
15,568 20,684 27,499
Non-subordinated Corporate Bonds
724,873 616,735 636,464
Subordinated Corporate Bonds
521,681 572,473 598,470
Shareholders’ equity
2,821,911 3,358,801 4,152,842
Total funding
21,148,518 24,314,584 30,120,985
(1)
See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2010.
(2)
Time deposit payable at the option of the depositor.
(3)
Includes, among others, expired time deposits and judicial deposits.

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Critical accounting policies
Our accounting and reporting policies comply with Central Bank Rules, which differ in certain significant respects from U.S. GAAP. See note 32 to our audited consolidated financial statements as of and for the three years ended December 31, 2010 included in this annual report for a reconciliation of our audited financial statements to U.S. GAAP. The preparation of our financial statements requires management to make estimates and assumptions of assets and liabilities, income, expenses and contingencies. Our financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding our financial position.
Critical accounting policies are those policies that management believes are the most important to the portrayal of our financial condition and results of operations, and require management to make estimates that are subjective or complex. Most accounting policies are not considered by management to be critical accounting. Several factors are considered in determining whether or not a policy is critical in the preparation of our financial statements. These factors include, among others, whether the estimates are material to our financial statements, the nature of the estimates, the ability to readily validate the estimates with other information including information from third parties or available prices, and sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under Central Bank Rules. Significant accounting policies are discussed in note 4 to our audited consolidated financial statements as of and for the three years ended December 31, 2010.
Income tax
In estimating accrued taxes, we assess the relative merits and risks of the appropriate tax treatment considering statutory, judicial and regulatory guidance in the context of the tax position.
Because of the complexity of tax laws and regulations, interpretation can be difficult and subject to legal judgment and given specific facts and circumstances. It is possible that others, given the same information, may at any point reach different reasonable conclusions regarding the estimated amounts of accrued taxes.
Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of the status of examinations being conducted by various taxing authorities, and newly-enacted statutory and regulatory guidance that impact the relative merits and risks of tax positions. These changes, when they affect accrued taxes, can be material to our operating results.
As explained in note 5 to our audited consolidated financial statements, Central Bank Rules do not require the recognition of deferred tax assets and liabilities and, therefore, income tax is recognized on the basis of amounts due in accordance with Argentine tax regulations and no deferred tax and liabilities are recognized.
For purposes of U.S. GAAP reporting, we apply FASB ASC 740 “Income Tax”. Under this method, income tax is recognized based on the liability method whereby deferred tax assets and liabilities are recorded for temporary differences between the financial reporting and tax basis of assets and liabilities at each reporting date. FASB ASC 740 requires that an allowance for deferred tax assets to the extent that it is more likely than not that they will not be realized, based on the weight of available evidence. In order to determine the amount of the valuation allowance required, in accordance with FAS ASC 740-10-30-16 through 30-25, we evaluate for each consolidated entity all available evidence, both positive and negative and the future realization of the tax benefit in a relatively short period of time, considering future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax-planning strategies.
FASB ASC 740 also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
There were no unrecognized tax benefits as of December 31, 2010, 2009 and 2008.
Exposure to the Argentine public sector and private securities
PGNs
During the fiscal year ended December 31, 2001, and as a consequence of Presidential Decree No. 1,387/01, we exchanged a portion of federal government securities effective as of November 6, 2001, and received so-called PGNs in consideration thereof. The loans received in this exchange were not significant. In addition, we have PGNs acquired in the market and also through business combinations.
PGNs as of December 31, 2008 and 2007 were valued according to Central Bank Communication “A” 3,911, as supplemented. As of December 31, 2010 and 2009, PGNs were valued according to Central Bank Communication “A” 4,898 at the higher of the present value published by Central Bank and the book value of the prior month (see note 4.4.c) to our audited consolidated financial statements as of and for the three years ended December 31, 2010).
Under U.S. GAAP, the difference between the cost of each acquired loan and its expected future cash flows is accounted for in accordance with FASB ASC 310-30 “Loans and debts acquired with deteriorated credit quality”. In accordance with this rule, we should continue to estimate cash flows expected to be collected over the life of the loan.

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As of December 31, 2008, based on available information and events, we estimated that the PGNs were impaired, applying FASB ASC 310-10-35 “Receivables — Overall — Subsequent measurement”, and it estimated allowances for such loans in accordance with FASB ASC 310.
As of December 31, 2010 and 2009, taking into account the available information and the significant improvement in the expected cash flow to be collected, we estimated that PGNs were not impaired, applying FASB ASC 310-30. In accordance with that rule, valuation allowances required in 2008 were reversed as of December 31, 2009.
In 2009, we subscribed an exchange agreement with the government whereby it exchanged a portion of the PGNs and received government securities (BONAR 2014). Under Central Bank Rules, the assets exchanged were valued at their carrying amounts. Therefore the exchange did not have a significant impact on income. In addition, the government securities were classified as “Holding in special investment account” (see note 32.b) to our audited consolidated financial statements as of and for the three years ended December 31, 2010).
Under U.S. GAAP, FASB ASC 310-30-35 “Loan refinancing or Restructuring” requires to recognize the government securities received at fair value and derecognize the guaranteed loans transferred at their carrying amounts. In addition, under FASB ASC 320 “Investment — Debt and Equity securities” the government securities were classified as available for sale securities (see note 32.b) to our consolidated financial statements for the year ended December 31, 2010).
Instruments issued by the Central Bank and other unlisted securities
Pursuant to Central Bank Rules, instruments issued by the Central Bank and other unlisted securities were valued at their quoted price or at their cost value increased by their internal rate of return (as provided by Communication “A” 4,414) as the case may be. For more information, see notes 4.4.b.3), b.4), b.5), 4.4.h.4) iii and 4.4.h.5) to our audited consolidated financial statements as of and for the three years ended December 31, 2010.
According to U.S. GAAP, these securities should be considered as “available for sale” and carried at fair value, with unrealized gains and losses reported as net of income tax within the shareholders’ equity accounts in accordance with FASB ASC 320.
Government securities
According to Central Bank Communication “A” 4,861 dated October 30, 2008, as supplemented, we classified certain government securities, including a significant portion of secured bonds (BOGARs), under “special investment accounts”, as disclosed in note 20 to our audited consolidated financial statements as of and for the three years ended December 31, 2010. These government securities are recorded at their cost value increased by their internal rate of return and adjusted by the benchmark stabilization coefficient (CER), as applicable (see note 4.4.b.1) to our audited consolidated financial statements as of and for the three years ended December 31, 2010).
In accordance with Central Bank Communication “A” 5,024, dated December 2010, the holdings of Argentine government securities and Central Bank monetary regulation instruments recorded under this valuation system should be reversed and booked at market value. Therefore, during 2010 we reclassified these securities.
In addition, considering the favorable market situation and improvement in the conditions of the assets, we sold a significant portion of such holdings. As of December 31, 2010 we classified those remaining government securities under “holdings for trading or intermediation transactions” recorded at their quoted price (see note 4.4.b.2) to our audited consolidated financial statements as of and for the three years ended December 31, 2010).
As of December 31, 2010, 2009 and 2008, we did not have the intention of keeping such holdings until their maturity. Consequently, under U.S. GAAP, these holdings in investment accounts should be considered as “available for sale” and carried at fair value with the unrealized gains and losses reported as net of income tax within the shareholders’ equity accounts in accordance with FASB ASC 320.
Allowance for loan losses
The loan loss reserve represents the estimate of probable losses in the loan portfolio. Determining the loan loss reserve requires significant management judgments and estimates including, among others, identifying impaired loans, determining customers’ ability to pay and estimating the fair value of underlying collateral or the expected future cash flows to be received. Actual events will likely differ from the estimates and assumptions used in determining the loan loss reserve. Additional loan loss reserves could be required in the future.
The loan loss reserve is maintained in accordance with the Central Bank Rules. This results from evaluating the degree of debtors’ compliance and the guarantees and collateral supporting the respective transactions.
Increases in the reserve are based on the deterioration of the quality of existing loans, while decreases in the reserve are based on regulations requiring the charge-off of nonperforming loans classified as “non-recoverable” after a certain period of time and on management’s decisions to charge-off non-performing loans evidencing a very low probability of recovery.
In addition, under Central Bank Rules, we record recoveries on previously charged-off loans directly to income and record the amount of charged-off loans in excess of amounts specifically allocated as a direct charge to the consolidated income of statement. We do not partially charge off troubled loans until final disposition of the loan, rather, the allowance is maintained on a loan-by-loan basis for its estimated settlement value.

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Under the Central Bank Rules, a minimum loan loss reserve is calculated primarily based upon the classification of commercial loan borrowers and upon delinquency aging (or the number of days the loan is past due) for consumer loan borrowers. Although we are required to follow the methodology and guidelines for determining the minimum loan loss reserves, as set forth by the Central Bank, we are allowed to establish additional loan loss reserves.
For commercial loans, we are required to classify all commercial loan borrowers. In order to classify them, we must consider different parameters related to each of those customers. In addition, based on the overall risk of the portfolio, we consider whether or not additional loan loss reserves in excess of the minimum required are needed.
For the consumer loan portfolio, we classify loans based upon delinquency aging, consistent with the requirements of the Central Bank. Minimum loss percentages required by the Central Bank are also applied to the totals in each loan classification.
We record provisions after evaluating the loan portfolio in terms of delay (for consumer loans) or constant monitoring (for commercial loans). This process determines whether an increase or decrease in charges for non-performing loans is required based on our estimate of whether the credit is worsening or improving, or whether the loan is repaid. Our loan loss charges have been historically stable (absent the impact of the Argentine crisis), accommodating qualitative and quantitative changes in the composition of our loan portfolio. As we are all aware, the world’s economy is sustaining a highly virulent crisis that is affecting, to a lesser or larger extent, the levels of economic activity and employment and dragging down foreign trade. This scenario leads us to the assumption that some of the loans that currently make up our portfolio might sustain a impairment in value. Therefore, the executive committee has decided to increase the allowance for loan losses related to the loan portfolio as of December 31, 2010, 2009 and 2008 to such amounts presently required by regulators.
Under U.S. GAAP, a portion of the total allowance typically consists of amounts that are used, for example, to cover loans that are analyzed on a “pool” or homogeneous basis and to supplement specific allowances in recognition of the uncertainties inherent in point estimates.
The accounting for its loan loss reserve under Central Bank Rules differs in some respects with practices of US-based banks, as discussed below.
In addition, all loans reserves from business combinations recorded under Central Bank Rules, since the effective date of FASB ASC 310-30, were reversed under U.S. GAAP purposes as of each acquisition date, due to the fact that it is not appropriate to report such acquired impaired loans on a gross basis, since the Bank is not expected to incur those losses.
Credit card loans
We establish a reserve for credit card loans based on the past due status of the loan. All loans without preferred guarantees past due over 180 days have been reserved at 50%, in accordance with Central Bank Rules. Under U.S. GAAP, we adopted a policy to fully provision loans which are 180 days past due.
Impaired loans—Non Financial Private Sector and residents abroad
We apply FASB ASC 310 for computing U.S. GAAP adjustments. FASB ASC 310 requires a creditor to measure impairment of a loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. This Statement is applicable to all loans (including those restructured in a troubled debt restructuring involving amendment of terms), except large groups of smaller-balance homogenous loans that are collectively evaluated for impairment. Loans are considered impaired when, based on management’s evaluation, a borrower will not be able to fulfill its obligation under the original loan terms.
Interest recognition—non-accrual loans
The method applied to recognize income on loans is described in note 4.4.d) of our audited consolidated financial statements as of and for the three years ended December 31, 2010. Additionally, the accrual of interest is discontinued generally when the related loan is non-performing and the collection of interest and principal is in doubt, generally after 90 days of being past due. Accrued interest remains on our books and is considered a part of the loan balance when determining the reserve for credit losses.
Under U.S. GAAP, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for credit losses.

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Business combination
We acquire financial institutions and, in some circumstances, acquire the assets and liabilities or branches of other financial institutions. According to Central Bank Rules, business acquisitions are recorded at the book value of the acquired company. Consequently, the difference between the purchase price and its interest valued by the equity method in the books of the acquirer, is recorded as positive goodwill (when the purchase price is higher than the interest valued by the equity method) or negative goodwill (when the purchase price is lower than the interest valued by the equity method), as the case may be. If goodwill is positive, Central Bank Rules establish that such goodwill should be amortized under the straight-line method based on an estimated useful life of ten years. If goodwill is negative, Central Bank Communication “A” 3,984 establishes specific amortization methods; the maximum amortization allowed per annum is 20%.
Under U.S. GAAP, applying FASB ASC 805, a business combination occurs when an entity acquires net assets that constitute a business or acquires equity interests of one or more entities and obtains control over that entity or entities. The acquisition of all or part of a financial institution that meets the definition of a business combination is accounted for by the acquisition method. The cost of an acquired entity shall be allocated to the assets acquired including intangible assets and liabilities based on their estimated fair values at the date of acquisition.
Fair value of financial and non-financial instruments
FASB ASC 820 defines fair value, establishes a consistent framework for measuring fair value, and enhances disclosures about fair value measurements. The adoption of FASB ASC 820 (effective January 1, 2008 and in particular effective January 1, 2009 for the measurement of nonfinancial assets and nonfinancial liabilities) had affected our accounting and reporting of fair value.
FASB ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, FASB ASC 820 has established a hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:
Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market that the Bank has the ability to access.
Level 2: Other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following:
a)
Quoted prices for similar assets or liabilities in active markets;
b)
Quoted prices for identical or similar assets or liabilities in less-active markets;
c)
Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d)
Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
Effective January 1, 2010, we adopted new accounting guidance under FASB ASC 820 that requires additional disclosures and clarifies existing disclosure requirements about the level of disaggregation, inputs and valuation techniques. Now reporting entities must disclose separately the amounts and reasons for certain significant transfers among the three hierarchy levels. In addition, in the reconciliation for Level 3 fair value measurements, a reporting entity should present separately information about purchase, sales, issuances and settlements; this requirement is effective since January 1, 2011.
We use fair value to measure certain assets and liabilities on a recurring basis when fair value is the primary measure for accounting. This is done primarily for government and private securities (debt instruments issued by Argentine government and the Central Bank, shares, mutual funds and corporate bonds) classified as available for sale or trading account, forward transactions pending settlement and derivatives (forward transactions without delivery of underlying assets and interest rate swaps).
FASB ASC 825 allows to report certain financial assets and liabilities at fair value. The option may be applied instrument by instrument, but is on an irrevocable basis. We did not elect to apply the fair value option.
Fair value is used on a nonrecurring basis to measure certain assets when applying lower of cost or market accounting or when adjusting carrying values, such as for loans held for sale, impaired loans, and other real estate. Fair value is also used for annual disclosures required by FASB ASC 825 “Financial Instruments”. We have no assets measured at fair value on a nonrecurring basis.
Repurchase agreements
We entered into repo and reverse repo agreements of financial instruments. Under Central Bank Rules, we derecognize the securities transferred under the repurchase agreements and record an asset related to the future repurchase of these securities. Contemporaneously, we record a liability related to the cash received in the transaction. The asset related to securities to be repurchased is measured under the same criteria as the transferred securities, as mentioned in note 4.4 to our audited consolidated financial statements as of and for the three years ended December 31, 2010.
Similer treatment is applied to reverse repo agreements.
Under U.S. GAAP, FASB ASC 860, these transactions do not qualify as sales and therefore these transactions are recorded as secured financings.

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C. Research and Development, Patents and Licenses, Etc.
Not applicable.
D. Trend Information
We believe that the following trends in the international context, the Argentine economy, the banking sector and our business have affected and will, for the foreseeable future, continue to affect our results of operations and profitability. Our continued success and ability to increase our value to our shareholders will depend, among other factors, upon the continued economic recovery in Argentina and the corresponding re-emergence of the market for long-term private sector lending.
International context
The world economic activity continues recovering and growth is expected to be stimulated by emerging economies, as well as also by the recovery of the United States and European Union economies. Nevertheless, the relevant macroeconomic imbalances experienced by some European countries might affect the sustainability of this trend in the medium term. The principal risks would be associated to unemployment and the deterioration of developed countries’ public finances, deepened by the anti-cyclical measures adopted during the crisis.
In a general context of economic performance improvement, Latin American financial systems continued showing strenghs, although it is expected that financial intermediation will gain dynamism maintaining a spectrum of narrowed risks.
Argentine economic performance
During 2008 and 2009, Argentina was affected by the existing global volatility, which resulted in a reduction of GDP growth rate from 7% in 2008 to 0.9% in 2009. During 2010, the economic activity improved significantly; GDP grew by 9.2%, reaching rates similar to those recorded before the 2008 global financial crisis. As a consequence of the economic downturn in 2008-2009, certain financial indicators of the financial system in general and of the Bank in particular, deteriorated.
The Central Bank’s survey of independent forecasting firms indicates a consensus GDP growth estimate of 6.0% for 2011. Expected economic growth would be supported by:
• Consumer spending: consumption has strongly recovered in 2010. In addition, consumers see our products (personal and credit card loans) as a way of hedging against inflation.
• Export levels: although the trade balance will be lower than the one registered in 2010, the result is expected to be positive.
• Record-high soy price: notwithstanding the draught affecting the Argentine farmland, the high international prices have more than set off the decrease in the harvested volumes.
• High inflation: high levels of public expenditure lead to the aggregate demand growing faster than the offer, thus producing an upward adjustment in prices.
Private sector lending
As a consequence of the 2008 global financial crisis and its impact in the local economy, the activity of financial intermediation diminished its pace of growth. During 2008 and 2009 loan growth decelerated, but recovered in 2010.
The evolution of loans to the private sector during the last three years showed a growth of 20% in 2008, 9% in 2009 and 37% of 2010, for the financial system as a whole. This trend was also reflected in the evolution of our portfolio. Our private sector loan portfolio increased to Ps.10,893 million (17%) in 2008, to Ps.11,248 million (3%) in 2009 and to Ps.15,933 million (42%) in 2010.
We see the following trends in this important area of our business:
•
Low cost of funds; high levels of liquidity. As a result of our low cost of funds and our high level of liquidity, a key driver of our results is our ability to increase our lending within the scope of our credit policy, as such lending is always at a positive margin. Therefore, we have seen increases in our gross intermediation margin as our private sector lending has increased.
•
Growth prospects subject to development of inflation and long-term fixed rate lending. We believe that the main obstacle preventing a faster recovery of Argentina’s private sector lending has been the uncertain outlook on long-term inflation, which has a significant impact on both the supply of and demand for long-term loans as borrowers try to hedge against inflation risk by borrowing at fixed rates while lenders hedge against inflation risk by offering loans at floating rates. As a result, most of the increase in the volume of private loans in the financial system until December 31, 2010 was concentrated in short-term products. For example, the ratio of personal loans, overdrafts and documents to GDP has increased from 3% in June 2003 to 8% as of December 31, 2010 while long-term loans represented by mortgages and secured loans have decreased from 3% to 2% of GDP during the same period (despite substantial GDP growth during the period).

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•
Stable intermediation spread. Based on the low banking penetration in Argentina, we believe that the expected loan growth mix, with a larger participation of consumer loans compared to commercial loans, will improve spreads. However, price competition could offset this effect and intermediation spreads might remain stable.
Lending portfolio credit quality
In 2008, the improvement of the financial system’s lending portfolio credit quality from previous years was interrupted by new signals of volatility. During 2009, the credit quality marginally deteriorated, more as a result of slow dynamics in private lending than as a result of an increase in delinquency. During 2010 the credit quality began to improve.
During 2008-2009 we had a slight deterioration of our portfolio; our non-performing lending level increased from 2.6% in 2008 to 3.2% in 2009. During 2010, the credit quality began to improve and the level of non-performing lending decresead to 2.1%. These figures reflect the same level and evolution registered by the financial system as a whole.
The table below reflects the portfolio credit quality of the Bank and the financial system for 2008, 2009 and 2010:
As of December 31,
2008 2009 2010
Banco Macro
Allowances/lending (1)
3.6 % 3.7 % 3.1 %
Non-performing lending ratio (2)
2.6 % 3.2 % 2.1 %
Financial System
Allowances/lending (1)
2.9 % 3.1 % 2.4 %
Non-performing lending ratio (2)
2.5 % 2.8 % 1.7 %
Source: Central Bank
(1)
Includes loans, other receivables from financial transactions, financial leases, memorandum accounts—other guarantees provided and unused portion of loans granted (included in Debtors Rating Standards).
(2)
Non-performing lending includes all lending to borrowers classified as “3—troubled/medium risk”, “4—with high risk of insolvency/high risk”, “5—irrecoverable” and “6—irrecoverable according to Central Bank Rules” under the Central Bank loan classification system.
At the end of 2008 and during 2009 and 2010, we created additional allowances above those required by the Central Bank, with the aim of maintaining the coverage ratio set forth by the Bank’s standards of prudence. As a result, the Bank’s coverage level reached 147.2% of the non-performing lending portfolio as of December 31, 2010.
We expect that based on our loan growth expectations and the recovery of the economy, asset quality standards should improve by the end of the year.
Organic growth complemented by strategic acquisitions
Acquisitions have fueled growth over the last years. During 2010, we acquired Banco Privado; this acquisition will enable us to serve a greater number of customers with our current structure, to complement lines of business and to achieve greater economies of scale by additionally providing Banco Privado with a more efficient financing structure and permitting its clients access to a network with a greater geographical coverage (for additional information please see “Item 4.A “Information on the Bank — History and development of the Bank”).
We will continue to consider strategic acquisition opportunities to complement our branch network consistently with our strategy. Due to our significant excess liquidity and capital, we are in a position to continue to complement organic growth with strategic acquisitions.
We evaluate the effectiveness of our acquisition strategy by how it complements our organic growth strategy and whether or not such acquisitions result in the Bank increasing its customer base, expanding its loan portfolio and generating more fee income from transactional services.
Commercial and balance sheet strategies
We have the most extensive branch network among private-sector banks in Argentina, with 94% of our branches located outside of the City of Buenos Aires. The great spreading over Argentine regional economies and the sectors that are availing themselves of the economic recovery imply a key advantage with respect to other banks upon competing in the credit expansion service in Argentina. In addition, this strong network of branches and the functions of financial agents from different provinces provide us with a source of growth and low costs in its deposit base.
We will continue with the diversification and atomization strategy regarding the credit portfolio, thus enabling to obtain satisfactory efficiency, growth, security and profitability in commercial management. It also intends to stress its presence in the assistance to small- and medium-sized enterprises, emphasizing the election of dynamic economic sectors and growth potential in industrial, commercial and service areas for the purpose of contributing to companies’ expansion and ensuring an acceptable return of the funds assigned. At the same time, a complete range of corporate financial services will be offered, including exports and imports financing, letters of credit confirmation and opening, and granting guarantees to third parties on behalf of its customers.

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We maintain a strong position with respect to excess capital, the liquidity ratio and the level of our provisions for loan losses. To counteract the effects that a run on deposits may have, one of our main priorities is to give depositors confidence that we would be able to absorb losses and fulfill our obligations to them.
Our practice of maintaining high liquidity levels throughout the business cycles helps us to withstand the economic crisis by serving two key purposes. First, we have funds available in the face of adverse systemic events. Second, we give our depositors confidence that they would be able to have access to their deposits at any time, even during the depth of a crisis. We also minimize excess cash deposited in the Central Bank, without harming our overall liquidity position. In this way, we maximize the return on our liquidity stock by keeping funds in more profitable assets, such as Central Bank-issued LEBACs/NOBACs and overdrafts to highly rated large corporations.
E. Off-Balance Sheet Arrangements
We enter into various transactions involving off-balance sheet financial instruments and we use these instruments to meet the risk management, trading and financing needs of customers or for our proprietary trading and asset and liability management purposes.
These instruments are subject to varying degrees of credit and market risk. We monitor credit risk and market risk associated with on- and off-balance sheet financial instruments on an aggregate basis. We use the same credit policies in determining whether to enter or extend option contracts, commitments, conditional obligations and guarantees as we do for granting loans. Our management believes that the outstanding off-balance sheet items do not represent an unusual credit risk.
For additional information of financial instruments with off-balance sheet risk see note 30 to our consolidated financial statements for the year ended December 31, 2010.
F. Contractual Obligations
The following table represents our contractual obligations and commercial commitments as of December 31, 2010:
Payments due by period
Less than After
Total 1 year 1-3 years 3-5 years 5 years
(in thousands of pesos)
Contractual obligations
Central Bank
1,877 1,452 — — 425
Banks and international institutions
45,697 45,697 — — —
Corporate Bonds
636,464 16,393 197,066 — 423,005
Financing received from Argentine financial institutions
75,637 34,893 9,342 14,766 16,636
Other
1,175,106 1,093,308 2,847 237 78,714
Operating leases
75,637 27,270 30,906 12,781 4,680
Subordinated corporate bonds
598,470 2,100 — — 596,370
Total contractual obligations
2,608,888 1,221,113 240,161 27,784 1,119,830
Commercial commitments
Lines of credit
67,020 67,020 — — —
Guarantees
196,876 65,289 20,642 15,031 95,914
Standby letters of credit
80,684 79,576 1,108 — —
Total commercial commitments
344,580 211,885 21,750 15,031 95,914
Item 6.
Directors, Senior Management and Employees
A. Directors and Senior Management
We are managed by our Board of Directors, which is currently comprised of twelve members and four alternate members. Currently, the shareholders present at any annual ordinary meeting may determine the size of the Board of Directors, provided that there shall be no less than three and no more than twelve directors. Any director so appointed will serve for three fiscal years. If the shareholders elect more than nine board members, each director will be re-elected as a staggered board, to be renewed by thirds, provided that in all cases no less than three directors shall be renewed each time. The annual ordinary shareholders’ meeting may also appoint an equal or lesser number of alternate directors, to hold office for the same term than regular directors, to fill any vacancy in the board occurring for any reason whatsoever, and shall further determine the order of substitution. Alternate directors shall hold office until the regular directors in whose place they have acted as substitutes shall resume office, and in case any such absence is permanent, until the next ordinary meeting of shareholders where at directors shall be appointed. Both regular and alternate directors may be re-elected indefinitely.

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DUTIES AND LIABILITIES OF DIRECTORS
Under Argentine corporate law, directors have the obligation to perform their duties with the loyalty and the diligence of a prudent business person. Directors are jointly and severally liable to a corporation, the shareholders and third parties for the improper performance of their duties, for violating the law, the corporation’s bylaws or regulations, if any, and for any damage caused by fraud, abuse of authority or gross negligence. The following are considered integral to a director’s duty of loyalty: (i) the prohibition on using corporate assets and confidential information for private purposes; (ii) the prohibition on taking advantage, or to allow another to take advantage, by action or omission, of the business opportunities of the Bank; (iii) the obligation to exercise board powers only for the purposes for which the law, the corporation’s bylaws or the shareholders’ or the Board of Directors’ resolutions have intended; and (iv) the obligation to take strict care so that acts of the board do not go, directly or indirectly, against the Bank’s interests. A director must inform the Board of Directors and the supervisory committee of any conflicting interest he may have in a proposed transaction and must abstain from voting thereon.
Under Argentine law, the Board of Directors is in charge of the management and administration of the Bank and, therefore, makes any and all decisions in connection therewith, as well as those decisions expressly provided for in the Argentine corporate law, the Bank’s bylaws and other applicable regulations. Furthermore, the board is generally responsible for the execution of the resolutions passed by shareholders meetings and for the performance of any particular task expressly delegated by the shareholders. In general, our Board of Directors is more involved in operating decision-making than might be customary in other jurisdictions.
BOARD OF DIRECTORS
The following table sets forth information about the members and alternate members of our Board of Directors as of December 31, 2010:
Year First Year of Expiration
Name Position Age Appointed of Term
Jorge Horacio Brito
Chairman 58 2002 2011
Delfín Jorge Ezequiel Carballo
Vice Chairman 58 2002 2011
Jorge Pablo Brito
Director 31 2002 2011
Marcos Brito
Director 28 2007 2011
Juan Pablo Brito Devoto
Director 50 2002 2010
Roberto Julio Eilbaum
Director 66 2002 2010
Luis Carlos Cerolini
Director 56 2002 2010
Carlos Enrique Videla
Director 65 2002 2012
Alejandro Macfarlane
Director 45 2005 2012
Guillermo Eduardo Stanley
Director 62 2006 2012
Constanza Brito
Director 29 2007 2012
Rafael Magnanini
Director 51 2010 2012
Mario Eduardo Bartolomé
Alternate director 65 2004 2011
Ernesto Eduardo Medina
Alternate director 43 2002 2011
Delfin Federico Ezequiel Carballo
Alternate director 26 2009 2011
Fernando Raúl García Pulles
Alternate director 55 2007 2011
The following table sets forth information about the members and alternate members of our Board of Directors elected by the most recent Ordinary shareholders’ meeting held on April 26, 2011.
Year First Year of Expiration
Name Position Age Appointed of Term
Jorge Horacio Brito
Chairman 58 2002 2011
Delfín Jorge Ezequiel Carballo
Vice Chairman 58 2002 2011
Jorge Pablo Brito
Director 31 2002 2011
Marcos Brito
Director 28 2007 2011
Juan Pablo Brito Devoto
Director 51 2002 2013
Luis Carlos Cerolini
Director 57 2002 2013
Carlos Enrique Videla
Director 66 2002 2012
Alejandro Macfarlane
Director 45 2005 2012
Guillermo Eduardo Stanley
Director 63 2006 2012
Constanza Brito
Director 29 2007 2012
Rafael Magnanini
Director 52 2010 2012
Roberto José Feletti (1)
Director 52 2011 2013
Mario Eduardo Bartolomé
Alternate director 65 2004 2011
Ernesto Eduardo Medina
Alternate director 44 2002 2011
Delfin Federico Ezequiel Carballo
Alternate director 26 2009 2011
Fernando Raúl García Pulles
Alternate director 56 2007 2011
(1)
Roberto José Feletti was elected by ANSES, through the exercise of its cumulative voting rights. See Item 10 “Additional Information — Memorandum and Articles of Association—Quorum and voting requirements” for a description of cumulative voting.
The following family relationships exist within the Board of Directors: (i) Chairman Jorge Horacio Brito and Vice Chairman Delfín Jorge Ezequiel Carballo are brothers-in-law; (ii) Directors Jorge Pablo Brito and Marcos Brito are the sons of Chairman Jorge Horacio Brito and the nephews of Vice Chairman Delfín Jorge Ezequiel Carballo; (iii) Director Constanza Brito is the daughter of Chairman Jorge Horacio Brito and the niece of Vice Chairman Delfín Jorge Ezequiel Carballo; (iv) Chairman Jorge Horacio Brito and Director Juan Pablo Brito Devoto are cousins; (v) Directors Jorge Pablo Brito, Marcos Brito and Constanza Brito are siblings; (vi) Delfín Federico Ezequiel Carballo is the son of Vice Chairman Delfín Jorge Ezequiel Carballo and the nephew of Chairman Jorge Horacio Brito; and (vii) Delfín Federico Ezequiel Carballo and Directors Jorge Pablo Brito, Marcos Brito and Constanza Brito are cousins.

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SENIOR MANAGEMENT
Our senior management oversees our day-to-day operations to ensure that our overall strategic objectives are being implemented and reports to our chief executive officer and our chief financial officer. In addition, we have the following committees comprised of different directors and senior management: executive committee, internal audit committee, systems committee, senior credit committee, committee on assets and liabilities, operational risk committee, anti-money laundering committe and senior legal recovery committee.
The following table sets forth certain relevant information of our executive officers and our senior management:
Names Position Age Year First
Appointed
Jorge Horacio Brito
Chief Executive Officer 58 2002
Delfín Jorge Ezequiel Carballo
Chief Financial Officer 58 2002
Juan Pablo Brito Devoto
Chief Accounting Officer 50 2002
Jorge Pablo Brito
Coordinator of the executive committee 31 2006
Guillermo Goldberg
Deputy general manager 53 2007
Ernesto Eduardo Medina
Deputy general manager 43 2007
Jorge Francisco Scarinci
Financial and investor relations manager 40 2006
Ana María Magdalena Marcet
Credit risk manager 49 2002
Miguel Leon Gurfinkiel
Government portfolio manager 60 2006
Horacio Ricardo Sistac
Corporate banking manager 54 2005
Francisco Muro
Retail banking manager 37 2008
Brian Anthony
Distribution and sales manager 37 2005
Eduardo Roque Covello
Operations manager 53 2004
Gerardo Adrián Alvarez
Administration manager 41 2010
Daniel Hugo Violatti
Accountancy and tax manager 48 2003
Constanza Brito
Human resources and organization and processes manager 29 2005
Marcelo de la Llave
Security and fraud control manager 47 2010
Claudia Cueto
Systems manager 50 2010
Byron Fabian Arias Jaramillo
Systems security manager 31 2010
Carmen Esther Estévez
Internal audit manager 53 2002
María Milagro Medrano
Institutional relations manager 34 2002
Ernesto López
Legal manager 38 2008
Alberto Figueroa
Management control and relationship with the regulatory authorities manager 50 2009
Sebastian Palla
Investment banking manager 36 2010
Set forth below are brief biographical descriptions of the current members of our Board of Directors and our senior management. The business address of each of our current directors and management is Sarmiento 447, Buenos Aires, Argentina.
Jorge Horacio Brito was born on July 23, 1952. He is the chairman of our Board of Directors, our Chiel Executive Officer and a member of our executive committee and senior credit committee. He has been with our bank since June 1988. Mr. Brito is the chairman of Asociación de Bancos Argentinos (Argentine Bank Association or ADEBA) . He also serves as chairman of the Board of Directors of Banco del Tucumán S.A. , Macro Securities S.A. Sociedad de Bolsa, Inversora Juramento S.A. and Banco Privado de Inversiones S.A.
Delfín Jorge Ezequiel Carballo was born on November 21, 1952. He is the vice-chairman of our Board of Directors, our Chief Financial Officer and a member of our executive committee, our senior credit committee, our operational risk committee and our assets and liabilities committee. Mr. Carballo holds a law degree from the Law School of the Catholic University in Argentina. He has been with our bank since June 1988. Mr. Carballo also serves as vice-chairman of the Board of Directors of , Banco del Tucumán S.A.,Macro Securities S.A. Sociedad de Bolsa and Banco Privado de Inversiones S.A.
Jorge Pablo Brito was born on June 29, 1979. He is a member of our Board of Directors, the coordinator of our executive committee and a member of our senior credit committee, our systems committee, our assets and liabilities committee, our operational risk committee and our senior legal recovery committee. He has been a member of the board since June 2002. Mr. Brito also serves as chairman of the Board of Directors of Macro Warrants S.A., as vice-chairman of the Board of Directors of Inversora Juramento S.A., as director of Banco del Tucumán S.A., Sud Inversiones & Análisis S.A., Macro Securities S.A. Sociedad de Bolsa and Banco Privado de Inversiones S.A.
Marcos Brito was born on October 5, 1982. He holds an economics degree from the University Torcuato Di Tella. He is a member of our Board of Directors and a member of our assets and liabilities committee and our senior legal recovery committee. Mr. Brito also serves as director of Inversora Juramento S.A. and Banco Privado de Inversiones S.A.
Juan Pablo Brito Devoto was born on March 25, 1960. He is a member of our Board of Directors, our Chief Accounting Officer and a member of our internal audit committee, our systems committee and our senior legal recovery committee. He has been with our bank since June 1988. Mr. Brito Devoto holds an accounting degree from the School of Economics of the University of Buenos Aires in Argentina. Mr. Brito Devoto serves as a chairman of the Board of Directors of Macro Bank, and Sud Inversiones & Análisis S.A., as director of Banco Privado de Inversiones S.A. and as alternate director of Banco del Tucumán S.A. and Macro Securities S.A. Sociedad de Bolsa.

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Luis Carlos Cerolini was born on January 27, 1954. He is a member of our Board of Directors and has been a member of the board since April 2000. He is a member of our anti-money laundering committee and our senior legal recovery committee. Mr. Cerolini holds a law degree granted by the National University of Córdoba in Argentina. Mr. Cerolini also serves as chairman of Provincanje S.A. and director of Banco del Tucumán S.A., Sud Inversiones & Análisis S.A., Macro Securities S.A. Sociedad de Bolsa, Macro Warrants S.A., Banco Privado de Inversiones S.A. and ACH S.A. Cámara Compensadora Electrónica.
Carlos Enrique Videla was born on March 21, 1945. He is a member of our Board of Directors and an independent member of our audit committee and our internal audit committee. He has been a member of the board since December 1999. Mr. Videla holds a law degree from the Law School of the Catholic University of Argentina.
Alejandro Macfarlane was born on August 16, 1965. He is a member of our Board of Directors, and has been a member since April 2005, and is an independent member of our audit committee. He also serves as chairman of the Board of Directors of Empresa Distribuidora y Comercializadora Norte or Edenor S.A .
Guillermo Eduardo Stanley was born on April 27, 1948. He has worked for the Bank since May 2005 and he has been a member of our Board of Directors since May 2006. He is an independent member of our audit committee. He also serves as director of Havanna S.A.
Constanza Brito was born on October 2, 1981. She is a member of our Board of Directors and the Human Resources and Organization and Processes manager for the Bank. She is a member of our systems committee, our operational risk committee and our internal audit committee. Ms. Brito has a degree in Human resources from the University of Salvador. She has been a member of our staff since May 2005. Ms. Brito also serves as director of Banco Privado de Inversiones S.A. and alternate director of Banco del Tucumán S.A.
Rafael Magnanini was born on February 10, 1959. On April 6, 2010 he has been appointed as director of the Bank. He holds a degree in agriculture engineering from the University of Buenos Aires.
Roberto José Feletti was born on October 22, 1958. Mr Felleti holds an accounting degree and a master degree in financial administration from the School of Economics of the University of Buenos Aires in Argentina. He currently serves at the Argentine Ministry of Economy as Secretary of Public Economic Policies. He is also an alternate director of Corporacion Andina de Fomento C.A.F. and member of Consejo Consultivo del Banco Latinoamericano de Exportaciones (BLADEX) . He was appointed as a member of our Board of Directors on April 26, 2011.
Mario Eduardo Bartolomé was born on August 12, 1945. He is an alternate member of our Board of Directors and has served on the board since July 2004.
Ernesto Eduardo Medina was born on January 9, 1967. He is an alternate member of our Board of Directors, a deputy general manager and a member of our systems committee, our operational risk committee and our anti-money laundering committee. He has been a member of our staff since February 1989. Mr. Medina holds a public accountant and business administration degree from the School of Economics of the University of Buenos Aires in Argentina. In addition, Mr. Medina holds a degree in systems analysis from the University of Buenos Aires in Argentina, as well as a psychology degree from the Business and Social Sciences University. Mr. Medina also serves as director of Banco del Tucumán S.A. and as alternate director of Banco Privado de Inversiones S.A.
Delfín Federico Ezequiel Carballo was born on July 4, 1984. He holds an economics degree from the University Torcuato Di Tella. He is an alternate member of our Board of Directors.
Fernando Raúl García Pulles was born on April 15, 1955. He is an alternate member of our Board of Directors and independent alternate member of our audit committee. He has a law degree and Doctor of Juridical Sciences degree, both granted by the Catholic University of Argentina. Mr. García Pulles served as Deputy Attorney General from 1991 to 1995. He is a partner of Estudio O’Farrell .
Guillermo Goldberg was born on January 31, 1957. He is our deputy general manager. He is a member of our systems committee, our asset and liabilities committee and our operational risk committee. Mr. Goldberg holds an economics degree from the School of Economics of the University of Buenos Aires in Argentina. Mr. Goldberg has been with us since July 2005.
Jorge Francisco Scarinci was born on May 19, 1970. He is our financial and investor relations manager and our finance manager. He is a member of our assets and liabilities committee. Mr. Scarinci holds a degree from the School of Economics of the University of Belgrano in Argentina, a master in finance from the University of CEMA and became CFA in 2001.
Ana María Magdalena Marcet was born on February 24, 1961. She is our credit risk manager. She has been a member of our staff since December 1996. She is a member of our senior credit committee and our senior legal recovery committee. Ms. Marcet holds a public accountant, economics and business administration degree from the School of Economics of the University of Buenos Aires and a master in banking management from the University of CEMA, both located in Argentina.
Miguel Leon Gurfinkiel was born on December 13, 1950. He is the government portfolio manager. He has been a member of our staff since April 2006.
Horacio Ricardo Sistac was born on March 7, 1956. He is our corporate banking manager. He is a member of our assets and liabilities committee. Mr. Sistac holds a public accounting degree from the Catholic University of Buenos Aires in Argentina. Mr. Sistac has been with us since September 2005.
Francisco Muro was born on March 2, 1973. He is our retail banking manager and a member of our assets and liabilities committee. Mr. Muro holds an accounting degree from the School of Economics of the University of Buenos Aires and an MBA from the IAE (Universidad Austral). Mr. Muro has been with us since August 2004.

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Brian Anthony was born on April 17, 1973. He is our distribution and sales manager. He is a member of our systems committee and our assets and liabilities committee. Mr. Anthony holds a business administration degree from the CAECE University. Mr. Anthony has been with us since September 2005.
Eduardo Roque Covello was born on February 20, 1957. He is the operations manager and a member of our systems committee. Mr. Covello holds a business administration degree from the Business School in Argentina. He has been a member of our staff since January 1996.
Gerardo Adrián Alvarez was born on December 13, 1969. He is our administration manager. Mr. Alvarez holds a law degree from the University of Argentine Federal Police and a post-graduate degree in Money Laundering from University Torcuato Di Tella . He has been with us since January 2006.
Daniel Hugo Violatti was born on May 27, 1962. He is our accountancy and tax manager. He is a member of our systems committee and has been a member of our staff since December 1997. Mr. Violatti holds an accounting degree from the School of Economics of the University of Buenos Aires in Argentina.
Marcelo de la Llave was born on April 21, 1963. He is our security and fraud control manager. He holds a criminal and social sciences degree from the University of Argentine Federal Police. He has been with us since January 2006.
Claudia Cueto was born on March 22, 1960. She is our systems manager and a member of our systems committee. She holds a system degree from Universidad Argentina de la Empresa . She has been with us since August 2008.
Byron Fabian Arias Jaramillo was born on May 7, 1979. He is our system security manager and a member of our systems committee. He holds a systems engineer degree from National Technical College (Ecuador). He has been with us since July 2008.
Cármen Esther Estévez was born on April 28, 1957. She is our internal audit manager and a member of our internal audit committee. Ms. Estévez holds an accounting degree and a master degree in system audits from the School of Economics of the University of Buenos Aires in Argentina. She has been a member of our staff since October 1997.
María Milagro Medrano was born on October 27, 1976. She is our institutional relations manager and a member of our systems committee. She is an alternate director of Banco del Tucumán S.A. Ms. Medrano holds a business administration degree from the Catholic University of Salta in Argentina. She has been a member of our staff since April 1997.
Ernesto López was born on October 5, 1972. Mr. López holds a law degree from the Law School of the University of Buenos Aires in Argentina. He is our legal manager and a member of our senior legal recovery committee. He has been a member of our staff since October 1999.
Alberto Figueroa was born on September 1, 1960. He is our management control and relationship with the regulatory authorities manager. He is a member of our operational risk committee and our anti-money laundering committee. He holds a public accounting degree from de University of Buenos Aires. He has been with us since March 2007.
Sebastian Palla was born on June 12, 1974. He is our investment banking manager. He holds a economics degree from University Torcuato Di Tella . He has been with us since February 2009.
B. Compensation
Argentine law provides that the compensation paid to all directors and syndics (including those directors who are also members of senior management) in a fiscal year may not exceed 5.0% of net income for such year, if the Bank is not paying dividends in respect of such net income. Argentine law increases the annual limitation on director compensation to up to 25.0% of net income based on the amount of such dividends, if any are paid. In the case of directors that perform duties at special commissions or perform administrative or technical tasks, the aforesaid limits may be exceeded if a shareholders’ meeting so approves and such issue is included in the agenda and is in accordance with the regulations of the CNV. In any case, the compensation of all directors and members of the supervisory committee requires shareholders’ approval at an ordinary meeting.
The aggregate amount of compensation paid by Banco Macro and their subsidiaries to all of their directors, alternate directors and members of supervisory committe for the fiscal year 2010 was Ps.49.8 million. The aggregate amount of compensation paid by Banco Macro to its senior management for the fiscal year 2010 was Ps.15.1 million.
Neither we nor any of our subsidiaries have entered into any agreement that provides for any benefit or compensation to any director after the expiration of his term or upon his retirement.

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C. Board Practices
Corporate Governance
As a listed company on the NYSE, we are required under the rules governing listed companies to (i) comply with SEC’s requirements concerning audit committee, (ii) submit an annual written affirmation to the NYSE and interim written affirmations if applicable, (iii) disclose any significant ways in which our corporate governance practices differ from those followed by domestic companies under the NYSE listing standards, and (iv) our CEO must promptly notify the NYSE in writing after any executive officer becomes aware of any non-compliance with any of the applicable NYSE corporate governance rules. We incorporate the information regarding the significant ways in which our corporate governance practices differ from those followed by domestic companies under the NYSE listing standards by reference to our website www.macro.com.ar . For further information see item 16.G.
Independence of the Members of the Board of Directors and the Supervisory Committee
The members of the Board of Directors and the supervisory committee of a public company such as us must inform the CNV within ten days from the date of their appointment whether such members of the Board of Directors or the supervisory committee are “independent”. A director shall not be considered independent in certain situations, including where a director (i) owns a 35% equity interest in a company, or a lesser interest if such director has the right to appoint one or more directors of a company (hereinafter “significant participation”) or has a significant participation in a corporation having a significant participation in the company or a significant influence in the company; (ii) depends on shareholders, or is otherwise related to shareholders, having a significant participation in the company or of other corporations in which these shareholders have directly or indirectly a significant participation or significant influence; (iii) is or has been in the previous three years an employee of the company; (iv) has a professional relationship or is a member of a corporation that maintains professional relationships with, or receives remuneration (other than the one received in consideration of his performance as a director) from, a company or its shareholders having a direct or indirect significant participation or significant influence on the same, or with corporations in which the shareholders also have a direct or indirect significant participation or a significance influence; (v) directly or indirectly sells or provides goods or services to the company or to the shareholders of the same who have a direct or indirect significant participation or significant influence, for higher amounts than his remuneration as a member of the administrative body; or (vi) is the spouse or parent (up to second grade of affinity or up to fourth grade of consanguinity) of persons who, if they were members of the administrative body, would not be independent, according to the above listed rules.
Carlos Enrique Videla, Alejandro Macfarlane, Guillermo Eduardo Stanley, Roberto Jose Feletti and Fernando Raúl García Pulles qualify as independent members of the Board of Directors under these criteria.
On April 26, 2011 Alejandro Almarza, Roberto Julio Eilbaum, Vivian Haydee Stenghele, Carlos Javier Piazza, Alejandro Carlos Piazza and Javier Rodrigo Siñeriz were appointed as members of our supervisory committee, all of whom, qualify as independent members.
For information on the expiration of current terms of directors see “Item 6.A”.
For information on service contracts with directors providing benefits upon termination of employment see Item “6.B Compensation.”
Supervisory Committee
Our bylaws provide for a supervisory committee, which consists of three syndics and three alternate syndics that serve for a term of one fiscal year. Pursuant to the Argentine corporate law, only lawyers and accountants admitted to practice in Argentina or civil partnerships composed of such persons may serve as syndics of an Argentine sociedad anónima , or limited liability corporation.
The primary responsibilities of the supervisory committee are to monitor the management’s compliance with Argentine corporate law, the bylaws, its regulations, if any, and the shareholders’ resolutions, and to perform other functions, including, but not limited to: (i) attending meetings of the Board of Directors, management committee and shareholders, (ii) calling extraordinary shareholders’ meetings when deemed necessary and ordinary and special shareholders’ meetings when not called by the Board of Directors and (iii) investigating written complaints of shareholders. In performing these functions, the supervisory committee does not control our operations or assess the merits of the decisions made by the directors.
The supervisory committee has unlimited access to our books and registers and a right to request as much information as necessary for the performance of its duties.
The following table sets forth certain relevant information of the members of our supervisory committee as of December 31, 2010:
Year of Current
Name Position Age Appointment Term Ends
Alejandro Almarza
Syndic 52 2010 April 2011
Santiago Marcelo Maidana
Syndic 80 2010 April 2011
Leonardo Pablo Cortigiani
Syndic 42 2010 April 2011
Carlos Javier Piazza
Alternate syndic 52 2010 April 2011
Horacio Della Rocca
Alternate syndic 57 2010 April 2011
Alejandro Carlos Piazza
Alternate syndic 56 2010 April 2011
The following table sets forth certain relevant information of the members of our supervisory committee elected by the Ordinary shareholders’ meeting held on April 26, 2011:
Year of Current
Name Position Age Appointment Term Ends
Alejandro Almarza
Syndic 53 2011 April 2012
Roberto Julio Eilbaum
Syndic 66 2011 April 2012
Vivian Haydee Stenghele (1)
Syndic 41 2011 April 2012
Carlos Javier Piazza
Alternate syndic 52 2011 April 2012
Alejandro Carlos Piazza
Alternate syndic 56 2011 April 2012
Javier Rodrigo Siñeriz (1)
Alternate syndic 40 2011 April 2012
(1)
Vivian Haydee Stenghele and Javier Rodrigo Siñeriz were elected by ANSES, through the exercise of its cumulative voting rights. See Item 10 “Additional Information — Memorandum and Articles of Association — Quorum and voting requirements” for a description of cumulative voting.

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Set forth below are brief biographical descriptions of the members of our supervisory committee:
Alejandro Almarza is a syndic on our supervisory committee. Mr. Almarza holds an accounting degree form the University of Buenos Aires in Argentina. Mr. Almarza also serves as syndic of Macro Securities S.A. Sociedad de Bolsa and Sud Inversiones & Análisis S.A ., Banco del Tucumán S.A. and Banco Privado de Inversiones S.A. Mr. Almarza was admitted to the Accountants Professional Association of the City of Buenos Aires in 1983.
Roberto Julio Eilbaum is a syndic on our supervisory committee. Mr. Eilbaum holds a law degree from the Law School of the University of Buenos Aires in Argentina.
Vivian Haydee Stenghele is a syndic on our supervisory committee. Ms. Stenghele holds an accounting degree from the University of Buenos Aires in Argentina. Ms. Stenghele also serves as syndic of Nucleoelectrica Argentina S.A. and Nacion Factoring S.A. and as alternate syndic of S.A. San Miguel . Ms. Stenghele is a member of the Accountants Professional Association of the City of Buenos Aires.
Carlos Javier Piazza is an alternate syndic on our supervisory committee. Mr. Piazza holds an accounting degree form the University of Buenos Aires in Argentina. Mr. Piazza also serves as syndic of Macro Fondos S.A. Sociedad Gerente de Fondos Comunes de Inversion S.A . and served as alternate syndic of Macro Securities S.A. Sociedad de Bolsa, Sud Inversiones & Análisis S.A . and Banco Privado de Inversiones S.A. Mr. Piazza was admitted to the Accountants Professional Association of the City of Buenos Aires in 1983.
Alejandro Carlos Piazza is an alternate syndic on our supervisory committee. Mr. Piazza holds accounting and business administration degree from the School of Economics of the University of Buenos Aires in Argentina. Mr. Piazza also serves as syndic of Macro Fondos S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A. and as an alternate syndic of Macro Securities S.A. Sociedad de Bolsa , Sud Inversiones & Análisis S.A., Banco del Tucumán S.A. and Banco Privado de Inversiones S.A. Mr. Piazza was admitted to the Accountants Professional Association of the City of Buenos Aires in 1978.
Javier Rodrigo Siñeriz is a syndic on our supervisory committee. Mr. Siñeriz holds a law degree from the Law School of the University of Buenos Aires in Argentina. Mr. Siñeriz also serves as syndic of Pellegrini S.A. Gerente de Fondos Communes de Inversión, Nación Factoring S.A. and Intercargo SAC and as alternate syndic of Nación Leasing S.A., Nación Servicios S.A., Energia Argentina S.A., Fabrica Argentina de Aviones Brig. San Martin S.A., Lineas Aereas Federales S.A., Operadora Ferroviares SE and Tandanor SAClyN.
Audit Committee
Our audit committee is comprised of three directors, all of which have independent status according to CNV, and one alternate director, who is also independent. The Argentine independence standards under the rules of the CNV differ in many ways from the NYSE, NASDAQ or the U.S. federal securities law standards.
All of the members of our audit committee who were appointed through a resolution of the Board of Directors dated May 2, 2007 were elected for one-fiscal year renewable terms. They were renewed by the Board of Directors in June 6, 2008, in April 24, 2009, in May 7, 2010 and May 5, 2011.
The audit committee is responsible for the fulfillment of the duties within its powers, as set forth under the Argentine Decree No. 677/2001, including, among others, the following: (i) delivering an opinion regarding the board of director’s proposal of appointment of our external auditors and controlling their independent status, (ii) supervising the correct performance of our internal control and accounting systems, (iii) supervising the observance of the policies regarding information about our risk management, and (iv) delivering an opinion regarding transactions with related parties or transactions that may threaten any conflicts of interest.
The following table sets forth certain relevant information of the members of the audit committee as of December 31, 2010:
Year of
Name Position Age Appointment Status
Guillermo Eduardo Stanley
Chairman 62 2007 Independent
Carlos Enrique Videla
Vice Chairman 65 2007 Independent
Alejandro Macfarlane
Member 45 2007 Independent
Fernando Raúl García Pulles
Alternate Member 55 2007 Independent

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Committees Reporting to the Board of Directors and to the CEO and the CFO
The following committees are under the supervision of our Board of Directors:
Executive committee . The executive committee is responsible for the management of the business and common affairs of the Bank and its powers include to: (i) manage the business and common affairs of the Bank and all other matters delegated by the Board of Directors; (ii) develop the commercial, credit and financial policy of the Bank subject to the goals approved by the Board of Directors; (iii) establish, maintain, eliminate, restructure or move the offices and areas of the administrative and operating organization of the Bank; (iv) establish special committees and approve various operating structures and determine the scope of their functions and duties; (v) approve personnel, including to appoint the General Manager, Assistant Managers, Executive Vice Presidents and other Department Heads and Managers, and to set the amount of their remunerations, working terms and conditions and any other personnel policy measure, including promotions; (vi) propose the establishment, opening, moving or closing of branches, agencies or representatives in the country or abroad; and (vii) supervise the management of subsidiary companies and of the other companies in which the Bank holds a participating interest and to propose to the Board of Directors the incorporation, acquisition or total or partial sale of participating interests in companies in financial services.
The following table sets forth certain relevant information of the members of our executive committee as of December 31, 2010:
Name Position
Jorge Horacio Brito
Chairman
Delfín Jorge Ezequiel Carballo
Vice Chairman
Jorge Pablo Brito
Director — coordinator
Internal audit committee. The internal audit committee is responsible for supervising the correct functioning of our internal control systems and procedures. Furthermore, this committee reviews our annual and quarterly financial statements, the external auditor’s reports, the syndic’s reports, the relevant financial information and the audit committee’s reports.
The following table sets forth certain relevant information of the members of the internal audit committee as of December 31, 2010:
Name Position
Constanza Brito
Director
Juan Pablo Brito Devoto
Director
Carlos Enrique Videla
Director — Independent
Carmen Esther Estévez
Internal audit manager — coordinator
Systems. The systems committee is responsible for the issuance of the systems and operations management policies. Furthermore, this committee verifies that the several management plans are in accordance with our business strategy and oversees the implementation of our strategic projects.
The main functions of the systems committee are: i) oversees the proper functioning of Information Technology and Systems ii) contributes to the improvement of the information technology and systems environment effectiveness; iii) notes Systems Plan; iv) periodically evaluates the Systems Plan and reviews its compliance; v) reviews the reports issued by environmentally related audits of Information Technology and Systems and oversees the implementation of corrective actions designed to stabilize or minimize weaknesses observed; and vi) maintains timely communication with officials of the External Audit Management Systems Division of the Superintendency in relation with the problems identified in inspections and monitor actions undertaken to solve such problems. The systems committee meets quarterly and prepares a written report which details the topics discussed at each meeting, as well as the points that require further follow-up. This record is sent to the Board of Directors for their knowledge.
The following table sets forth certain relevant information of senior members of the systems committee as of December 31, 2010:
Name Position
Jorge Pablo Brito
Director
Juan Pablo Brito Devoto
Director
Guillermo Goldberg
Deputy general manager
Ernesto Eduardo Medina
Deputy general manager
Claudia Cueto
Systems manager — coordinator
Eduardo Roque Covello
Operations manager
Brian Anthony
Distribution and Sales Manager
Constanza Brito
Human Resources and Organization and Processes manager
María Milagro Medrano
Institutional relations manager
Daniel Hugo Violatti
Accountancy and Tax manager
Byron Fabián Arias
System’s security manager
Senior credit committee. The senior credit committee is responsible for the issuance of our credit policy and credit analysis guidelines. Furthermore, this committee reviews and approves credit transactions in excess of Ps. 10,000,000 and examines periodic reports related to our loan portfolio.
The following table sets forth certain relevant information of the senior members of the senior credit committee, as of December 31, 2010:
Name Position
Jorge Horacio Brito
Chairman
Delfín Jorge Ezequiel Carballo
Vice Chairman
Jorge Pablo Brito
Director
Ana María Magdalena Marcet
Credit Risk manager — coordinator

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Committee on assets and liabilities. The committee on assets and liabilities is responsible for the financial strategy of the Bank. In addition, it carries on deep market analysis and establishes strategic policies related to the Bank’s liquidity, market, interest rate and currency risks.
The following table sets forth certain relevant information of the senior members of our committee on assets and liabilities as of December 31, 2010:
Name Position
Delfin Jorge Ezequiel Carballo
Vice Chairman
Jorge Pablo Brito
Director
Roberto Julio Eilbaum (1)
Director
Guillermo Goldberg
Deputy general manager
Jorge Francisco Scarinci
Financial and Investor relations manager — coordinator
Brian Anthony
Distribution and Sales manager
Horacio Ricardo Sistac
Corporate banking manager
Francisco Muro
Retail banking manager
Marcos Brito
Director
(1)
As from April 26, 2011 Mr. Eilbaum is no longer a Director.
Operational Risk committee . The operational risk committee is responsible for the evaluation of the risk operations administration model. It has the authority to investigate any topic that may need the intervention of the committee and its functions include: (i) appraising changes in policies, procedures and structures and submitting them to the consideration of the Board of Directors; (ii) evaluating periodic reports from the Operational Risk Area and informing the Executive Board of any relevant details; (iii) reviewing, at least annually, the Bank’s firm-wide framework regarding management of operational risk; (iv) promoting the creation of an organizational culture that prioritizes the administration of Operational Risk, including standards of conduct, integrity and behavior ethics for personnel; and (v) providing an executive-level forum for discussion and decision-making on all aspects of Operational Risk and its management, compliant with all the obligations imposed by applicable laws and decrees.
The following table sets forth the name and positions of the senior members of our operational risk committee as of December 31, 2010:
Name Position
Jorge Pablo Brito
Director
Constanza Brito
Director
Guillermo Goldberg
Deputy general manager
Ernesto Eduardo Medina
Deputy general manager
Alberto Figueroa
Management Control manager
Anti-money laundering committee . The anti-money laundering committee is responsible for Planning, coordinating and monitoring compliance with anti-money laundering policies approved by the Board of Directors and its powers include to: (i) define policies for compliance with anti-money laundering corporate guidelines, (ii) be a permanent forum for the discussion of money laundering and terrorist financing risks that affect the Entity in its entirety, (iii) promote the definition of strategies so that the Entity will establish more effective controls to prevent money laundering and terrorist financing and implement such controls, (iv) take care of the continued updating of the Manual of Procedures for the prevention of money laundering and terrorist financing, in accordance with regulatory changes and new Entity needs, (v) monitor the implementation of a program designed to provide training and raise awareness regarding the prevention and control of asset laundering and terrorist financing, (vi) establish appropriate mechanisms for the internal reporting of unusual / suspicious activities, (vii) report any unusual or suspicious transactions to the relevant Agencies in compliance with applicable regulations, and subsequently inform the Board of Directors, (viii) provide support to the head of the anti-money laundering committee in the examination of unusual or suspicious transactions, (ix) approve and follow-up the work program submitted by the anti-money laundering committee for the relevant fiscal year, for which it will report to the Board of Directors and (x) perform any other duties that may be imposed under applicable laws and regulations.
The following table sets forth certain relevant information of the senior members of our anti-money laundering committee as of December 31, 2010:
Name Position
Luis Carlos Cerolini
Director
Roberto Julio Eilbaum (1)
Director
Ernesto Eduardo Medina
Deputy general manager
Alberto Figueroa
Management Control manager
(1)
As from April 26, 2011 Mr. Eilbaum is no longer a Director.
Senior Legal Recovery committee. The senior legal recovery committee manages outstanding loans on behalf of the Board of Directors, which nevertheless retains its power in that regard. The committee’s functions and powers are to: a) approve special recovery policies for different bank segments; b) analyze and decide on payment or refinancing proposals that are exceptional to specified refinancing policies and reductions and also meet some of the following requirements: -The principal owed is higher than Ps. 500,000; or — implies a capital reduction in excess of Ps. 100,000; c) analyze and decide on proposals for the termination of account management and the filing of court proceedings for unpaid principal amounts higher than Ps. 500,000; d) analyze and decide on the selection of Law Firms to manage principal debts in excess of Ps. 500,000; e) discuss and decide on recovery policies or portfolio sales proposed by the Junior Recovery Committee; f) approve write off of debts higher than Ps. 500,000; g) determine, in both court and out-of-court tenders, the value of property guaranteeing financing in cases where powers granted exceed the scope of those conferred upon other empowered institutions.

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The following table sets forth certain relevant information of the senior members of our Senior Legal Recovery committee as of December 31, 2010:
Name Position
Luis Carlos Cerolini
Director
Jorge Pablo Brito
Director
Juan Pablo Brito Devoto
Director
Ernesto López
Legal manager-coordinator
Ana María Magdalena Marcet
Credit Risk manager
Marcos Brito
Director
D. Employees
As of December 31, 2010 we had 8,209 employees, 38% of whom worked at our headquarters and the remaining 62% at our branches. Our employees are represented by a national bank union, which negotiates a collective bargaining agreement setting minimum wages for all of its members. We maintain good relations with our employees and have never experienced a work stoppage.
As of December 31,
Employees 2008 2009 2010
Headquarters
2,805 2,775 3,081
Branches
5,168 5,088 5,128
Total
7,973 7,863 8,209
E. Share Ownership
As of December 31, 2010, the persons who are currently members of our Board of Directors, our supervisory committee or are our senior management held as a group 237,320,185 shares of our capital stock. This represented approximately 40% of our outstanding capital stock as of such date and 44% of the voting rights. Other than Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Juan Pablo Brito Devoto, Luis Carlos Cerolini and Carlos Enrique Videla, no member of our Board of Directors, the Supervisory Committee or senior management directly or beneficially owned shares as of December 31, 2010.
The following table sets forth the beneficial ownership of our shares by the members of our Board of Directors, our Supervisory Committee and members of senior management as of December 31, 2010:
Number of Class A Number of Class B Percentage of Percentage of
Shareholder Name shares owned shares owned Capital stock (%) Voting rights(%)
Jorge Horacio Brito
5,362,889 115,140,594 20.27 % 22.20 %
Delfín Jorge Ezequiel Carballo
4,895,416 106,605,523 18.76 % 20.50 %
Juan Pablo Brito Devoto
281,590 5,020,799 0.89 % 1.01 %
Luis Carlos Cerolini
— 7,500 0.00 % 0.00 %
Carlos Enrique Videla
5,874 — 0.00 % 0.00 %
Total
10,545,769 226,774,416 39.92 % 43.71 %
As of March 31, 2011, the persons who are currently members of our Board of Directors, our Supervisory Committee or are our senior management held as a group a total of 235,919,314 shares of our capital stock. This represented approximately 40% of our outstanding capital stock and 43% of the voting rights as of such date. Other than Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Juan Pablo Brito Devoto, Luis Carlos Cerolini and Carlos Enrique Videla, no member of our Board of Directors, the Supervisory Committee or senior management directly or beneficially owned shares as of March 31, 2011.
The following table sets forth the beneficial ownership of our shares by the members of our Board of Directors, our supervisory committee and members of senior management, as of March 31, 2011:
Number of Class A Number of Class B Percentage of Percentage of
Shareholder Name shares owned shares owned Capital stock (%) Voting rights(%)
Jorge Horacio Brito
5,362,889 114,443,904 20.15 % 22.09 %
Delfín Jorge Ezequiel Carballo
4,895,416 105,908,833 18.64 % 20.39 %
Juan Pablo Brito Devoto
281,590 5,020,799 0.89 % 1.01 %
Luis Carlos Cerolini
— 9 0.00 % 0.00 %
Carlos Enrique Videla
5,874 — 0.00 % 0.00 %
Total
10,545,769 225,373,545 39.68 % 43.49 %
Item 7.
Major Shareholders and Related Party Transactions
A. Major Shareholders
As of December 31, 2010, we had 594,485,168 outstanding shares of common stock, consisting of 11,235,670 Class A shares and 583,249,498 Class B shares. Each share of our common stock represents the same economic interests, except that holders of our Class A shares are entitled to five votes per share and holders of our Class B shares are entitled to one vote per share.
The following table sets forth information regarding the ownership of our Class A and Class B shares as of December 31, 2010:

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Number of Number of
Class A shares Class B shares Percentage of Percentage of
Shareholder Name owned owned Total capital stock (%) Voting rights (%)
ANSES
— 182,210,297 182,210,297 30.65 % 28.50 %
Jorge Horacio Brito
5,362,889 115,140,594 120,503,483 20.27 % 22.20 %
Delfín Jorge Ezequiel Carballo
4,895,416 106,605,523 111,500,939 18.76 % 20.50 %
Other Shareholders
977,365 179,293,084 180,270,449 30.32 %(1) 28.80 %
Total
11,235,670 583,249,498 594,485,168 100.00 % 100.00 %
(1)
The 24.91% of capital stock is held in the form of ADSs issued by The Bank of New York.
As of March 31, 2011, we had 594,485,168 outstanding shares of common stock, consisting of 11,235,670 Class A shares and 583,249,498 Class B shares. Each share of our common stock represents the same economic interests, except that holders of our Class A shares are entitled to five votes per share and holders of our Class B shares are entitled to one vote per share. Other than aforementioned differences among holders of Class A shares and holders of Class B shares, the holders of these shares listed in the table below do not have different voting rights.
The following table sets forth information regarding the ownership of our Class A and Class B shares as of March 31, 2011:
Number of Number of
Class A shares Class B shares Percentage of Percentage of
Shareholder Name owned owned Total capital stock (%) Voting rights (%)
ANSES
— 182,210,297 182,210,297 30.65 % 28.50 %
Jorge Horacio Brito
5,362,889 114,443,904 119,806,793 20.15 % 22.09 %
Delfín Jorge Ezequiel Carballo
4,895,416 105,908,833 110,804,249 18.64 % 20.39 %
Other Shareholders
977,365 180,686,464 181,663,829 30.56 %(1) 29.02 %
Total
11,235,670 583,249,498 594,485,168 100.00 % 100.00 %
(1)
The 24.76% of capital stock is held in the form of ADSs issued by The Bank of New York.
The table below represents the evolution of our capital stock and the material changes in equity participation of the major shareholders, in both cases, since December 31, 2007:
Outstanding Capital Stock
Date (Ps.) Event Major Shareholders
December 31, 2007
683,943,437 Jorge H. Brito 18.87%
Delfín Jorge Ezequiel Carballo 16.80%
February 29, 2008
683,978,973 Capital Increase (1) Jorge H. Brito 18.17%
Delfín Jorge Ezequiel Carballo 16.56%
December 31, 2008
683,978,973 Transfer of shares (2) Jorge H. Brito 18.17%
Delfín Jorge Ezequiel Carballo 16.56%
ANSES 26.62%
April 30, 2009
623,978,973 Capital Decrease (3) Jorge H. Brito 20.11%
Delfín Jorge Ezequiel Carballo 18.15%
ANSES 29.18%
September 30, 2009
594,485,168 Capital Increase/Decrease (4) (5) Jorge H. Brito 20.78%
Delfín Jorge Ezequiel Carballo 19.05%
ANSES 30.62%
December 31, 2010
594,485,168 Jorge H. Brito 20.27%
Delfín Jorge Ezequiel Carballo 18.76%
ANSES 30.65%
(1)
On June 4 and June 5, 2007, shareholders’ meetings for Banco Macro and Nuevo Banco Suquía, respectively, resolved to authorize the merger of Nuevo Banco Suquía into the Bank and an increase in the capital stock of the Bank’s from Ps.683,943,437 to Ps.683,978,973, issuing 35,536 Class B ordinary shares with a Ps. 1.00 par value each and the right to one vote per share, to be granted to the minority shareholders of Nuevo Banco Suquía, as a result of the merger. Although this capital increase was authorized in 2007, the new shares were issued on February 12, 2008.
(2)
On November 20, 2008, the Argentine Congress passed Law No. 26,425 unifying the Argentine pension and retirement system into a system publicly administered by the National Social Security Agency (Administración Nacional de la Seguridad Social), or ANSES, eliminating the retirement savings system previously administered by private pension funds under the supervision of a governmental agency. In accordance with the new law, private pension funds transferred all of the assets administered by them under the retirement savings system to ANSES. These transferred assets included shares of Banco Macro.
(3)
Related to the reduction of the capital stock by 60,000,000 registered Class B shares entitled to 1 vote each with a face value of Ps. 1 per share. These shares were included in the Bank’s portfolio and were acquired under section 68, Law No. 17,811, as a result of the macroeconomic context and fluctuations that the capital market was going through in general. On April 21, 2009, and after BCBA authorization, the Bank’s general ordinary and extraordinary shareholders’ meeting and special shareholders’ meeting approved the abovementioned capital reduction. During July 2009, the CNV authorized, the IGJ registered, and the Central Bank consented to the capital stock reduction.
(4)
Related to the capital increase through the issuance of Ps. 1,147,887 of new common, registered Class B shares with a face value of Ps. 1, each one entitled to one vote, delivered to the minority shareholders of former Nuevo Banco Bisel, in the merger process with such bank.
(5)
Related to the reduction of the capital stock by 30,641,692 Class B registered shares each one entitled to one vote, with a face value of ARS 1 per share. These shares were included in the Bank’s portfolio and were acquired under section 68, Law No. 17,811 for the same reasons mentioned in paragraph (3) above. On September 10, 2009, the Bank’s general ordinary and extraordinary shareholders’ meeting approved the abovementioned capital reduction subject to the BCBA’s consent. Subsequently, the BCBA and the CNV approved such capital reduction, the IGJ recorded it and the Central Bank acknowledged it.

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B. Related Party Transactions
We are not party to any transactions with, and have not made any loans to, any of our directors, key management personnel or other related persons, nor are there any proposed transactions with such persons, except for those permitted by applicable law. Some of our directors have been involved in certain credit transactions with us. The Argentine Corporate law and Central Bank regulations allow directors of a corporation to enter into a transaction with such corporation if the transaction is in line with prevailing market practice. Additionally, lending to persons or entities affiliated with us is subject to the regulations of the Central Bank. These regulations set limits on the amount of credit that can be extended to affiliates based on, among other things, a percentage of our adjusted shareholders’ equity.
We are required by the Central Bank to present, on a monthly basis, a list of the outstanding amount of credit advanced to directors, controlling shareholders, officers and other related entities, which is recorded in the minute book of the Board of Directors. Central Bank Rules establish that loans to directors, controlling shareholders, officers and other related entities must be granted on an equal basis with respect to rates, tenor and guarantees as loans granted to the general public. Additionally, the Central Bank establishes limits for the transactions with related parties.
“Related parties” is defined as our directors, our senior officers, our syndics, our controlling shareholders as well as individuals related to them and any entities directly or indirectly affiliated with any of these parties that are not required to be consolidated.
For the years ended December 31, 2010, 2009 and 2008 an aggregate of Ps .55.0 million, 15.7 million and Ps. 17.8 million, respectively, in financial assistance granted by us (including loans, leasing and guarantees granted) was outstanding to related parties. The single largest amount of financial assistance outstanding as of December 31, 2010 was a dollar denominated loan by total amount of Ps. 18.7 million to Inversora Juramento S.A. with an average dollar interest rate of 3.30%. All of these loans (a) were made in the ordinary course of business; (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and (c) did not involve more than the normal risk of collectibility or present other unfavorable features.
Likewise, as of December 31, 2010, 2009 and 2008, the deposits made by related parties to the Bank amounted to Ps. 181.0 million, Ps. 124.4 million and Ps. 67.1 million, respectively.
For further information regarding related parties transactions see note 8 to our consolidated financial statements for the year ended December 31, 2010.
C. Interest of experts and counsel
Not applicable.
Item 8.
Financial Information
A. Consolidated Statements and Other Financial Information
See Item 18 and our audited consolidated financial statements as of December 31, 2010 included in this annual report.
Legal Proceedings
We are involved in normal collection proceedings and other legal proceedings in the ordinary course of business. We are not involved in any litigation or other legal proceedings that, if adversely determined, would individually or in the aggregate have a material adverse effect on our operations.
For further information regarding Legal proceedings see note 16 “Tax claims” to our consolidated financial statements for the year ended December 31, 2010.
Dividend Policy
Although we do not have, and have no current plans to adopt, a formal dividend policy governing the amount and payment of dividends, we currently intend to pay dividends subject to approval by a majority vote of our shareholders. All shares of our capital stock are pari passu with respect to the payment of dividends.
The following table sets forth the cash dividends paid to our shareholders in 2003 through 2010. All banks were prohibited by the Central Bank from paying dividends in respect of the results of 2001 and 2002.
Aggregate Dividend
Dividends per Share Payment
Based on financial statements for year ended December 31, Payment Dates (in pesos) (in millions of pesos)
2003
July 2004 0.10 60.9
2004
April 2005 0.05 30.4
2005
May 2006 0.10 68.4
2006
May 2007 0.15 102.6
2007
May 2008 0.25 171.0
2008
September 2009 0.25 149.9 (1)
2009
June 2010 0.35 208.1
2010
May 2011 0.85 505.3
(1)
For the fiscal year ended December 31, 2008, dividends paid in cash were Ps.148.3 million based on the outstanding number of shares on the payment dates .

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Central Bank and contractual limitations on distribution of dividends
The Central Bank has imposed restrictions on the payment of dividends, substantially limiting the ability of financial institutions to distribute such dividends without its prior consent.
The Central Bank has eased these restrictions through Communication “A” 4,589, as amended by Communication “A” 4,591, “A” 5,072 and others, by providing for a mechanism for the calculation of distributable profits of the financial institutions:
The Superintendency will review the ability of the Bank to distribute dividends upon the Bank’s requests for its approval. Such request has to be filed within 30 business days prior to the shareholders meeting that will resolve the approval of the annual financial statements. The Superintendency will authorize the distribution of dividends when none of the following circumstances are verified during the month preceding the request for the payment of dividends:
(i) we are subject to a liquidation procedure or the mandatory transfer of assets by the Central Bank in accordance with section 34 or 35 bis of the Financial Institutions Law;
(ii) we are receiving financial assistance from the Central Bank;
(iii) we are not in compliance with or have failed to comply on a timely basis with our reporting obligations to the Central Bank; or
(iv) we are not in compliance with minimum capital requirements (both on an individual and consolidated basis) or with minimum cash reserves (on average).
Any distribution of dividends will be authorized only to the extent the Bank complies with the minimum capital and minimum cash requirements calculated considering the proposed distribution and any applicable adjustment established by the regulations in force.
We have consistently obtained authorization from the Central Bank to distribute dividends corresponding to fiscal years 2003 through 2010.
Additional regulatory and contractual restrictions exist which could affect the distribution of earnings and are included in note 15 of our audited consolidated financial statements as of and for the three years ended December 31, 2010.
Amounts available for distribution and distribution approval process
Under Argentine corporate law, declaration and payment of annual dividends, to the extent funds are legally available, is determined by our shareholders at the annual ordinary shareholders’ meeting. Generally, but not necessarily, the Board of Directors makes a recommendation with respect to the payment of dividends.
Dividends may be lawfully declared and paid only out of our retained earnings stated in our yearly financial statements according to Central Bank Rules and approved by a shareholders’ meeting as described below.
The Board of Directors submits our financial statements for the preceding fiscal year, together with reports thereon by the supervisory committee, at the annual ordinary shareholders’ meeting for approval. Within four months of the end of each fiscal year, an ordinary shareholders’ meeting must be held to approve the financial statements and determine the allocation of our net income for such year.
Under applicable CNV regulations, but subject to prior Central Bank approval, cash dividends must be paid to shareholders within 30 days of the shareholders’ meeting approving such dividends. We have not been able to make payment of dividends within this term in connection with fiscal years 2008 and 2009 due to Central Bank’s delay in granting its approval. In the case of stock dividends, shares are required to be delivered within three months of our receipt of notice of the authorization of the CNV for the public offering of the shares arising from such dividends.
Legal reserve requirement
According to the Argentine Financial Institutions Law, or the Financial Institutions Law, and Central Bank regulations, we are required to maintain a legal reserve of 20% of our yearly income plus or minus prior-year adjustments and minus the accumulated loss at the prior year closing period. The legal reserve is not available for distribution to shareholders. Under Argentine corporate law and our bylaws, our yearly net income (as adjusted to reflect changes in prior results) is allocated in the following order: (i) to comply with the legal reserve requirement, (ii) to pay the accrued fees of the members of the Board of Directors and statutory supervisory committee; (iii) to pay fixed dividends, which are applied first to pending and unpaid dividends and holders of preferred stock (if applicable); (iv) for voluntary or contingent reserves, as may be resolved from time to time by our shareholders at the annual ordinary shareholders’ meeting; and (v) the remainder of the net income for the year may be distributed as dividends on common stock or as otherwise decided by our shareholders at the annual ordinary shareholders’ meeting.

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Personal assets tax
Our shareholders approved the absorption of personal asset tax by us for the fiscal year 2010. There can be no assurance that in the future this tax will be absorbed by the Bank. For more information, see “Item 10. Additional Information—E.Taxation—Material Argentine tax considerations relating to our Class B shares and ADSs—Personal Assets Tax”.
B. Significant Changes
Except as otherwise disclosed in this annual report, there has been no undisclosed significant change since the date of the most recent annual financial statements included herein.
Item 9.
The Offer and Listing
A. Offer and listing details
The table below shows the high and low market prices in pesos for our Class B shares on the BCBA for the periods indicated:
Ps. per Class B Share
Banco Macro High Low
2011:
April
18.40 15.40
March
17.90 16.00
February
19.00 16.35
January
21.40 18.35
2010:
December
22.50 19.10
November
21.00 19.00
2010
22.50 9.40
2009
12.65 3.36
2008
8.46 2.12
2007
12.30 7.20
2006
9.51 5.32
2010
4th quarter
22.50 16.95
3rd quarter
18.70 11.60
2nd quarter
12.65 9.60
1st quarter
12.65 9.40
2009
4th quarter
12.65 9.20
3rd quarter
9.29 5.90
2nd quarter
6.55 3.74
1st quarter
4.19 3.36
Source:
BCBA Bulletin.
The ordinary shares trade on the NYSE in the form of ADSs issued by The Bank of New York, as depositary. Each ADS represents ten ordinary shares. The table below shows the high and low market prices of the ADSs in dollars on the NYSE for the periods indicated.
US$ per ADS
Banco Macro (1) High Low
2011:
April
43.74 35.95
March
42.04 38.21
February
46.84 38.65
January
51.94 44.98
2010:
December
56.57 47.88
November
53.73 47.55
2010
56.57 23.74
2009
33.85 8.72
2008
26.67 4.92
2007
39.11 22.40
2006
31.96 18.35
2010
4th quarter
56.57 42.83
3rd quarter
47.46 28.99
2nd quarter
32.31 24.58
1st quarter
32.77 23.74
2009
4th quarter
33.85 23.95
3rd quarter
24.46 15.19
2nd quarter
17.27 9.63
1st quarter
12.83 8.72
Source:
Reuters
(1)
The Bank was first listed on NYSE in March 2006

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B. Plan of Distribution
Not applicable.
C. Markets
Our Class B shares are currently traded on the BCBA under the symbol ‘BMA’. Additionally, our ADSs have been trading on the NYSE since March 24, 2006 under the symbol ‘BMA’.
Our (i) 9.75% Fixed/Floating Rate Non-Cumulative Junior Subordinated Notes Due 2036, (ii) 8.50% Notes Due 2017 and (iii) 10.750% Argentine Peso-Linked Notes Due 2012 are all currently listed on both the BCBA and the Luxembourg Stock Exchange.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the issue
Not applicable.
Item 10.
Additional Information
A. Share Capital
Not applicable
B. Memorandum and Articles of Association
General
We are a financial institution incorporated on November 21, 1966 as a sociedad anónima, or a stock corporation, duly incorporated under the laws of Argentina for a 99-year period and registered on March 8, 1967 with the Public Registry of Commerce of Bahía Blanca, Province of Buenos Aires, Argentina, under No. 1154 of Book 2, Folio 75 of Estatutos . We subsequently changed our legal address to the City of Buenos Aires and registered it with the IGJ on October 8, 1996 under No. 9777 of Book 119, Volume A of sociedades anónimas A translation of our bylaws has been filed as an exhibit to our 2009 annual report on form 20-F filed on June 1, 2010.
As of December 31, 2010, our capital stock consists of Ps. 594,485,168, represented by 11,235,670 common, book-entry Class A shares, with a par value of one peso each and the right to five votes per share, and 583,249,498 common, book-entry Class B shares, with a par value of one peso each and the right to one vote per share.
Under our bylaws, we may issue different classes of shares of common stock entitled with one to five votes per share. However, as long as we remain public we cannot issue additional shares of any class of capital stock that could entitle the holder thereof to more than one vote per share. All outstanding shares are fully paid.
Our Class B shares have been listed on the BCBA since November 1994. Our ADSs have been listed in the NYSE since March 24, 2006. Holders of Class A shares are permitted to convert their shares into Class B shares on a one-for-one basis.
Corporate Purpose
Our bylaws sets forth that our corporate purpose is to engage within or outside of Argentina in any banking transaction contemplated and authorized under the Financial Institutions Law and other laws, rules and regulations governing banking activities in the place of performance, under the guidelines and with prior authorization, if appropriate, of the Central Bank. In addition, we are capable of acting as an agent in connection with securities in the open market, and in any exchange transactions contemplated under the legal provisions in effect governing the activity, under the guidelines and with the prior authorization, if appropriate, of the CNV. To that effect, we have full legal capacity to develop rights, incur obligations, and execute any kind of act and transaction related thereto. Furthermore, we are capable of having interests in other domestic or foreign financial institutions with the prior authorization of the Central Bank.

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Shareholders’ liability
Shareholders’ liability for losses of a company is limited to the value of their shareholdings in the company. Under Argentine corporate law, however, shareholders who voted in favor of a resolution that is subsequently declared void by a court as contrary to Argentine laws or a company’s bylaws (or regulations, if any) may be held jointly and severally liable for damages to such company, other shareholders or third parties resulting from such resolution. See also “ Risk Factors— Our shareholders may be subject to liability for certain votes of their securities”.
Redemption and rights of withdrawal
Our shares are subject to redemption in connection with a reduction in capital by the vote of a majority of shareholders at an extraordinary shareholders’ meeting. Any shares so redeemed must be cancelled by us. Whenever our shareholders approve a spin-off or merger in which we are not the surviving corporation, the change of our corporate legal status, a fundamental change in our corporate purpose, change of our domicile outside of Argentina, voluntary withdrawal from public offering or delisting, our continuation in the case of mandatory delisting or cancellation of the public offering authorization, or a total or partial recapitalization following a mandatory reduction of our capital or liquidation, any shareholder that voted against such action that was approved or did not attend the meeting at which the decision was taken, may withdraw and receive the book value of its shares, determined on the basis of our latest balance sheet prepared or that should have been prepared in accordance with Argentine laws and regulations, provided that such shareholder exercises its appraisal rights within a determined period. However, because of the absence of legal precedent directly on point, there is doubt as to whether holders of ADSs will be able to exercise appraisal rights either directly or through the depositary with respect to Class B shares represented by ADSs. Appraisal rights must be exercised within the five days following the adjournment of the meeting at which the resolution was adopted, in the event that the dissenting shareholder voted against such resolution, or within 15 days following such adjournment if the dissenting shareholder did not attend such meeting and can prove that he was a shareholder on the date of such meeting. In the case of merger or spin-off, appraisal rights may not be exercised if the shares to be received as a result of such transaction are authorized for public offering or listed. Appraisal rights are extinguished if the resolution giving rise to such rights is revoked at another shareholders’ meeting held within 75 days of the meeting at which the resolution was adopted.
Payment on the appraisal rights must be made within one year of the date of the shareholders’ meeting at which the resolution was adopted, except when the resolution was to delist our stock or to continue following a mandatory delisting, in which case the payment period is reduced to 60 days from the resolution date.
Preemptive and accretion rights
In the event of a capital increase, a holder of existing common shares of a given class has a preemptive right to subscribe for a number of shares of the same class sufficient to maintain the holder’s existing proportionate holdings of shares of that class.
In addition, shareholders are entitled to the right to subscribe on pro-rata basis for the unsubscribed shares remaining at the end of a preemptive rights offering, known as accretion rights.
Holders of ADSs may be restricted in their ability to exercise preemptive rights if an annual report under the Securities Act relating thereto has not been filed or is not effective or an exemption is not available. Preemptive rights are exercisable during the 30 days following the last publication of notice to the shareholders in the Official Bulletin of the Republic of Argentina, or the Official Gazette and an Argentine newspaper of wide circulation. Pursuant to Argentine corporate law, in the case of public companies, such 30-day period may be reduced to a minimum of ten days if so approved by the company’s shareholders at an extraordinary shareholders’ meeting.
Shares not subscribed by the shareholders by virtue of their exercise of preemptive rights or accretion rights may be offered to third parties.
Voting rights
Under our bylaws, each Class A share entitles the holder thereof to five votes at any meeting of our shareholders and Class B shares entitle the holders thereof to one vote per share. However, according to Argentine corporate law, shares entitle the holder to only one vote per share to vote the approval of: an early dissolution, a merger or spin-off when we are not the surviving entity, a reduction of capital stock and redemption of shares, a transformation from one type of entity to another, a limitation of shareholders’ preemptive rights, a transfer of our domicile outside Argentina, and a fundamental change of our corporate purpose set forth in our bylaws. In such cases Class A shares are entitled to only one vote per share and Class B shares are entitled to only one vote per share. In addition, pursuant to Argentine applicable law, as long as we remain public we cannot issue additional shares of any class of capital stock that could entitle the holder thereof to more than one vote per share.
Registration requirements of foreign companies that hold Class B shares directly
Under Argentine regulations, foreign companies that hold shares directly (and not as ADSs) in an Argentine company must register with the IGJ to exercise certain shareholder rights, including voting rights. The registration requires the filing of corporate and accounting documents in order to demonstrate that the foreign shareholder’s main activity is conducted outside of Argentina.

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Liquidation rights
In the case of our liquidation or dissolution we are requested to communicate such event to the Central Bank, and our assets will be applied to satisfy our outstanding liabilities and proportionally distributed first among our holders of preferred stock as per the terms of the preferred stock, if any. If any surplus remains, it will be proportionally distributed among holders of our common stock.
Ordinary and extraordinary meetings
Shareholders’ meetings may be ordinary meetings or extraordinary meetings. We are required to convene and hold an ordinary meeting of shareholders within four months of the close of each fiscal year to consider the matters specified in the first two paragraphs of Section 234 of the Argentine Corporation Law, such as the approval of our financial statements, allocation of net income for such fiscal year, approval of the reports of the Board of Directors and the statutory audit committee and election and remuneration of directors and members of the statutory audit committee. In addition, pursuant to Decree No. 677/2001, at an ordinary shareholders’ meetings, our shareholders must consider (i) the disposition of, or creation of any lien over, our assets as long as such decision has not been performed under the ordinary course of business; (ii) the execution of administration or management agreements; and (iii) whether to approve the payment of any agreement providing assets or services to us as long as such payment is material when measured against the volume of the ordinary course of business and our shareholders’ equity. Other matters which may be considered at an ordinary meeting convened and held at any time include the responsibility of directors and members of the statutory audit committee, capital increases and the issuance of certain corporate bonds. Extraordinary shareholders’ meetings may be called at any time to consider matters beyond the authority of an ordinary meeting, including amendment of the bylaws, issuance of debentures, early dissolution, merger, spin off, reduction of capital stock and redemption of shares, transformation from one type of entity to another and limitation of shareholders’ preemptive rights.
Notices of meetings
Notices of shareholders’ meetings are governed by the provisions of Argentine Corporations Law, and in case of publicly traded companies, Law No. 17,811. Furthermore, notice of shareholders’ meetings must be published for five days in the Official Gazette, in an Argentine newspaper of wide circulation and in the publications of Argentine exchanges or securities markets in which our shares are traded, at least twenty (20) but not more than forty five (45) days prior to the date on which the meeting is to be held. Such notice must include information regarding the type of meeting to be held, the date, time and place of such meeting and the agenda. If a quorum is not available at such meeting, a notice for a second meeting, which must be held within 30 days of the date on which the first meeting was called, must be published for three days, at least eight days before the date of the second meeting. The above-described notices of shareholders’ meetings may be effected simultaneously for the second meeting to be held on the same day as the first meeting, only in the case of ordinary meetings. Shareholders’ meetings may be validly held without notice if all shares of our outstanding capital stock are present and resolutions are adopted by unanimous vote of such shares.
Quorum and voting requirements
The quorum for ordinary meetings of shareholders on first call is a majority of the shares entitled to vote, and action may be taken by the affirmative vote of an absolute majority of the shares present that are entitled to vote on such action. If a quorum is not available at the first meeting a second meeting may be held at which action may be taken by the holders of an absolute majority of the shares present, regardless of the number of such shares. The quorum for an extraordinary shareholders’ meeting on first call is 60% of the shares entitled to vote, and if such quorum is not available, a second meeting may be held, for which the quorum is 20% of the shares entitled to vote.
Action may be taken at extraordinary shareholders’ meetings by the affirmative vote of an absolute majority of shares present that are entitled to vote on such action, except that: the approval of a majority of shares with voting rights (for these purposes non-voting preferred shares shall have voting rights), without application of multiple votes, is required at both the first and second meeting for: (i) the transfer of our domicile outside Argentina, (ii) a fundamental change of the corporate purpose set forth in our bylaws, (iii) our anticipated dissolution, (iv) the total or partial redemption of shares, (v) our merger or spin-off, if we are not the surviving entity, or (vi) the transformation of our corporate legal status, in which cases resolutions shall be adopted by the affirmative vote of the majority of shares with the right to vote. Preferred shares will be entitled to one vote in these circumstances.
Argentine corporate law reserves the right to cumulative voting in order to elect up to one third of the directors to fill vacancies of the Board of Directors, sharing such part with candidates voted for by means of the plural system. Cumulative voting is a system designed to protect minority interests, as it gives rise to the possibility, but does not ensure, that minority interests will be able to elect some of their candidates to the Board of Directors. Such system works by multiplying the number of members that are taking part in the proceeding by the number of contemplated vacancies, which cannot exceed one third of the vacancies. The larger the number of vacancies, the greater the possibility that minority groups or shareholders will win positions in the Board of Directors.
Shareholders’ meetings may be called by the Board of Directors or the members of the statutory audit committee whenever required by law or whenever they deem it necessary. Also, the board or the members of the statutory audit committee are required to call shareholders’ meetings upon the request of shareholders representing an aggregate of at least five percent of our outstanding capital stock. If the board or the statutory audit committee fails to call a meeting following such a request, a meeting may be ordered by the CNV or by the courts. In order to attend a meeting, a shareholder must also deposit with us a certificate of book-entry shares registered in its name and issued by Caja de Valores S.A. at least three business days prior to the date on which the meeting is to be held. If so entitled to attend a meeting, a shareholder may be represented by proxy. Proxies may not be granted to our board, members of the statutory audit committee, officers or employees.

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Election of directors
Currently, the shareholders present at any annual ordinary meeting may determine the size of the Board of Directors, provided that there shall be no less than three and no more than twelve directors. Any director so appointed will serve for three fiscal years. If the shareholders elect more than nine board members, each director will be re-elected as a staggered board, to be renewed by thirds, provided that in all cases no less than three directors shall be renewed each time. The annual ordinary shareholders’ meeting may also appoint an equal or lesser number of alternate directors, to hold office for the same term than regular directors, to fill any vacancy in the board occurring for any reason whatsoever, and shall further determine the order of substitution. Alternate directors shall hold office until the regular directors in whose place they have acted as substitutes shall resume office, and in case any such absence is permanent, until the next ordinary meeting of shareholders where at directors shall be appointed. Both regular and alternate directors may be re-elected indefinitely.
Anti-takeover provisions
Our bylaws do not contain any provision that would (i) oblige us to disclose information regarding our shareholders; and (ii) have the effect of delaying, deferring or preventing a change in control, the last of which may happen only in the event of a merger, acquisition or public offering for acquisition.
Tender offer regime
Optional mandatory tender offer regime in the case of a change in control
Mandatory tender offer or exchange in Argentina
We elected to automatically become subject to the optional mandatory tender offer regime under Decree 677/2001 regarding transparency in a public offering ( Regimen de Transparencia de la Oferta Públíca ). In this context, the regulation provides that in certain circumstances a tender offer (“ oferta pública de adquisción” or OPA) with respect to some or all of the outstanding shares as described below must be launched. Pursuant to such regulation, the relevant circumstances include anyone intending to purchase, either directly or indirectly, for cash, either individually or collectively, either in one act or in a series of successive acts during a period of 90 consecutive days, a number of voting shares, subscription rights or stock options, negotiable securities or similar securities which directly or indirectly, and by computing the prior holding of such person, may entitle such person to subscribe, purchase or convert voting shares, shares entitled to or that once exercised grant the right to a “significant share” in the voting capital stock and/or in the votes of a company having publicly traded shares. In such cases, the OPA must be launched by the prospective purchaser within 10 days of having made the decision to participate in such offer, except in those cases expressly mentioned in the CNV rules.
Such obligation is not applicable in cases where the acquisition of the significant share does not imply the acquisition of the company’s control. It also does not apply in cases where there is a change of control as a consequence of a corporate reorganization, merger or split-off. However, the regulation is applicable in certain cases of indirect acquisitions by means of a merger of the purchaser with the controlling shareholding company of the affected company or the taking of control of such controlling shareholding company.
Concept of a “Significant Share”
The regulations establish a duty to effect an offer with respect to a part or all of the outstanding shares depending on the percentage of the capital stock or relating to the votes to be acquired. Decree 677/2001 establishes that in no circumstance can a “significant share” be less than 35% of the capital stock and/or the votes of the affected company. The regulations provide for the following duties relating to the OPA:
•
Whenever the goal is to acquire participation rights equal to or greater than 35% of the capital stock and/or the company’s votes, the offer must be made for a number of securities that would enable the purchaser to acquire at least 50% of the voting capital stock of the affected company.
•
Whenever an entity already holds participation rights equal to or greater than 35% of the voting capital stock and/or the company’s votes but less than 51% of such rights, and the intention is to increase such share of the affected company’s capital stock at least 6% during a 12-month period, the offer shall be made on the number of securities representing at least 10% of the voting capital stock of the affected company.
•
Whenever participation rights equal to or greater than 51% of the voting capital stock and/or the company’s votes are sought, the offer shall be made for the number of securities that would enable the purchaser to obtain 100% of the voting capital stock of the affected company. The application of this stipulation shall have priority over the stipulations discussed in the preceding paragraphs.
Determination of the price of the OPA in the case of a change in control
The price shall determined by the offeror with the following exceptions:
Whenever the purchaser would have purchased other securities related to the offering in the prior 90 consecutive days beginning as of the date the price was announced, the price cannot be lower than the highest price the purchaser would have paid in such transactions.

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Whenever the purchaser would have obtained firm sales commitments from the controlling shareholder or other shareholders with the right to take part in the public offering, the price cannot be lower than the price provided for in such commitments.
The CNV can authorize different offering prices in the hypothetical situation that the assignment of control goes hand in hand with indemnity or warrant clauses on a certain risk or deferred payment stated in the financial statements of the affected company, by virtue of the controlling party’s shareholdings. Such difference cannot exceed 20%.
Penalties for breach
Without prejudice to the penalties established by the CNV, the regulation provides that anyone purchasing shares of a company in violation of such regime cannot exercise their political rights derived from the shares thus purchased, or that may be hereinafter purchased without launching the relevant OPA, and if exercised, the agreements shall be considered void for administrative purposes. Should a resale of the purchased shares occur in violation of the regime, the new purchaser of such shares may only exercise the political rights corresponding to them if the purchase was made in good faith, and provided the purchaser does not maintain any of the relationships with the transferor that are established in the regulation.
Tender offer regime in the case of a voluntary withdrawal from the public offering and listing system in Argentina
Decree 677/2001 and its regulation also established that when a company, whose shares are publicly offered and listed in Argentina, agrees to voluntary withdraw from the public offering and listing system in Argentina, it must follow the procedures provided for in the CNV’s regulations and it must likewise launch an OPA for its aggregate shares and/or subscription rights or securities convertible into shares or stock options under the terms provided for in such regulation. It is not necessary to extend the public offering to those shareholders that voted for the withdrawal at the shareholders’ meeting. The public offering can only be made as a purchase and sale and the consideration must be cash.
The acquisition of one’s own shares must be made with liquid and realized profits or with free reserves, whenever paid up in full, and for the amortization or disposition thereof, within the term set forth in section 221 of the Argentine Companies Law and the company must present the CNV with evidence that it has the necessary solvency to effect such purchase and that the payment for the shares will not affect its solvency.
Determination of the price of the OPA in the case of a voluntary withdrawal from the public offering and listing system in Argentina
The price offered should be an equitable price, as such, one must consider the following relevant criteria:
•
The equity value of the shares, taking into account a special financial statement for the withdrawal from the public offering system and/or listing.
•
The value of the company, in accordance with discounted cash flow criteria and/or ratios applicable to comparable businesses or companies.
•
The company’s liquidation value.
•
Average quotation prices on the stock exchange where the shares are listed during the six month period immediately preceding the withdrawal application, no matter the number of sessions necessary for such negotiation.
•
The consideration offered beforehand, or the placement of the new shares, in the event that a public offering has been made with regard to the same shares or if new_shares have been issued, if applicable, during the last year, to be counted as of the date of the agreement for the withdrawal application.
Under no circumstances can the price offered be lower than the average quotation price discussed in this paragraph.
Form and transfer
Our current capital stock is represented by book-entry shares. Our shareholders are required to hold their shares through book-entries directly made by Caja de Valores S.A. in the stock registry of the company carried by Caja de Valores S.A. or through book-entries with brokers, banks and other entities approved by the CNV that have accounts with Caja de Valores S.A., or with the participants of the Caja de Valores S.A. Caja de Valores S.A. is in charge of maintaining a stock registry on our behalf based on information received from shareholders that choose to hold their shares directly by registration on the stock registry of the company and from participants of the Caja de Valores S.A., and in accordance with Argentine law only those holders listed in the stock registry either directly or through participants of the Caja de Valores S.A. will be recognized as shareholders. Shares held by participants of the Caja de Valores S.A. have the same rights as shares recorded in our shareholders’ register.
C. Material Contracts
During the past two years we did not enter into or become a party to any contract that is required to be disclosed under this item.

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D. Exchange controls
Exchange rates
On January 7, 2002, the Argentine congress enacted the Public Emergency Law, abandoning over ten years of fixed peso-U.S. dollar parity at Ps.1.00 per US$1.00. After devaluing the peso and setting the official exchange rate at Ps.1.40 per US$1.00, on February 11, 2002, the government allowed the peso to float. The shortage of U.S. dollars and their heightened demand caused the peso to further devalue significantly in the first half of 2002 reaching a value of Ps. 3,8675 per US$1.00 in June 2002.
The following table sets forth the annual high, low, average and period-end exchange rates for the periods indicated, expressed in pesos per U.S. dollar and not adjusted for inflation. There can be no assurance that the peso will not depreciate again in the future, particularly while the restructuring of a substantial portion of Argentina’s foreign debt remains unresolved. The Federal Reserve Bank of New York does not report a noon buying rate for pesos.
Exchange Rates
High Low Average (1) Period-end
2006
3.1072 3.0305 3.0741 3.0695
2007
3.1797 3.0553 3.1156 3.1510
2008
3.4537 3.0128 3.1614 3.4537
2009
3.8545 3.4497 3.7301 3.7967
2010
3.9857 3.7942 3.9127 3.9758
November 2010
3.9840 3.9567 3.9676 3.9840
December 2010
3.9857 3.9732 3.9776 3.9758
January 2011
4.0008 3.9715 3.9813 4.0008
February 2011
4.0305 4.0088 4.0220 4.0305
March 2011
4.0520 4.0288 4.0372 4.0520
April 2011
4.0837 4.0495 4.0655 4.0805
Source:
Central Bank
(1)
Based on daily closing price.
Exchange controls
In 2001 and 2002, the Central Bank, among other restrictive measures, restricted the inflow and outflow of foreign currency into and from Argentina without its prior approval. Since then, the Argentine government has substantially eased these restrictions but dual controls are still in place. Pursuant to such restrictions, new indebtedness and debt refinancings with non-Argentine residents from the private sector entered into the local foreign exchange market must be mandatory settled into through the local exchange market (i.e., be transferred into Argentina and exchanged for Argentine pesos) and must have a term of at least 365 calendar days as from the settlement date of such funds, among others.
Additionally, currently applicable foreign exchange regulations prohibit the prepayment of any such indebtedness before the expiration of such 365-day term, irrespective of the payment method and whether or not payment includes a foreign exchange trade in the local market. The following transactions are exempted from this restriction: (i) foreign trade financings; (ii) purchase of primary stock and debt security issuances through public offerings and listed on self-regulated markets; and (iii) foreign financial indebtedness, provided that (a) the proceeds from the exchange settlement, net of taxes and expenses, are used for the purchase of foreign currency to cancel principal on foreign debt and/or to invest in long term foreign assets; or (b) they have an average term of not less than two years (including payments of principal and interest for purposes of the calculation), and to the extent they are applied to the net purchase of fixed assets, as defined by Argentine GAAP.
As a result, any inflow of funds to the local foreign exchange market arising from, but not limited to: (i) foreign indebtedness, except in the above-mentioned instances; (ii) primary stock issuances of companies residing in Argentina not made pursuant to public offerings and not listed on self-regulated markets, or secondary issuances of such stock, to the extent they do not constitute foreign direct investments (i.e., represent at least a 10% interest in the local company); (iii) non-resident portfolio investments to hold Argentine currency and assets and liabilities in the financial and non-financial private sector, to the extent they do not arise from the primary subscription of debt securities issued pursuant to a public offering and listed on a self-regulated market and/or the primary subscription of stock of companies residing in Argentina pursuant to a public offering and listed on a self-regulated market; and (iv) non-resident portfolio investments to purchase any right on securities issued by the public sector in the over-the-counter market, must comply with the following requirements, among others:
(1) fund inflows may only be transferred out of the local foreign exchange market upon the lapse of a term of 365 calendar days as from the date on which the funds entered the country; and
(2) the placement of a nominative, non-transferable and non-compensated deposit in U.S. dollars for an amount equal to the 30% of the amount involved in the transaction for a term of 365 calendar days, pursuant to the terms and under the conditions established in the applicable regulations.
As of the date hereof, original maturity of certain debt securities issued pursuant to a primary public offering and listed on a self-regulated market shall be exempt from the minimum stay period of 365 calendar days for purposes of purchasing foreign currency to repay such debt. Although the proceeds received by us from the issuance and sale of notes under our notes program are subject to mandatory settlement into Argentina, they are not subject to the mandatory 30% deposit or the aforementioned 365-day stay period.

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E. Taxation
Material U.S. federal income tax considerations relating to our Class B shares and ADSs
The following discussion is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our Class B shares or ADSs. This discussion applies only to beneficial owners of Class B shares or ADSs that are “U.S. holders” (as defined below) that hold Class B shares or ADSs as “capital assets” (generally, property held for investment). This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed Treasury regulations, administrative pronouncements of the IRS and judicial decisions, all as currently in effect and all of which are subject to change (possibly on a retroactive basis) and to different interpretations. This discussion does not purport to address all U.S. federal income tax considerations that may be relevant to a particular U.S. holder, and you are urged to consult your own tax advisor regarding your specific tax situation. The discussion does not address the tax considerations that may be relevant to U.S. holders in special tax situations, such as:
•
dealers in securities or currencies;
•
insurance companies;
•
tax-exempt organizations;
•
traders in securities that elect to mark to market;
•
certain financial institutions;
•
partnerships or other pass-through entities;
•
holders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
•
U.S. expatriates;
•
holders that hold Class B shares or ADSs as part of a hedge, straddle, conversion transaction, constructive sale transaction or other integrated transaction;
•
holders that own, directly, indirectly, or constructively, 10% or more of the total combined voting power of our shares;
•
real estate investment trusts; or
•
regulated investment companies.
This discussion does not address the estate, gift, or alternative minimum tax consequences of holding Class B shares or ADSs or the indirect consequences to holders of equity interests in partnerships or other entities that own our Class B shares or ADSs. Moreover, this discussion does not address the state, local, or non-U.S. income or other tax consequences of an investment in our Class B shares or ADSs, or any aspect of U.S. federal taxation other than income taxation.
We are uncertain whether we currently are a passive foreign investment company (a “PFIC”) or will be a PFIC in a future tax year. As discussed below under “Passive Foreign Investment Companies”, the application of the PFIC rules to banks is unclear under present federal U.S. federal income tax law. A determination that we are a PFIC generally will result in unfavorable consequences to a U.S. holder. You should carefully consider the discussion under “Passive Foreign Investment Companies” and consult your own tax advisor regarding the consequences of investing in a PFIC. Unless otherwise noted, the following discussion assumes that we are not a PFIC.
You should also consult your own tax advisor regarding the U.S. federal, state, local, and foreign income and other tax consequences of purchasing, owning and disposing of our Class B shares or ADSs in your particular circumstances.
For the purposes of this discussion, you are a “U.S. holder” if you are a beneficial owner of Class B shares or ADSs and you are for U.S. federal income tax purposes:
•
an individual who is a citizen or resident of the United States;
•
a corporation, or any other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
•
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
•
a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.
If a partnership holds our Class B shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor who is a partner of a partnership holding our class B shares or ADSs shares should consult its own tax advisor.
In general, for U.S. federal income tax purposes, U.S. holders that are beneficial owners of ADSs will be treated as the beneficial owners of the Class B shares represented by those ADSs.
Taxation of Dividends. Distributions of cash with respect to the Class B shares or ADSs (other than distributions in redemption of the Class B shares that are treated as sales or exchanges under Section 302(b) of the Code or upon our liquidation) will, to the extent made from our current or accumulated earnings and profits as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes. Whether such current or accumulated earnings and profits will be sufficient for all such distributions on the Class B shares or ADSs to qualify as dividends for U.S. federal income tax purposes depends on our future profitability and other factors, many of which are beyond our control.

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We do not currently maintain calculations of our earnings and profits under U.S. federal income tax principles. Unless and until these calculations are made, distributions should be presumed to be taxable dividends for U.S. federal income tax purposes. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes. In general, cash dividends (including amounts withheld in respect of Argentine taxes) paid with respect to:
•
the Class B shares generally will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the U.S. holder; or
•
the Class B shares represented by ADSs generally will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the depositary;
and, in either case, these dividends will not be eligible for the dividends received deduction allowed to corporations. To the extent that a distribution by us exceeds the amount of our earnings and profits, it will be treated as a non-taxable return of capital to the extent of the U.S. holder’s adjusted tax basis in the Class B shares or ADSs, and thereafter as capital gain.
Subject to certain exceptions for short-term and hedged positions, the amount of dividends received by certain U.S. holders (including individuals) with respect to the ADSs before January 1, 2013 will be subject to taxation at a maximum rate of 15% under current law if the dividends represent “qualified dividend income”. Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a PFIC. Under current guidance recently issued by the IRS, the ADSs should qualify as readily tradable on an established securities market in the United States so long as they are listed on the NYSE, but no assurances can be given that the ADSs will be or remain readily tradable under future guidance. See below for a discussion of our potential PFIC classification.
Based on existing IRS guidance, it is not entirely clear whether dividends received with respect to the Class B shares will be treated as qualified dividend income, because the Class B shares are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury Department has announced its intention to promulgate additional procedures pursuant to which holders of ADSs or Class B stock and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividend income. Because such procedures have not yet been issued, we are not certain that we will be able to comply with them. You should consult your own tax advisors regarding the availability of the preferential dividend tax rate in the light of your own particular circumstances.
Dividends paid in pesos will be includible in the gross income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day they are received by the U.S. holder, in the case of Class B shares, or the depositary, in the case of Class B shares represented by ADSs, regardless of whether the payment is in fact converted to U.S. dollars. If dividends paid in pesos are converted into U.S. dollars on the day they are received by the U.S. holder or the depositary, as the case may be, U.S. holders should not be required to recognize foreign currency gain or loss in respect of the dividend income. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in the gross income of a U.S. holder through the date such payment is converted into U.S. dollars (or otherwise disposed of) will be treated as U.S. source ordinary income or loss. However, U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any pesos received by the U.S. holder or the depositary are not converted into U.S. dollars on the date of receipt.
A U.S. holder will be entitled, subject to a number of complex limitations and conditions, to claim a U.S. foreign tax credit in respect of any Argentine income taxes withheld on dividends received on shares. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, the dividends should generally constitute “passive category income,” or in the case of certain U.S. holders, “general category income”. U.S. holders who do not elect to claim a credit for any foreign taxes paid during the taxable year may instead claim a deduction of such Argentine income taxes, provided that the U.S. holder elects to deduct (rather than credit) all foreign income taxes paid or accrued for the taxable year. Dividends received with respect to the common shares will be treated as foreign source income, which may be relevant in calculating a U.S. holder’s foreign tax credit limitation. The rules relating to computing foreign tax credits or deducting foreign taxes are extremely complex, and U.S. holders are urged to consult their independent tax advisors regarding the availability of foreign tax credits with respect to any Argentine income taxes withheld from a dividend on the common shares. The IRS has expressed concern that intermediaries in connection with depositary arrangements may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. persons who are holders of depositary shares. Accordingly, investors should be aware that the discussion above regarding the availability of foreign tax credits for Argentine withholding tax on dividends paid with respect to Class B shares represented by ADSs could be affected by future action taken by the IRS.
Taxation of Capital Gains. Deposits and withdrawals of Class B shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.
In general, gain or loss realized by a U.S. holder on the sale, redemption or other taxable disposition of Class B shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized (including the gross amount of the proceeds of the sale or other taxable disposition before the deduction of any Argentine tax) on the taxable disposition and such U.S. holder’s adjusted basis in the Class B shares or the ADSs. Capital gains of certain non-corporate U.S. holders, including individuals, derived with respect to capital assets held for more than one year may be eligible for various reduced rates of taxation, which rates currently are scheduled to increase on January 1, 2013. For example, for capital assets held for over one year, the maximum rate of tax under current law generally will be 15% (rather than the higher rates of tax generally applicable to items of ordinary income). The deductibility of capital losses is subject to limitations. Any gain or loss realized by a U.S. holder will generally be treated as a U.S. source gain or loss for U.S. foreign tax credit purposes.

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If Argentine withholding tax is imposed on the sale or disposition of Class B shares or ADSs, the amount realized by a U.S. holder will include the gross amount of the proceeds of such sale or disposition before deduction of the Argentine withholding tax. The availability of U.S. foreign tax credits for these Argentine taxes and any Argentine taxes imposed on distributions that do not constitute dividends for U.S. tax purposes is subject to various limitations and involves the application of rules that depend on a U.S. holder’s particular circumstances. In particular, because any gain from the sale or other disposition of Class B shares or ADSs generally will be treated as U.S. source income, a U.S. holder may not be able to fully utilize its U.S. foreign tax credits in respect of such Argentine withholding taxes unless such U.S. holder has other income from foreign sources. U.S. holders are urged to consult their own tax advisors regarding the application of the U.S. foreign tax credit rules to their investment in, and disposition of, Class B shares or ADSs.
Passive Foreign Investment Companies. U.S. holders should carefully consider the discussion below regarding our potential treatment as a PFIC for U.S. federal income tax purposes.
In general, if during any taxable year of a non-U.S. corporation, 75% or more of the corporation’s gross income consists of certain types of “passive” income, or the average value during a taxable year of the “passive assets” of the corporation (generally assets that generate passive income) is 50% or more of the average value of all the corporation’s assets, the corporation will be treated as a PFIC under U.S. federal income tax law. Passive income for this purpose generally includes interest, dividends, royalties, rents and gains from commodities and securities transactions. Certain exceptions are provided, however, for passive income derived in the conduct of an active business.
We are unable to determine with certainty that we are not a PFIC because the application of the PFIC rules to banks is unclear under present U.S. federal income tax law. Banks generally derive a substantial part of their income from assets that are interest bearing or that otherwise could be considered passive under the PFIC rules. The IRS has issued a notice and has proposed regulations that exclude from passive income any income derived in the active conduct of a banking business by a qualifying foreign bank (the “active bank exception”). The IRS notice and proposed regulations have different requirements for qualifying as a foreign bank, and for determining the banking income that may be excluded from passive income under the active bank exception. Moreover, the proposed regulations have been outstanding since 1994 and will not be effective unless finalized.
Because final regulations have not been issued and because the definition of banking income for purposes of the active bank exception is unclear under both the notice and the proposed regulations, our status under the PFIC rules is subject to considerable uncertainty. We conduct, and intend to continue to conduct, a significant banking business, and therefore we believe we should qualify as an active foreign bank. However, there can be no assurance that a sufficient amount of our assets will be treated as generating qualifying banking income to avoid our characterization as a PFIC. In particular, we presently hold a significant amount of cash and securities that may be considered passive assets, even if we are treated as an active foreign bank. Accordingly, U.S. holders could be subject to U.S. federal income tax under the rules described below. U.S. holders should consult their tax advisors regarding this issue.
If we are treated as a PFIC for any taxable year, a U.S. holder would be subject to special rules (and may be subject to increased tax liability and form filing requirements) with respect to (a) any gain realized on the sale or other disposition of Class B shares or ADSs, and (b) any “excess distribution” made by us to the U.S. holder (generally, any distribution during a taxable year in which distributions to the U.S. holder on the Class B shares or ADSs exceed 125% of the average annual distributions the U.S. holder received on the Class B shares or ADSs during the preceding three taxable years or, if shorter, the U.S. holder’s holding period for the Class B shares or ADSs). Under those rules, (a) the gain or excess distribution would be allocated ratably over the U.S. holder’s holding period for the Class B shares or ADSs, (b) the amount allocated to the taxable year in which the gain or excess distribution is realized and to taxable years before the first day on which we became a PFIC would be taxable as ordinary income, (c) the amount allocated to each prior year in which we were a PFIC would be subject to U.S. federal income tax at the highest tax rate in effect for that year and (d) the interest charge generally applicable to underpayments of U.S. federal income tax would be imposed in respect of the tax attributable to each prior year in which we were a PFIC. In addition, as discussed above, a U.S. holder would not be entitled to (if otherwise eligible for) the preferential reduced rate of tax payable on certain dividend income.
A U.S. holder may mitigate these effects by electing mark-to-market treatment for its ADSs or Class B shares, provided the relevant shares constitute “marketable stock” as defined in Treasury regulations. Our ADSs and our Class B shares will be “marketable stock” if they are “regularly traded” on a “qualified exchange or other market”. The term “qualified exchange or other market” includes the NYSE. Our ADSs will be “regularly traded” if they are traded on at least 15 days during each calendar quarter, other than in de minimis quantities. No assurance can be provided that our ADSs will be characterized as regularly traded on a qualified exchange or other market for this purpose. Our Class B shares will be treated as listed on a “qualified exchange or other market” for purposes of the relevant Treasury regulations if the exchange on which they are listed has sufficient trading volume, listing, financial disclosure and surveillance, is regulated or supervised by a governmental authority of the country in which the market is located, and meets certain other characteristics. It is unclear whether the BCBA would meet these requirements and whether there would be sufficient trading of the Class B shares for the Class B shares to be characterized as “regularly traded”. It is therefore unclear whether a U.S. holder would be able to elect mark-to-market treatment for the Class B shares.
A U.S. holder electing the mark-to-market regime generally would compute gain or loss at the end of each taxable year as if the Class B shares or ADSs had been sold at fair market value. Any gain recognized by the U.S. holder under mark-to-market treatment, or on an actual sale, would be treated as ordinary income, and the U.S. holder would be allowed an ordinary deduction for any decrease in the value of Class B shares or ADSs as of the end of any taxable year, and for any loss recognized on an actual sale, but only to the extent, in each case, of previously included market-to-market income not offset by previously deducted decreases in value. Any loss on an actual sale of Class B shares or ADSs would be a capital loss to the extent in excess of previously included mark-to-market income not offset by previously deducted decreases in value. A U.S. holder’s tax basis in Class B shares or ADSs would increase or decrease by gain or loss taken into account under the mark-to-market regime.

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A mark-to-market election under the PFIC rules applies to all future years of an electing U.S. holder during which the Class B shares or ADSs are regularly traded on a qualifying exchange, unless revoked with the IRS’s consent.
If we are characterized as a PFIC and, at any time, we have non-U.S. subsidiaries that are classified as PFICs, U.S. holders generally will be deemed to own, and also would be subject to the PFIC rules with respect to, their indirect ownership interests in that lower-tier PFIC. If we are characterized as a PFIC, the U.S. holder could incur liability for the deferred tax and interest charge described above if either:
(1) we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC or
(2) the U.S. holder disposes of all or part of its Class B shares or ADSs.
A mark-to-market election under the PFIC rules with respect to shares would not apply to a lower-tier PFIC, and a U.S. holder would not be able to make such a mark-to-market election in respect of its indirect ownership interest in that lower-tier PFIC. Consequently, U.S. holders of shares could be subject to the PFIC rules with respect to income of the lower-tier PFIC the value of which already had been taken into account indirectly via mark-to-market adjustments.
Furthermore, if we are characterized as a PFIC, a U.S. holder will be required to annually file an IRS Form 8621. Under recent legislation, the statute of limitations on assessment and collections will remain open with respect to unreported PFIC interests.
Information Reporting and Backup Withholding. Information reporting requirements will apply to dividends in respect of the Class B shares or ADSs or the proceeds from the sale, exchange, or redemption of the Class B shares or ADSs paid within the United States (and, in some cases, outside of the United States) to U.S. holders, unless, in either case, the U.S. holder is an exempt recipient (such as a corporation). A 28% backup withholding tax may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number or to report interest and dividends required to be shown on its U.S. federal income tax returns. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
Material Argentine tax considerations relating to our Class B shares and ADSs
The following discussion is a summary of the material Argentine tax considerations relating to the purchase, ownership and disposition of our Class B shares or ADSs.
Dividends tax. Dividends paid on our Class B shares or ADSs, whether in cash, property or other equity securities, are not subject to income tax withholding, except for dividends paid in excess of our taxable accumulated income at the previous fiscal period which are subject to withholding at the rate of 35% applicable on such excess and regarding both local and foreign shareholders.
Capital gains tax. Due to the amendments made to the Argentine Income Tax Law by Law 25,414, Decree 493/2001 (the “AITL”) and the abrogation of Law 25,414 by 25,556, it is not clear whether certain amendments are in effect. Although opinion No. 351 of the National Treasury General Attorney Office solved the most important matters related to capital gains, certain issues still remain unclear:
•
Resident individuals. Pursuant to a reasonable construction of the AITL: (i) income obtained from the sale, exchange or other disposition of our Class B shares or ADSs by resident individuals who do not sell or dispose of Argentine shares on a regular basis would not be subject to Argentine income tax; and (ii) although there still exists uncertainty regarding this issue, income obtained from the sale, exchange or other disposition of our Class B shares or ADSs by resident individuals who sell or dispose of Argentine shares on a regular basis should be exempt from Argentine income tax.
•
Foreign beneficiaries. Capital gains obtained by non-residents or foreign entities from the sale, exchange or other disposition of our Class B shares or ADSs are exempt from income tax. Pursuant to a reasonable construction of the AITL, and although the matter is not completely free from doubt, such treatment should also apply to those foreign beneficiaries that qualify as offshore entities.
•
Local entities. Capital gains obtained by Argentine entities (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) derived from the sale, exchange or other disposition of our Class B shares or ADSs are subject to income tax at the rate of 35%. Losses arising from the sale of our Class B shares or ADSs can be offset against the same type of income, for a five-year period.
Personal assets tax. Argentine entities, such as us, have to pay the personal assets tax corresponding to Argentine and foreign individuals and foreign entities for the holding of our shares at December 31 of each year. The applicable tax rate is 0.5% and is levied on the valor patrimonial proporcional , or the book value, of the shares arising from the last balance sheet. Pursuant to the Personal Assets Tax Law, the Argentine company is entitled to seek reimbursement of such paid tax from the applicable Argentine individuals and/or foreign shareholders. The Argentine company may seek this reimbursement of Personal Assets Tax by setting off the applicable tax against any amount due to its shareholders or in any other way or, under certain circumstances, waive its right under Argentine law to seek reimbursement from the shareholders.

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Value added tax: The sale, exchange or other disposition of our Class B shares or ADSs and the distribution of dividends are exempted from the value added tax.
Transfer taxes: The sale, exchange or other disposition of our Class B shares or ADSs is not subject to transfer taxes.
Stamp taxes: Argentine residents may be subject to stamp tax in certain Argentine provinces in case transfer of our Class B shares or ADSs is performed or executed in such jurisdiction by means of written agreements. In the City of Buenos Aires the sale of Class B shares or ADSs is exempt from stamp tax.
Other taxes: There are no Argentine inheritance or succession taxes applicable to the ownership, transfer or disposition of our Class B shares or ADSs, except for the province of Buenos Aires. In such jurisdiction, there is a tax on free transmission of goods, including inheritance, legacies, donations, etc. Since January 2011, the tax rates have been set between 4% and 21.925% according to the taxable base and the degree of kinship involved. Free transmission of Class B shares or ADSs could be subject to this tax.
In addition, turnover tax could be applicable to Argentine residents on the transfer of Class B shares.
Tax treaties. Argentina has signed tax treaties for the avoidance of double taxation with Australia, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. There is currently no tax treaty or convention in effect between Argentina and the United States. It is not clear when, if ever, a treaty will be ratified or entered into effect. As a result, the Argentine tax consequences described in this section will apply, without modification, to a holder of our Class B shares or ADSs that is a U.S. resident. Foreign shareholders located in certain jurisdictions with a tax treaty in force with Argentina may be exempted from the payment of the personal asset tax.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are required to file annual reports, including exhibits, and other information with the SEC and to furnish interim information on Form 6-K. You may read and copy any documents filed by the Company at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains a website at http://www.sec.gov which contains reports and other information regarding registrants that file electronically with the SEC.
We are subject to the reporting requirements of the Exchange Act of 1934, as applied to foreign private issuers. Because we are a foreign private issuer, the SEC’s rules do not require us to deliver proxy statements or to file quarterly reports. In addition, our “insiders” are not subject to the SEC’s rules that prohibit short-swing trading. We prepare quarterly and annual reports containing consolidated financial statements in accordance with Central Bank Rules. Our annual consolidated financial statements are certified by an independent accounting firm.
We have appointed The Bank of New York to act as depositary for our ADSs. During the time the deposit agreement remains in force, we will furnish the depositary with:
•
our annual reports; and
•
summaries of all notices of general meetings of shareholders and other reports and communications that are made generally available to our shareholders.
The depositary will, as provided in the deposit agreement, if we so request, arrange for the mailing of summaries in English of the reports and communications to all record holders of our ADSs. Any record holder of ADSs may read the reports, notices, or summaries thereof, and communications at the depositary’s office located at 101 Barclay Street, New York, New York 10286.
I. Subsidiary Information
Not applicable.

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Item 11.
Quantitative and Qualitative Disclosure About Market Risk
Market Risk
Market risk is the risk of loss arising from fluctuations in financial markets variables such as interest rates, foreign exchange rates and other rates or prices. This risk is a consequence of our lending, trading and investments businesses and mainly consists of interest rate risk, foreign exchange risk and financial asset quotes.
We evaluate, upgrade and improve market risks measurements and controls on a daily basis. In order to measure significant market risks (whether they arise in trading or non-trading portfolios) we use the VaR methodology.
This methodology is based on statistical methods that take into account many variables that may cause a change in the value of our portfolios, including interest rates, foreign exchange rates, securities prices, volatility and any correlation among them.
VaR is an estimation of potential losses that could arise from reasonably likely adverse changes in market conditions. It expresses the maximum amount of loss expected (given confidence interval) over a specified time period, or “time horizon,” if that portfolio were held unchanged over that time period.
All VaR models, while forward-looking, are based on past events and are dependent upon the quality of available market data. The quality of our VaR’s models is therefore continuously monitored. As calculated by the Bank, VaR is an estimate of the expected maximum loss in the market value of a given portfolio over a five-day horizon at a one-tailed 99% confidence interval. We assume a five day holding period and adverse market movements of 2.32 standard deviations as the standard for risk measurement and comparison.
The following table shows the 5-day 99% confidence VaR for the Bank combined trading portfolios for the last two years (in millions of pesos):
2009 2010
Minimum
39.8 36.6
Maximum
67.2 72.5
Average
56.8 57.1
December 31
39.8 55.9
In order to take advantage of good trading opportunities we have sometimes increased risk, however during periods of uncertainty have also reduced it. The main source of our VaR was during 2010 the foreign exchange portfolio.
The following tables show the VaR for trading portfolio by categories for the last two years (in millions of pesos):
Currency risk for foreign exchange position 2009 2010
Minimum
18.2 19.6
Maximum
37.0 41.1
Average
29.3 29.2
December 31
22.0 19.7
Market risk for securities position 2009 2010
Minimum
12.9 12.9
Maximum
45.2 44.0
Average
27.5 27.9
December 31
17.8 36.2
Equity and Commodity Price Risk
Equity and commodity risks are the risks associated with adverse movements in the value of equity securities and commodities or related indexes. We do not have any material exposure to either of them.
Interest Rate Risk
Interest-rate risk is the effect on our net interest income of the fluctuations of market interest rates. Sensitivity to interest rate arises in our normal course of business as the repricing characteristics of its interest-earning assets do not necessarily match those of its interest-bearing deposits and other borrowings. The repricing structure of assets and liabilities is matched when an equal amount of assets and liabilities re-price for any given period. Any excess of assets or liabilities over these matched items results in a gap or mismatch.
Our interest rate sensitivity analysis measures the risk arising from the different sensitivity of assets and liabilities when interest rate changes occur (“duration” approach). It covers all the assets and liabilities excluding tradable portfolios.
In this case our VaR model or maximum potential loss in the net economic value of the portfolio of assets and liabilities due to interest rate risk increases, considers a 3-month horizon and with a confidence level of 99%.
Our methodology also captures the real interest rate risk, which is the risk arising from the mismatch produced as a consequence of an imperfect correlation between inflation rate movements and financing interest rate variations.

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The following table shows the 3-month 99% confidence VaR for the Bank combined interest rate position for last two years (in millions of pesos):
2009 2010
Minimum
198.3 180.1
Maximum
261.2 283.5
Average
227.8 243.8
December 31
198.3 283.5
For additional information regarding markert risk management see note 17 to our audited consolidated financial statements for the year ended December 31, 2010.
Item 12.
Description of Securities Other Than Equity Securities
A- Not applicable
B- Not applicable
C- Not applicable
D — American Depositary Shares
Fees and Charges Applicable to ADS Holders
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary also collects fees for making distributions to investors, by deducting those fees from amounts being distributed or by selling a portion of the distributable property to pay the fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
Persons depositing or withdrawing shares may be request to pay: For:
US$5.00 (or less) per 100 ADSs (or portion thereof)
• Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
• Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
A fee equivalent to the fee that would be payable if securities distributed had been shares and the shares had been deposited for issuance of ADSs US$02 (or less) per ADS (or portion thereof)
• Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders
• Any cash distribution to ADS registered holders
Registration fees
• Registration of transfer of shares on our stock registry to or from the name of the depositary or its nominee or the custodian, or its nominee when making deposits or withdrawals
Expenses of the depositary
• Cable, telex and facsimile transmissions
• Conversion of foreign currencies into U.S. dollars
Taxes and other governmental charges the depositary or the custodian, have to pay on any ADS or share underlying an ADS
• As necessary
Any charges incurred by the depositary or its agents, including
the custodian, for servicing the deposited securities
• As necessary
Fees and Direct and Indirect Payments Made by the Depositary to us
Past Fees and Payments
During 2010, we received from the depositary a reimbursement of US $75,000 for (i) investor relation expenses, (ii) annual NYSE listing fees, and (iii) standard out-of-pocket administrative, maintenance and shareholder service expenses for providing services to the registered American depositary receipts holders, consisting, without limitation, of expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls, incurred by us during the year ended December 31, 2009. In addition, the depositary waived the cost of various support services that it provided to us.
Future Fees and Payments
The depositary has agreed to reimburse us for expenses incurred by us in connection with the administration and maintenance of the ADSs program, including, but not limited to, investor relation expenses, annual NYSE listing fees or other program related expenses. The depositary has also agreed to pay its standard out-of-pocket administrative, maintenance and shareholder services expenses for providing services to the registered American depositary receipts holders, which consist, without limitation, of expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. There are limits and conditions on the amount of expenses for which the depositary will reimburse us, but the amount of such reimbursements is not necessarily tied to the amount of fees the depositary collects from investors. In addition, the depositary has waived the cost of various support services that it provides to us.

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We are expecting to receive from the depositary reimbursements for expenses incurred by us during the year ended December 31, 2010 by an amount of approximately US$200,000.
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
None.
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
Item 15.
Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2010. There are, as described below, inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Based upon and as of the date of our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act is recorded, processed, summarized and reported as and when required.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Bank is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Bank’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Bank’s internal control over financial reporting includes those policies and procedures that:
a)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Bank;
b)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Bank; and
c)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Bank’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Bank’s management assessed the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2010. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on its assessment and those criteria, the Bank’s management concluded that, as of December 31, 2010 the Bank’s internal control over financial reporting was effective.
The effectiveness of the Bank’s internal control over financial reporting as of December 31, 2010, has been audited by Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global), an independent registered public accounting firm, as stated in their report which appears herein.
Attestation Report of the Independent Registered Public Accounting Firm
The Bank’s independent registered public accounting firm, Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global), has issued an attestation report on the effectiveness of the Bank’s internal control over financial reporting. The report follows below:

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
BANCO MACRO S.A. and subsidiaries
Sarmiento 447
City of Buenos Aires
We have audited the internal control over financial reporting of BANCO MACRO S.A. (a bank organized under Argentine legislation) and its subsidiaries (the Bank) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Bank’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Bank’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, BANCO MACRO S.A. and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the consolidated balance sheets of BANCO MACRO S.A. and its subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2010 of BANCO MACRO S.A. and its subsidiaries, and our report dated May 17, 2011 expressed an unqualified opinion thereon.
City of Buenos Aires,
May 17, 2011
PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.
Member of Ernst & Young Global
CARLOS M. SZPUNAR
Partner
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16A.
Audit Committee Financial Expert
The Board of Directors has determined that Guillermo Eduardo Stanley, independent member of the audit committee, meets the attributes defined in Item 16A of Form 20-F for “audit committee financial experts”.
Item 16B.
Code of Ethics
In addition to the general code of conduct that applies to all of our employees, we have adopted a code of ethics that applies to directors and senior management, including specifically to our principal executive officers, and principal financial and accounting officer and controller, as well as persons performing similar functions. The text of our code of ethics for our principal executive officers and principal financial and accounting officer and controller is posted on our web site at: www.macro.com.ar /scp/codigoEtica.asp. There has been no change in our Code of Ethics during the period covered by this annual report.

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Item 16C.
Principal Accountant Fees and Services
Fees Paid to the Bank’s Principal Accountant
Since 2006 Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global) has served as our principal external auditor. Fees payable to Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global) in 2009 and 2010 are detailed below.
Thousands of pesos 2009 2010
Audit Fees
9,380 9,413
Audit Related Fees
240 276
Tax Fees
— —
All Other Fees
— 51
Total
9,620 9,740
Audit Fees
Audit fees were paid for professional services rendered by the auditors for the audit of our consolidated financial statements.
Audit-Related Fees
Audit-related fees are typically services that are reasonably related to the performance of the audit or review of the consolidated financial statements and are not reported under the audit fees item above. This item includes fees for attestation services on our financial information.
Tax Fees
The auditors do not provide any tax advice.
All Other Fees
Fees disclosed in the table above under “All Other Fees” consisted of other fees paid for professional services .
Audit Committee’s Pre-approval Policies and Procedures
Our audit committee is responsible for, among other things, the oversight of our independent auditors. During the year, the audit committee reviews together with management and the independent auditor, the audit plan, audit related services and other non-audit services and approves, at least on a yearly basis, the related fees.
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F.
Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G.
Corporate Governance
Companies listed on the NYSE must comply with certain standards regarding corporate governance as codified in Section 303A of NYSE’s Listed Company Manual, as amended. Nevertheless, the “Bank”, while a listed company, qualifies also as a foreign private issuer and, as such, is permitted to follow its home country corporate governance practices, governed by the Business Companies Law, Decree No. 677/01 and the Standards of the CNV, in lieu of the provisions of Section 303A, except that it is required to comply with Sections 303A.06, 303A.11 and 303A.12(b) and (c).
Accordingly:
(i) we must satisfy the audit committee requirements of Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) (Section 303A.06);

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(ii) we must provide a brief description of any significant differences between our corporate governance practices and those followed by U.S. companies under NYSE listing standards (Section 303A.11); and
(iii) (y) our Chief Executive Officer (as of the date hereof, Mr. Jorge Brito) must promptly notify the NYSE in writing after any executive officer of the Bank becomes aware of any non-compliance with the applicable NYSE corporate governance rules (Section 303A.12(b)); and (z) we must submit an executed written affirmation (in relation to the members of our audit committee) annually or interim written affirmations, if required to the NYSE (Section 303A.12(c)).
As required by Section 303A.11 of NYSE’s Listed Company Manual, the table below discloses any significant differences between the NYSE rules and the Bank’s corporate governance practices pursuant to Argentine corporate governance rules.
NYSE Corporate Governance Standards - Section 303.A Banco Macro Corporate Practices
303A.01-Independent Directors- Listed companies must have a majority of independent directors on its Board of Directors.
Neither Argentine law nor our by-laws require us to have a majority of independent directors.
303A.02-Independence Tests- This section establishes general standards to determine directors’ independence.
Pursuant to General Resolution No. 368/01 of the CNV, as amended (T.O. 2001), a director is not independent if such director is:
(a)  No director qualifies as “independent” unless the Board of Directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company).The Board of Directors is also required to identify which directors are independent and disclose the basis for that determination.

(b)  In addition, a director is not independent if:

A.  the director is or has been within the last three years, an employee, or an immediate family member is, or has been within the last three years, an executive officer, of the listed company, its parent or a consolidated subsidiary, other than employment as interim chairman or CEO or other executive officer;

B.  the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than U.S.$120,000 in direct compensation from the listed company, its parent or a consolidated subsidiary, other than director and committee fees and pension or other forms of deferred compensation for prior services (provided such compensation is not contingent in any way on continued service);

C.   (i) the director is a current partner or employee of a firm that is the listed company’s internal or external auditor; (ii) the director has an immediate family member who is a current partner of such firm; (iii) the director has an immediate family member who is a current employee of such firm and personally works on the company’s audit; or (iv) the director or an immediate family member was within the last three years a partner or employee of such firm and personally worked on the company’s audit within that time;

D.  the director, or an immediate family member is, or has been with the last three years, employed as an executive officer of another company where any of the listed company’s present executive officers at the same time serves or served on that company’s compensation committee;
E.  the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from the listed company its parent or a consolidated subsidiary for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of U.S.$1 million, or 2% of such other company’s consolidated gross revenues.

There is a three-year “look-back” period before non-independent directors can be considered independent.

“Immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, and anyone (other than domestic employees) who share such person’s home.
(a)  a member of management or an employee of shareholders who hold material holdings in the listed company or of other entities in which these shareholders have material holdings or over which these shareholders exercise a material influence;

(b)  is currently an employee or has, in the last three years, been an employee of the listed company;

(c)  a person who has a professional relationship or is part of a company or professional association that maintains professional relations with, or that receives remunerations or fees (other than directors’ fees) from, the listed company or from shareholders that have material holdings in the listed company, or with a company in which such shareholders have material holdings or exercise a material influence;

(d)  a person who has material holdings in the listed company or in an entity that has material holdings in, or exercises a material influence over, the listed company;

(e)  a person who provides goods or services to the listed company or to shareholders that have material holdings in or exercise a material influence over the listed company and receives compensation for such services that is substantially higher than that received as director of the listed company; or

(f)  the member is married or is a family member to an individual who would not qualify as independent.

“Material holdings” are shareholdings, either directly or indirectly, that represent at least 35% of the capital stock of the relevant entity, or a smaller percentage when the person has the right to elect one or more directors per class of shares or by having entered into agreements with other shareholders relating to the governance and the management of the relevant entity or of its controlling shareholders.
303A.03-Executive Sessions- Non-management directors of each listed company must meet at regularly scheduled executive sessions without management.
Neither Argentine law nor our by-laws require the holding of such meetings and we do not hold non-management directors meetings.

Our by-laws provide, however, that the board shall meet as often as required by the interests of the Bank and at least once a month.
303A.04-Nominating/Corporate Governance Committee- Listed companies must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties.
Neither Argentine law nor our by-laws require the establishment of a nominating/corporate governance committee. Although our by-laws provide the possibility to create a nominating/corporate governance committee, the Bank does not have a nominating/corporate governance committee.
Directors are nominated and appointed by the shareholders.

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NYSE Corporate Governance Standards - Section 303.A Banco Macro Corporate Practices
303A.05-Compensation Committee- Listed companies must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties.
Neither Argentine law nor our by-laws require the establishment of a compensation committee. We do not have a compensation committee.

The compensation of our directors is determined at the annual ordinary shareholders’ meeting. Additionally, the audit committee must issue an opinion regarding the reasonableness and adequacy of such compensation.
303A.06/07-Audit Committee/Requirements- Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act.
(a)  The audit committee must have a minimum of three members. All of its members shall be financially literate or must acquire such financial knowledge within a reasonable period and at least one of its members shall have experience in accounting or financial administration. In addition to any requirement of Rule 10A-3(b)(1), all audit committee members must satisfy the independence requirements set out in Section 303A.02.

(b)  The audit committee must have a written charter that establishes the duties and responsibilities of its members, including, at a minimum, some of the duties and responsibilities required by Rule 10A-3 of the Exchange Act and the following responsibilities set forth in NYSE Sections 303A.07(c)(iii)(A)-H) of the NYSE Manual.

A.  at least annually, obtain and review a report by the independent auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditor’s independence) all relationships between the independent auditor and the listed company;

B.  meet to review and discuss the listed company’s annual audited consolidated financial statements and quarterly financial statements with management and the independent auditor, including reviewing the company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

C.  discuss the listed company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;

D.  discuss policies with respect to risk assessment and risk management;

E.  meet separately, periodically, with management, with internal auditors (or other personnel responsible for the internal audit function) and with independent auditors;

F.   review with the independent auditor any audit problems or difficulties and management’s response;

G.  set clear hiring policies for employees or former employees of the independent auditors; and

H.  report regularly to the Board of Directors.

(c)  303A.07(c) provides that each listed company must have an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control.

If a member of the audit committee is simultaneously a member of the audit committee of more than three public companies, and the listed company does not limit the number of audit committees on which its members may serve, then, in each case the Board of Directors shall determine whether the simultaneous service would prevent such members from effectively serving on the listed company’s audit committee, and shall disclose in the annual proxy statement of the company or in the company’s annual report on Form 10-K, which is filed with the SEC.
(a)  Argentine law requires that the audit committee be composed of three or more members from the Board of Directors (with a majority of independent directors), all of whom must be well-versed in business, financial or accounting matters. In addition, we are not required to satisfy the audit committee requirements of Rule 10A-3. All of the members of our Audit Committee, as appointed on May 7, 2010, satisfy the independence requirements of Rule 10A-3.

(b)  A comparable provision, relating to an audit committee member’s simultaneous membership on the audit committee of other public companies, does not exist under Argentine law or CNV standards.

(c)  The responsibilities of an audit committee, as provided in Decree No. 677/2001 and the CNV standards, are essentially the same as those provided for under Rule 10A-3 of the Exchange Act, including, but not limited to, the following:

A.  discussing the adequacy of its charter and reporting any proposed changes to the Board of Directors;

B.  overseeing the performance of internal control systems, the administrative-accounting system and of all financial information or other facts which could be submitted to the controlling authorities in compliance with the applicable reporting regime;

C.  issuing an opinion about the Board of Directors’ proposal for the appointment of the external auditors to be retained by the Bank, and ensuring that auditors are objective and independent;

D.  reviewing external and internal auditors’ plans, evaluating their performance, and issuing an opinion to that end;

E.  analyzing the different services provided by the external auditors;

F.  reporting on the fees invoiced by external auditors for other related services that secure third-party reliability;

G.  supervising the enforcement of the Bank’s risk management information policies;

H.  providing the market with full disclosure with respect to transactions that give rise to conflict of interests with the Bank’s members or controlling shareholders;

I.  issuing an opinion on the reasonableness of any proposal regarding Directors, management fees and stock option plans proposed by the Board of Directors;

J.  issuing an opinion on the compliance with applicable legal requirements and on the reasonableness of the terms of any issuance of stock or convertible securities that exclude or limit shareholders’ preferential subscription rights;

K.  assessing compliance with relevant rules of conduct;

L.  issuing a related-party transaction opinion as provided by applicable regulations;

M.  preparing an performance plan annually for each fiscal year which is presented to the Bank’s Board of Directors and the Supervisory Committee; and

N.  complying with all other obligations imposed by applicable laws and regulations.
303A.08-Shareholder Approval of Equity Compensation Plans- Shareholders must be given the opportunity to vote on equity -compensation plans and material revisions thereto, except for employment inducement awards, certain grants, plans and amendments in the context of mergers and acquisitions, and certain specific types of plans as set forth in the NYSE rules.
We do not currently offer equity-based compensation to our directors, executive officers or employees, and have no policy on this matter.
303A.09-Corporate Governance Guidelines- Listed companies must adopt and disclose corporate governance guidelines.
Neither Argentine law nor our by-laws require the adoption or disclosure of corporate governance guidelines. The CNV, through General Resolution 516/07, issued a recommended Code of Corporate Governance for listed companies. Using the CNV recommended code as basis, on June 3, 2009, our Board of Directors approved a Code of Corporate Governance for the Bank.

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NYSE Corporate Governance Standards - Section 303.A Banco Macro Corporate Practices
303A.10-Code of Business Conduct and Ethics- Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.
Neither Argentine law nor our by-laws require the adoption or disclosure of a code of business conduct. We, however, have adopted a code of business conduct that applies to all our employees. In addition, we have adopted a specific Code of Ethics for our Directors and Senior Financial Officers.
303A.12 Certification Requirements-
(a)  Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards, qualifying the certification to the extent necessary.

(b)  Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any non-compliance with any applicable provisions of this Section 303A.

(c)   Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim written affirmation as and when required by the interim written affirmation form specified by the NYSE.
Comparable provisions do not exist under Argentine law and CNV standards.

Nevertheless, the Bank has complied with the certification requirements under Section 303A.12 of the NYSE rules.
PART III
Item 17.
Financial Statements
We have responded to Item 18 in lieu of responding to this Item.
Item 18.
Financial Statements
See pages F-1 through F-100 of this annual report.
Item 19.
Exhibits
EXHIBIT INDEX
Exhibit
Number 		Description
1.1
Amended and Restated Bylaws of the Bank, as amended on April 21, 2009 is incorporated by reference to the annual report on Form 20-f filed on June 1 st , 2010 (File No. 001-32827).
2.1
Deposit Agreement among the registrant, The Bank of New York, as depositary, and the holders from time to time of American depositary shares issued thereunder, including the form of American depositary receipts, incorporated by reference to the Registration Statement on Form F-1, as amended, filed by the Bank on March 20, 2006 (File No. 333-130901).
8
See Note 4.1 to our audited consolidated financial statements for information regarding our subsidiaries.
12.1 *
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2 *
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1 *
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2 *
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*
Filed herein

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SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
BANCO MACRO S.A.
By: /s/ Jorge Horacio Brito
Name: Jorge Horacio Brito
Title: Chief Executive Officer
Date: May 17, 2011

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(MACRO LOGO)
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE YEARS ENDED DECEMBER 31, 2010, TOGETHER WITH THE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

F - 1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
BANCO MACRO S.A. and subsidiaries
Sarmiento 447
City of Buenos Aires
We have audited the accompanying consolidated balance sheets of BANCO MACRO S.A. (a bank organized under Argentine legislation) and its subsidiaries (the Bank) as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Bank’s Management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BANCO MACRO S.A. and its subsidiaries as of December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in accordance with Central Bank of Argentine Republic rules applicable to the consolidated financial statements, which differ in certain respects from the accounting principles generally accepted in the United States of America (see note 32 to the consolidated financial statements).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the internal control over financial reporting of BANCO MACRO S.A. and its subsidiaries as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 17, 2011 expressed an unqualified opinion thereon.
City of Buenos Aires,
May 17, 2011
PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.
Member of Ernst & Young Global
CARLOS M. SZPUNAR
Partner

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BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
(Figures stated in thousands of pesos)
2010 2009 (1)
ASSETS
CASH
Cash on hand
1,406,971 1,304,922
Due from banks and correspondents
Central Bank of Argentina
3,089,851 2,910,020
Local Others
17,446 11,454
Foreign
687,487 789,559
Other
249 237
5,202,004 5,016,192
GOVERNMENT AND PRIVATE SECURITIES
Holdings in investment accounts
— 659,371
Holdings for trading or financial intermediation
532,582 464,851
Government securities under repo transactions with Central Bank or Argentina
2,299,088 1,046,220
Unlisted government securities
175,053 79,449
Instruments issued by the Central Bank of Argentina
4,005,766 4,650,421
Investments in listed private securities
17,588 773
Less: Allowances
(3 ) (44 )
7,030,074 6,901,041
LOANS
To the non-financial government sector
336,430 206,484
To the financial sector
Interbank financing
110,100 50,000
Other financing to Argentine financial institutions
45,100 40,442
Accrued interest, adjustments, foreign exchange and quoted price differences receivables
501 474
To the non-financial private sector and foreign residents
Overdrafts
2,032,986 1,436,292
Documents
1,805,226 1,412,551
Mortgage loans
902,734 746,762
Pledged loans
347,321 262,508
Personal loans
5,802,442 4,006,592
Credit cards
1,553,183 950,098
Other
3,302,223 2,271,756
Accrued interest, adjustments, foreign exchange and quoted price differences receivables
216,888 182,168
Less: Unposted payments
— (29 )
Less: Unearned discount
(30,121 ) (21,246 )
Less: Allowances
(514,910 ) (448,045 )
15,910,103 11,096,807
(1)
See Note 4.2. to the accompanying consolidated financial statements.

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(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
(Figures stated in thousands of pesos)
2010 2009 (1)
OTHER RECEIVABLES FROM FINANCIAL INTERMEDIATION
Central Bank of Argentina
2,545,880 1,284,709
Amounts receivable from spot and forward sales pending settlement
248,714 37,042
Securities and foreign currency receivable from spot and forward purchases pending settlement
77,567 536,560
Unlisted corporate bonds
279,306 123,793
Receivables from forward transactions without delivery of underlying asset
2,840 5,295
Other receivables not covered by debtors classification standards
642,223 635,280
Other receivables covered by debtors classification standards
40,280 41,835
Less: Allowances
(237,513 ) (231,219 )
3,599,297 2,433,295
RECEIVABLES FROM FINANCIAL LEASES
Receivables from financial leases
249,081 271,470
Accrued interest and adjustments
4,339 6,230
Less: Allowances
(6,021 ) (3,649 )
247,399 274,051
INVESTMENTS IN OTHER COMPANIES
In financial institutions
557 531
Other
10,789 10,925
Less: Allowances
(1,676 ) (1,497 )
9,670 9,959
OTHER RECEIVABLES
Receivables from sale of assets
7,229 12,231
Minimum presumed income tax — Tax credit
— 10,280
Other
605,691 357,483
Accrued interest and adjustments on receivables from sale of assets
330 481
Other accrued interest and adjustments
290 —
Less: Allowances
(16,529 ) (13,980 )
597,011 366,495
BANK PREMISES AND EQUIPMENT, NET
445,531 433,625
OTHER ASSETS
181,256 114,342
INTANGIBLE ASSETS
Goodwill
100,945 55,045
Organization and development costs, including Differences due to court orders
196,352 155,529
297,297 210,574
ITEMS PENDING ALLOCATION
4,765 2,857
TOTAL ASSETS
33,524,407 26,859,238
(1)
See Note 4.2. to the accompanying consolidated financial statements.

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(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
(Figures stated in thousands of pesos)
2010 2009 (1)
LIABILITIES
DEPOSITS
From the non-financial government sector
5,216,109 3,613,924
From the financial sector
15,776 14,052
From the non-financial private sector and foreign residents
Checking accounts
4,178,758 3,275,826
Savings accounts
4,526,697 3,445,577
Time deposits
8,714,101 7,711,471
Investment accounts
178,010 52,286
Other
518,807 416,503
Accrued interest, adjustments, foreign exchange and quoted price differences payables
59,135 63,227
23,407,393 18,592,866
OTHER LIABILITIES FROM FINANCIAL INTERMEDIATION
Central Bank of Argentina — Other
1,877 1,897
Banks and international institutions
45,506 219,743
Non-subordinated Corporate Bonds
620,071 601,016
Amounts payable for spot and forward purchases pending settlement
93,609 492,183
Securities and foreign currency to be delivered under spot and forward sales pending settlement
2,561,740 1,076,047
Put options sold premiums
398 80
Financing received from Argentine financial institutions
Interbank financing
30,068 145,000
Other financing received from Argentine financial institutions
17,278 18,957
Accrued interest payables
25 78
Forward transactions amounts pending settlement without delivery of underlying asset
755 —
Other
1,173,873 732,686
Accrued interest, adjustments, foreign exchange and quoted price differences payables
46,083 50,383
4,591,283 3,338,070
OTHER LIABILITIES
Fees
447 624
Other
633,244 883,458
633,691 884,082
PROVISIONS
105,830 88,275
SUBORDINATED CORPORATE BONDS
598,470 572,473
ITEMS PENDING ALLOCATION
7,399 3,987
MINORITY INTEREST IN SUBSIDIARIES
27,499 20,684
TOTAL LIABILITIES
29,371,565 23,500,437
SHAREHOLDERS’ EQUITY
4,152,842 3,358,801
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
33,524,407 26,859,238
(1)
See Note 4.2. to the accompanying consolidated financial statements.
The accompanying Notes 1 through 32 to the consolidated financial statements
are an integral part of these statements.

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(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
MEMORANDUM ACCOUNTS
(Figures stated in thousands of pesos)
2010 2009 (1)
DEBIT-BALANCE ACCOUNTS
15,219,447 12,204,355
Contingent
5,542,009 4,430,261
Guarantees received
5,197,200 3,963,188
Other not covered by debtors classification standards
229 359
Contingent debit-balance contra accounts
344,580 466,714
Control
7,835,246 6,152,834
Receivables classified as irrecoverable
845,119 797,220
Other
6,745,666 5,094,428
Control debit-balance contra accounts
244,461 261,186
Derivatives
1,022,181 1,033,601
Notional value of put options taken
— 25,229
Notional value of forward transactions without delivery of underlying asset
555,897 461,234
Interest rate swap
157,066 157,917
Derivatives debit-balance contra accounts
309,218 389,221
Trust activity
820,011 587,659
Trust funds
820,011 587,659
(1)
See Note 4.2. to the accompanying consolidated financial statements.

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(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
MEMORANDUM ACCOUNTS
(Figures stated in thousands of pesos)
2010 2009 (1)
CREDIT-BALANCE ACCOUNTS
(15,219,447 ) (12,204,355 )
Contingent
(5,542,009 ) (4,430,261 )
Credit lines granted (unused portion) covered by debtors classification standards
(57,533 ) —
Other guarantees provided covered by debtors classification standards
(66,192 ) (85,213 )
Other guarantees provided not covered by debtors classification standards
(130,684 ) (130,826 )
Other covered by debtors classification standards
(90,171 ) (250,675 )
Contingent credit-balance contra accounts
(5,197,429 ) (3,963,547 )
Control
(7,835,246 ) (6,152,834 )
Checks to be credited
(244,461 ) (261,186 )
Control credit-balance contra accounts
(7,590,785 ) (5,891,648 )
Derivatives
(1,022,181 ) (1,033,601 )
Notional value of call options sold
(17,587 ) (32,905 )
Notional value of put options sold
(54,780 ) (69,900 )
Notional value of forward transactions without delivery of underlying asset
(236,851 ) (286,416 )
Derivatives credit-balance contra accounts
(712,963 ) (644,380 )
Trust activity
(820,011 ) (587,659 )
Trust activity credit-balance contra accounts
(820,011 ) (587,659 )
(1)
See Note 4.2. to the accompanying consolidated financial statements.
The accompanying Notes 1 through 32 to the consolidated financial statements
are an integral part of these statements.

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BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Figures stated in thousands of pesos)
2010 2009 (1) 2008 (1)
FINANCIAL INCOME
Interest on cash and due from banks
275 363 7,010
Interest on loans to the financial sector
13,668 7,491 15,584
Interest on overdrafts
278,851 340,275 357,215
Interest on documents
146,321 195,069 184,852
Interest on mortgage loans
112,498 104,016 97,057
Interest on pledged loans
51,258 55,081 64,499
Interest on credit card loans
210,058 183,369 117,952
Interest on financial leases
42,991 49,433 73,481
Interest on other loans
1,538,828 1,243,788 1,032,837
Interest on other receivables from financial intermediation
966 74 14,416
Income from government and private securities, net
988,707 1,370,981 641,299
Income from guaranteed loans — Presidential Decree No. 1,387/01
62,053 7,232 37,043
Net income from options
616 — 261
CER (Benchmark Stabilization Coefficient) adjustment
46,176 18,652 70,477
CVS (Salary Variation Coefficient) adjustment
688 728 818
Difference in quoted prices of gold and foreign currency
160,209 133,731 143,094
Other
74,275 150,169 171,965
3,728,438 3,860,452 3,029,860
FINANCIAL EXPENSE
Interest on checking accounts
4,073 16,423 17,708
Interest on savings accounts
19,639 17,094 14,534
Interest on time deposits
954,465 1,146,013 933,881
Interest on interfinancing received loans (received call)
4,444 2,679 3,909
Interest on other financing from financial institutions
6 62 28
Interest on other liabilities from financial intermediation
62,889 81,510 91,083
Interest on subordinated bonds
57,381 54,874 47,523
Other interest
1,961 2,692 8,762
Net expense from options
— 1 —
CER adjustment
4,890 4,341 32,946
Contribution to Deposit Guarantee Fund
35,151 30,038 25,945
Other
185,271 155,880 165,743
1,330,170 1,511,607 1,342,062
GROSS INTERMEDIATION MARGIN — GAIN
2,398,268 2,348,845 1,687,798
PROVISION FOR LOAN LOSSES
215,040 197,512 297,606
SERVICE-CHARGE INCOME
Related to lending transactions
96,574 60,741 63,669
Related to deposits
816,100 669,564 587,259
Other commissions
31,084 29,136 23,695
Other
380,783 290,834 217,077
1,324,541 1,050,275 891,700
(1)
See Note 4.2. to the accompanying consolidated financial statements.

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(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Figures stated in thousands of pesos)
2010 2009 (1) 2008 (1)
SERVICE-CHARGE EXPENSE
Commissions
80,233 59,216 54,215
Other
205,132 167,383 118,186
285,365 226,599 172,401
ADMINISTRATIVE EXPENSES
Personnel expenses
1,233,898 966,963 798,236
Directors’ and statutory auditors’ fees
59,391 36,413 26,941
Other professional fees
81,169 65,533 55,012
Advertising and publicity
63,437 46,861 53,178
Taxes
102,547 79,784 70,994
Depreciation of equipment
58,285 53,993 50,543
Amortization of organization costs
43,273 33,317 25,557
Other operating expenses
248,430 216,128 170,926
Other
26,884 23,428 18,615
1,917,314 1,522,420 1,270,002
NET INCOME FROM FINANCIAL INTERMEDIATION
1,305,090 1,452,589 839,489
OTHER INCOME
Income from long-term investments
6,168 7,618 25,847
Penalty interest
26,775 23,884 14,982
Recovered loans and allowances reversed
69,981 46,921 94,490
CER adjustment
107 74 95
Other
64,492 43,480 53,036
167,523 121,977 188,450
OTHER EXPENSE
Penalty interest and charges payable to the Central Bank of Argentina
20 20 181
Charge for other receivables uncollectibility and other allowances
32,517 21,275 37,242
Amortization of differences from deposits dollarization
17,475 20,633 29,509
Depreciation and loss of other assets
3,662 6,847 2,151
Goodwill amortization
10,305 8,432 8,439
Other
25,561 101,087 25,806
89,540 158,294 103,328
MINORITY INTEREST IN SUBSIDIARIES
(6,868 ) (5,092 ) (3,354 )
INCOME BEFORE INCOME TAX
1,376,205 1,411,180 921,257
INCOME TAX
365,775 659,250 261,207
NET INCOME FOR THE FISCAL YEAR
1,010,430 751,930 660,050
NET INCOME PER SHARE (2) — stated in pesos
1.70 1.26 1.00
(1)
See Note 4.2. to the accompanying consolidated financial statements.
(2)
See Note 9. to the accompanying consolidated financial statements.
The accompanying Notes 1 through 32 to the consolidated financial statements
are an integral part of these statements.

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(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Figures stated in thousands of pesos)
Adjustments Earnings reserved
Capital Stock to Special
stock issuance Shareholders’ Corporate Unappropriated
Changes (1) premium equity Legal Bonds Voluntary earnings (1) Total
Balances as of December 31, 2007
685,127 398,750 4,511 382,705 — 211 1,241,716 2,713,020
Distribution of unappropriated earnings, as approved by the Shareholders’ Meeting held on April, 29,2008:
- Legal reserve
99,038 (99,038 )
- Cash dividends (2)
(170,995 ) (170,995 )
- Special reserve — Corporate Bonds (3)
46,083 (46,083 )
Reversal of Special Reserve - Corporate Bonds (3)
(46,083 ) 46,083
Own shares reacquired (4)
(380,164 ) (380,164 )
Net income for the fiscal year
660,050 660,050
Balances as of December 31, 2008
685,127 398,750 4,511 481,743 — 211 1,251,569 2,821,911
Own shares reacquired (4)
(56,665 ) (56,665 )
Capital Stock decrease approved by the Shareholders’ Meeting of April 21, 2009 (4)
(60,000 ) 60,000
Capital stock decrease approved by the Shareholders’ meeting of September 10, 2009 (4)
(30,642 ) 30,642
Distribution of unappropriated earnings, as approved by the Shareholders’ Meeting held on May, 12,2009:
- Legal reserve
132,010 (132,010 )
- Cash dividends (2)
(148,335 ) (148,335 )
- Special reserve — Corporate Bonds (3)
50,510 (50,510 )
- Tax on Personal Assets
(10,040 ) (10,040 )
Reversal of Special Reserve - Corporate Bonds (3)
(50,510 ) 50,510
Net income for the fiscal year
751,930 751,930
Balances as of December 31, 2009
594,485 398,750 4,511 613,753 — 211 1,747,091 3,358,801

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(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Figures stated in thousands of pesos)
Adjustments Earnings reserved
Capital Stock to Special
stock issuance shareholders’ Corporate Unappropriated
Changes (1) premium equity Legal Bonds Voluntary earnings (1) Total
Distribution of unappropriated earnings, as approved by the Shareholders’ Meeting held on April, 6,2010:
- Legal reserve
150,387 (150,387 )
- Cash dividends (2)
(208,070 ) (208,070 )
- Special reserve — Corporate Bonds (3)
55,527 (55,527 )
- Tax on Personal Assets
(8,319 ) (8,319 )
Reversal of Special Reserve - Corporate Bonds (3)
(55,527 ) 55,527
Net income for the fiscal year
1,010,430 1,010,430
Balances as of December 31, 2010
594,485 398,750 4,511 764,140 — 211 2,390,745 4,152,842
(1)
Includes the retroactive accounting effects of legal merger of Nuevo Banco Bisel S.A. mentioned in Note 3.6. The legal capital structure is described in Note 9. to the accompanying consolidated financial statements. See Notes 3.6 and 4.2 to the accompanying consolidated financial statements.
(2)
Through resolutions of April 11, 2008, September 4, 2009 and May 28, 2010, respectively, the Central Bank authorized the above mentioned cash dividends distribution.
(3)
See Note 10. to the accompanying consolidated financial statements
(4)
See Notes 4.4.q.2) and 9. to the accompanying consolidated financial statements
The accompanying Notes 1 through 32 to the consolidated financial statements
are an integral part of these statements.

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BANCO MACRO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Figures stated in thousands of pesos)
2010 2009 (1) 2008 (1)
Changes in cash and cash equivalents
Cash and cash equivalents at beginning of fiscal year
5,396,063 3,523,897 3,117,426
Cash and cash equivalents at end of fiscal year
5,990,480 5,396,063 3,523,897
Net increase in cash and cash equivalents
594,417 1,872,166 406,471
Causes of changes in cash and cash equivalents
Operating activities
Net collections / (payments):
- Government and private securities
3,131,177 (516,662 ) 80,038
- Loans
- to the financial sector
(51,069 ) (2,801 ) 95,190
- to the non-financial government sector
(24,793 ) 58,098 66,026
- to the non-financial private sector and foreign residents
(2,224,016 ) 1,630,838 236,273
- Other receivables from financial intermediation
(1,769,683 ) (228,120 ) (53,947 )
- Receivables from financial leases
67,018 170,624 85,202
- Deposits
- from the financial sector
1,725 (8,386 ) 10,705
- from the non-financial government sector
1,531,907 (532,281 ) 1,981,008
- from the non-financial private sector and foreign residents
2,011,260 2,083,281 (668,310 )
- Other liabilities from financial intermediation
- financing facilities from the financial sector (received calls)
(119,490 ) 117,083 (866 )
- others (except liabilities included under financing activities)
188,107 475,800 (91,712 )
Collections related to service-change income
1,312,098 1,043,723 882,354
Payments related to service-charge expenses
(278,375 ) (220,860 ) (168,091 )
Administrative expenses paid
(1,780,237 ) (1,405,088 ) (1,120,663 )
Payments of organization and development expenses
(79,155 ) (44,144 ) (45,258 )
Net collections from penalty interest
26,756 23,874 14,801
Differences from payments related to court orders
(20,570 ) (30,327 ) (16,733 )
Collections of dividends from other companies
6,369 6,397 26,939
Other collections/(payments) related to other income and losses
64,149 (25,351 ) (12,831 )
Net (payments) / collections from other operating activities
(115,183 ) (38,934 ) 6,636
Payment of income tax / minimum presumed income tax
(726,269 ) (350,396 ) (81,967 )
Net cash flows generated in operating activities
1,151,726 2,206,368 1,224,794
Investing activities
Net payments for bank premises and equipment
(57,434 ) (34,329 ) (72,819 )
Net (payments) / collections for other assets
(69,191 ) (1,080 ) 23,731
Payments from purchases of investments in other companies
(91,857 ) — (635 )
Collections from sales of investments in other companies
— 150 922
Other collections/(payments) for investing activities
12,077 (8,138 ) 5,032
Net cash flows used in investing activities
(206,405 ) (43,397 ) (43,769 )
Financing activities
Net (payments) / collections:
- Non-subordinated corporate bonds
(56,372 ) (108,424 ) (133,211 )
- Central Bank of Argentina
- Other
(19 ) (76,814 ) (79,206 )
- Banks and International Institutions
(176,042 ) (22,318 ) 47,204
- Subordinated corporate bonds
(58,827 ) (56,225 ) (18,397 )
- Financing received from Argentine financial institutions
(1,685 ) (5,171 ) (63,489 )
Payment of dividends
(208,124 ) (148,350 ) (171,004 )
Other payments from financing activities
- Own shares reacquired
— (56,665 ) (380,164 )
Net cash flows used in financing activities
(501,069 ) (473,967 ) (798,267 )
Financial income and holding gains on cash and cash equivalents
150,165 183,162 23,713
Net increase in cash and cash equivalents
594,417 1,872,166 406,471
(1)
See Note 4.2. to the accompanying consolidated financial statements.
The accompanying Notes 1 through 32 to the consolidated financial statements
are an integral part of these statements

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2010 AND 2009
(Figures stated in thousands of pesos, except otherwise indicated)
1.
OVERVIEW OF THE BANK
Macro Compañía Financiera S.A. was created in 1977 as a non-banking financial institution. In May 1988, it received the authorization to operate as a commercial bank and it was incorporated as Banco Macro S.A. Subsequently, as a result of the merger process with other entities, it adopted other names (among them, Banco Macro Bansud S.A.) and since August 2006, Banco Macro S.A. (hereinafter, the Bank).
Banco Macro S.A.’s shares have been publicly listed on the BCBA (Buenos Aires Stock Exchange) since November 1994, and in March 24, 2006, it listed its shares on the New York Stock Exchange.
Since 1994, Banco Macro S.A.’s market strategy was mainly focused on the regional areas outside the City of Buenos Aires. Following this strategy, in 1996, Banco Macro S.A. started to acquire entities and assets and liabilities during the privatization of provincial and other banks.
In 2001, 2004 and 2006, the Bank acquired control of Banco Bansud S.A., Nuevo Banco Suquía S.A. and Nuevo Banco Bisel S.A. (see Note 3.6), respectively. Such entities merged with and into Banco Macro S.A. on December 2003, October 2007 and August 2009, respectively.
During fiscal years 2006 and 2010, Banco Macro S.A. acquired control of Banco del Tucumán S.A., and Banco Privado de Inversiones S.A. (see Note 3.7), respectively.
The Bank currently offers traditional bank products and services to companies, including those operating in regional economies, as well as to individuals, thus reinforcing the Bank’s objective to be a multi-services bank.
In addition, the Bank performs certain transactions through its subsidiaries, including mainly Banco del Tucumán S.A., Banco Privado de Inversiones S.A., Macro Bank Limited (an entity organized under the laws of Bahamas), Macro Securities S.A. Sociedad de Bolsa, Sud Inversiones & Análisis S.A. and Macro Fondos SGFCI S.A.
The chart showing the organizational structure as of December 31, 2010 is disclosed in Note 4.1. with the percentages indicating the ownership in each subsidiary.
2.
CHANGES IN THE ARGENTINE MACROECONOMIC ENVIRONMENT AND THE SITUATIONS OF THE FINANCIAL SYSTEM AND THE BANK
The financial and capital markets
During the year 2008 the financial markets of the world’s leading countries were rocked by volatility, lack of liquidity and credit. Consequently, a worldwide economic deceleration was evidenced by stock indexes on international markets. Instead, in early 2009, although signs of a tendency towards normalcy or initiation of a globaleconomic recovery are not consolidated, this situation began turning around, showing signs of stabilization and registering improvements in financial markets and a decrease in market volatility. However, they have not fully recovered and there are still high volatility levels.
In Argentina, stock markets had shown decreases in the prices of government and private securities, as well as increases in interest rates, the country risk and in foreign exchange rates, and the effects of the mentioned economic deceleration began to show. Furthermore, on October, 2008, the AFJP (private pension fund managers) system was brought to an end. Starting from the second half of 2009, the abovementioned situation began a reversal process as the country risk premium has dropped, government securities registered significant rises in their listed prices and the foreign exchange and interest rates reduced their volatility. Subsequently, during the second quarter of 2010, the Argentine Government restructured of the government debt that had not been restructured upon the 2005 exchange.
The accompanying consolidated financial statements should be read considering the circumstances previously mentioned.

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Legal actions
The Argentine economic and financial situation worsened in late 2001, when the Argentine government suspended payments on the sovereign debt and imposed severe restrictions on cash withdrawals from financial institutions.
The measures adopted by the Federal Executive Government with respect to the public emergency in political, economic, financial and foreign exchange matters (mainly, pesification of deposits denominated in US dollars) triggered a number of legal actions (known as recursos de amparo — constitutional rights protection actions), brought by individuals and companies against the Federal Government, the Central Bank and the financial institutions.
On December 27, 2006, the Argentine Supreme Court revoked prior instance judgments that ordered the reimbursement of deposits in US dollars and decided that depositors are entitled to reimbursement of their deposits switched to pesos at the Ps. 1.40-to-USD 1 exchange rate, adjusted by the CER through the payment date, and interest should be applied to such amount at a 4% rate p.a., which may not be compounded through the payment date.
As regards courts deposit in US dollars, on March 20, 2007, the Argentine Supreme Court ruled that principal should be reimbursed with no deterioration in value whatsoever, and that the sums should be kept in their original currency.
Taken into account the Central Bank rules (see Note 4.4.l.2)), as of December 31, 2010, and 2009, the Bank booked in “Intangible assets” the amounts of 54,680 and 50,532, respectively, net of related amortizations, with respect to the payments and provisions made by the bank in relation to the previous order.
Additionally, as of December 31, 2010 and 2009, the Bank recorded the additional liability (representing the difference between the original deposit and the amount capitalized as intangible asset) related to such regulation under the “Provisions” account in the amount of 14,473 and 19,979, respectively. Considering what has been mentioned in Note 4.4.l.2), the Bank’s Management believes that there would be no significant effects, other than those recognized in accounts, that could derive from the final outcome of such actions.
3.
BANK OPERATIONS
3.1.
Agreement with the Misiones Provincial Government
The Bank and the Misiones Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a term of five years since January 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.
In addition, on November 25, 1999, and on December 28, 2006, extensions to such agreement were agreed upon, making it currently effective through December 31, 2019.
As of December 31, 2010 and 2009, the deposits of the Misiones Provincial Government amounted to 900,550 and 458,678 (including 67,177 and 61,159 related to court deposits), respectively.
3.2.
Agreement with the Salta Provincial Government
The Bank and the Salta Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a term of ten years since March 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.
In addition, on February 22, 2005, such agreement was extended through March 1, 2016.
As of December 31, 2010 and 2009, the deposits of the Salta Provincial Government amounted to 719,785 and 259,912 (including 108,853 and 111,370 related to court deposits), respectively.

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3.3.
Agreement with the Jujuy Provincial Government
The Bank and the Jujuy Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a ten-year term since January 12, 1998, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.
Additionally, on April 29, 2005, such agreement was extended through November 4, 2014.
As of December 31, 2010 and 2009, the deposits of the Jujuy Provincial Government amounted to 516,077 and 347,028 (including 61,182 and 54,815 related to court deposits), respectively.
3.4.
Agreements with Tucumán Provincial and Municipal Governments
Banco del Tucumán S. A. executed special-relationship agreements with the Government of the Province of Tucumán and with the Municipality of San Miguel de Tucumán, appointing it their exclusive financial agent, as well as revenue collection and obligation payment agent, through 2011 and 2013, respectively.
In addition, on June 30, 2010, the services agreement with the Tucumán Provincial Government was extended through July 8, 2021.
As of December 31, 2010 and 2009, the deposits held by the Tucumán Provincial Government and the Municipality of San Miguel del Tucumán in Banco del Tucumán S.A. amounted to 874,498 and 426,832 (including 298,841 and 271,381 related to court deposits), respectively.
3.5.
Uniones Transitorias de Empresas (joint ventures)
a)
Banco Macro S.A. — Siemens Itron Business Services S.A.
On April 7, 1998, the Bank entered into a joint venture agreement with Siemens Itron Business Services S.A. in which each holds a 50% equity interest, whereby a provincial data processing center would be provided to manage tax-related issues, to modernize tax collection systems and procedures in the Province of Salta, and to manage and perform the recovery of taxes and municipal assessments payable.
b)
Banco Macro Bansud S.A. — Montamat & Asociados S.R.L.
On October 22, 2004, the Bank entered into a joint venture agreement with Montamat & Asociados S.R.L under the name “BMB M&A — Unión Transitoria de Empresas”, in which each hold a 50% equity interest. The purpose of such agreement is to render audit services related to oil and gas royalties and fiscal easements in the province of Salta to optimize tax collection in such province.
c)
Banco Macro S.A. — Gestiva S.A.
On May 4, 2010, the creation of a joint venture between the Bank and Gestiva S.A. was approved under the name “Banco Macro S.A. — Gestiva S.A. — Unión Transitoria de Empresas” in which each hold 50% equity interest. The purpose of such joint venture is to provide a comprehensive tax processing and management system for the province of Misiones, its administration and collection of taxes thereof.
As of December 31, 2010, and 2009, the net assets of such joint ventures recorded in the Bank’s consolidated financial statements through the proportionate consolidation method amounted to 7,797 and 3,996, respectively.
Also, as of December 31, 2010, 2009 and 2008 the net income recorded through the method mentioned in the previous paragraph, amounted to 18,487, 7,334 and 7,139 respectively.
3.6.
Legal merger of Nuevo Banco Bisel S.A.
On March 19, 2009, the Boards of Directors of Banco Macro S.A. and Nuevo Banco Bisel S.A. entered into a “Preliminary merger agreement”, which established the incorporation of the latter to Banco Macro S.A. retroactively as from January 1, 2009, on the basis of the financial statements of such banks as of December 31, 2008 (see also Notes 4.2. and 7.1.e)).

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On May 27, 2009, the General Regular and Special Shareholders’ Meetings of Banco Macro S.A. and Nuevo Banco Bisel S.A., respectively, approved such preliminary merger agreement, as well as the consolidated special balance sheet for merger purposes as of December 31, 2008, and the exchange ratio. Furthermore, Banco Macro S.A.’s Shareholders’ Meeting, mentioned above, approved the capital stock increase through the issuance of 1,147,887 common registered Class B shares with a face value of Ps. 1, each entitled to one vote, to be delivered to the minority shareholders of the absorbed bank (Sud Inversiones & Análisis S.A. and Macro Securities S.A. Sociedades de Bolsa).
Subsequently, the BCBA, the Central Bank and the CNV (Argentine securities commission), authorized the abovementioned merger, which was registered with the IGJ (Business Associations Regulatory Agency). Additionally, the CNV and the BCBA authorized the public offering of shares to be delivered to the minority shareholders of former Nuevo Banco Bisel S.A.
Finally, on August 18, 2009, the Central Bank reported Nuevo Banco Bisel S.A.’s merger with and into Banco Macro S.A.
In September 2009, the shares issued were accredited to the minority shareholders of the bank merged with and into the Bank. Additionally, during October 2009, Sud Inversiones & Análisis S.A. and Macro Securities S.A. Sociedad de Bolsa sold those shares to unrelated parties.
Under Central Bank rules, the accounting of the merger did not have a significant impact on the consolidated financial statements of the Bank.
3.7.
Banco Privado de Inversiones S.A
On March 30, 2010, the Bank entered into an agreement to purchase 100% of the shares of Banco Privado de Inversiones S.A.
On September 9, 2010, the Central Bank issued Resolution 198/2010 whereby it stated that there are no objections for Banco Macro S.A. to acquire 100% of Banco Privado de Inversiones S.A. capital stock and to transfer 1% thereof to Sud Inversiones y Análisis S.A. and 1% to Macro Securities S.A. Sociedad de Bolsa.
On September 20, 2010, 100% of the capital stock of Banco Privado de Inversiones S.A. was transferred to the Bank, which paid USD 23.3 million, out of which, USD 10.4 million is related to an escrowed amount, as provided in the purchase agreement mentioned above.
As of such date, Banco Privado de Inversiones S.A’s assets and liabilities amounted to 403,686 and 368,034, respectively; consequently, shareholders’ equity amounted to 35,652. Therefore, the Bank booked a positive goodwill amounting to 56,205, which arises from the difference between the total price of the transaction and Banco Privado de Inversiones S.A.’s shareholders’ equity as of such date, which will be amortized in ten years pursuant to Central Bank rules.
On September 22, 2010, the Bank made an irrevocable capital contribution of 50,000 to Banco Privado de Inversiones S.A. as provided in Resolution No. 443 of the SEFyC (Financial Institutions and Foreign Exchange Regulatory Agency) dated September 15, 2010.
At the date of issuance of these consolidated financial statements, the National Commission of Competition Defense has not issued an authorization in this respect.
On December 20, 2010, Banco Macro S.A. sold 366,590 of Banco Privado de Inversiones S.A. common shares to Sud Inversiones y Análisis S.A. and another 366,590 to Macro Securities S.A. Sociedad de Bolsa for a total amount of 740. Consequently, as of December 31, 2010, Banco Macro S.A. holds 98% of Banco Privado de Inversiones S.A.’s capital stock.

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4.
SIGNIFICANT ACCOUNTING POLICIES
The preparation of the Bank’s consolidated financial statements requires Management to make estimates and assumptions to determine the recorded amounts of assets and liabilities, income, expenses and contingencies, as well as the related disclosures, as of each balance sheet date. However, uncertainty about theses assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
In the process of applying the Bank’s accounting policies, management has exercised judgment and estimates in determining the amounts recognized in the financial statements.
4.1.
Consolidation and basis of presentation
The Consolidated Financial Statements have been prepared in accordance with accounting principles issued by the Central Bank (Central Bank rules).
For the purpose of these consolidated financial statements, certain disclosures related to formal legal requirements for reporting in Argentina have been omitted since they are not required for SEC (Securities and Exchange Commission) reporting purposes.
Under Central Bank’s rules and FACPCE (Federación Argentina de Consejos Profesionales de Ciencias Económicas — Argentine Federation of Professional Council in Economic Sciences) Technical Resolutions, Banco Macro S.A. has consolidated the following subsidiaries:
Equity Investment amounts
Shares Percentage held of as of
Capital December 31, December 31,
Company Class Number Stock Votes 2010 2009
Banco del Tucumán S.A.
Common 395,341 89.932 % 89.932 % 243,810 182,755
Banco Privado de Inversiones S.A. (a)
Common 35,925,820 99.985 % 99.985 % 84,454 —
Macro Bank Limited (b)
Common 9,816,899 99.999 % 99.999 % 184,060 164,576
Macro Securities S.A. Sociedad de Bolsa (c) y (d)
Common 12,776,680 99.921 % 99.921 % 26,914 28,374
Sud Inversiones & Análisis S.A.
Common 6,475,143 98.605 % 98.605 % 13,155 14,509
Macro Fondos SGFCI S.A.
Common 327,183 99.936 % 99.936 % 1,765 1,503
(a)
Banco Macro S.A.’s indirect equity interest derives from Sud Inversiones y Análisis S.A. and Macro Securities S.A. Sociedad de Bolsa.
(b)
Consolidated with Sud Asesores (ROU) S.A. (voting rights: 100%, equity interest: 1,038).
(c)
Consolidated with Macro Fondos SGFCI S.A.
(d)
The indirect equity interest of Banco Macro S.A comes from Sud Inversiones & Análisis S.A.
Intercompany transactions were eliminated in the consolidation process.
Furthermore, the financial statements of Macro Bank Limited (consolidated with Sud Asesores (ROU) S.A.) were conformed to the Central Bank rules. Also, as they are originally stated in US dollars, they were translated into pesos following the procedures indicated below:
(a)    Assets and liabilities were translated at the reference exchange rate or the exchange rate reported by the Central Bank trading room and effective for the foreign currency at the closing of transactions on the last business day of the years ended December 31, 2010 and 2009.

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(b)    Figures related to the owners’ contributions (capital stock, additional paid-in capital and irrevocable capital contributions) were translated applying the effective exchange rates as of the date on which such contributions were paid in.
(c)    Retained earnings were estimated by the difference between assets, liabilities and owners’ contributions, translated into pesos, as indicated above.
(d)    The amounts of income were translated into pesos, as described in (a) above. The difference between retained earnings at beginning of year and retained earnings at year-end was recorded in “Financial income — Difference in quoted prices of gold and foreign currency’’ or “Financial expense — Difference in quoted prices of gold and foreign currency” accounts, as the case may be.
4.2.
Comparative information
The consolidated financial statements as of December 31, 2010, are presented comparatively with those of December 31, 2009 and 2008.
By means of Communiqués “A” 5,047, “A” 5,094 as supplemented, the Central Bank introduced amendments to the valuation and disclosure methods applicable to financial leases and to the disclosure methods for holdings of government securities issued in Argentine pesos, resulting from reverse repurchase agreements executed with the Central Bank, respectively. As a result, certain accounts and items on the balance sheet, the statements of income, changes in shareholders’ equity and cash flows as of December 31, 2010, as well as certain supplementary information, were reclassified due to the application of such communiqués and had no impact whatsoever on shareholders’ equity or income (loss) in prior years.
Additionally, and mainly as a result of the legal merger of Nuevo Banco Bisel S.A. described in Note 3.6., the Bank made certain reclassifications in the consolidated financial statements as of December 31, 2008, so as to make them comparable with the current consolidated financial statements.
4.3.
Restatement into constant pesos
Professional accounting standards in Argentina establish that the financial statements should be stated in constant pesos. In a monetary stability context, the nominal currency is used as constant currency; however, during inflationary or deflationary periods, financial statements are required to be stated in constant currency as of the latest balance sheet date, recognizing the variations in the domestic wholesale price index (domestic WPI) published by the INDEC (Argentine Institute of Statistics and Censuses), in conformity with the restatement method under FACPCE Technical Resolution No. 6.
The Bank’s consolidated financial statements reflect the changes in the peso purchasing power through February 28, 2003, under Presidential Decree No. 664/03, IGJ General Resolution No. 4/2003, CNV General Resolution No. 441, and Central Bank Communiqué “A” 3,921. Professional accounting standards provide that the restatement method established by Technical Resolution No. 6 should have been discontinued as from October 1, 2003.
Before February 28, 2003, the financial statements were restated in constant currency on a monthly basis, using INDEC’s domestic WPI measurements. The restatement coefficient for a given month resulted from dividing the index value at the end of the month by the value at the beginning. The procedure is as follows:
i)
Assets and liabilities are classified into monetary and non-monetary.
ii)
Monetary assets and liabilities are those that are not adjusted for inflation, but generate a monetary gain (loss). The effect of inflation is broken down depending on its origin, i.e., monetary gain (loss) on financial intermediation, monetary gain (loss) on other transactions and monetary gain (loss) on other operating expenses.
iii)
Non-monetary assets and liabilities, shareholders’ equity and statement-of-income accounts are restated.

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4.4.
Valuation methods
The main valuation methods used to prepare these consolidated financial statements as of December 31, 2010, and 2009, were:
a)
Assets and liabilities denominated in foreign currency:
The assets and liabilities denominated in US dollars were valued at Central Bank benchmark US dollar exchange rate effective as of the last business day of each year. Additionally, assets and liabilities denominated in other foreign currencies were translated at the exchange rate communicated by the Central Bank’s dealing room. Foreign exchange differences were recorded in the statement of income for each year.
b)
Government and private securities:
b.1)
Listed government securities — Holdings in special investment accounts:
As of December 31, 2009, in accordance with the provisions of Central Bank Communiqués “A” 4,676 and 4,861, as supplemented, the Bank chose to classify certain holdings as “Special investment accounts”. Those holdings were valued at the acquisition cost defined in such communiqués, increased by the accrual of the internal rate of return as from the date of inclusion in this classification.
Additionally, when the market value of these holdings was lower than the value defined above, the accrual of the internal rate of return was recorded in an offset account until the book value equals the market value.
b.2)
Listed government securities — Holdings for trading or intermediation transactions and repurchase agreements:
They were valued at the quoted price of each security effective on the last business day of each year. Differences in quoted market values were recorded in the statement of income for each year.
b.3)
Unlisted government securities:
As of December 31, 2010, and 2009, as set forth in Central Bank Communiqué “A” 4,898, as supplemented, the holdings of government securities without volatility (active market in accordance with Central Bank rules) and included in the list of current securities disseminated by Central Bank were valued at the higher of the present value disseminated by Central Bank and the book value of the prior month.
When the present value of these holdings is lower than their book value, the accrual of interest will be recorded in an offset account created to such end until the book value equals the present value.
b.4)
Listed instruments issued by the Central Bank:
Holdings in the proprietary portfolio and those received from repurchase agreements were valued according to the effective quoted market value for each instrument on the last business day of each year. Differences in quoted market values were recorded in the statement of income for each year.

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b.5)
Unlisted instruments issued by the Central Bank:
As provided in Central Bank Communiqué “A” 4,414, as supplemented, the holdings in the proprietary portfolio and those received from repurchase agreements, were valued at acquisition cost plus interest accrued as of each year-end, exponentially applying the internal rate of return as per their issue terms and conditions. The accruals of the internal rate of return mentioned above were charged to income for each year.
c)
Guaranteed loans — Presidential Decree No. 1,387/01:
As of December 31, 2010, and 2009, as set forth in Central Bank Communiqué “A” 4,898, as supplemented, the guaranteed loans issued by the Argentine Government under Presidential Decree No. 1387/2001 were valued at the higher of the present value disseminated by Central Bank and the book value of the prior month (net of the offset account and services collected).
When the present value of these holdings is lower than their book value, the accrual of interest will be recorded in an offset account created to such end until the book value equals the present value.
In addition, in 2009, the Bank entered into exchange agreements whereby it exchanged the guaranteed loans for a book value of 296,893 and received Argentina bonds (Bonar) at the Badlar interest rate + 275 basis points, in Argentine pesos maturing in 2014 for the same amount. These transactions did not have any effects in the income statement.
d)
Interest accrual:
Interest has been accrued according to a compound interest formula in the period in which it was generated, except interest on transactions in foreign currency and those whose maturity does not exceed 92 days, on which interest has been accrued according to a simple interest formula.
The Bank suspends the interest accrual whenever loan payments are not settled (generally, after 90 days) or when the recoverability of the collection of principal or interest accrued is doubtful. Accrued interest is considered part of the loan balance when determining the allowances for loan losses. Afterwards, interest is only recognized on a cash basis.
e)
CER accrual:
Receivables and payables have been indexed by the CER, wherever applicable, as follows:
e.1)
Holdings in special investment accounts and unlisted government securities: as explained in Note 4.4.b.1) and 4.4.b.3), respectively.
e.2)
Guaranteed loans: as explained in Note 4.4.c).
e.3)
Deposits and other assets and liabilities: they were adjusted by CER as of the last business day of each year.
f)
Allowance for loan losses and provision for granted guarantees:
These provisions have been calculated based on the estimated uncollectibility risk of the Bank’s credit portfolio, which, among other factors, results from the evaluation of the degree of debtors compliance and the guarantee/security supporting the respective transactions, under Central Bank Communiqué “A” 2,950, as supplemented, and the Bank’s provisioning policies.
When loans covered by specific allowances are settled or generate a reversal of the allowances recorded in the current year, and in cases where the allowances set in prior years exceed what is considered necessary, the excess allowance is reversed with effects on income for the current year.
The recovery of receivables previously classified under “Debit-balance control memorandum accounts — Receivables classified as irrecoverable” are recorded directly to income.

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The Bank assesses the credit risk related to possible commitments and determines the appropriate amount of allowances to be recorded. The allowances related to amounts recorded in memorandum accounts granted guarantees are included under “Provisions”.
g)
Loans and deposits of government securities:
They were valued at the quoted price of each security effective on the last business day of each year, plus the related accrued interest. Differences in quoted market values were recorded in the statement of income as of each year.
h)
Other receivables from financial intermediation and Other liabilities from financial intermediation:
h.1)
Amounts receivable from spot and forward sales pending settlement and amounts payable for spot and forward purchases pending settlement: they were valued based on the prices agreed upon for each transaction, plus related premiums accrued through the end of each year.
h.2)
Securities and foreign currency to be received for spot and forward purchases pending settlement and to be delivered for spot and forward sales pending settlement:
i)
Listed: they were valued at the effective quoted prices for each of them on the last business day of each year. Differences in quoted market values were recorded in the statement of income for each year.
ii)
Unlisted: they were valued as provided by Central Bank Communiqué “A” 4,414, at their cost value increased exponentially by their internal rate of return.
h.3)
Securities to be received for repurchase agreement and to be delivered for reverse repurchase agreement:
i)
Listed: they were valued at the effective quoted prices for each of them on the last business day of each year. Differences in quoted market values were recorded in the statement of income for each year.
ii)
Unlisted: they were valued as provided by Central Bank Communiqué “A” 4,414, at their cost value increased exponentially by their internal rate of return.
h.4)
Debt securities and certificates of participation in financial trusts:
i)
Debt securities: they were valued as provided by Central Bank Communiqué “A” 4,414, at their cost value increased exponentially by their internal rate of return, translated into pesos pursuant to the method described in Note 4.4.a), as the case may be.
ii)
Certificates of participation in the Fideicomiso Financiero Suquía and Fideicomiso Financiero Bisel financial trust: they were valued based on the cost of shareholders’ equity of former Nuevo Banco Suquía S.A. and former Nuevo Banco Bisel S.A., respectively, plus interest accrued, net of redemptions. As of December 31, 2010, and 2009, an allowance was booked for the full amounts receivable booked on account of such certificates, as they were deemed unrecoverable.
iii)
Other certificates of participation: they were stated at amortized cost value increased, as the case may be, by interest accrued until the last business day of each year, translated into pesos according to the method described in Note 4.4.a), as the case may be.
The values recorded, net of allowances recorded, do not exceed the recoverable values from the respective trusts.
h.5)
Unlisted corporate bonds purchased:
They were valued by the accrual method based on their internal rate of return, as provided by Central Bank Communiqué “A” 4,414 and supplementary regulations.

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h.6)
Non-subordinated corporate bonds issued:
They were valued at the amount due for principal and interest accrued as of each year-end, translated into pesos pursuant to the method described in Note 4.4.a), as the case may be.
i)
Receivables from financial leases:
They were valued at the net investment in the lease less unearned income and calculate in accordance with the conditions agreed upon in the respective agreements, by applying the interest rate imputed therein.
j)
Investments in other companies:
j.1)
In non-controlled financial institutions (less than 50% ownership interest), supplementary and authorized activities:
i.
In pesos: they were valued at acquisition cost, plus the nominal value of share-dividends received, restated as explained in Note 4.3.
ii.
In foreign currency: they were valued at the acquisition cost in foreign currency, plus the nominal value of share-dividends received, translated into pesos in accordance with the criterion stated in Note 4.4.a).
Such net values do not exceed the values calculated by the equity method on the basis of the latest financial statements published by the companies.
j.2)
In other non-controlled companies: they were valued at acquisition cost, plus the nominal value of share-dividends received, restated as described in Note 4.3., net of allowances for impairment in value. Such net values do not exceed the values calculated by the equity method on the basis of the latest financial statements published by the companies.
k)
Bank premises and equipment and other assets:
They were valued at their acquisition cost, restated as explained in Note 4.3., less the related accumulated depreciation calculated based on their estimated useful life using the straight line method.
l)
Intangible assets:
l.1)
Goodwill and organization and development costs (except differences due to court orders — Nondeductible for the determination of the computable equity): they were valued at their cost, restated as explained in Note 4.3., less the related accumulated amortization, calculated under the straight line method over their estimated useful life.
l.2)
Differences due to court orders (amparos) — Not included for the determination of the computable equity: represent the difference between the amount of the original foreign currency translated at the exchange rate applied upon payment of the recursos de amparo (constitutional rights protection actions) and the amount recorded under Central Bank rules (convert into Argentine pesos at the Ps. 1.4 to USD 1 exchange rate, or its equivalent in other currencies, plus CER). Additionally, and as disclosed in Central Bank Communiqué “A” 3,916, since April 2003 the sums related to the amounts paid are amortized straight line over 60 months.
In addition, the Central Bank informed the Bank through a notice dated August 4, 2008, that the permission established by Communiqué “A” 3,916 (allowing the difference between the amount of the “amparos” and the amounts recorded as liabilities to be capitalized as intangible assets) is applicable only to such differences which were actually paid.

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m)
Valuation of derivatives:
m.1)
Put options sold on Boden 2012 and 2013 coupons: such options were valued at the exchange value of the bonds plus interest and the CER adjustment accrued on the last business day of each year- end.
m.2)
Interest rate swap: this included the equivalent in pesos of the notional value in relation to which the Bank agreed to pay / charge a variable rate and charge / pay a fixed rate.
m.3)
Forward transactions without delivery of underlying asset: they were valued at the quoted price of the underlying assets upon maturity, effective on the last business day of each fiscal year. Differences in quoted market values were recorded in the statement of income of each year.
m.4)
Put options purchased / call options sold: valued at the agreed-upon exercise price.
In all cases, see also Note 30.
n)
Severance payments:
The Bank charges these payments directly to income.
o)
Provisions included in liabilities:
The Bank carries certain contingent liabilities related to current or future claims, lawsuits and other proceedings, including those related to labor and other obligations. Liabilities are recorded when it is probable that future costs will be incurred and whenever such costs may be reasonably estimated.
p)
Subordinated corporate bonds:
They were valued at the amount due for principal and interest accrued as of each year, translated into pesos pursuant to the method described in Note 4.4.a).
q)
Shareholders’ equity accounts:
q.1)
They are restated as explained in Note 4.3., except for the “Capital Stock” account which has been kept at its original value. The adjustment resulting from its restatement as explained in Note 4.3. was included in the “Adjustments to Shareholders’ Equity” account.
q.2)
The purchase cost of own shares reaquired was debited to the “Unappropriated earnings” account. Furthermore, the face value of such shares was reclassified from “Outstanding shares” to “Shares in treasury”. The decrease in own shares reacquired as a result of the capital decrease was credited against unappropriated retained earnings (see also Note 9).
r)
Consolidated Statement of income accounts:
r.1)
Accounts reflecting monetary transactions occurred in the fiscal years ended December 31, 2010, 2009 and 2008 (financial income and expenses, service-charge income and service-charge expenses, provision for loan losses, administrative expenses, etc.), were computed at their historical amounts on a monthly accrual basis.
r.2)
Accounts reflecting the effects of the sale, retirement or consumption of non-monetary assets were computed on the basis of restated amounts of such assets, restated as mentioned in Note 4.3.

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s)
Statement of cash flows:
The Bank considers cash and cash equivalents to include the following accounts: Cash and Government and private securities which mature less than 90 days as from their date of acquisition. Below is a breakdown of the reconciliation of the “Cash and cash equivalent” item on the Statement of cash flows with the related balance sheet accounts as of December 31, 2010, 2009 and 2008:
2010 2009 2008
Cash
5,202,004 5,016,192 3,523,897
Government and private securities
Holdings for trading or financial intermediation
198,790 379,871 —
Instruments issued by Central Bank of Argentina
589,686 — —
Cash and cash equivalents
5,990,480 5,396,063 3,523,897
5.
INCOME TAX AND MINIMUM PRESUMED INCOME TAX (TOMPI)
As required by Central Bank’s rules, the Bank calculates income tax by applying the effective 35% rate to the estimated taxable income for each year, without considering the effect of temporary differences between book and taxable income.
In 1998, Law No. 25,063 established minimum presumed income tax for a ten-year term. At present, after subsequent extensions, such tax is effective through December 30, 2019. This tax is supplementary to income tax, while the latter is levied on the taxable income for the year, minimum presumed income tax is a minimum levy assessment by applying the 1% over the 20% of certain assets as provided by the law for financial institutions. Therefore, the Bank’s tax obligation for each year will be equal to the higher of these taxes. However, if minimum presumed income tax exceeds income tax in a given tax year, such excess may be computed as a payment on account of any income tax in excess of minimum presumed income tax that may occur in any of the following ten years, once accumulated net operating losses (NOLs) have been used.
As of December 31, 2010, 2009 and 2008, the Bank accrued income tax expense of 365,775, 659,250 and 261,207, respectively.
As of December 31, 2009, the Bank maintained a total amount of 10,280 for minimum presumed income tax credit under “Other receivables”. Such credit was considered as an asset because the Bank estimated that it will be used within 10 years, as established by Central Bank Communiqué “A” 4,295, as supplemented. The Bank used the tax credit as of December 31, 2009 in 2010.
In addition as of December 31, 2010 and 2009, the Bank made income tax prepayments for 334,846 and 173,927, respectively, which were recorded in the “Other receivables” account.
6.
DIFFERENCES BETWEEN CENTRAL BANK RULES AND PROFESSIONAL ACCOUNTING STANDARDS EFFECTIVE IN ARGENTINA
The CPCECABA (Professional Council in Economic Sciences of the City of Buenos Aires) adopted the technical resolutions and interpretations issued by FACPCE governing board through Technical Resolution No. 27. As of the date of issue of these financial statements, the CPCECABA had not approved Technical Resolutions No. 28 and 29 issued by the FACPCE.
These professional accounting standards differ, in certain valuation and disclosure aspects, from Central Bank rules. The differences between those standards, which the Bank deemed significant to these consolidated financial statements, are as follows:

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6.1.
Valuation standards
Adjustments under professional
accounting standards to equity
Item 2010 2009 2008
Government securities and assistance to the government sector (a)
Holdings in special investment accounts
— 237,913 (31,557 )
Holdings of unlisted government securities
17,279 9,160 (21,639 )
Unlisted instruments issued by the Central Bank
(18,427 ) (2,392 ) (33,776 )
Guaranteed loans — Presidential Decree No. 1,387/01
(14,806 ) 8,805 (259,617 )
Business combinations (b)
Acquisition of Nuevo Banco Bisel S.A.
(119,165 ) (127,663 ) (101,467 )
Other
(71,453 ) (69,547 ) (62,443 )
Intangible assets — Organization and development expenses (c)
(53,544 ) (50,378 ) (40,090 )
Other receivables from financial intermediation (d)
— — 27,633
Deferred assets — Income tax (e)
40,131 46,667 78,009
Other assets (f)
1,680 2,832 3,560
Liabilities — Provisions (g)
(51,362 ) (51,413 ) (46,923 )
Total
(269,667 ) 3,984 (488,310 )
a)
Government securities and assistance to the government sector: they are valued in accordance with the regulations and standards issued by the Argentine Government and Central Bank described in Notes 4.4.b.1), 4.4.b.3), 4.4.b.5) and 4.4.c). According to professional accounting standards, those holdings booked in special investment accounts for which the Bank does not show intention of keeping through their maturity and holdings of unlisted government securities and instruments issued by the Central Bank, should be valued at their market value, whereas holdings of guaranteed loans should be valued at their present value. Additionally, effective loan-loss provisioning regulations issued by the Central Bank establish that receivables from the nonfinancial government sector are not subject to loan-loss provisioning, whereas professional accounting standards require receivables to be compared with their recoverable value every time financial statements are prepared. During 2010 considering the favorable market situation and improvements in conditions of the assets recorded in special investment accounts, the Bank has sold a significant part of such.
b)
Business combinations: under the standards set forth by the Central Bank, business acquisitions are recorded according to the book values of the acquired company. Consequently, the difference between the purchase price and its interest valued by the equity method in the books of the acquirer, is recorded as positive goodwill (when the purchase price is higher than the interest valued by the equity method) or negative goodwill (when the purchase price is lower than the interest valued by the equity method), as the case may be. If goodwill is positive, Central Bank standards establish that such goodwill should be amortized under the straight-line method based on an estimated useful life of ten years. If goodwill is negative, Central Bank Communiqué “A” 3,984 establishes specific amortization methods; the maximum amortization allowed per annum is 20%.

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According to professional accounting standards effective in Argentina, business combinations are recorded based on the market values of the acquired company’s identifiable net assets. Consequently, the difference between the purchase price and the identifiable net asset measurement value is recorded as positive or negative goodwill, as the case may be. If goodwill is positive, such goodwill (i) will depreciate systematically throughout the estimated useful life and (ii) will be compared with its recoverable value as of each year-end. If goodwill is negative, such goodwill will be allocated to income (loss) in accordance with the changes in the specific circumstances that created such negative goodwill.
c)
Intangible assets: the Bank and its subsidiaries capitalized under “Intangible Assets” net of the related amortization amounts, the foreign exchange differences related to the reimbursement of certain deposits in foreign currency converted to pesos and the effect of court deposits dollarization. According to professional accounting standards, the above mentioned amounts are charged to expense and the book value of surpluses paid should decrease to their recoverable value. As of the date of issuance of the accompanying financial statements, the existing evidence does not support that the book value of such assets is fully or partially recoverable.
d)
Other receivables from financial intermediation: as of December 31, 2008, the Bank recorded 29,105 under “Other receivables from financial intermediation” — nonsubordinated corporate bonds issued by the Bank itself, mentioned in Note 10.b.2) and b.3), respectively, valued as mentioned in Note 4.4.h.5), and 56,738 under Other liabilities from financial intermediation and recorded the liabilities generated by the issuance thereof valued as mentioned in Note 4.4.h.6). According to professional accounting standards, such repurchase corporate bonds should be considered settled. Consequently, liability as of December 31, 2008, would have decrease by 27,633.
e)
Income tax: the Bank and its subsidiaries determine income tax applying the effective rate to the estimated taxable income, without considering the effect of the temporary differences between book and taxable income. According to professional accounting standards, income tax should be booked following deferred tax method, recognizing (as a receivable or payable) the tax effect of temporary differences between book and tax valuation of assets and liabilities, and subsequently charging them to income for the years in which such differences are reversed, considering the possibility of using net operating losses (NOLs) in the future.
f)
Other assets: the Bank recorded interest rate swap agreements in conformity with the Central Bank accounting standards under memorandum accounts. According to professional accounting standards effective in Argentina, the measurement of derivative financial instruments should be made at their net realizable value if they have quoted prices, or lacking this, using mathematical models that are appropriate in relation to the instrument’s characteristics and which use data that can be verified.
g)
Liabilities: the Bank books the effects of the Argentine Supreme Court rulings dated December 27, 2006, and August 28, 2007, upon payment of such precautionary measures, in conformity with Central Bank indications in the notice dated August 4, 2008. According to professional accounting standards, the Bank should have recorded a liability related to this item.
If professional accounting standards would have been applied, the Bank’s shareholders’ equity as of December 31, 2010, 2009 and 2008, would have decreased by around 269,667, increased by around 3,984 and decreased by around 488,310, respectively. Consequently, income for the years ended December 31, 2010, 2009 and 2008, would have decreased by around 273,651, would have increased by around 492,294 and would have decrease by around 177,179, respectively.
6.2.
Disclosure aspects
There are certain disclosure differences between the criteria established by Central Bank and Argentine professional accounting standards.

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7.
RESTRICTED AND PLEDGED ASSETS
As of December 31, 2010, and 2009, the following Bank’s assets are restricted:
7.1)
Government and private securities :
a)
Secured Bonds under Presidential Decree No. 1,579/02 for 40,598 and 24,945 (face value of 24,400), respectively, provided as security for the loan received from Banco de Inversión y Comercio Exterior S.A. (BICE) to finance the “Paso San Francisco” public work, in accordance with the Note sent by the Bank on November 5, 2002, BICE’s reply dated November 18, 2002, and the security agreement covering the abovementioned securities dated January 29, 2004.
b)
Central Bank Notes (NOBACs) of 22,097 and 27,128 (for a face value of 21,410 and 26,700), respectively, used to perform forward foreign currency trading transactions through Rosario Futures Exchange (Rofex) and Mercado Abierto Electrónico S.A. (MAE).
c)
NOBACs for an amount of 7,844 and 13,146 (for a face value of 7,600 and 13,000), respectively, used to guarantee the repayment of the loan in pesos agreed upon under the Global Credit Program for Micro-, Small- and Medium-sized Enterprises received from the Under-department of Small- and Medium-sized Enterprises and Regional Development (SSEPyMEyDR).
d)
NOBACs for an amount of 5,501 and 10,591 (for a face value of 5,330 and 10,424), respectively, used to perform interest rate swap transactions, through Mercado Abierto Electrónico S.A. (MAE).
e)
Argentine Government Bonds in Argentine pesos at private Badlar + 275 basis points for an amount of 79,200 and 66,428 (for a face value of 80,000), respectively, used as security in favor of SEDESA, in replacement of former Nuevo Banco Bisel S.A.’s preferred shares to secure payment of all obligations undertaken in the sales agreement executed on May 28, 2007. The price payable was set at 66,240, plus 4% nominal interest rate p.a., to be compounded through its settlement which will be made before the expiration of the 15-year term as from the takeover date of former Nuevo Banco Bisel S.A. (August 11, 2021).
f)
Other government and private securities for 1,462 and 2,820, respectively.
7.2)
Loans:
Agreements for loans backed by pledges and unsecured loans for 2,599 and 9,876, respectively, provided as guarantee in favor of the Mypes II Trust Fund, in full compliance with the terms and conditions of the program called “Mypes II (a)” and under the Global Credit Program for Small-sized and Micro-enterprises.
7.3)
Other receivables from financial intermediation:
a)
Special guarantee checking accounts opened at the Central Bank for transactions related to the electronic clearing houses and similar entities, for an amount of 287,135 and 242,426, respectively.
b)
Contributions to the mutual guarantee association Risk Fund of Garantizar SGR for 10,170 and 10,000 respectively, resulting from contributions made by the Bank on December 21, 2009, in its capacity as contributory partner of that company. Such contribution may be fully or partially reimbursed once two and three years have elapsed from the date of contribution.
c)
Contribution to the Risk Fund of Macroaval SGR for 5,622 and 5,368, respectively, resulting from a contribution made by the Bank on December 31, 2008, in its capacity as contributory partner of such company. Such contribution may be fully or partially reimbursed once two and three years have elapsed from the date of contribution.
d)
As of December 31, 2010 it keeps certain amounts related to credit card customers consumptions abroad as securities amounting to 1,257.

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7.4)
Investments in other companies:
a)
As of December 31, 2010, and 2009, this includes other investments in other companies in the amount of 1,453.
7.5)
Other receivables:
a)
It carries as guaranty mainly transactions carried out on institutional markets, credit card transactions, trust activities and lease guaranties amounting to 42,276 and 30,008, respectively.
b)
Other security deposits for 15,539 and 10,277, respectively.
8.
TRANSACTIONS WITH RELATED PARTIES
Banco Macro S.A.’s receivables / payables and income (loss) from transactions performed with subsidiaries and related parties are as follows. As mentioned in Note 4.1., transactions with subsidiaries were eliminated in the consolidation process:
Macro Other
Banco Securities subsidiaries
Banco del Privado de Macro S.A. and related
Tucumán Inversiones Bank Sociedad parties Total Total
S.A. S.A. Limited de Bolsa (1) 2010 2009
ASSETS
Cash
— — 3,090 — — 3,090 2,996
Loans
— — — — 51,676 51,676 13,216
Other receivables from financial intermediation
120,401 — — 5,050 — 125,451 70,105
Receivables from financial leases
— — — — 2,124 2,124 2,462
Other receivables
25 1,251 — — — 1,276 14,700
Items pending allocation
83 — — — — 83 4
Total assets
120,509 1,251 3,090 5,050 53,800 183,700 103,483
LIABILITIES
Deposits
— 92 16,991 7,085 181,483 205,651 130,490
Other liabilities from financial intermediation
120,151 — — 8,628 — 128,779 70,180
Other liabilities
— — — — — — 64
Total liabilities
120,151 92 16,991 15,713 181,483 334,430 200,734
MEMORANDUM ACCOUNTS
Debit balance accounts — Contingent
— — — — 1,162 1,162 —
Debit balance accounts — Control
— — 125,051 — 257,237 382,288 432,639
Credit balance accounts — Contingent
923 — — 2,213 — 3,136 40,180
Credit balance accounts — Derivatives (2)
— — — — 99,413 99,413 —

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Macro Other
Banco Securities subsidiaries
Banco del Privado de Macro S.A. and related
Tucumán Inversiones Bank Sociedad parties Total Total Total
S.A. S.A. Limited de Bolsa (1) 2010 2009 2008
INCOME (LOSS)
Financial income
2 44 — — 2,855 (2) 2,901 2,794 6,407
Financial expense
(3,300 ) (121 ) — — (3,099 ) (6,520 ) (5,025 ) (4,134 )
Service-charge income
30 5 12 52 1,050 1,149 545 235
Other income
6,427 — — — — 6,427 5,899 8,068
Total income / (loss)
3,159 (72 ) 12 52 806 3,957 4,213 10,576
(1)
Related to receivables from and payables to other related parties to the Bank in the normal course of business, under normal market conditions, in terms of interest rates and prices, as well as guarantees required.
(2)
The Bank has recorded foreign currency trading transactions without delivery of the underlying asset and involving related parties, in its memorandum accounts. According to the Bank’s policy, they are matched in terms of amounts and maturity with transactions carried out with third parties who are not related parties. As of December 31, 2010, 2009 and 2008, although there is no position for these transactions, the net intermediation income from such transaction generated earnings for the year of around 32, 113 and 311, respectively.
9. CAPITAL STOCK
As of December 31, 2010, 2009 and 2008, the legal capital structure without considering the retroactive accounting effects of the legal merger of Nuevo Banco Bisel S.A. mentioned in Note 3.6., is as follows:
SHARES CAPITAL STOCK
Votes Pending
per Issued and issuance or In
Class Number share outstanding distribution treasury Paid-in
Registered Class A shares of common stock
11,235,670 5 11,236 — — 11,236
Registered Class B shares of common stock
672,743,303 1 672,743 — — 672,743
Acquired Registered Class B shares of common stock
— 1 (75,542 ) — 75,542 —
Total 2008
683,978,973 608,437 — 75,542 683,979
Acquired Registered Class B shares of common stock
— 1 (15,100 ) — 15,100 —
Capital stock decrease — Registered Class B shares of common stock (1)
(60,000,000 ) 1 — — (60,000 ) (60,000 )
Capital stock increase — Registered Class B shares of common stock (2)
1,147,887 1 1,148 — — 1,148
Capital stock decrease — Registered Class B shares of common stock (3)
(30,641,692 ) 1 — — (30,642 ) (30,642 )
Total 2009
594,485,168 594,485 — — 594,485

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SHARES CAPITAL STOCK
Votes Pending
per Issued and issuance or In
Class Number share outstanding distribution treasury Paid-in
As of December 31, 2010:
Registered Class A shares of common stock
11,235,670 5 11,236 — — 11,236
Registered Class B shares of common stock
583,249,498 1 583,249 — — 583,249
Total 2010
594,485,168 594,485 — — 594,485
(1)
Related to the reduction of the capital stock by 60,000,000 registered Class B shares entitled to 1 vote each with a face value of Ps. 1 per share. These shares were included in the Bank’s portfolio and were acquired under section 68, Law No. 17,811, as a result of the macroeconomic context and fluctuations that the capital market was going through in general. On April 21, 2009, and after BCBA authorization, the Bank’s General Regular and Special Shareholders’ meeting approved the abovementioned capital reduction. During July 2009, the CNV authorized, the IGJ registered, and the Central Bank consented to the capital stock reduction.
(2)
Related to the capital increase through the issuance of Ps. 1,147,887 of new common, registered Class B shares with a face value of Ps. 1, each one entitled to one vote, delivered to the minority shareholders of former Nuevo Banco Bisel S.A., in the legal merger process of that bank (see also Note 3.6.).
(3)
Related to the reduction of the capital stock by 30,641,692 Class B registered shares each one entitled to one vote, with a face value of Ps 1 per share. These shares were included in the Bank’s portfolio and were acquired under section 68, Law No. 17,811 for the same reasons mentioned in paragraph (2) above. On September 10, 2009, the Bank’s General Regular and Special Shareholders’ meeting approved the abovementioned capital reduction subject to the BCBA’s consent. On November 23 and December 29, 2009 and January 15 and March 25, 2010, the BCBA, consented to such capital reduction, the CNV approved it, the IGJ recorded it and the Central Bank acknowledged it, respectively.
In addition, net income per common share for the fiscal years ended December 31, 2010, 2009 and 2008, was computed by dividing net income by the weighted average number of outstanding common shares for each year.
10.
CORPORATE BONDS ISSUANCE
The amounts recorded in the consolidated financial statements related to corporate bonds are as follows:
Remaining of
Original face face value as of As of December, 31
Class value 12/31/2010 2010 2009
Subordinated
USD 4,000,000 a) — — 963
Subordinated — Class 1
USD 150,000,000 b.1) USD 150,000,000 598,470 571,510
Non-subordinated — Class 2
USD 150,000,000 b.2) USD 106,395,000 437,986 418,257
Non-subordinated — Class 3
USD 100,000,000 b.3) USD 63,995,000 198,478 198,478
Total
1,234,934 1,189,208

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Maturities of the corporate bonds as of December 31, 2010, are as follows:
Fiscal Year Amounts
2011
18,493
2012
197,066
2017
423,005
2036
596,370
Total
1,234,934
a)
On January 20, 1997, the general special shareholders’ meeting of former Banco de Salta S.A. (which was absorbed by the Bank in 1999) approved issuing Subordinated Corporate Bonds in the amount of USD 4,000,000 to exercise the power granted to it by the second clause of the Loan Agreement entered into with former Banco Provincial de Salta on June 28, 1996. In addition, the general special shareholders’ meeting of former Banco de Salta S.A. held on May 29, 1997, approved the IPO of such Corporate Bonds. Through Resolution No. 1,006, dated December 19, 1997, the CNV authorized the IPO of former Banco de Salta S.A. for the issuance of Corporate Bonds, and it also approved the public offering of such bonds.
The installments of the corporate bonds were paid by the Bank in the original currency until February 3, 2002, the day on which the amounts payable were switched into pesos at Ps. 1-to-USD 1, adjusted by CER.
On August 2, 2010, the Bank settled the last installment in the amount of USD 200,000 (original value).
b)
On September 1, 2006 and June 4, 2007, the general regular shareholders’ meeting approved the creation, and subsequent extension, of a Global Program for the Issuance of simple Corporate Bonds in a short, medium or long term, either subordinated or non-subordinated, with or without guarantee, in accordance with the provisions of Law No. 23,576, as amended by Law No. 23,962, and further applicable regulations, up to a maximum amount outstanding at any time during the term of the program of USD 700,000,000 (seven hundred million US dollars), or an equal amount in other currencies, under which it will be possible to issue different classes and/or series of corporate bonds denominated in US dollars or other currencies and reissue the successive classes or series to be amortized.
b.1)
On December 18, 2006, under the abovementioned Global Program, Banco Macro S.A. issued the 1 st series of Class 1 subordinated Notes for a face value of USD 150,000,000 (US dollars one hundred and fifty million). The main characteristics of this issuance are:
•
Included in the Bank’s required minimum capital (computable equity), as established by Communiqué “A” 4,576.
•
The Notes fall due within a 30-year term, with full amortization upon maturity (December 18, 2036), with a full redemption option in 10 years as from the issuance date.
•
Interest payments will be made with a semiannual frequency (June 18 and December 18, every year).
•
During the first 10 years, the interest rate will be a fixed one (9.75%), and a variable one for the remaining years (six-month LIBOR, plus 7.11%). As established by Communiqué “A” 4,576 the interest rate payable can be increased only once over the life of the instrument and subsequent to the 10-year term as from their issuance.
•
They do not include covenants that change the subordination order.

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•
No interest on the Notes will be neither fall due and payable if: (i) payments of such interest exceed the distributable amount, as defined in the pricing supplement dated November 23, 2006; (ii) there is a general prohibition by the Central Bank; (iii) the Bank is subject to the provisions of sections 34 or 35 bis, Financial Institutions Law; (iv) the Bank is receiving financial assistance from the Central Bank under Article 17 of Central Bank Charter; (v) the Bank is not in compliance with or have failed to comply in a timely basis with reporting obligations to the Central Bank; and/or (vi) the Bank is not in compliance with minimum capital requirements (both on an individual and consolidated basis) or with minimum cash reserves (on average).
•
The unpaid interest is not cumulative.
•
They have authorizations both for their public offering and their listing on domestic or foreign stock exchanges or markets.
•
In no case, the payment of financial services may exceed net unappropriated retained earnings as per the financial statements for the last fiscal year, with an external auditor’s report, which should be appropriated to a reserve created to such end, as established by Communiqué “A” 4,576.
The Bank used the funds from such issuance to grant loans.
b.2)
On January 29, 2007, the Bank issued the 1st series of Class 2 nonsubordinated corporate bonds at a fixed rate of 8.5% p.a., simple, not convertible into shares, fully amortizable upon maturity (February 1, 2017), for a face value of USD 150,000,000 (one hundred and fifty million US dollars), under the terms and conditions set forth in the price supplement dated January 10, 2007. Interest will be paid semiannually on February 1 and August 1 of every year. Additionally, the Bank has the option to redeem such issuance, either fully or partially, at any time and periodically. The Bank used the funds from such issuance to grant loans.
b.3)
On June 7, 2007, the Bank issued the 1st series of Class 3 nonsubordinated corporate bonds (peso-linked Notes) at a fixed rate over principal in pesos of 10.75% p.a., simple, not convertible into shares, fully amortizable upon maturity (June 7, 2012), for a face value of USD 100,000,000 (one hundred million US dollars), under the terms and conditions set forth in the price supplement dated May 18, 2007. Interest will be paid semiannually on June 7 and December 7 of every year. Additionally, the Bank may fully redeem the issuance for tax purposes. The Bank used the funds from such issuance to grant loans.
On August 16, 2007, the SEC authorized the abovementioned exchange offers mentioned in b.1) through b.3).
Because of the macroeconomic context and fluctuations that the capital market went through in general, as of December 31, 2009, the Bank repurchased nonsubordinated corporate bonds of Class 2 and 3 for a face value amount of USD 79,610,000 (43,605,000 and 36,005,000 of Class 2 and 3, respectively), which were fully settled. Consequently, the Bank recognized total income for such repurchases amounting to 101,291 (69,071 for the year ended December 31, 2009 and the remaining amount is related to prior years).
On April 26, 2011 the Bank’s shareholders’ meeting approved the increase of the maximum aggregate principal amount of our Global Medium-Term Note Program from USD 700 million up to USD 1,000 million (or its equivalent in other currencies).
11.
ITEMS IN CUSTODY
11.1.
Portfolio Management
a)
On March 1, 1996, former Banco de Salta S.A. (which was absorbed by the Bank in 1999) and the Government of the Province of Salta entered into an Agreement to Manage the Loan Portfolio of former Banco Provincial de Salta related to the nonfinancial private sector, whereby the Bank undertakes to perform all acts necessary to manage such portfolio. In consideration thereof, the Province of Salta recognizes to the Bank a percentage of the amounts effectively recovered.
As of December 31, 2010, and 2009, the loans portfolio managed for principal and interest, after application adjustments, amounted to 14,214 and 14,359, respectively.

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b)
By virtue of the agreement formalized on August 11, 1998, between former Banco de Jujuy S.A. (which was absorbed by the Bank in 2000) and the Government of the Province of Jujuy, the Bank undertakes to perform all acts necessary to manage the loan portfolio of the former Banco de la Provincia de Jujuy and to provide a monthly report on the tasks performed. In consideration thereof, the Province of Jujuy recognizes to the Bank, for all accounts and as a lump-sum and total consideration, a percentage of the amounts actually recovered.
As of December 31, 2010 and 2009, the loans portfolio managed amounts to 42,603 and 43,238, respectively.
c)
On April 6, 2001, through Provincial Decree No. 806, the Ministry of the Treasury of the Province of Salta approved an extension to the “Contract for the service of collecting, processing and arranging information, managing the loan portfolio and performing collection procedures related to the receivables of the IPDUV (Provincial Institute of Urban and Housing Development)” entered into on March 27, 2001, between such agency and the former Banco Macro S.A. Through that extension, the Bank will provide to the IPDUV, among others, the service of collecting the installments payable by successful bidders for housing and a service of performing collection procedures related to such institute’s receivables. In consideration thereof, the IPDUV recognizes to the Bank a percentage of the amounts effectively recovered.
As of December 31, 2010 and 2009, the loans portfolio managed amounts to 62,885 and 78,911, respectively.
d)
On August 19, 2002, ABN AMRO Bank N.V. Sucursal Argentina, as trustee, the former Scotiabank Quilmes S.A., as trustor, Banco Comafi S.A., as collecting agent and manager and the former Banco Bansud S.A. (currently Banco Macro S.A.), entered into an agreement for the LAVERC financial trust, whereby former Banco Bansud S.A. would be in charge of the collection management, custody, settlement and any other task related to the corpus assets which were originally recorded in the branches of former Scotiabank Quilmes S.A.
As of December 31, 2010 and 2009, the portfolio managed by the Bank amounted to 99,833 and 114,328, respectively.
e)
On June 30, 2006, the Bank and Sud Inversiones y Análisis S.A. entered into a management and custody agreement regarding the “RETUC 1” trust loan portfolio.
As of December 31, 2010 and 2009, the portfolio managed by the Bank for principal and accrued interest amounted to 58,467 and 58,863, respectively.
f)
In addition, as of December 31, 2010 and 2009, the Bank had under its management other portfolios for total amounts of 84,936 and 93,344, respectively.
11.2.
Mutual Funds
As of December 31, 2010, the Bank, in its capacity as Depository Company, held in custody the shares of interest subscribed by third parties and securities from the following mutual funds (FCI):
Shareholders’
Fund Shares of interest equity Assets (a)
Pionero Pesos
397,491,205 567,379 375,088
Pionero Renta Ahorro
34,921,271 57,561 56,904
Pionero Latam
1,671,391 8,004 10,608
Pionero FF – Fideicomiso Financieros
25,003,634 36,101 36,016
Pionero Renta
36,771,835 131,399 130,527
Pionero Acciones
1,251,979 4,183 3,926
Pionero Renta Dólares
6,653,558 13,350 12,253
Pionero América
342,851 1,678 1,608
Galileo Event Driven FCI
16,000,624 121,823 118,104
Galileo Argentina FCI
4,105,386 24,692 24,281
Total
524,213,734 966,170 769,315
(a)
“Memorandum accounts – Debit-balance accounts – Control – Other” includes mainly items in custody. Consequently, this account includes the above mentioned amounts related to the mutual funds’ investment portfolios.

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12.
BANK DEPOSITS GUARANTEE INSURANCE SYSTEM
Law No. 24,485, and Presidential Decree No. 540/95, provided for the organization of a Bank Deposit Guarantee Insurance System, characterized as being limited, mandatory and for valuable consideration, designed to provide coverage for risks inherent in bank deposits, supplementary to the bank deposit privileges and protection offered by the system created by Financial Institutions Law. Such law also provided for the organization of SEDESA to manage the Deposit Guarantee Fund. Such company was organized in August 1995. The Bank holds a 9.9891% equity interest therein, according to the percentages set forth in Central Bank Communiqué “B” 10,060 of April 4, 2011.
This system shall cover the deposits in Argentine pesos and foreign currency with the participating institutions as checking accounts, savings accounts, certificates of deposit or any other modes determined by Central Bank, as long as fulfilling the requirements under Presidential Decree No. 540/95 and any others established by the enforcement agency. On the other hand, Central Bank established that the deposits made by other financial institutions, those made by persons related to the Bank, deposits of securities, among others, would be excluded from the deposit guarantee system.
13.
TRUST AGREEMENTS
The Bank is related to different types of trusts. Below the different trust agreements are disclosed, according to the Bank’s business purpose:
13.1.
Interest in trusts for investment purposes.
As of December 31, 2010 and 2009, the amounts recorded in the Bank’s consolidated financial statements for certificates of participation (net of allowances for 231,184 and 224,193, respectively) and debt securities held in financial trusts under “Other receivables from financial intermediation — Other receivables not covered by debtors classification regulations”, amounted to:
Financial trust 2010 2009
Certificates of participation:
TST & AF (a)
97,181 46,733
Tucumán (b)
63 25,163
Luján (c)
— 77,348
Others (d)
23,255 16,727
Subtotal certificates of participation
120,499 165,971
Debt securities:
Underwriting agreements (e)
54,566 70,645
San Isidro (f)
87,920 82,925
Created by Decree 976-01 (g)
51,763 31,570
Galtrust (h)
32,874 —
Chubut oil & gas royalties (i)
24,313 —
Others
9,023 21,647
Subtotal debt securities
260,459 206,787
Total interest in trusts (1)
380,958 372,758
(1)
See also Note 22.

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(a)
TST & AF Trust
On July 14, 1999, Austral Financial LLC, in its capacity as trustor, and First Trust of New York National Association, in its capacity as trustee, entered into a trust agreement known as TST & AF Financial Trust. On November 29, 2005, the trustor, the trustee and the beneficiaries (Austral Financial LLC, Proa del Puerto S.A. and Macro Bank Limited) agreed to replace the trustee by Sud Inversiones y Análisis S.A.
The purpose of the trust is to develop a real estate project in Puerto Madero and the subsequent sale thereof to settle the certificates of participation. Therefore, it will terminate 30 years after its execution date and/or the date in which the project is paid in full, sold or otherwise fully dispose of.
The Trust issued certificates of participation with economic rights proportional to the capital invested by each Beneficiary. However, the trust is controlled jointly by all certificate-of-participation holders.
As of December 31, 2010 and 2009, Banco Macro S.A. is the beneficiary of 100% and 50% of the certificates of participation issued by the trust, respectively.
As per the latest accounting information available to date, corpus assets amounted to about 93,908.
(b)
Tucumán Trust
On August 31, 2005, Federalia Sociedad Anónima de Finanzas, Maxifarm S.A. and Gabrinel S.A., in their capacity as trustors, entered into a trust agreement that created the financial trust “Fideicomiso Financiero Tucumán”. The trustors assigned to the trust debt securities issued by the trust “Fideicomiso República”, the purpose of which is the recoverability of certain assets, mainly loans and real property of former Banco República.
Tucumán Trust issued certificates of participation Class “A”, with characteristics of debt securities and Class “B” (subordinated to Class “A”). The unanimous vote of all certificates of participation is required to control the trust (some of them with characteristics of debt securities).
As of December 31, 2007, Banco Macro S.A. held the Class “A” certificates. On June 6, 2008, partial settlements of the Tucuman Trust’s certificates were made by the Trust. In addition Banco Macro S.A. acquired the rest of Class “B” certificates. Consequently, since that date, Banco Macro S.A. owns 100% of the trust certificates.
As of December 31, 2010, only class B certificates, entitled to the Trust equity, were pending payment.
As per the latest accounting information available to date, corpus assets (mainly, loans granted) amounted to about 8,744.
This trust will end with the full settlement of the certificates of participation.
(c)
Luján Trust
On May 20, 2003, the Luján trust was created for the purpose reduce the credit risk of the financing granted by Banco Macro S.A. to Federalia S.A. de Finanzas.
The trust issued different classes of certificates of participation, all of them entitled to vote but with different economic rights (some of them with characteristics of debt securities).
The main asset managed by the trust involves the real estate properties located in the districts of Luján, Navarro and General Rodríguez in the Province of Buenos Aires.

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As of December 31, 2007, the Bank was the beneficiary of 100% of the certificates issued by the trust. On June 6, 2008, the Bank sold on credit all of the certificates of participation to Federalia S.A. de Finanzas.
On September 16, 2009, the Bank entered into an agreement with Federalia S.A. de Finanzas, whereby the Bank repurchased the 100% of this trust’s certificates. The Bank paid the price of this transaction part in cash and the rest by the settlement of the loan mentioned before.
On December 3, 2010, the Bank executed an agreement to sell 100% of the trust’s certificates, in two cash installments. On December 17, 2010, the first installment was paid, with the second installment falling due on May 30, 2011.
(d)
Others
Including Bisel Trust, which was created within the framework of the reorganization process of former Banco Bisel S.A., as established by section 35 bis, Law No. 21,526, on May 21, 2002, with assets transferred by former Banco Bisel S.A., and with Banco de la Nación Argentina being appointed as trustee (replaced by Sud Inversiones y Análisis S.A. as from May 20, 2008). The purpose of the trust is to realize the managed assets and settle the certificates of participation issued. As of December 31, 2010, and 2009, Banco Macro S.A., is beneficiary of 100% of the certificates issued by such trust. Additionally, an allowance was booked for the full amounts receivable booked on account of such certificates, since they were deemed unrecoverable.
(e)
Underwriting agreements
It relates to prepayments towards the placement price of trust securities of the financial trusts under public offerings, made by the Bank through underwriting agreements, such as Consubond, Tarjeta Shopping and Consumax, among others. The assets managed for these trusts are mainly related to securitizations of consumer loans issued by others. Trust securities are placed once public offering is authorized by the CNV. Upon expiry of the placement period, once all trust securities have been placed on the market, the Bank recovers the disbursements made, plus the amount equal to the agreed-upon rate (“underwriting Price”). If after making the best efforts, such trust securities cannot be placed, the Bank (“Underwriter”) will retain the securities subject to underwriting.
(f)
San Isidro Trust
On June 4, 2001, Fideicomiso San Isidro was created for the purpose of securing loans that Banco Macro S.A. had previously granted to the trustor. The corpus asset was a real estate property.
The certificates of participation were delivered to Banco Macro S.A. to settle a loan granted previously to República S.A. de Finanzas.
Subsequently, a real state urbanization project was undertaken prior to the sale of the real property. On November 7, 2008, the Bank sold on credit all of the certificates of participation issued by the trust to an unrelated company. This loan was secured by such certificates.
Additionally, the trust issued debt securities to finance its activity for a total amount of USD 20,700,000. The Bank acquired such debt securities, which are entitled to vote, taking the control of the main decisions of the Trust.
According to the accounting information available as of the date of issuance of these consolidated financial statements, the corpus assets amounted to about 102,384.
(g)
Trust created by Decree 976-01
On September 13, 2001, the Argentine Government (trustor) and Banco de la Nación Argentina (trustee) entered into a trust agreement called “Fideicomiso Creado por Decreto 976-01” (Trust created by Presidential Decree 976-01).

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The purpose of the Trust is the development of projects, works, services and maintenance on road and railway infrastructure in rural and semirural areas, among others. The trust revenues (corpus assets) arise, mainly, from collecting tax on gas oil, equivalent to 22% of the price per liter. Such tax was created by Law No. 26,028 and its effective term was subsequently extended until 2024 by Law 26,422.
As of the date of issuance of these consolidated financial statements, the debt securities acquired by the Bank account for less than 2% of the trust issues.
(h)
Galtrust Financial Trust
On October 13, 2000, Banco de Galicia y Buenos Aires S.A. (trustor) and First Trust of New York N.A., permanent representation in Argentina (financial trustee), organized Galtrust I financial trust. The purpose of the trust is to collect the corpus assets (BOGAR 2018) and settle the debt securities and certificates of participation issued.
BOGAR 2018 arise from the exchange of loans in US dollars granted by the trustor to several provincial governments in Argentina, secured with Federal Tax Revenue Sharing System, under Presidential Decree No. 1,579 issued on August 27, 2002.
As of the date of issuance of these financial statements, the Bank is the beneficiary of the 26% of the debt securities in force.
(i)
Chubut oil & gas royalties Trust
On July 6, 2010, the Province of Chubut (trustor) and Banco de Valores S.A. (trustee) entered into a trust agreement that created the financial trust “Fideicomiso Chubut regalías hidrocarburíferas” (Chubut oil & gas royalties Trust).
The purpose of such trust is to finance production projects, infrastructure works in the province of Chubut and financial investments aimed at increasing the state’s interest in the energy sector. Trust revenues (corpus assets) arise mainly from credits resulting from the assignment, by the Province in favor of the trustee, of the rights on such oil & gas royalties collected by the appointed concessionaire (Pan American Energy LLC., Argentine Branch).
As of the date of issuance of these financial statements, the debt securities acquired by the Bank account for 4% of the trust issues.
13.2.
Trusts created using financial assets transferred by the Bank
The Bank transferred financial assets (loans) to trusts for the purpose of issuing and selling securities the collection of which is guaranteed by the cash flow resulting from such assets or group of assets. This way, the funds originally used to finance loans are recovered early, increasing the Bank’s lending capacity.
The Bank does not hold securities issued by these trusts.
As of December 31, 2010, and 2009, the trusts’ assets managed amount to 7,396 and 7,353, respectively.
13.3.
Trusts as collateral for the loans granted by the Bank
As it is common in the Argentine banking market, the Bank requires, in some cases, that the debtors present certain assets or entitlements to receiving assets in a trust as a guarantee for the loans granted. This way, the risk of losses is minimized and access to the security is guaranteed in case of the debtor’s noncompliance.
Trusts usually act as conduits to collect cash from the debtor’s flow of operations and send it to the bank for the payment of the debtor’s loans and thus ensure compliance with the obligations assumed by the trustor and guaranteed through the trust.

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Additionally, other guarantee trusts manage specific assets, mainly real property.
Provided there is no noncompliance or delays by debtor in the obligations assumed with the beneficiary, the Trustee shall not execute the guaranty and all excess amounts as to the value of the obligations are reimbursed by the Trustee to the debtor.
As of December 31, 2010 and 2009, the trusts’ managed amount to 273,508 and 383,533, respectively.
13.4.
Normal trust activities (The Bank acts as trustee)
The Bank performs management duties in relation to the corpus assets according to the agreements and only performs trustee duties and has no other interests in the trust.
In no case shall the Trustee be liable with its own assets or for any obligation deriving from the performance as trustee. Such obligations do not imply any type of indebtedness or commitment for the trustee and they will be fulfilled only through trust assets. In addition, the trustee will not encumber the corpus assets or dispose of them beyond the limits established in the related trust agreements. The fees earned by the Bank from its role as trustee are calculated according to the terms and conditions of the agreements.
Trusts usually manage funds derived from the activities performed by trustors for the following main purposes:
(a)
Guaranteeing in favor of the beneficiary the existence of the resources required to finance and/or pay certain obligations, such as the payment of installments regarding work or service certificates, and the payment of invoices and fees stipulated in the related agreements.
(b)
Promoting the production development of the private economic sector at a provincial level.
(c)
Being a party to public work concession agreements granting road exploitation, management, keeping and maintenance.
Additionally, other trusts manage specific assets, mainly real property.
As of December 31, 2010 and 2009, the trusts’ assets managed amount to 885,863 and 604,345, respectively.
14.
COMPLIANCE WITH REQUIREMENTS TO ACT AS OVER-THE-COUNTER SECURITIES MARKET BROKER
Under CNV Resolution 368/01, the Bank’s shareholder’s equity exceeds the minimum amount required.
15.
RESTRICTION ON EARNINGS DISTRIBUTION
a)
According to Central Bank provisions, 20% of income for the year plus/minus prior-year adjustments and less accumulated losses as of the prior year-end, if any, should be appropriated to Legal Reserve. Consequently, the Shareholders’ Meeting held on April 26, 2011, decided to apply 202,086 out of Unappropriated retained earnings to increase such legal reserve.
b)
As established in the issuance conditions for the 1st series of Class 1 Corporate Bonds mentioned in Note 10.b.1) and as established by Central Bank Communiqué “A” 4,576 the Shareholders’ Meeting held on April 26, 2011, decided to appropriate 58,146 out of unappropriated retained earnings to set a special reserve for interest to be paid upon the maturities taking place in June and December 2011.

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c)
Under Law No. 25,063, dividends to be distributed in cash or in kind in excess of taxable income accumulated as of the end of the fiscal year immediately preceding the payment or distribution date shall be subject to a 35% income tax withholding as single and definitive payment. Income to be considered in each year will result from deducting the tax paid for the tax period(s) in which income was distributed or the related proportional amount from taxable income, and adding dividends or income from other corporations not computed upon determining such income in the same tax period(s).
d)
Through Communiqué “A” 5,072, the Central Bank established the general procedure for the distribution of earnings. According to that procedure, earnings may only be distributed upon express authorization by the Central Bank, provided there are no records of the Bank having received financial aid from the Central Bank due to illiquidity or shortages in payments of minimum capital, among other previous conditions listed in the communiqué.
Therefore, earnings may only be distributed as long as the Bank has income after deducting, Unappropriated retained earnings, the amounts of the legal and statutory reserves which are mandatory, the positive net difference between the book value and market value or present value reported by Central Bank, as the case may be, of government debt securities and/or of the Central Bank monetary regulation not valued at market price, amounts capitalized due to legal proceedings related to deposits, among other items.
As of December 31, 2010, the adjustments to be made to unappropriated retained earnings are as follows:
i.
Capitalized amounts related to compliance with legal measures related to deposits in the amount of 52,273.
ii.
The positive net difference between the book value and the market value of unlisted government securities and federal guaranteed loans in the amount of 17,387.
Lastly, the maximum amount to be distributed cannot exceed the excess payments of required capital minimum considering, for this purpose only, an increasing adjustment of 30% the required amount and deducting the abovementioned adjustments, the capitalized amount for minimum presumed income tax and the reserves used to compensate instruments representing long-term debt liable to forming part of the Bank’s computable equity.
Having applied the above, the maximum amount to be distributed for the year ended December 31, 2010, totals 1,785,335.
Subsequently, on April 26, 2011 , the Regular and Special General Shareholders’ Meeting of Banco Macro S.A. approved, among other issues, (i) the compensation paid to the Directors amounting to 41,776 (ii) the distribution of cash dividends for an amount of up 505,312, which was authorized by the Central Bank on March 18, 2011 and (iii) the write off of payments made on behalf of shareholders for their personal assets tax for an amount of 11,156.
16.
TAX CLAIMS
Federal Public Revenue Agency (AFIP) has reviewed the tax returns filed by the Bank related to income tax and minimum presumed income tax in previous fiscal years.
Additionally, provincial and municipal tax agencies have conducted reviews of other taxes (mainly taxes on gross income) for previous fiscal years.
Listed below are the most significant claims arising from these reviews:
a)
AFIP objected the income tax returns filed by the former Banco Bansud S.A. (for fiscal years ended from June 30, 1995, through June 30, 1999, and the six-month irregular period ended December 31, 1999) and by the former Banco Macro S.A. (for fiscal years ended 1998, 1999 and 2000).

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The issues under discussion and on which the regulatory agency bases its position are the impossibility to deduct the credits with collateral security and the requirement to begin judicial collection proceedings for outstanding receivables to be deducted for tax purposes. Both issues were analyzed by the Federal Administrative Tax Court in similar cases, which issued a resolution in favor of the position assumed by the Bank.
On June 29, 2009, and August 26, 2009, the Bank partly joined a settlement agreement under Law No. 26,476 Title I regarding the credits in question that lack collateral security.
b)
AFIP objected to the income tax returns of the Bank for fiscal years ended December 31, 2002, through December 31, 2004, and the minimum presumed income tax settlement of the Bank for such tax years.
The matter under discussion and on which the tax agency bases its position is the tax value of the amount pending receipt at that time for the compensation bonds resulting from the asymmetric translation into pesos (Law No. 25,561, Presidential Decree No. 214/02 and 216/02).
On August 31, 2009, the Bank joined a settlement agreement created by Law No. 26,476, Title I regularizing the claim brought by tax authorities.
c)
The Buenos Aires City Tax Authorities (DGR CABA) attributed turnover tax differences to former Banco Macro S.A. for fiscal year ended 2002, in relation to the treatment of foreign exchange differences and the compensation bond.
On February 27, 2009, a precautionary measure filed by the Bank was rejected and, therefore, an appeal was filed with Court of Appeals in and for the City of Buenos Aires.
In September 2010, the Bank joined a settlement agreement under Law No. 3,461, of the DGR CABA regularizing the claim brought by tax authorities.
d)
The DGR CABA attributed turnover tax differences to former Banco Bansud S.A. for fiscal years ended 2002 and 2003, based mainly on the adjustments made in objections regarding foreign exchange differences and the compensation bond.
In October 2009 and September 2010, the Bank partially joined a settlement agreement under General Resolution 1,489/09 of a DGR CABA and under Law No. 3,461, of the DGR CABA regularizing the claim brought by tax authorities.
e)
The Buenos Aires Province Tax Authorities (DGR ARBA) attributed a turnover tax difference to Banco Macro S.A. related to mechanisms of distribution of gross income to the different provinces in relation to period 2002 and 2006. On May 5, and October 14, 2008, the Bank filed its defense brief which was dismissed. The Bank filed appeals with the Province of Buenos Aires Tax Appeal Court, which are still pending judgement.
In August 2010, the Bank partially joined a settlement agreement under Law 12,914, Regulatory Resolution No. 35/2010.
Therefore, the items described in a) through e) above have now been settled.
Additionally, there are other appeals which are not relevant with Tax Court.
The Bank’s Management believes there are no additional significant effects to those already recognized in the books that may result from the final outcome of such claims.
17.
RISK MANAGEMENT POLICIES
In financing activities there are a multiple number of risks to which banks are exposed. These risks are managed through a continuous Identification, Evaluation, Measuring, Control/Mitigation and Monitoring process of the risk events or potential risk situations, so as to provide reasonable assurance regarding their impact.

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All persons working at the Bank are responsible for the risk management process, in spite of the fact that the process begins with the Bank’s Board of Directors and has been designed to provide reasonable assurance that the Bank’s objectives are been fulfilled; every employee plays a specific role.
The Board of Directors establishes the organizational risk strategies and approves the policies and structures upon which the Bank will base its comprehensive risk management.
The members of the Board of Directors participate actively in the daily management, sharing their experience and knowledge of the financial system, forming different Committees (Executive, Audit, Anti-Money-Laundering, Internal Audit, IT, Assets and Liabilities (CAP), Loan, Recovery and Operational Risk Committees).
Some of the key risks in financing activities involve:
Credit risk
The credit risk results from the possibility of loss derived from our customers or counter-parties from fully or partially breaching financial obligations they have undertaken with the Bank.
Banco Macro S.A. has counter-party and credit risk policies, aimed at its management and control, the purpose of which is to ensure risks fall within a risk tolerance level decided by the bank and the tolerance level established by Central Bank regulations effective to this end. The Credit Risk Management is in charge of applying the policies, administrating and monitoring the exposure to risk. The Board of Directors and the Executive and Senior Credit Committees are empowered to define and amend credit policies, the application of which is the responsibility of the abovementioned Management.
Procedural manuals and tools (information systems, rating and monitoring systems, measuring models, recovery policies) have been developed, which, as a whole, allow for a risk treatment based on the type of the customers. Compliance with Central Bank credit regulations related to credit diversification, grading (establishing credit limits based on the customers’ net worth) and concentration, is also monitored continuously.
The Management of Corporate and Individual Risks and Micro-projects analyzes the credit risks of the different segments and provides technical support for credit decisions. The Senior Committee, Junior Committee, SME Banking Committee, Agro Committee, the Large and Regional Companies Committee and senior officers with customer-rating powers participate in the credit approval process, within a progressive scale in relation to the amount being requested, transaction’s terms and conditions.
The Credit Administration and Transactions Management is also required to mitigate credit risks through its Credit Review, Lending Transactions and Credit Administration sectors. To do so, it monitors the documentation and settlement of transactions, among other matters. Also, the classification of debtors and the debtors’ guarantees are reviewed on a regular basis (so as to determine the sufficiency of the provisions in conformity with the standards established by the Central Bank in this regard).
Within Credit Risk Management, the Analysis and Planning area duties involve monitoring risk exposure using tools such as alerts and indicators, preparing reports that serve as a source of information in portfolio management by the Bank’s Management, Credit Risk Management and the commercial areas.
Also, Prelegal Recovery Management defines and carries out the recovery tasks involving the arrears portfolio.
Finally, Management has a specific area focused on creating, amending and formalizing the standards and procedures that regulate the credit cycle and the purpose of which is to minimize and/or neutralize credit risks.
Operational risk
The Bank adopted the definition of Operational risk under the Basel 2 Accord and the definition established by the Central Bank through its Communiqué “A” 4793, which consists in the risk of incurring losses due to the lack of adjustment or weaknesses in the internal processes, systems or persons, or due to external events. This definition includes legal risk but excludes strategic and reputation risk.

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The Bank has policies, procedures and structures, appointing a Head of Operational Risk and an Operational Risk Committee, to ensure an Operational Risk Management plan for identifying, assessing and managing risks, with the purpose of assisting Area Managers and the Bank’s Board of Directors, in an environment of rapidly changing and significant risks.
In this context, the Evolutionary Comprehensive Operational Risk Management Model was developed, which involves the identification, measurement, management and monitoring of operational risks. A training plan was designed to begin conveying the concepts inherent to Operational Risk and the cultural change that this generates, and an implementation plan of the model was put into practice to achieve full implementation of all of its stages.
During fiscal 2010, the Bank continued to apply the above model, using it to carry out tasks intended to assess all of the processes. Progress was made in integrating the operational and technological risk assessment models, risk timing and impact assessment matrices were applied to assess processes and subprocesses. The qualitative assessment of risks was enhanced, identifying action plans and proposals to make improvements in critical processes, all of this complying fully with the set goals.
Also a procedure has been applied to gather information on events and losses, the purpose of which is to reduce incidents and loss amounts, thus incorporating a quantitative assessment into the risk management model, by recording risk events and losses in a centralized database.
During 2010, a tool was put in place to manage operational risk and used to manage identified risks. Different indicators are calculated so as to have an information system providing an overall view of the results of the different practices and tools involved in operational risk management.
Aiming to reinforce the operational risk function, during 2010 progress was made in implementing the method through which the IT areas can identify, assess and control risks related to the Bank’s information assets and to specific events, generating information that is later taken into consideration when decisions have to be made.
With regards to IT and information systems Risk Management, the Bank has contingency and business continuity plans in place to minimize the risks that could affect the Bank’s continuity of operations.
Market and Liquidity Risk
The market risk is defined by the uncertainty to which the Bank’s future results are exposed in light of adverse movements in market conditions. Should such adverse market conditions arise, the Bank would sustain unexpected losses or decreases in income as a result of changes in the value of the main market factors or variables, such as interest rates, foreign exchange rates and financial asset values, among others.
The liquidity risk is related to the Bank suffering a shortage of funds to meet its obligations, and that hence, it is required to depend on assets or acquire alternative resources (in unfavorable conditions), in order to meet customer fund requirements.
Banco Macro S.A. has written policies on the management and administration guidelines in relation to market, liquidity and price risks.
The Bank’s investment strategy is reviewed on a regular basis by the CAP in the context of the economic and market tendencies in relation to the market risk, assets and liabilities concentration, maturity, expected rate of return and alternative investments, according to which the exceptions and capacities are also assessed.
The CAP evaluates the Bank’s situation based on reports provided by Finance Management. To analyze the market risk it uses the VAR (Value at Risk) method, determining the present value of net assets, weighting it using the modified duration and the historical volatility of the interest rate at a 99% confidence interval.
The Financial Planning area uses the following instruments in preparing its reports and recommendations: sensitivity analysis, stress tests, index curves, in addition to other simulations. The adoption of measures based on the information provided is left to the Finance Management’s discretion, in relation to several factors that it must take into consideration such as the market conditions or the complexity and variety of transactions.

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The reports prepared contemplate the following aspects: changes in yield curves; a mismatch of assets and liabilities in relation to currency, rates, terms and based on their volatility and speed of realization; minimum cash; changes, rates and volatility of term deposits, and the participation of institutional investors; price and liquidity risk; limits established by the CAP and issuance of warnings.
Additionally, the Bank seeks to maintain an adequate degree of liquidity through the prudent management of assets and liabilities, in regards to both the cash flow as well as the concentration thereof.
The administration of liquidity needs to be supported by a planning process that determines the current and future cash needs, considering changes in economic, political, regulatory and other conditions. This makes it necessary to identify forecast and possible cash outflows, as well as consider alternative strategies to handle assets and liabilities in critical situations.
The Bank evaluates the liquidity situation through different tools, some of which include:
1.
Business plan. This is the starting point to determine the cash needs of the current year.
2.
Liquidity test. This is used to define the amount of funding required in a predetermined series of future dates assuming normal market circumstances and without there being any significant changes in the business.
3.
Stress tests. Used to quantify the impact of individual or systemic illiquidity scenarios.
4.
Mismatch control. The Committee defines the amount of the accumulated mismatch that is acceptable for each one of the tranches or gaps in the liquidity test, both in the normal and stress scenarios.
5.
Assets and Liabilities Assumptions. In the process of constructing the liquidity mismatches, whether in normal market or stress situations, assumptions are to be included for the assets and liabilities of the balance sheet, taking into account the stability, diversification, and historical renovation percentages.
Finally, the purpose of the price risk or interest rate policy is to ensure that the Committee has the adequate information, tools and procedures enabling it to measure, manage and control the price risk.
One of the objectives in relation to the price risk is eliminating the unwanted risk from the different assets and liabilities, but it is also the Bank’s objective to take advantage of the business opportunities that changes in interest rates and prices may offer.
The Finance Management will report to the CAP on a monthly basis on the price risk exposure and the effects that may be caused in the Bank’s financial margin. The risk reports should clearly compare the existing exposure with the limits policy, using it for analysis purposes: identification of market factors, sensitivity to market factors, volatility, correlations, value at risk, index curves, stress tests, among others.
18.
BALANCES IN FOREIGN CURRENCY
The balances of assets and liabilities denominated in foreign currency are as follows:
As of December 31,
2010 2009
ASSETS
Cash
2,199,875 2,634,999
Government and private securities
2,581,728 1,548,189
Loans
2,382,835 1,899,185
Other receivables from financial intermediation
2,846,622 1,312,797
Receivables from financial leases
59,958 72,334
Investments in other companies
577 550
Other receivables
43,877 30,036
Items pending allocation
456 257
Total
10,115,928 7,498,347

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As of December 31,
2010 2009
LIABILITIES
Deposits
3,890,417 3,895,939
Other liabilities from financial intermediation
3,329,221 1,892,293
Other liabilities
5,495 5,546
Subordinated Corporate Bonds
598,470 571,510
Items pending allocation
3 2
Total
7,823,606 6,365,290
19.
INTEREST-BEARING DEPOSITS WITH OTHER BANKS
Included in “Cash” there are: (a) no interest-bearing deposits with the Central Bank as of December 31, 2010 and 2009 and (b) interest-bearing deposits in foreign banks totaling 269,155 and 363,041 as of December 31, 2010 and 2009, respectively.
In 2010 and 2009 interest-bearing deposits with the Central Bank did not yield a nominal annual interest rate. Additionally, interest-bearing deposits in foreign banks yielded a nominal annual interest rate of approximately 0.59% and 0.54% as of December 31, 2010 and 2009, respectively.
20.
GOVERNMENT AND PRIVATE SECURITIES
As of December 31,
2010 2009
GOVERNMENT SECURITIES
Holdings in Special Investment Accounts
In pesos:
Federal Government bonds at 2% – Maturity 2014
— 222,169
Federal Government bonds at Badlar + 2.75% – Maturity 2014
— 191,384
Secured bonds Decree 1,579/02 at 2% – Maturity 2018
— 178,979
Discount bonds at 5.83% – Maturity 2033
— 18,207
Consolidation bonds at 2% – Sixth series – Maturity 2024
— 5,350
Subtotal holdings in Special Investment Accounts — In pesos
— 616,089
In foreign currency:
Federal Government bonds at 7% – Maturity 2015
— 38,881
Federal Government bonds at Libor – Maturity 2012
— 1,784
Par bonds at variable rate – Maturity 2038 (governed by Argentina legislation)
— 1,594
Federal Government bonds at Libor – Maturity 2013
— 562
Par bonds at variable rate – Maturity 2038 (governed by New York State legislation)
— 461
Subtotal holdings in Special Investment Accounts — In foreign currency
— 43,282
Subtotal holdings in Special Investment Accounts
— 659,371
Holdings for trading or financial intermediation
In pesos:
Federal Government bonds at Badlar + 2.75% – Maturity 2014
200,925 1,464
Secured bonds Decree 1,579/02 at 2% – Maturity 2018
40,988 1,433
Consolidation bonds of social security payables at 2% – Maturity 2014
7,029 7,525
Discount bonds at 5.83% – Maturity 2033
6,956 9,752
Federal Government bonds at 2% – Maturity 2014
3,674 6,579
Federal Government bonds at 10.50% – Maturity 2012
1,059 189
Federal Government bonds at Badlar + 3% – Maturity 2015
901 1,064
Consolidation bonds at 2% – Sixth series – Maturity 2024
645 382
Par bonds at variable rate – Maturity 2038
519 261
GDP — Related Securities – Maturity 2035
54 325
Others
279 943
Subtotal holdings for trading or financial intermediation — In pesos
263,029 29,917

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As of December 31,
2010 2009
GOVERNMENT SECURITIES (contd.)
In foreign currency:
Treasury Bill – Maturity 2011
198,790 —
Federal Government bonds at Libor – Maturity 2012
42,466 52,874
Federal Government bonds at 7% – Maturity 2015
1,640 1,544
Federal Government bonds at Libor – Maturity 2013
1,113 345
Federal Government bonds at 7% – Maturity 2017
1,026 —
Treasury Bill – Maturity 2010
— 379,666
Others
64 505
Subtotal holdings for trading or financial intermediation – In foreign currency
245,099 434,934
Subtotal holdings for trading or financial intermediation
508,128 464,851
Unlisted government securities
In pesos:
Province of Buenos Aires treasury bills at 168 days – Maturity 2011
50,084 —
Province of Buenos Aires treasury bills at 84 days– Maturity 2011
49,575 —
Federal Government bonds at Badlar + 3.50% – Maturity 2013
46,350 44,541
Federal Government bonds at variable rate – Maturity 2013
7,523 9,738
Province of Tucumán bonds at 2% – Maturity 2018
1,565 1,984
Consolidation bonds at 2% – Maturity 2010
— 199
Others
3 7
Subtotal unlisted government securities – In pesos
155,100 56,469
In foreign currency:
Province of Córdoba Debt Securities at 12% – Maturity 2017
17,498 19,160
Province of Tucumán bonds at Libor – Maturity 2015
2,455 3,820
Subtotal unlisted government securities – In foreign currency
19,953 22,980
Subtotal unlisted government securities
175,053 79,449
Instruments issued by the Central Bank of Argentina
In pesos:
Unlisted Central Bank bills and notes (Lebacs / Nobacs)
3,167,344 4,371,284
Listed Central Bank bills and notes (Lebacs/ Nobacs)
681,949 264,485
Subtotal instruments issued by Central Bank
3,849,293 4,635,769
Securities under repurchase agreements
In pesos:
Unlisted Central Bank bills and notes (Lebacs / Nobacs)
148,959 14,652
Consolidation bonds at 2% – Sixth series – Maturity 2024
18,518 —
Listed Central Bank bills and notes (Lebacs/ Nobacs)
7,514 —
Discount bonds at 5.83% – Maturity 2033
4,797 —
Federal Government bonds at Badlar + 2.75% – Maturity 2014
990 —
GDP — Related Securities – Maturity 2035
149 —
Subtotal securities under repurchase agreements – In pesos
180,927 14,652
In foreign currency:
Federal Government bonds at 7% – Maturity 2013
2,299,088 —
Federal Government bonds at 7% – Maturity 2017
— 1,046,220
Subtotal securities under repurchase agreement – In foreign currency
2,299,088 1,046,220
Total government securities
7,012,489 6,900,312
PRIVATE SECURITIES
Investments in listed private securities
In foreign currency:
Shares
17,588 —
Mutual Funds
— 773
Subtotal listed private securities — In foreign currency
17,588 773
Total private securities
17,588 773
Total government and private securities, before allowances
7,030,077 6,901,085
Allowances
(3 ) (44 )
Total government and private securities
7,030,074 6,901,041

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Maturing
After 1 year After 5 years
Within 1 but within 5 but within 10 After 10 Without
year years years years due date Total
Book value
GOVERNMENT SECURITIES
Holdings for trading or financial intermediation
In pesos:
7,226 232,631 15,335 7,837 — 263,029
Federal Government bonds at Badlar + 2.75% – Maturity 2014
— 200,925 — — — 200,925
Secured bonds Decree 1,579/02 at 2% – Maturity 2018
4,216 21,759 15,013 — — 40,988
Consolidation bonds at 2% – Sixth series – Maturity 2024
— 112 322 211 — 645
Discount bonds at 5.83% – Maturity 2033
— — — 6,956 — 6,956
Consolidation bonds of social security payables at 2% — Maturity 2014
2,054 4,975 — — — 7,029
Federal Government bonds at 2% – Maturity 2014
919 2,755 — — — 3,674
Federal Government bonds at 10.50% – Maturity 2012
— 1,059 — — — 1,059
Federal Government bonds at Badlar + 3% – Maturity 2015
— 901 — — — 901
Par bonds at variable rate – Maturity 2038
— — — 519 — 519
GDP — Related Securities – Maturity 2035
— — — 54 — 54
Others
37 145 — 97 — 279
Holdings for trading or financial intermediation
In foreign currency:
220,404 23,616 1,058 21 — 245,099
Treasury Bill — Maturity 2011
198,790 — — — — 198,790
Federal Government bonds at Libor – Maturity 2012
21,233 21,233 — — — 42,466
Federal Government bonds at 7% – Maturity 2015
— 1,640 — — — 1,640
Federal Government bonds at Libor – Maturity 2013
371 742 — — — 1,113
Federal Government bonds at 7% – Maturity 2017
— — 1,026 — — 1,026
Others
10 1 32 21 — 64
Unlisted government securities
In pesos:
102,328 52,196 573 — 3 155,100
Province of Buenos Aires treasury bills at 168 days – Maturity 2011
50,084 — — — — 50,084
Province of Buenos Aires treasury bills in pesos at 84 days– Maturity 2011
49,575 — — — — 49,575
Federal Government bonds at Badlar + 3.50% – Maturity 2013
— 46,350 — — — 46,350
Federal Government bonds at variable rate – Maturity 2013
2,508 5,015 — — — 7,523
Province of Tucumán bonds at 2% – Maturity 2018
161 831 573 — — 1,565
Others
— — — — 3 3
Unlisted government securities
In foreign currency:
2,991 11,963 4,999 — — 19,953
Province of Córdoba Debt Securities at 12% – Maturity 2017
2,500 9,999 4,999 — — 17,498
Province of Tucumán bonds at Libor – Maturity 2015
491 1,964 — — — 2,455
Instruments issued by the Central Bank of Argentina – In pesos:
3,849,293 — — — — 3,849,293
Unlisted Central Bank bills and notes (Lebacs/Nobacs)
3,167,344 — — — — 3,167,344
Listed Central Bank bills and notes (Lebacs/Nobacs)
681,949 — — — — 681,949

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Maturing
After 5
After 1 year years but
Within 1 but within within 10 After 10 Without
year 5 years years years due date Total
Book Value
Securities under repurchase agreement
180,927 — — — — 180,927
In pesos:
Unlisted Central Bank bills and notes (Lebacs / Nobacs)
148,959 — — — — 148,959
Consolidation bonds at 2% – Sixth series – Maturity 2024
18,518 — — — — 18,518
Listed Central Bank bills and notes (Lebacs/ Nobacs)
7,514 — — — — 7,514
Discount bonds at 5.83% – Maturity 2033
4,797 — — — — 4,797
Federal Government bonds at Badlar + 2.75% – Maturity 2014
990 — — — — 990
GDP — Related Securities – Maturity 2035
149 — — — — 149
Securities under repurchase agreement
2,299,088 — — — — 2,299,088
In foreign currency:
Federal Government bonds at 7% – Maturity 2013
2,299,088 — — — — 2,299,088
Total government securities
6,662,257 320,406 21,965 7,858 3 7,012,489
PRIVATE SECURITIES
Investments in listed private securities
— — — — 17,588 17,588
In foreign currency:
Shares
— — — — 17,588 17,588
Total private securities
— — — — 17,588 17,588
Total government and private securities, before allowances
6,662,257 320,406 21,965 7,858 17,591 7,030,077
Allowances
(3 )
Total government and private securities
7,030,074

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BANCO MACRO S.A. AND SUBSIDIARIES
21.
LOANS
Description of certain categories of loans in the accompanying Balance Sheets include:
a.
Non-financial government sector: loans to the government sector, excluding government owned financial institutions.
b.
Financial sector: mainly, refers to short-term loans to financial institutions.
c.
Non financial private sector and foreign residents: loans given to the private sector (excluding financial institutions) and residents outside Argentina.
The classification of the loan portfolio in this regard was as follows:
As of December 31,
Description 2010 2009
Non-financial government sector
336,430 206,484
Financial sector
155,701 90,916
Non-financial private sector and foreign residents
Commercial
- With Senior “A” guarantees
320,399 226,381
- With Senior “B” guarantees
869,936 570,170
- Without Senior guarantees
5,502,813 3,860,755
Consumer
- With Senior “A” guarantees
29,149 27,932
- With Senior “B” guarantees
673,329 669,081
- Without Senior guarantees
8,537,256 5,893,133
Less: Allowance
(514,910 ) (448,045 )
Total loans, net of allowance
15,910,103 11,096,807
Senior “A” guarantees consist mainly of cash guarantees, gold guarantees, warrants over primary products and other forms of self-liquidating collateral.
Senior “B” guarantees generally consist of mortgages and other forms of collateral pledged to secure the loan amount.
“Without senior guarantees” consist, in general, of unsecured third-party guarantees.
A breakdown of total loans by geographical location of borrowers is as follows:
Geographical location 2010 2009
Argentina
16,422,685 11,523,838
Uruguay
1,316 8
Brasil
997 —
France
8 8
Chile
6 11
Spain
1 127
United States of America
— 10,875
England
— 7,500
Australia
— 2,095
Venezuela
— 388
Paraguay
— 2
Less: Allowance
(514,910 ) (448,045 )
Total loans, net of allowances
15,910,103 11,096,807

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BANCO MACRO S.A. AND SUBSIDIARIES
A breakdown of total loans by sector activity classified according to the principal business of the borrowers is as follows:
Economic Activity 2010 2009
Retail loans
6,512,629 4,403,933
Agricultural livestock- Forestry-Fishing- Mining — Hunting
2,286,297 1,910,164
Construction
1,009,744 1,112,702
Other services
1,281,916 858,936
Retail and consumer products
1,140,019 747,897
Foodstuff and beverages
917,874 637,814
Transportation, storage and communications
488,356 190,796
Chemicals
455,313 129,145
Governmental services
418,026 258,784
Financial Services
387,074 290,331
Real estate, business and leases
357,865 236,555
Manufacturing and wholesale
302,927 140,620
Electricity, oil, water
92,475 75,095
Hotels and restaurants
27,866 29,949
Others
746,632 522,131
Total loans
16,425,013 11,544,852
Less: Allowance
(514,910 ) (448,045 )
Total loans, net of Allowance
15,910,103 11,096,807
22.
OTHER RECEIVABLES AND PAYABLES FROM FINANCIAL INTERMEDIATION
The breakdown of Other receivables from financial intermediation by guarantee type is as follows:
As of December 31,
Description 2010 2009
With preferred guarantees
2,398,732 1,056,919
Without preferred guarantees
1,438,078 1,607,595
Allowances
(237,513 ) (231,219 )
3,599,297 2,433,295
The breakdown of private securities recorded in Other receivables from financial intermediation is as follows:
As of December 31,
Description 2010 2009
Corporate bonds — Unlisted (1)
279,306 123,793
Certificates of participation in financial trusts — Unlisted (1)
351,683 390,164
Debt securities in financial trusts — Unlisted
260,459 206,787
Total investments in unlisted private securities
891,448 720,744
(1)
As of December 31, 2010 and 2009, the Bank booked allowances for impairment in value amounting to 234,187 and 225,210, respectively (see also note 25).

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As of December 31, 2010, maturities for the private securities disclosed above are as follows:
After 1 After 5
year but years but
Within 1 within 5 within 10 After 10 Without
year years years years due date Total
Corporate bonds —Unlisted
7,344 224,538 47,233 — 191 279,306
Certificates of participation in financial trusts —Unlisted
4,395 114,350 — 8,851 224,087 (1) 351,683
Debt securities in financial trusts —Unlisted
154,839 91,476 14,144 — — 260,459
Total investments in unlisted private securities
166,578 430,364 61,377 8,851 224,278 891,448
(1)
As of December 31, 2010 the Bank booked allowances for impairment in value amounting to 231,184.
The Bank enters into forward transactions related to government securities and foreign currencies. The Bank recognizes cash, security or currency amount to be exchanged in the future as a receivable and payable at the original transaction date. The assets and liabilities related to such transactions are as follows:
As of December 31,
Description 2010 2009
Amounts receivable from spot and forward sales pending settlement
Receivables from repurchase agreements of government securities
177,583 14,657
Receivable from spot sales of government and private securities pending settlement
38,734 21,651
Receivables from spot sales of foreign currency settlement
32,397 734
248,714 37,042
Securities and foreign currency receivable from spot and forward purchases pending settlement
Spot purchases of foreign currency pending settlement
32,439 734
Spot purchases of government and private securities pending settlement
11,917 1,608
Forward purchases of securities under repurchase agreements
990 521,159
Other spot purchases
32,221 13,059
77,567 536,560
Amounts payable for spot and forward purchases pending settlement
Payables for spot purchases of government securities pending settlement
36,674 14,552
Payables for spot purchases of foreign currency pending settlement and forward purchases of foreign currency
32,381 734
Payables under repo transactions
23,653 8,362
Payables for forward purchases of securities under repurchase agreements
901 468,535
93,609 492,183
Securities and foreign currency to be delivered under spot and forward sales pending settlement
Forward sales of government securities under repurchase agreements
2,480,124 1,060,887
Spot sales of government and private securities pending settlement
49,186 14,430
Forward sales of foreign currency pending settlement
32,430 730
2,561,740 1,076,047

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These instruments consist of foreign currency and securities contracts (spot and forward purchases and sales), whose valuation method is disclosed in note 4.4.h). The fair value of these instruments was:
End-of-year fair value
Description 2010 2009
Assets
74,228 535,160
Liabilities
2,529,901 1,028,014
Premiums on these instruments have been included in the “Financial income” and “Financial expense” captions of the consolidated statement of income of each year.
23.
BANK PREMISES AND EQUIPMENT AND OTHER ASSETS
23.1
Premises and Equipment
The major categories of the Bank’s premises and equipment, and related accumulated depreciation are presented in the following table:
As of December, 31
Estimated
useful life
Description (years) 2010 2009
Buildings
50 410,710 396,024
Furniture and facilities
10 112,624 98,332
Machinery and equipment
5 408,087 366,355
Vehicles
5 37,428 34,192
Other
— 1,408 1,552
Accumulated depreciation
(524,726 ) (462,830 )
Total
445,531 433,625
Depreciation expense was 58,285, 53,993 and 50,543 as of December 31, 2010, 2009 and 2008, respectively.
23.2
Other assets
Other assets consisted of the following as of December 31, 2010 and 2009:
As of December, 31
Estimated
useful life
Description (years) 2010 2009
Works in progress
— 36,955 15,531
Works of art
— 1,235 1,213
Prepayments for the purchase of assets
— 57,862 1,335
Foreclosed assets
50 13,199 19,498
Leased buildings
50 3,893 4,543
Stationery and office supplies
— 4,055 3,347
Other assets (1)
50 78,385 82,141
Accumulated depreciation
(14,328 ) (13,266 )
Total
181,256 114,342
(1)
Mainly includes buildings acquired by attachment in aide of execution, which under Central Bank rules are included in this line after a period of six months from the acquisition.
Depreciation expense was 2,032, 1,583 and 1,313 at December 31, 2010, 2009 and 2008, respectively.

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23.3
Operating Leases
As of December 31, 2010, the Bank’s branch network includes certain branches that were located in properties leased to the Bank (some of which are renewable for periods between 2 and 10 years).
The estimated future lease payments in connection with these properties are as follows:
Fiscal year end Amounts
2011
27,270
2012
18,699
2013
12,207
2014
8,155
2015
4,626
2016 and after
4,680
Total
75,637
As of December 31, 2010, 2009 and 2008, rental expenses amounted to 40,526, 34,638 and 21,769, respectively. As of such dates, there are no contractual obligations with separate amounts of minimum rentals, contingent rentals, and sublease rental income.
24.
INTANGIBLE ASSETS
24.1.
Goodwill:
As of December 31, 2010 and 2009 goodwill breakdown is as follows:
As of December 31,
Estimated
useful life
Description (years) 2010 2009
Goodwill for the purchase of Banco del Tucumán S.A., net of accumulated amortization of 8,503 as of December 31, 2010 (a)
10 9,740 11,567
Goodwill for the purchase of Nuevo Banco Bisel S.A., net of accumulated amortization of 29,169 as of December 31, 2010 (b)
10 36,874 43,478
Goodwill for the purchase of Banco Privado de Inversiones S.A., net of accumulated amortization of 1,873 as of December 31, 2010 (c)
10 54,331 —
Total
100,945 55,045
(a)
On May 5, 2006, Banco Macro acquired 75% of the capital stock of Banco del Tucumán in the amount of 45,961. The assets transferred amounted to 700,612 and the liabilities assumed amounted to 660,547.
Additionally, from September through December 2006, Banco Macro S.A. acquired 4.84% of the capital stock of Banco del Tucumán S.A.
Finally, on November 28, 2006, the General Regular and Special Shareholder’s Meeting of Banco del Tucumán S.A. approved a capital increase of 21,980, establishing an additional paid-in capital of 26,171. During January 2007, Banco Macro S.A. subscribed the total increase, thus increasing its overall interest in Banco del Tucumán S.A. to 89.93%.
Under Central Bank rules, this transaction resulted in Banco Macro’s positive goodwill amounting to 18,242, which is amortized in ten years and no impairment is required.

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(b)
On August 11, 2006, the Bank acquired 92.73% of the capital stock of Nuevo Banco Bisel in the amount of 19,509. The assets transferred amounted to 1,824,644 and the liabilities assumed amounted to 1,804,534.
Under Central Bank rules, as a result of the acquisition, the Bank booked a positive goodwill amounting to 66,042, which is amortized in ten years and no impairment is required. See also note 3.6.
(c)
On September 22, 2010, the Bank acquired 100% of the capital stock of Banco Privado de Inversiones in the amount of USD 23.3 million, out of which, USD 10.4 million is related to a guaranteed amount, as provided in the purchase agreement. The assets transferred amounted to 403,686 and the liabilities assumed amounted to 368,034.
Under Central Bank rules, as a result of the acquisition, the Bank booked a positive goodwill amounting to 56,205, which is amortized in ten years and no impairment is required.
Amortization expense on goodwill was 10,305, 8,432 and 8,439 as of December 31, 2010, 2009 and 2008, respectively.
24.2.
Organization and development costs:
As of December 31, 2010 and 2009, the organization and development costs breakdown is as follows:
As of December 31,
Estimated
useful life
Description (years) 2010 2009
Differences due to courts orders – deposits dollarizations (a)
5 54,680 50,532
Cost from information technology projects (b)
5 100,937 78,158
Organizational cost (c)
5 2,602 8,001
Other capitalized cost
5 38,133 18,838
Total
196,352 155,529
(a)
Under Central Bank rules, the Bank records exchange differences related to payments and provisions made by the Bank in relation to the constitutional protection and court judgments resulting from court decisions mentioned in Note 4.4.l.2.
(b)
Under Central Bank rules, the Bank records as expense software cost relating to preliminary application development and post-implementation stages of software development.
(c)
Under Central Bank rules, the Bank records cost inherent to the set up and organization of the Bank.
Amortization expense was 60,748, 53,950 and 55,066 as of December 31, 2010, 2009 and 2008, respectively, which was recorded in Administrative expenses and Other expenses.
Intangible assets changed as follows during fiscal years ended December 31, 2010, 2009 and 2008:
Fiscal year ended December 31,
2010 2009 2008
Balance at the beginning of the fiscal year
210,574 198,546 199,963
Additions
157,940 74,867 62,096
Decreases
(164 ) (457 ) (8 )
Amortization expense (1)
(71,053 ) (62,382 ) (63,505 )
Balance at the end of the fiscal year
297,297 210,574 198,546
(1)
See Note 28.

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25.
ALLOWANCES AND PROVISIONS
The Bank had recorded allowances and provisions for:
Government and private securities: recorded to cover possible impairment risk arising out of government securities.
Loans: recorded in compliance with the provision of Communique “A” 2950, as supplemented, of the Central Bank, taking into account Notes 4.4.f).
Other receivables from financial intermediation: recorded in compliance with the provision of Communique “A” 2950, as supplemented, of the Central Bank, taking into account Notes 4.4.f) and 4.4.h.4).
Receivables from financial leases: recorded in compliance with the provision of Communique “A” 2950, as supplemented, of the Central Bank, taking into account Note 4.4.f).
Investment in other companies: recorded to cover possible impairment risk arising from investments in other companies.
Other receivables: recorded to cover collectibility risks of other receivables.
Granted guarantees: recorded under Central Bank’s rules to cover contingent losses related to loan commitments. These amounts have been accrued in accordance with Central Bank’s rules, which are similar to FASB ASC 450 “Contingencies”.
Negative goodwill: recorded to cover the difference between the purchase price and the book value of the net equity acquired of Banco Bansud S.A. and Nuevo Banco Suquía S.A.
Other loss contingencies: mainly includes labor litigation and customer and other third-party claims. The amounts have been accrued in accordance with Central Bank’s rules, which are similar to FASB ASC 450 “Contingencies”.
Difference from court deposit dollarization: recorded under Central Bank’s rules to cover the difference form court deposit dollarization (see Note 2.).
As of December 31, 2010
Balance at Balance at
the beginning the end of
of the fiscal the fiscal
year Provision Reversals Charge off year
Allowances
- Government and private securities
44 6 (47 ) — 3
- Loans
448,045 254,010 (a)(b) (28,747 )(b) (158,398 ) 514,910 (c)
- Other receivables from financial intermediation
231,219 11,756 (3,458 ) (2,004 ) 237,513
- Receivables from financial leases
3,649 3,298 (926 ) — 6,021
- Investment in other companies
1,497 277 (98 ) — 1,676
- Other receivables
13,980 3,881 (981 ) (351 ) 16,529
Total of allowances
698,434 273,228 (34,257 ) (160,753 ) 776,652
Provisions
- Granted guarantees
966 — (182 ) — 784
- Negative goodwill
483 — (483 ) — —
- Other loss contingencies
66,847 34,492 (d) (509 ) (10,257 ) 90,573
- Difference from court deposit dollarization
19,979 2,194 (87 ) (7,613 ) 14,473
Total of provisions
88,275 36,686 (1,261 ) (17,870 ) 105,830

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As of December 31, 2009
Balance at
the beginning Balance at the
of the fiscal end of the
year Provision Reversals Charge off fiscal year
Allowances
- Government and private securities
27 28 (11 ) — 44
- Loans
438,348 187,648 (2,596 ) (175,355 ) 448,045
- Other receivables from financial intermediation
228,588 4,202 (68 ) (1,503 ) 231,219
- Receivables from financial leases
5,391 138 (1,878 ) (2 ) 3,649
- Investment in other companies
247 1,266 (16 ) — 1,497
- Other receivables
15,838 2,477 (1,914 ) (2,421 ) 13,980
Total of allowances
688,439 195,759 (6,483 ) (179,281 ) 698,434
Provisions
- Granted guarantees
1,523 24 (581 ) — 966
- Negative goodwill
483 — — — 483
- Other loss contingencies
62,765 17,114 (2,069 ) (10,963 ) 66,847
- Difference from court deposit dollarization
18,233 1,746 — — 19,979
Total of provisions
83,004 18,884 (2,650 ) (10,963 ) 88,275
As of December 31, 2008
Balance at
the beginning Balance at the
of the fiscal end of the
year Provision Reversals Charge off fiscal year
Allowances
- Government and private securities
27 — — — 27
- Loans
220,422 314,532 (20,360 ) (76,246 ) 438,348
- Other receivables from financial intermediation
206,939 24,099 (1,689 ) (761 ) 228,588
- Receivables from financial leases
4,898 614 (121 ) — 5,391
- Investment in other companies
697 45 (8 ) (487 ) 247
- Other receivables
27,034 7,332 (517 ) (18,011 ) 15,838
Total of allowances
460,017 346,622 (22,695 ) (95,505 ) 688,439
Provisions
- Granted guarantees
1,660 40 (177 ) — 1,523
- Negative goodwill
483 — — — 483
- Other loss contingencies
78,044 28,792 (21,385 ) (22,686 ) 62,765
- Difference from court deposit dollarization
21,146 1,864 — (4,777 ) 18,233
Total of provisions
101,333 30,696 (21,562 ) (27,463 ) 83,004
(a)
As of December 31, 2010, the amount of “Provision for loan losses” disclosed in the Statements of Income, includes above amounts and the provision for “Other receivables for financial intermediation” and “Receivables from financial leases”, mainly, net of the related allowances for loan losses from acquisition of Banco Privado de Inversiones S.A.
(b)
As of December 31, 2010 the amount of “Provisions for loan loss, net” disclosed in Note 28., under US SEC Regulation S-X, includes above amounts and provision and reversals of “Receivables from financial leases” disclosed in Note 27, mainly, net of those related to Recovered loans.
(c)
As of December 31, 2010, as disclosed in Note 28, under SEC requirements Regulation S-X, the amount of Allowance for loan losses includes the allowance for Receivables from financial leases.
(d)
As of December 31, 2010, the amount of “Provision for losses on other receivables and other allowances” disclosed in the Statement of Income, mainly includes above amounts net of expenses related to contingent liabilities for probable claims, lawsuit and other proceeding, including those related to labor and other obligations.

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BANCO MACRO S.A. AND SUBSIDIARIES
26.
DEPOSITS AND OTHER LIABILITIES FROM FINANCIAL INTERMEDIATION
26.1
Deposits
The aggregate amount of time deposits and investment accounts exceeding Ps.100 (thousands) or more as of December 31, 2010 and 2009 is 9,036,046 and 6,964,798, respectively.
26.2
Central Bank of Argentina
The Bank borrowed funds under various credit facilities from the Central Bank for specific purposes, as follows:
As of December 31, 2010 As of December 31, 2009
Interest and Interest and
CER CER
Principal adjustments Rate Principal adjustments Rate
Short–term liabilities
1,447 5 0.01 % 1,363 — —
Long–term liabilities
415 10 0.08 % 518 16 0.08 %
Total
1,862 15 1,881 16
Accrued interest is included in the “Central Bank of Argentina” under the “Other Liabilities from Financial Intermediation” in the accompanying Consolidated Balance Sheets. Amounts are unsecured.
26.3
Banks and international institutions
The Bank borrowed funds under various credit facilities from Banks and international institutions for specific purposes, as follows:
As of December 31, 2010 As of December 31, 2009
Principal Interest Rate Principal Interest Rate
Short–term liabilities
45,506 191 1.89 % 219,743 7,471 7.78 %
Total
45,506 191 219,743 7,471
Accrued interest is included in the “Accrued interest, adjustments, foreign exchange and quoted price differences payable” under the “Other Liabilities from Financial Intermediation” in the accompanying Consolidated Balance Sheets. Amounts are unsecured.
26.4
Financing received from Argentine financial institutions
The Bank borrowed funds under various credit facilities from the Argentine financial institutions for specific purposes, as follows:
As of December 31, 2010 As of December 31, 2009
Principal Interest Rate Principal Interest Rate
Short–term liabilities
31,845 3,048 9.14 % 146,679 2,443 9.45 %
Long–term liabilities
15,501 25,243 2.00 % 17,278 23,571 2.00 %
Total
47,346 28,291 163,957 26,014
Accrued interest and adjustments are included in “Accrued interest payables” under the Financing received from Argentine financial institutions and “Accrued interest, adjustments, foreign exchange and quoted price differences payables” under the “Other liabilities from financial intermediation” in the accompanying consolidated balance sheets. Amounts are unsecured.

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Maturities of the long-term liabilities in the table above for each of the following periods are as follows:
Periods As of
December 31,
2010
2012
4,671
2013
4,671
2014
7,136
2015
7,630
2016
7,630
2017
7,630
2018
1,376
40,744
26.5
Others
The rest of liabilities included in “Others liabilities from financial intermediation” are liabilities assumed for the Bank, mainly related to operating banking activities.
As of December 31, 2010 As of December 31, 2009
Principal Interest Rate Principal Interest Rate
Short–term liabilities (1)
1,093,289 19 0.01 % 652,241 89 0.02 %
Long–term liabilities (2)
80,584 1,214 3.98 % 80,445 1,168 3.96 %
Total
1,173,873 1,233 732,686 1,257
(1)
Includes mainly pending settlement transactions and payment account.
(2)
Includes the liability assumed with SEDESA related to the acquisition of preferred shares of former Nuevo Banco Bisel S.A. in the amount of 77,500 and 74,519 as of December 31, 2010 and 2009, respectively (see Note 7.1.e)).
Additionally, the Bank has other liabilities related to corporate bonds and forward transactions (see Notes 10 and 22, respectively).
Accrued interest is included in the “Accrued interest, adjustments, foreign exchange and quoted price differences payable” under the “Other Liabilities from Financial Intermediation” in the accompanying Consolidated Balance Sheets. Amounts are unsecured.
27.
EMPLOYEE BENEFIT PLANS
The Bank does not maintain pension plans for its personnel. The Bank is required to pay employer contributions, determined on the basis of total monthly payroll.
These expenses aggregated 183,831, 142,440 and 110,170 for the fiscal years ended December 31, 2010, 2009 and 2008, respectively, and are included in the “Administrative expenses—Personnel expenses” account.
28.
CONSOLIDATED INCOME STATEMENTS AND BALANCE SHEET
The presentation of consolidated financial statements under Central Bank’s rules differs significantly from the format required by the U.S. SEC under Rules 9-03 and 9-04 of Regulation S-X (“Article 9”). The following consolidated financial statements were restated into constant pesos, as explained in Note 4.3. These consolidated financial statements were prepared using the measurement methods provided by Central Bank, but under US SEC requirements:
Consolidated Statements of Income 2010 2009 (1) 2008 (1)
Interest and fees on loans
2,627,497 2,343,185 2,105,895
Interest on bearing deposits with other banks
275 363 7,010
Interest on other receivables from financial intermediation
46,654 43,825 174,038
Interest on securities and foreign exchange purchased under resale agreements
33,839 63,167 28,010
Securities gains, net
949,055 1,321,130 569,095

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Consolidated Statements of Income 2010 2009 (1) 2008 (1)
Other interest income
38,396 33,653 23,166
Total interest income
3,695,716 3,805,323 2,907,214
Interest on deposits
979,919 1,181,701 970,072
Interest on securities and foreign exchange purchased under resale agreements
5,281 2,314 5,723
Interest on short-term borrowings
31,843 37,631 29,227
Interest on long-term debt
97,671 106,278 150,457
Other interest expense
255,566 206,122 160,487
Total interest expense
1,370,280 1,534,046 1,315,966
Net interest income
2,325,436 2,271,277 1,591,248
Provision for loan losses, net
(149,430 ) (154,397 ) (226,705 )
Net interest income after provision for loan losses
2,176,006 2,116,880 1,364,543
Service charges on deposit accounts and other fees
811,190 663,000 570,968
Credit-card service charges and fees
197,818 158,418 153,413
Other commissions
34,779 23,365 19,557
Foreign currency exchange trading income
28,358 26,682 19,261
Income from equity in other companies
24,654 14,953 32,986
Foreign exchange, net
153,134 133,731 143,094
Other
199,642 140,430 119,576
Total non-interest income
1,449,575 1,160,579 1,058,855
Commissions
81,464 61,620 57,077
Salaries and payroll taxes
1,224,207 963,889 796,129
Outside consultants and services
79,564 64,436 54,375
Depreciation of bank premises and equipment
60,006 55,255 51,499
Rent
40,367 34,554 21,685
Stationery and supplies
9,913 11,472 15,050
Electric power and communications
48,183 45,747 37,004
Advertising and publicity
64,017 46,861 53,178
Taxes
105,521 79,444 70,702
Directors’ and Statutory Audits’ fee
59,391 36,413 26,941
Insurance
9,882 7,313 6,073
Security services
61,186 47,668 42,241
Maintenance, conservation and repair expenses
78,647 68,006 47,743
Amortization of organization and development expenses (2)
71,026 62,151 63,210
Provision for losses on other receivables and other allowances (3)
32,517 21,275 37,242
Other
210,514 255,083 118,638
Total non-interest expense
2,236,405 1,861,187 1,498,787
Income before income tax expense
1,389,176 1,416,272 924,611
Income tax expense
371,878 659,250 261,207
Income from continuing operations
1,017,298 757,022 663,404
Net income
1,017,298 757,022 663,404
Net income attributable to the noncontrolling interest
6,868 5,092 3,354
Net income attributable to the controlling interest
1,010,430 751,930 660,050
Earnings per common share
1.70 1.26 1.00
(1)
See Note 4.2.
(2)
See Notes 24 and 32.5.
(3)
See Note 25.

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Central Bank rules also require certain classifications of assets and liabilities, which are different from those required by Article 9. The following table discloses the Bank’s consolidated balance sheets as of December 31, 2010, and 2009, as if the Bank followed the balance sheet disclosure requirements under Article 9:
2010 2009 (1)
ASSETS
Cash and cash equivalent
4,005,929 4,298,395
Interest-bearing deposits in other banks
269,155 363,041
Federal Funds sold and securities purchased under resale agreements of similar arrangements
2,436,328 1,056,940
Trading account assets
142,825 85,709
Investment securities available for sale
4,632,956 6,018,960
Loans
16,732,999 11,924,322
Allowance for loan losses
(520,931 ) (451,693 )
Premises and equipment
626,606 775,962
Due from customers on acceptances
220,855 381,501
Other assets
1,525,804 1,057,034
Total assets
30,072,526 25,510,171
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
16,777,893 14,502,258
Non interest-bearing deposits
5,469,561 3,354,322
Federal Funds purchased and securities sold under repurchase agreements
24,664 476,912
Other short-term borrowings
1,191,743 1,045,748
Long-term borrowings
743,038 724,012
Contingent liabilities
105,830 87,172
Other liabilities
760,131 986,288
Bank acceptances outstanding
220,855 381,501
Subordinated corporate bonds
598,470 572,473
Total liabilities
25,892,185 22,130,686
Common stocks
594,485 594,485
Retained appropriated earnings
764,351 613,964
Retained unappropriated earnings
2,390,745 1,747,091
Other shareholders’ equity
403,261 403,261
Noncontrolling interests
27,499 20,684
Total shareholders’ equity
4,180,341 3,379,485
Total liabilities and shareholders’ equity
30,072,526 25,510,171
(1)
See Note 4.2.
29.
OPERATIONS BY GEOGRAPHICAL SEGMENT
The principal financial information, classified by country of office where transactions originate, is shown below:
As of December 31,
2010 2009 2008
Total revenues
5,220,502 5,032,704 4,110,010
Argentina
5,186,234 4,952,908 4,088,419
Bahamas
34,268 79,796 21,591
Net income
1,010,430 751,930 660,050
Argentina
990,907 687,294 656,611
Bahamas
19,523 64,636 3,439
Total assets
33,524,407 26,859,238 22,430,272
Argentina
32,793,241 25,882,809 22,036,045
Bahamas
731,166 976,429 394,227

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30.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank enters into various transactions involving off-balance-sheet financial instruments. These instruments could be used to meet the risk management, trading and financing needs of customers or for the Bank’s proprietary trading and asset and liability management purposes, and could be subject to varying degrees of credit and market risk. Credit risk and market risk associated with on- and off-balance-sheet financial instruments are monitored on an aggregate basis.
The Bank uses the same credit policies in determining whether to enter or extend call and put option contracts, commitments, conditional obligations and guarantees as it does for granting loans.
30.1.
Derivatives
In the normal course of business, the Bank enters into a variety of transactions principally in the foreign exchange and stock markets. Most counterparts in the derivative transactions are banks and other financial institutions.
These instruments include:
•
Options: they confer the right to the buyer, but no obligation, to receive or pay a specific quantity of an asset or financial instrument for a specified price at or before a specified date. Options may be traded on a stock exchange or under OTC (Over-the-Counter) agreements.
•
Forwards and Futures: they are agreements to deliver or take delivery at a specified rate, price or index applied against the underlying asset or financial instrument, at a specific date. Futures are exchange traded at standardized amounts of the underling asset or financial instrument. Forwards contracts are OTC agreements and are principally dealt in by the Bank in securities/foreign exchange as forward agreements.
•
Swaps: they are agreements between two parties with the intention to exchange cash flows and risks at a specific date and for a period in the future. Swaps may be exchange traded or OTC agreements.
Pursuant to Central Bank’s rules, forward transactions with delivery of underlying assets, must be recorded under “Other receivables from financial intermediations” and “Other liabilities from financial intermediations” in the accompanying balance sheets and they were valued as mentioned in Note 4.4.h) (accrual method).
The notional contractual amount of these instruments represents the volume of outstanding transactions and do not represent the potential gain or loss associated with the market or credit risk of such transactions. The market risk of derivatives arises from the potential for changes in value due to fluctuations in market prices.

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The credit risk of derivatives arises from the potential of the counterparty to default on its contractual obligations. The effect of such a default varies as the market value of derivative contracts changes. Credit exposure exists at a particular point in time when a derivative has a positive market value. The Bank attempts to limit its credit risk by dealing with creditworthy counterparts and obtaining collateral, where appropriate. The following table shows, the notional value of options and outstanding forward contracts recorded in memorandum accounts as of December 31, 2010 and 2009:
As of December 31,
2010 2009
Forward purchases of foreign exchange without delivery of underlying asset (a)
555,897 461,234
Forward sales of foreign exchange without delivery of underlying asset (a)
236,851 286,416
Interest rate swaps (b)
157,066 157,917
Put options sold (c)
54,780 69,900
Put options taken (d)
— 25,229
Call options sold (e)
17,587 32,905
(a)
It is related mainly to negotiation transactions of forward foreign currency exchange rates, carried out through the local markets (ROFEX and MAE). The differences of such trading transactions are settled on a daily basis based on the prices agreed upon and their quoted price upon maturity; the underlying asset is not delivered or received.
The Bank enters into these transactions to take advantage of price differentials. Under Central Bank rules, they were valued at their quoted prices as of December 31, 2010 and 2009. They expired a few days later. Any quoted price-differences were charged to income.
(b)
Related to the following interest rate swap transactions:
b.1)
The Bank and the Central Bank agreed swap agreements entitling the Bank to collect, an a monthly basis, the positive difference between the Badlar interest rate in Argentine pesos and interest rates ranging from 15%, to 16.50% nominal interest rate p.a., applied on a total of notional values of thousands of 115,000. In the event that the difference between the rates is negative, the Bank shall be required to pay the difference. The agreement will expire between April 30, 2012 and October 31, 2014. The objective of the transactions is placement on medium- and long-term loans set forth in Central Bank Communiqué “A” 4776, as supplemented.
b.2)
Relates to interest rate swap agreements whereby on a quarterly basis the Bank shall be entitled to receive the positive difference between 10.25% nominal interest rate p.a. and the variable rate agreed-upon in relation to a loan granted by the Bank (Libor at 90 days plus 2.9%), applied to the residual principal of such loan. In the event that the differences between both rates were negative, the Bank shall be required to pay the difference. The amount booked in the Bank’s memorandum accounts is related to the residual principal amount of the loan of notional values of thousands of 42,066 and 41,917, respectively.
b.3)
The Bank agreed on ten swap agreements entitling the Bank to receive, on a monthly basis, the positive difference between 16.35% nominal interest rate p.a. and the Badlar interest rate in Argentine pesos, of notional values of thousands of 1,000. In the event that the difference between both rates is negative, the Bank shall be required to pay the difference. The agreement expired on April 30, 2010.
(c)
Relates to put options on coupons of the Argentine Government bonds provided in Presidential Decrees Nos. 905/02 and 1,836/02, as supplemented, which were received by the holders of rescheduled deposits through the exchanges implemented by the Argentine Government.
(d)
This is related to a put option taken on trust securities issued by financial trust Fideicomiso Financiero Best Consumer Finance Serie IX. On February 4, 2010, the transaction with Credilogros Compañia Financiera S.A. was cancelled and the put option purchase was thus annulled.

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(e)
As of December 31, 2010, this is related four call options of Petroleo Brasileiro S.A. The agreement expired on January, 2011 and April, 2011. These call options were not exercised.
As of December 31, 2009 this is related to a call option sold on a piece of real property belonging to the Bank, entitling the Bank to receive a minimum income of USD 300,000 or the resulting amount from applying a 15% nominal interest rate p.a. on a principal amount of USD 5,100,000 plus notarial expenses, maintenance expenses and service expenses, whichever higher. This option expired in September 2010, and it was not exercised.
Net income (loss) resulting from these transactions for the fiscal years ended December 31, 2010, 2009 and 2008, amount to income (loss) and are included in the “Other Financial Income”:
Transactions 2010 2009 2008
Premiums on reverse repurchase agreements
33,839 63,168 (10,049 )
Premiums on repurchase agreements
(5,281 ) (2,314 ) 10,705
Interest rate swaps
(3,397 ) 4,344 1,696
Forwards foreign-currency transaction offset
9,471 13,992 130,127
Transaction with options
1,441 2,654 5,162
Total
36,073 81,844 137,641
30.2.
Credit-related financial instruments
The Bank’s exposure to credit loss in the event of the counterparts’ failure to fulfill the commitments to extending credit, guarantees granted and foreign trade acceptances is represented by the contractual notional amount of those investments.
A summary of credit exposure related to these items is shown below (*):
As of December 31,
2010 2009
Unusued portion of loans granted per debtors classification regulations
57,533 —
Other guarantees provided covered by debtors classification regulations
66,192 85,213
Other guarantees provided not covered by debtors classification regulations
130,684 130,826
Other covered by debtors classification standards
90,171 250,675
(*)
Most of this amount as of December 31, 2010 and 2009, have a remaining maturity of less than one year.
Commitments to extend credit are agreements to lend to a customer at a future date, subject to compliance with contractual terms. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent actual future cash requirements for the Bank. The Bank evaluates each customer’s creditworthiness on a case-by-case basis.
Foreign trade acceptances represent Bank customers’ liabilities on outstanding drafts or bills of exchange that have been accepted by the Bank and the Bank’s liability to remit payment upon the presentation of the accepted drafts or bills of exchange.
The credit risk involved in foreign trade acceptances and guarantees granted is essentially the same as that involved in extending loan facilities to customers. In order to grant guarantees to its customers, the Bank may require counter guarantees.

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The Bank accounts for checks drawn thereon and on other banks, as well as other items in process of collection, such as notes, bills and miscellaneous items, in memorandum accounts until the related item clears or is accepted. In Management’s opinion, no significant risk of loss exists on these clearing transactions. The amounts of clearing items in collection process are as follows:
As of December 31,
2010 2009
Checks drawn on the Bank pending clearing
1,364,942 997,472
Checks drawn on other Banks
244,461 261,186
30.3
Trust activities
See Note 13.
31.
BUSINESS SEGMENT CONSOLIDATED INFORMATION
FASB ASC 280 “Segment reporting” requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. Management has determined that the Bank has one reportable segment related to banking activities.
32.
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN CENTRAL BANK RULES AND UNITED STATES ACCOUNTING PRINCIPLES
The following is a description of the significant differences between Central Bank rules followed in the preparation of the Bank’s financial statements and those applicable in the United States under generally accepted accounting principles (US GAAP). “FASB ASC” shall refer to Financial Accounting Standards Board Accounting Standards Codification.
In 2010 the Bank adopted the following Accounting Standards Update (ASU):
•
ASU 2009-17 — Consolidations (Topic 810), Amendments to FASB Interpretations No 46 (R); see Note 32.26,
•
ASU 2010-06 — “Fair Value Measurement and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements”. This ASU requires additional disclosures about fair value measurements. Such disclosures are in Note 32.21,
•
ASU 2010-20 — “Receivables (Topic 310) Disclosures about Credit Quality of Financing Receivables and the Allowance for Credit Losses”. This Update amends Topic 310 to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. Such disclosures are in Note 32.4.
32.1.
Income taxes
a)
As explained in Note 5, Central Bank rules do not require the recognition of deferred tax assets and liabilities and, therefore, income tax is recognized on the basis of amounts due in accordance with Argentine tax regulations and no deferred tax and liabilities are recognized.

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For purposes of US GAAP reporting, the Bank applies FASB ASC 740 “Income Taxes”. Under this method, income tax is recognized based on the liability method whereby deferred tax assets and liabilities are recorded for temporary differences between the financial reporting and tax basis of assets and liabilities at each reporting date. FASB ASC 740 requires that an allowance for deferred tax assets be provided to the extent that it is more likely than not that they will not be realized, based on the weight of available evidence. In order to determine the amount of the valuation allowance required, in accordance with FAS ASC 740-10-30-16 through 30-25, the Bank evaluates for each consolidated entity all available evidence, both positive and negative and the future realization of the tax benefit in a relatively short period of time, considering future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax-planning strategies.
FASB ASC 740 also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
There were no unrecognized tax benefits as of December 31, 2010, 2009 and 2008.
The Bank and its subsidiaries file income tax returns in Argentina. The Bank is subject to Argentina income tax examination for calendar fiscal years ending 2005 through 2010 (in addition see Note 16).
Deferred tax assets and liabilities (including those related to business combinations mentioned in Note 32.7.a) y c)) are summarized as follows:
As of December 31,
Description 2010 2009
Deferred tax assets:
Governments and private securities
162 2,386
Loans
147,086 105,963
Intangible assets
— 9,487
Allowance for loss contingencies
68,683 62,535
Net tax loss carry forwards
921 754
Other
35,517 36,955
Total deferred assets
252,369 218,080
Deferred tax liabilities:
Property, equipment and other assets
(2,399 ) (6,768 )
Intangible assets
(37,404 ) —
Foreign exchange difference
(24,684 ) (19,224 )
Total deferred liabilities
(64,487 ) (25,992 )
Deferred tax asset
187,882 192,088
Allowance for deferred tax assets
(79,858 ) (65,673 )
Net deferred tax assets under US GAAP
108,024 126,415
As of December 31, 2010, the consolidated tax loss carry forwards of 2,632 are as follows:
Expiration year Amount
2011
489
2012
1,361
2013
144
2014
638
2,632

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The movement of the net deferred tax assets for the fiscal years presented is summarized as follows:
As of December 31,
2010 2009 2008
Net deferred tax assets at the beginning of the year
126,415 102,946 123,077
Net deferred tax liabilities acquired from acquisition on business combination (*)
(11,113 ) — —
Net amount recorded in comprehensive income
85,251 (146,525 ) 42,132
Net deferred tax (expense)/ income for the year
(92,529 ) 169,994 (62,263 )
Net deferred tax assets at the end of the year
108,024 126,415 102,946
(*)
Included in Note 32.7.
The following table accounts for the difference between the actual tax provision under Central Bank regulations and the total income tax expense in accordance with US GAAP:
Year ended December 31,
Description 2010 2009 2008
Income tax in accordance with Central Bank regulations
365,775 659,250 261,207
Deferred tax charges
92,529 (169,994 ) 62,263
Total income tax expense in accordance with US GAAP
458,304 489,256 323,470
The following table accounts for the difference between the actual tax provision and the amounts obtained by applying the statutory income tax rate in Argentina to income before income tax in accordance with US GAAP:
Year ended December 31,
Description 2010 2009 2008
Pre-tax income in accordance with US GAAP
1,323,519 1,483,025 954,641
Statutory income tax rate
35 % 35 % 35 %
Tax on net income at statutory rate
463,232 519,059 334,124
Permanent differences at the statutory rate:
- Variation of allowances
14,185 (23,635 ) (30,159 )
- Income not subject to income tax
(34,669 ) (23,955 ) (5,098 )
- Others
15,556 17,787 24,603
Income tax in accordance with US GAAP
458,304 489,256 323,470
In Note 32.7 the abovementioned adjustments were split considering business combinations or other adjustments.
Had US GAAP been applied, in addition to the adjustments related to business combinations mentioned in Note 32.7 d), the Bank’s assets would increase by 132,250, 131,364 and 107,012 as of December 31, 2010, 2009 and 2008, respectively. In addition, income would decrease by 84,365 and 58,608 for the years ended December 31, 2010 and 2008, respectively, and increase by 170,877 for the year ended December 31, 2009.
b)
In addition, as of December 31, 2009 and 2008 the Bank had asset of 10,280 and 25,767, respectively, for the credit for Tax on minimum presumed income. As mentioned in Note 5 to the financial statements, under Central Bank Rules, such credit is considered to be an asset because Management estimates it will be used within ten years, which is the period allowed by the Central Bank Communiqué “A” 4,295, as amended. As of December 31, 2010 the credit was totally used. In accordance with US GAAP, the Bank should be record allowances for the portion of such credit which was deemed to be more likely than not that it would not be recovered, as per FASB ASC 740. The Bank determinated that no allowances was needed under US GAAP as of December 31, 2009 and 2008.

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32.2.
Exposure to the Argentine Public Sector and Private Securities
a)
Loans—Non-financial federal government sector
During the fiscal year ended December 31, 2001, and as a consequence of Presidential Decree No. 1,387/01, the Bank exchanged a portion of federal government securities effective as of November 6, 2001, and received so-called guaranteed loans in consideration thereof. The loans received in this exchange were not significant. In addition, the Bank has guaranteed loans acquired in the market and also through business combinations described elsewhere in this footnote.
During 2009, the Bank entered into an exchange agreement whereby it exchanged the guaranteed loans for a book value of 277,832 and received Argentine bonds (Bonar) at the Badlar interest rate + 275 basis points, in Argentine pesos maturing in 2014 for a book value of 277,832. Under Central Bank rules, the accounting of the exchange did not have impact in the consolidated financial statements of the Bank.
Under US GAAP, FASB ASC 310-30-35 “Loan refinancing or Restructuring” requires to recognize the government securities received at fair value and derecognize the guaranteed loans transferred at their carrying amounts. In consequence, income would increase by 11,635.
As mentioned in Note 4.4.c), Guaranteed loans were valued according to Central Bank Communiqué “A” 4,898.
Under US GAAP, the difference between the cost of each acquired loan and its expected future cash flows is accounted for in accordance with FASB ASC 310-30 “Loans and debts acquired with deteriorated credit quality”. In accordance with this rule, the Bank should continue to estimate cash flows expected to be collected over the life of the loan.
As of December 31, 2008, based on available information and events, the Bank estimated that the guaranteed loans were impaired, applying FASB ASC 310-10-35 “Receivables — Overall — Subsequent measurement”. The guaranteed loans considered impaired were approximately 475,658 (in 2008 the Bank recognized interest income for these loans of 31,604). Therefore, as of December 31, 2008, the Bank estimated allowances for such loans for a total amount of 50,127.
As of December 31, 2009, taking into account the available information and the significant improvement in the expected cash flow to be collected, the Bank estimated that guaranteed loans were not impaired. In accordance with FASB ASC 310-30, valuation allowances required the previous year were reversed.
As of December 31, 2010, taking into account the available information and the significant improvement in the expected cash flow to be collected, the Bank estimated that guaranteed loans were not impaired.
The effects of adjustments required to state such amounts in accordance with US GAAP, besides the adjustments mentioned in Note 32.7 d), would decrease assets by 168,933, 82,537, and 285,320 as of December 31, 2010, 2009 and 2008, respectively.
On the other hand, income would decrease by 86,396, for the year ended December 31, 2010 and increase by 202,783 and 3,726 for the years ended December 31, 2009 and 2008 respectively.
b)
Government securities
As of December 31, 2009 and 2008, according to Central Bank Communiqué “A” 4861 dated October 30, 2008, as supplemented, the Bank classified certain government securities under “special investment accounts”, as disclosed in Note 20. These government securities were recorded at their cost value increased by their internal rate of return and adjusted by the benchmark stabilization coefficient (CER), as applicable (see Note 4.4.b.1).

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In accordance with Central Bank Communiqué “A” 5,024, the holdings of Argentine government securities and Central Bank monetary regulation instruments recorded under this valuation system should be reversed and booked at market value. Therefore, during 2010 the Bank reclassified these securities. In addition considering the favorable market situation and improvements in conditions of the assets, the Bank has sold a significant portion of such holdings. As of December 31, 2010 the Bank classified those remaining government securities under “holdings for trading or intermediation transactions” recorded at their quoted price (see Note 4.4.b.2).
As of December 31, 2010, 2009 and 2008, the Bank did not have the intention of keeping such holdings through their maturity. Consequently, under US GAAP, these holdings in investment accounts were considered as “available for sale” and carried at fair value with the unrealized gains and losses reported as net of income tax within the shareholders’ equity accounts in accordance with FASB ASC 320.
The effects of adjustments required to state such amounts in accordance with US GAAP would increase assets by 363, 237,869 as of December 31, 2010 and 2008, respectively, and would decrease by 39,639 as of December 31, 2009.
On the other hand, income would increase by 20,305 and 19,139 for the years ended December 31, 2010 and 2008, respectively, and would decrease by 92,109 for the year ended December 31, 2009.
c)
Instruments issued by Central Bank of Argentina
As of December 31, 2010, 2009 and 2008, the Bank had instruments issued by Central Bank of Argentina. Under Central Bank rules, these securities were valued at the quoted price of each security or at the cost value increased by their internal rate of return, as mentioned in Note 4.4.b.4 and b.5).
Under US GAAP, these securities should be considered as “available for sale” and carried at fair value, with unrealized gains and losses reported as net of income tax within the shareholders’ equity accounts in accordance with FASB ASC 320.
The effects of adjustments required to state such amounts in accordance with US GAAP would decrease assets by 3,986 and 33,729 as of December 31, 2010 and 2008, respectively, and would increase assets by 711 as of December 31, 2009.
On the other hand, income would increase by 13,467 and 3,008 for the years ended December 31, 2010 and 2009, respectively, and decrease by 3,758 for the year ended December 31, 2008.
d)
Other unlisted securities (in accordance with Central Bank)
As of December 31, 2010, 2009 and 2008, the Bank had other unlisted securities (mainly government securities and Corporate Bonds). Under Central Bank rules, these securities were valued at the quoted price of each security or at the cost value increased by their internal rate of return, as mentioned in Note 4.4.b.3), 4.4.h.4) and 4.4.h.5).
Under US GAAP, these securities should be considered as “available for sale” and carried at fair value, with unrealized gains and losses reported as net of income tax within the shareholders’ equity accounts in accordance with FASB ASC 320.
The effects of adjustments required to state such amounts in accordance with US GAAP would increase assets by 7,877 as of December 31, 2010 and would decrease assets by 4,954 and 32,215 as of December 31, 2009 and 2008, respectively.
On the other hand, income would decrease by 11,618 and 11,262 for the years ended December 31, 2010 and 2008, respectively, and increase by 9,653 for the year ended December 31, 2009.

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The carrying amount under Central Bank rules, amortized cost, net unrealized gains and fair value of securities classified as available for sale (see Notes 20 and 28) mentioned in items b) and c) as of December 31, 2010 and 2009, are as follows:
As of December 31, 2010
Net
Carrying Amortized Unrealized
Amount Cost Gains/(Loss) Fair Value
Government securities
214,317 154,005 60,675 214,680
Instruments issued by Central Bank of Argentina
3,849,293 3,850,101 (19,240 ) 3,830,861
Others unlisted securities
569,346 575,605 20,904 596,509
Total
4,632,956 4,579,711 62,339 4,642,050
As of December 31, 2009
Net
Carrying Amortized Unrealized
Amount Cost Gains/(Loss) Fair Value
Government securities
659,371 578,754 318,487 897,241
Instruments issued by Central Bank of Argentina
5,156,929 5,154,796 (1,076 ) 5,153,720
Others unlisted securities
202,660 205,205 (3,546 ) 201,659
Total
6,018,960 5,938,755 313,865 6,252,620
The proceeds from sales of available for sale securities and the gross realized gains that have been included in earnings as a result of those sales, for the years ended December 31, 2010, 2009 and 2008 are as follows:
Proceeds from sales
As of December 31,
Available for sale securities 2010 (*) 2009 (*) 2008 (*)
Debt Securities Issued by Argentinian Government
1,086,234 1,947,021 3,450,382
Others unlisted securities
111,667 — —
1,197,901 1,947,021 3,450,382
(*)
As of December 31, 2010, 2009 and 2008, realized gains as a result of those sales amounted to 175,960, 388,190 and 2,538, respectively.
The amount of the unrealized holding gain or loss on available for sale securities, before tax, that have been included in accumulated other comprehensive income (see Note 32.18) is as follows:
Securities 2009 Increase Decrease 2010
Government securities
318,487 20,644 (278,456 ) 60,675
Instruments issued by Central Bank of Argentina
(1,076 ) — (18,164 ) (19,240 )
Others unlisted securities
(3,546 ) 27,220 (2,770 ) 20,904
Total
313,865 47,864 (299,390 ) 62,339
Securities 2008 Increase Decrease 2009
Government securities
(51,130 ) 369,617 — 318,487
Instruments issued by Central Bank of Argentina
(32,509 ) 31,433 — (1,076 )
Others unlisted securities
(21,153 ) 21,210 (3,603 ) (3,546 )
Total
(104,792 ) 422,260 (3,603 ) 313,865

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BANCO MACRO S.A. AND SUBSIDIARIES
Securities 2007 Increase Decrease 2008
Government securities
7,648 2,538 (61,316 ) (51,130 )
Instruments issued by Central Bank of Argentina
(2,538 ) — (29,971 ) (32,509 )
Others unlisted securities
1,617 — (22,770 ) (21,153 )
Total
6,727 2,538 (114,057 ) (104,792 )
FASB ASC 320 requires that if the decline in fair value is judged to be other than temporary, the cost of the security shall be written down to fair value, and the write down amount shall be included in earnings. The Bank evaluated the declines in fair value to determine whether it was other than temporary and did not recognize any other than temporary impairment.
The maturities of available for sale securities as of December 31, 2010 are as follows:
For the year ended December 31, 2010
After 5
After 1 year years but
Within 1 but within 5 within 10
year years years Total
Government securities
4,141 195,793 14,746 214,680
Instruments issued by Central Bank of Argentina
3,830,861 — — 3,830,861
Others unlisted securities
184,153 348,961 63,395 596,509
Total
4,019,155 544,754 78,141 4,642,050
The portion of trading gains and losses for the period that relates to trading securities still held as of December 31, 2010, 2009 and 2008 are as follows:
Gains as of December 31,
Trading Securities 2010 2009 2008
Government securities
62,217 839 16,874
Corporate Bonds
— 601 319
Other
1,592 2,308 (656 )
63,809 3,748 16,537
32.3.
Loan origination fees
The Bank recognizes fees on consumer loans, such as credit cards, mortgage, pledged and personal loans, stand by letters of credit and guarantees issued, when collected and charges direct origination costs when incurred. In accordance with US GAAP under FASB ASC 310-20, loan origination fees and certain direct loan origination costs should be recognized over the life of the related loan as an adjustment of yield or by straight-line method, as appropriate.
The effects of adjustments required to state such amounts in accordance with US GAAP, would decrease assets by 46,801, 38,920 and 34,043 as of December 31, 2010, 2009 and 2008, respectively. Income would decrease by 7,881, 4,877 and 13,880 for the years ended December 31, 2010, 2009 and 2008, respectively.
32.4.
Allowance for loan losses
The loan loss reserve represents the estimate of probable losses in the loan portfolio. Determining the loan loss reserve requires significant management judgments and estimates including, among others, identifying impaired loans, determining customers’ ability to pay and estimating the fair value of underlying collateral or the expected future cash flows to be received. Actual events will likely differ from the estimates and assumptions used in determining the loan loss reserve. Additional loan loss reserve could be required in the future.

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The loan loss reserve is maintained in accordance with Central Bank rules. This results from evaluating the degree of debtors’ compliance and the guarantees (see Note 21) and collateral supporting the respective transactions.
Increases in the reserve are based on the deterioration of the quality of existing loans, while decreases in the reserve are based on regulations requiring the charge off of non-performing loans classified as “non-recoverable” after a certain period of time and on management’s decisions to write off non-performing loans evidencing a very low probability of recovery.
In addition, under Central Bank rules, the Bank records recoveries on previously charged-off loans directly to income and records the amount of charged-off loans in excess of amounts specifically allocated as a direct charge to the consolidated income of statement. The Bank does not partially charge off troubled loans until final disposition of the loan, rather, the allowance is maintained on a loan-by-loan basis for its estimated settlement value.
Under Central Bank rules, a minimum loan loss reserve is calculated primarily based upon the classification of commercial loan borrowers and upon delinquency aging (or the number of days the loan is past due) for consumer and housing loan borrowers. Although, the Bank is required to follow the methodology and guidelines for determining the minimum loan loss reserve, as set forth by the Central Bank, the Bank is allowed to establish additional loan loss reserve.
For commercial loans, the Bank is required to classify all commercial loan borrowers. In order to classify them, the Bank must consider different parameters related to each of those customers. In addition, based on the overall risk of the portfolio, the Bank considers whether or not additional loan loss reserves in excess of the minimum required are warranted.
Pursuant to Central Bank regulations, commercial loans are classified as follows:
Classification Criteria
In normal situation
Borrowers for whom there is no doubt as to their ability to comply with their payment obligations.
Subject to special monitoring/Under observation
Borrowers that, among other criteria, are up to 90 days past due and, although considered to be able to meet all their financial obligations, are sensitive to changes that could compromise their ability to honor debts absent timely corrective measures.
Subject to special monitoring / Under negotiation or refinancing agreement
Borrowers who are unable to comply with their obligations as agreed with the bank and, therefore, formally state, within 60 calendar days after the maturity date, their intention to refinance such debts. The borrower must enter into a refinancing agreement with the bank within 90 calendar days (if up to two lenders are involved) or 180 calendar days (if more than two lenders are involved) after the payment default date. If no agreement has been reached within the established deadline, the borrower must be reclassified to the next category according to the indicators established for each level.
Troubled
Borrowers with difficulties honoring their financial obligations under the loan on a regular basis, which, if uncorrected, may result in losses to the bank.
With high risk of insolvency
Borrowers who are highly unlikely to honor their financial obligations under the loan.

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Classification Criteria
Irrecoverable
Loans classified as irrecoverable at the time they are reviewed (although the possibility might exist that such loans might be collected in the future). The borrower will not meet its financial obligations with the financial institution.
Irrecoverable according to Central Bank’s Rules
(a) Borrower has defaulted on its payment obligations under a loan for more than 180 calendar days according to the corresponding report provided by the Central Bank, which report includes (1) financial institutions liquidated by the Central Bank, (2) residual entities created as a result of the privatization of public financial institutions, or in the privatization or dissolution process, (3) financial institutions whose licenses have been revoked by the Central Bank and find themselves subject to judicial liquidation or bankruptcy proceedings and (4) trusts in which Seguro de Depósitos S.A. (SEDESA) is a beneficiary, and/or (b) certain kinds of foreign borrowers (including banks or other financial institutions that are not subject to the supervision of the Central Bank or similar authority of the country in which they are incorporated) that are not classified as “investment grade” by any of the rating agencies approved by the Central Bank.
For consumer loan portfolio, the Bank classifies loans based upon delinquency aging, consistent with the requirements of the Central Bank. Minimum loss percentages required by the Central Bank are also applied to the totals in each loan classification.
Under the Central Bank regulations, consumer and housing borrowers are classified as follows:
Classification Criteria
Performing
If all payments on loans are current or less than 31 calendar days overdue and, in the case of checking account overdrafts, less than 61 calendar days overdue.
Low Risk
Loans upon which payment obligations are overdue for a period of more than 31and up to 90 calendar days.
Medium Risk
Loans upon which payment obligations are overdue for a period of more than 90 and up to 180 calendar days.
High Risk
Loans in respect of which a legal action seeking collection has been filed or loans having payment obligations overdue for more than 180 calendar days, but less than 365 calendar days.
Irrecoverable
Loans in which payment obligations are more than one year overdue or the debtor is insolvent or in bankruptcy or liquidation.
Irrecoverable according to Central Bank’s Rules
Same criteria as for commercial loans in the Irrecoverable according to Central Bank Rules.
Under US GAAP, a portion of the total allowance typically consists of amounts that are used, for example, to cover loans that are analyzed on a “pool” or homogeneous basis and to supplement specific allowances in recognition of the uncertainties inherent in point estimates.
The Bank’s accounting for its loan loss reserve under Central Bank rules differs in some respects with practices of US-based banks, as discussed below.
In addition, all loans reserves from business combinations recorded under Central Bank rules, since the effective date of FASB ASC 310-30, were reversed under US GAAP purposes as of each acquisition date, due to the fact that it is not appropriate to report such acquired impaired loans on a gross basis, since the Bank is not expected to incur those losses.

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a)
Recoveries and write-offs
Under Central Bank rules, recoveries are recorded in a separate income line item under Other Income. Write-offs are recorded directly in the income statement. Under US GAAP, recoveries and write-offs would be recorded in the allowance for loan losses in the balance sheet; however there would be no net impact on net income or shareholders’ equity.
b)
Credit Card Loans
The Bank establishes its reserve for credit card loans based on the past due status of the loan. All loans without preferred guarantees greater than 180 days have been reserved at 50% in accordance with the Central Bank rules.
Under US GAAP, the Bank adopted a policy to fully provision loans which are 180 days past due.
Had US GAAP been applied, the Bank’s assets would decrease by 12,106, 6,796 and 5,897 as of December 31, 2010, 2009 and 2008, respectively. In addition, income would decrease by 5,310, 899 and 2,297 for the years ended December 31, 2010, 2009 and 2008, respectively.
c)
Impaired loans—Non Financial Private Sector and residents abroad
FASB ASC 310, requires a creditor to measure impairment of a loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. This Statement is applicable to all loans (including those restructured in a troubled debt restructuring involving amendment of terms), except large groups of smaller-balance homogenous loans that are collectively evaluated for impairment. Loans are considered impaired when, based on Management’s evaluation, a borrower will not be able to fulfill its obligation under the original loan terms.
The following table discloses the amounts of loans considerer impairment in accordance with FASB ASC 310 updated by ASU 20-2010, as of December 31, 2010 and 2009:
Unpaid
Recorded principal Related
investment balance allowance
2010
With no related allowance recorded
Commercial
Overdrafts
14 14 —
Documents
6,064 7,070 —
Mortgage and pledge loans
1,502 3,085 —
Other loans (1)
88,114 106,715 —
Consumer (2)
Documents
282 297 —
Mortgage and pledge loans
307 320 —
Other loans
547 566 —
Total
96,830 118,067 —
With an allowance recorded
Commercial
Overdrafts
385 1,603 1,218
Documents
783 2,933 2,150
Mortgage and pledge loans
10,260 16,153 5,893
Credit card
20 331 311
Other loans
5,564 62,849 56,186

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Unpaid
Recorded principal Related
investment balance allowance
Consumer (2)
Overdrafts
3,245 10,217 6,972
Documents
1,836 4,102 2,266
Mortgage and pledge loans
12,193 26,313 14,120
Personal loans
49,479 171,718 122,239
Credit Card
16,102 40,968 24,866
Other loans
5,896 11,917 6,021
Total
105,763 349,104 242,242
Total Commercial
112,706 200,753 65,758
Total Consumer
89,887 266,418 176,484
Unpaid
Recorded principal Related
investment balance allowance
2009
With no related allowance recorded
Commercial
Overdrafts
100 105 —
Documents
7,975 8,385 —
Mortgage and pledge loans
2,663 3,723 —
Other loans (1)
144,014 163,814 —
Consumer (2)
Documents
386 390 —
Personal loans
502 524 —
Other loans
352 356 —
Total
155,992 177,297 —
With an allowance recorded
Commercial
Overdrafts
1,628 3,936 2,308
Documents
1,335 3,776 2,441
Mortgage and pledge loans
5,438 10,468 4,053
Credit card
200 372 172
Other loans
59,228 94,929 38,069
Consumer (2)
Overdrafts
6,956 13,243 6,287
Documents
5,432 7,601 2,169
Mortgage and pledge loans
26,144 31,817 5,673
Personal loans
95,630 182,536 86,908
Credit card
6,919 23,983 17,064
Other loans
10,146 11,268 2,692
Total
219,056 383,929 167,836
Total Commercial
222,581 289,508 47,043
Total Consumer
152,467 271,718 120,793
(1)
Mainly includes loans to highly rating companies.
(2)
Includes consumer loans collectively evaluated for impairment.
The average recorded investments for impairment loans were 376,316, 435,182 and 288,430 for the years ended December 31, 2010, 2009 and 2008, respectively.
The interest income recognized on impairment loans were 39,797, 45,766 and 20,638 for the years ended December 31, 2010, 2009 and 2008, respectively.
The Bank recognizes interest income on impaired loans on a cash basis method.
In addition, the Bank has performed a migration analysis based on uncollectability following the FASB ASC 450 considerations.

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Had US GAAP been applied, the Bank’s assets would decrease by 8,352, 8,935 and 10,539 as of December 31, 2010, 2009 and 2008, respectively. In addition, income would increase by 583, 1,604 and 3,667 for the years ended December 31, 2010, 2009 and 2008, respectively.
Under US GAAP, the activity in the allowance for loan losses for the years ended December 31, 2010 and 2009 respectively, is as follows:
Commercial Consumer Total
2010
Beginning balance
146,346 328,773 475,119
Provision for possible loan losses
59,868 197,869 257,737
Charge-off
(5,826 ) (152,572 ) (158,398 )
Recoveries
(29,640 ) (33 ) (29,673 )
Ending balance
170,748 374,037 544,785
Period end allocated to:
Allowances individually evaluated for impairment
65,758 — 65,758
Allowances collectively evaluated for impairment
104,990 374,037 479,027
Ending balance
170,748 374,037 544,785
2009
Beginning balance
177,782 286,868 464,650
Provision for possible loan losses
10,371 179,929 190,300
Charge-off
(37,333 ) (138,024 ) (175,357 )
Recoveries
(4,474 ) — (4,474 )
Ending balance
146,346 328,773 475,119
Period end allocated to:
Allowances individually evaluated for impairment
46,166 — 46,166
Allowances collectively evaluated for impairment
100,180 328,773 428,953
Ending balance
146,346 328,773 475,119
Loans individually evaluated for impairment for Commercial segment amounts to 83,493 and 104,977 for the years ended December 31, 2010 and 2009.
Loans collectively evaluated for impairment for Commercial segment amounts to 7,331,239 and 5,120,323, for the years ended December 31, 2010 and 2009.
Loans collectively evaluated for impairment for Consumer segment amounts to 9,271,783 and 6,660,210 for the years ended December 31, 2010 and 2009.
d)
Interest recognition — non-accrual loans
The method applied to recognize income on loans is described in Note 4.4.d). Additionally, the accrual of interest is discontinued generally when the related loan is non-performing and the collection of interest and principal is in doubt generally after 90 days of being past due. Accrued interest remains on the Banks books and is considered a part of the loan balance when determining the reserve for credit losses.
Under US GAAP the accrual of interest is discontinued when Management has serious doubts about further collectability of principal or interest, usually after 90 days, even though the loan currently is performing. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for credit losses.
Had US GAAP been applied, the Bank’s assets would decrease by 3,396, 7,694 and 4,443 as of December 31, 2010, 2009 and 2008, respectively. In addition, income would increase by 4,298 for the year ended December 31, 2010 and would decrease by 3,251 and 1,824 for the years ended December 31, 2009 and 2008, respectively.

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The following table represents the amounts of nonaccruals, segregated by class of loans, as of December 31, 2010 and 2009, respectively:
2010 2009
Commercial
Overdrafts
708 3,874
Documents
1,368 2,953
Mortgage and pledge loans
15,384 6,535
Credit card
283 289
Other loans (1)
78,740 56,676
Consumer
Overdrafts
8,594 11,453
Documents
4,772 7,798
Mortgage and pledge loans
28,776 37,116
Personal loans
163,964 176,599
Credit Card
24,094 13,294
Other loans
13,162 12,175
Total
339,845 328,762
(1)
Mainly includes loans to highly rating companies.
An aging analysis of past due loans, segregated by class of loans, as of December 31, 2010 and 2009 were as follows:
Greater
30-59 60-89 Than Total
Days Days past 90 Past Total
past due due days Due Current Loans
2010
Commercial
Overdrafts
42,961 16,906 22,972 82,839 1,728,767 1,811,606
Documents
— 991 1,368 2,359 1,331,351 1,333,710
Mortgage and pledge loans
11,851 166 39,936 51,953 603,596 655,549
Credit card
— — 309 309 42,083 42,392
Other loans (1)
5,717 31,367 94,527 131,611 3,439,864 3,571,475
Consumer
Overdrafts
7,228 1,527 9,843 18,598 245,640 264,238
Documents
941 343 2,583 3,867 466,338 470,205
Mortgage and pledge loans
7,291 1,979 17,222 26,492 595,202 621,694
Personal loans
35,628 19,743 82,893 138,264 5,683,274 5,821,538
Credit card
254 220 43,625 44,099 1,469,148 1,513,247
Other loans
4,615 1,458 7,080 13,153 567,708 580,861
Total
116,486 74,700 322,358 513,544 16,172,971 16,686,515
Greater
30-59 60-89 Than Total
Days Days past 90 Past Total
past due due days Due Current Loans
2009
Commercial
Overdrafts
50,621 25,441 44,872 120,934 1,092,166 1,213,100
Documents
894 — 2,826 3,720 1,013,136 1,016,856
Mortgage and pledge loans
8,541 — 27,355 35,896 369,064 404,960
Credit card
— — 289 289 23,836 24,125
Other loans (1)
31,216 5,718 89,397 126,331 2,439,928 2,566,259
Consumer
Overdrafts
9,781 2,766 12,208 24,755 254,376 279,131
Documents
1,489 528 4,542 6,559 405,842 412,401
Mortgage and pledge loans
6,944 3,935 21,385 32,264 602,273 634,537
Personal loans
35,872 18,876 99,809 154,557 3,863,263 4,017,820
Credit card
219 134 22,884 23,237 903,314 926,551
Other loans
2,823 916 7,038 10,777 378,993 389,770
Total
148,400 58,314 332,605 539,319 11,346,191 11,885,510
(1)
Mainly includes loans to highly rating companies.

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The following table shows the loans balances (mainly “Other loans” and “Personal loans” for commercial and consumer portfolio, respectively) categorized by credit quality indicators for the years ended December 31, 2010 and 2009:
Commercial Consumer
2010 2009 2010 2009
In normal situation / performing
7,299,370 5,011,361 8,903,050 6,292,230
Subject to special monitoring / in observation — in negotiation or with rollover agreement / Low Risk
32,017 108,962 101,757 97,515
Troubled / Medium Risk
2,361 42,709 71,083 87,954
With high risk or Insolvency / High Risk
21,225 49,535 144,327 138,850
Irrecoverable
59,759 12,733 51,155 43,263
Irrecoverable according to Central Bank rules
— — 411 398
7,414,732 5,225,300 9,271,783 6,660,210

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32.5.
Intangible assets
a)
Judgments due to court decisions related to foreign currency- denominated deposits
Under Central Bank Rules, it includes exchange differences related to the payments and provisions made by the Bank in relation to the constitutional protection and court judgments resulting from court decision mentioned in note 2 to our consolidated financial statements.
Under US GAAP, the right to obtain these compensations is deemed a contingent gain which can not be recognized until realized, pursuant to FASB ASC 450.
Additionally, as of December 2010, 2009 and 2008, as mentioned in Note 4.4.l.2), the Bank recorded the effects of the Argentine Supreme Court rulings dated December 27, 2006, and August 28, 2007, upon payment of court decisions, in conformity with Central Bank indications in the notice dated August 4, 2008.
Under US GAAP, in accordance with FASB ASC 450, the Bank should have recorded a liability to cover the contingent losses related to the application of the Argentine Supreme Court ruling dated December 27, 2006 and August 28, 2007.
The effects of adjustments required to state such amounts in accordance with US GAAP, besides the adjustments mentioned in Note 32.7. a), would decrease net assets by 103,772 100,528 and 84,974 as December 31, 2010, 2009 and 2008, respectively. In addition, income would decrease by 3,244 and 15,554 for the years ended December 31, 2010 and 2009, and increase by 25,677 for the year ended December 31, 2008, respectively.
The adjustments related to these intangible asset acquired in business combination transactions are included in Note 32.7.a).
b)
Software costs
Under Central Bank Rules, it includes software costs relating to preliminary, application development and post —implementation stages of software development. BCRA GAAP permits the capitalization of certain costs that are not eligible for capitalization under FASB ASC 350- 40.
The adjustments related to capitalized of software cost acquired in business combination transactions are included in Note 32.7 a).
The effects of adjustments required to state such amounts in accordance with US GAAP, besides the adjustments mentioned in Note 32.7 a), would decrease assets by 17,514, 26,858 and 38,875 as of December 31, 2010, 2009 and 2008, respectively. In addition income would increase by 9,344, 12,017 and 1,431 for the years ended December 31, 2010, 2009 and 2008, respectively.
c)
Organizational costs
Under Central Bank Rules, it includes inherent cost of set up and organization of the Bank.
Applying US GAAP and in accordance with FASB ASC 720-15 also resulted in other adjustments relative to capitalized organizational costs resulting in a decrease to the Bank ´s assets of 1,889, 8,028 and 8,291 as of December 31, 2010, 2009 and 2008, respectively. In addition income would increase by 6,139, 263 and 365 for the years ended December 31, 2010, 2009 and 2008, respectively.
The adjustments related to Organizational costs acquired in business combination transactions are included in Note 32.7 a) to d).

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32.6.
Vacation accrual
The cost of vacations earned by employees is generally recorded by the Bank when paid. US GAAP requires that this expense be recorded on an accrual basis as the vacations are earned.
Had US GAAP been applied, the Bank’s shareholder’s equity would decrease by 95,061, 72,676 and 61,122 as of December 31, 2010, 2009 and 2008, respectively. In addition, the income would decreased by 22,385, 11,554 and 19,341 for the years ended December 31, 2010, 2009 and 2008, respectively.
32.7.
Business Combinations
The Bank has effected several business combinations in the past few years. The Bank is presenting separately the US GAAP adjustments related to deferred income taxes, loans and securities valuation and the other effects of purchase accounting by business combination related to the banks which have not been legally merged into the Bank (mainly Banco del Tucumán S.A. and Banco Privado de Inversiones S.A.). The qualitative description of the adjustments related to business combinations are described above, as the case may be. The details of these effects are described in this footnote.
a)
Acquisition of controlling interest in Banco del Tucumán S.A.
On May 5, 2006, the Bank acquired 75% of the capital stock of Banco del Tucumán S.A., at a cash purchase price of 45,961.
Under Central Bank rules, business combinations are accounted for the carryover book value of the acquired company. Additionally, at the acquisition date, the Bank recognized the difference between the book value of the net equity acquired and the purchase price as a positive goodwill. Such goodwill is being amortized under the straight line method over 10 years.
Under US GAAP, former FAS 141 (not codified) required the acquisition of the controlling interest of Banco del Tucumán S.A. to be accounted for as a business combination applying the purchase method.
Consequently, Banco Macro S.A. has allocated the purchase price (45,961) to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date (73,575), and the excess of the fair value of the acquired net assets over the cost has resulted in a negative goodwill (27,614).
Subsequently, in 2006 and 2007 the Bank acquired the 4.84% and 10.09% additional interest of Banco del Tucumán S.A. for cash payments of 2,907 and 9,709, respectively. These acquisitions were accounted for steps acquisitions in accordance with former SFAS 141 (not codified). Consequently, Banco Macro S.A. has allocated the purchase prices to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition dates (17,628 and 6,982, respectively), and the excess of the fair value of the acquired net assets over the cost has resulted in a negative goodwill (7,919 and 4,075, respectively).

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The following table summarizes the adjustments to the assets acquired and liabilities assumed as of December 31, 2010, 2009 and 2008:
Increase / (Decrease)
Consolidated
shareholders’ Equity as of Consolidated Net income Year
December 31 ended December 31,
2010 2009 2008 2010 2009 2008
Deferred taxes, net of allowances
(2,102 ) (4,949 ) (4,066 ) 2,847 (883 ) (3,655 )
Write off of tangible and intangible assets as a result of negative goodwill allocated
(3,735 ) 2,300 3,339 (6,035 ) (1,039 ) (4,794 )
Judgments due to Court decisions related to foreign currency-denominated deposit
(1,281 ) (1,418 ) (2,038 ) 137 620 2,301
Other purchase price adjustments
(3,413 ) (3,469 ) (2,888 ) 56 (581 ) 408
Total
(10,531 ) (7,536 ) (5,653 ) (2,995 ) (1,883 ) (5,740 )
b)
Acquisition of Nuevo Banco Bisel S.A. —Merger with and into Former Nuevo Banco Bisel S.A.
b.1) Acquisition of Nuevo Banco Bisel S.A.
In August 2006, the Bank acquired 100% of the common shares of Nuevo Banco Bisel S.A., at a cash purchase price of 19,509. In addition, the Bank and SEDESA entered into a call and put options agreement for the preferred shares owned by SEDESA.
On May 28, 2007, the Bank acquired the preferred shares mentioned above by exercising a call option in relation to them.
Under Central Bank rules, business combinations are accounted for the carryover book value of the acquired company. Additionally, at the acquisition date, the Bank recorded the difference between the book value of the net assets acquired and the purchase price as a positive goodwill. Such goodwill is being amortized under the straight line method over 10 years. See also Note 4.2.
Under US GAAP, former FAS 141 (not codified) required the acquisition of the controlling interest of Nuevo Banco Bisel S.A. to be accounted for as a business combination applying the purchase method.
Consequently, Banco Macro S.A. has allocated the purchase price (19,509) to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date (61,214), and the excess of the fair value of the acquired net assets over the cost has resulted in a extraordinary gain (41,705).
b.2) Merger with and into Former Nuevo Banco Bisel S.A.
As mentioned in Note 3.6. in 2009, Banco Macro S.A. carried out the legal merger of Nuevo Banco Bisel S.A. with and into the Bank. The result of this transaction was a single shareholder group, including the former non controlling interest of former Nuevo Banco Bisel S.A., owning the consolidated net assets.
Banco Macro S.A. issued 1,147,887 registered Class B shares to be delivered to the non controlling interest of former Nuevo Banco Bisel S.A. That non controlling interest belonged to subsidiaries of Banco Macro S.A. Therefore, it was a transaction between entities under common control.

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Under Central Bank rules, the merger was accounted for based on the carryover value of assets and liabilities as of January 1, 2009 since the merger was retroactively recognized to that date for 5,314.
Under US GAAP, FASB ASC 805 requires this transaction to be accounted for as a transaction between entities under common control. Therefore, the transaction is recorded at carryover value of assets and liabilities and in consequence, no gain or loss shall be recognized in consolidated net income. In addition, the merger effects were recognized from August 18, 2009 (merger date).
The effects on the Bank’s net assets, to account under US GAAP had been resulted in a decrease by 20,746, 32,840 and 51,721 as of December 31, 2010, 2009 and 2008, respectively. In addition income would increase by 12,094 and 13,567 for the years ended December 31, 2010 and 2009, respectively, and decrease by 7,868 for the year ended December 31, 2008.
c)
Acquisition of Banco Privado de Inversiones S.A.
As mentioned in note 3.7, on September 20, 2010, the Bank acquired 100% of the common shares of Banco Privado de Inversiones S.A at a cash purchase price of USD 23.3 millions.
The transaction will enable the Bank to serve a greater number of customers with our current structure, to complement lines of business and to achieve greater economies of scale by additionally providing Banco Privado de Inversiones with a more efficient financing structure and permitting its clients access to a network with a greater geographical coverage.
Under Central Bank Rules, business combinations are accounted for the carryover book value of the acquired company and goodwill is recognized based on the difference of the book value of the net assets acquired and the purchase price (including contingent consideration). The bank recognized a positive goodwill amounting to 56,205.
Under US GAAPS, FASB ASC 805 requires the acquisition of controlling interest of Banco Privado de Inversiones S.A. to be accounted for as a business combination applying the purchase method. Consequently, Banco Macro has allocated the purchase price to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, and the excess of the fair value of the acquired net asset over the cost has resulted in a gain.
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:
Credit card
252,101
Intangible non-current assets
Credits card
59,799
Core deposit
5,433
Other Assets
142,918
Total assets acquired
460,251
Deposits
292,438
Deferred tax
11,113
Other liabilities
64,590
Total liabilities assumed
368,141
Total net assets
92,110
% acquired
100 %
Total net assets acquired
92,110
Cash purchase price
91,857
Gain
253

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Identification and allocation of the value to the identified intangible assets was based on “multi-period excess earning method (“MEEM”) for Credit Card and Favourable Source of Founds (“FSF”) for Core Deposit.
The following table summarizes the adjustments to the assets acquired and liabilities assumed as of December 31, 2010:
Increase /(Decrease)
Consolidated Consolidated Net
shareholders’ income
Equity Year ended
As of December December
31, 2010 31, 2010
Deferred taxes, net of allowances
(22,124 ) (11,011 )
Judgements due to Court decisions related to foreign currency-denominated deposit
(989 ) 141
Intangible assets adjustments
63,212 (2,020 )
Reversal of goodwill under Central Bank Rules
(54,331 ) 1,874
Other purchase price adjustments
3,582 113
Total
(10,650 ) (10,903 )
d)
Other
In past years, the Bank consummated other business combinations which also generated similar adjustments. Had US GAAP been applied, other adjustments relative to these other business combination would decrease the Bank’s assets by 46,298, 66,094 and 70,400 as of December 31, 2010, 2009 and 2008, respectively. In addition, income would increase by 19,796, 4,306 and 4,821 for the years ended December 31, 2010, 2009 and 2008, respectively.
32.8.
Reporting on Comprehensive Income (loss)
FASB ASC 220 requires entities to report a measure of all changes in equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners (“comprehensive income”). Comprehensive income (loss) is the total of net income (loss) and all other non-owner changes in equity.
This statement requires that comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements with an aggregate amount of comprehensive income (loss) reported in that same financial statement. The adoption of this accounting disclosure is shown in Note 32.18. In the Bank’s case, comprehensive income is affected by FASB ASC 830 cumulative translation adjustments related to the foreign subsidiaries and unrealized gains and losses of available for sale securities, net of income taxes.
32.9.
Restatement of financial statements in constant pesos
Pursuant to Central Bank rules, the Bank’s financial statements recognize the effects of inflation as described in Note 4.3.
As allowed by the SEC, as the Banking financial statements are restated applying a methodology that comprehensively addresses the accounting for inflation, the effects of general price-level changes recognized in the Bank’s financial statements do not need to be eliminated in reconciling to US GAAP.

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32.10.
Accounting for derivative instruments and hedging activities
FASB ASC 815 “Derivatives and Hedging” establishes accounting and reporting standards for derivative instruments, including certain ones embedded in other contracts (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Bank had no embedded derivatives and does not apply hedge accounting in accordance with FASB ASC 815.
Under US GAAP and according with FASB ASC 815 “Derivatives and Hedging” also requires disclosures with the intent to provide users of financial statements more information about Derivative Instruments and Hedging Activities.
In the Bank’s case, interests rate contracts were created with the purpose of extending medium and long-term credit to productive activity and works of infrastructure, in line with the communicated No. 49,460 issued by the Central Bank. The Bank performs these transactions in MAE market, as well as private contracts. These derivatives are settled monthly (those perform in MAE market) or quarterly (private contracts), whichever is applicable.
In the Foreign Exchange contracts the Bank mainly operates as an intermediary between parties. The Bank performs these transactions in MAE an Rofex markets, as well as private contracts. These derivatives are settled daily (those perform in MAE and Rofex markets) or at maturity (private contracts).
The credit risk of derivatives arises from the potential of a counterparty to default on its contractual obligations. The effect of such a default varies as the market value of derivative contracts changes. Credit exposure exists at a particular point in time when a derivative has a positive market value.
The tables below disclose the requirement of FASB ASC 815:
As of December 31,
2010 2009
Derivates not designated as hedging Balance sheet Balance sheet
instruments under FASB ASC 815 location (1) Fair value location (1) Fair value
Assets derivatives
Interest rate contracts
Other receivables from financial intermediation 8,074 Other receivables from financial intermediation 7,748
Foreign exchange contracts
Other receivables from financial intermediation 2,799 Other receivables from financial intermediation 5,262
Total assets derivatives
10,873 13,010
Liability derivatives
Interest rate contracts
Other liabilities from financial intermediation 11,756 Other liabilities from financial intermediation 20,271
Foreign exchange contracts
Other liabilities from financial intermediation 755 Other liabilities from financial intermediation —
Total liability derivatives
12,511 20,271

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As of December 31,
2010 2009
Amount of gain Amount of gain
Location of gain or (loss) or (loss)
Derivates not designated or (loss) recognized in recognized in recognized in
as hedging instruments income on income on income on
under FASB ASC 815 derivatives (1) derivatives derivatives
Interest rate contracts
Financial income-Other / (Financial expense-Other) (6,383 ) (21,325 )
Foreign exchange contracts
Financial income-Other / (Financial expense-Other) 9,471 (13,992 )
Total
3,088 (35,317 )
(1)
According to Central Bank rules.
Considering the derivatives used by the Bank (described in Note 30 and according to the valuation standards described in Notes 4.4.h) and 4.4.m)), had this accounting requirement been applied, the Bank’s assets would decrease by 3,682 and 12,522 as of December 31, 2010, and 2009, respectively and would increase by 7,200 as of December 31, 2008. In addition income would increase by 8,840 and 4,754 for the years ended December 31, 2010 and 2008 respectively and decrease by 19,722 for the year ended December 31, 2009.
32.11.
Foreign currency translation
Financial statements of the subsidiaries Macro Bank Limited and Red Innova Administradora de Inversión S.A. (liquidated in December 2008) were translated under Central Bank rules as described in Note 4.1. US GAAP foreign currency translation requirements are covered by FASB ASC 830-20 “Foreign Currency Matters” and differs with Central Bank rules in the translation of the income statement accounts, which under US GAAP should have been translated at the average exchange rate other than at the year-end exchange rate, and resulting differences in translation adjustments between assets and liabilities and components of shareholders’ equity are recognized as an other comprehensive income.
Had US GAAPS been applied, the Bank’s net income would decrease by 7,951 for the year ended December 31, 2010, and would increase by 15 and 8,859 for the years ended December 2009 and 2008, respectively, and these resulting differences recognized as other comprehensive income.
32.12.
Accounting for guarantees
The Bank issues financial guarantees, which are obligations to pay to a third party when a customer fails to repay its obligation.
Under Central Bank rules, guarantees issued are recognized as liabilities when it is probable that the obligation undertaken by the guarantor will be performed.
Under US GAAP, FASB ASC 460 requires that at inception of a guarantee, a guarantor recognize a liability for the fair value of the obligation undertaken in issuing the guarantee. Such liability at inception is deemed to be the fee received by the Bank with and offsetting entry equal to the consideration received. Subsequent reduction of liability is based on an amortization method as the Bank is decreasing its risk.
Had US GAAP been applied, no differences would have existed in the Bank records, besides the adjustment mentioned in Note 32.3.

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32.13.
Earning Per Share
The Bank holds, and has held, a capital structure with only common stock outstanding.
Central Bank rules do not require the disclosure of earnings per share nor dividend per share.
Under US GAAP, FASB ASC 260, it is required to present basic per-share amounts (Basic EPS) which is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.
Diluted earnings per share (Diluted EPS) measure the performance if the potential common shares that were dilutive had been issued. Potential common shares are securities that do not have a current right to participate fully in earnings but could do so in the future. No potential common shares exist, and therefore basic and diluted EPS are the same.
The following table sets forth the computation of Basic EPS:
2010 2009 2008
Numerator:
Net income attributable to the controlling interest under US GAAP
859,272 986,285 628,243
Denominator:
Common stock outstanding for the fiscal year (1)
594,485,168 594,485,168 608,437,455
Weighted-average common shares outstanding for the year
594,485,168 595,633,666 658,124,254
Basic EPS attributable to controlling interest under US GAAP — stated in pesos
1.45 1.66 0.95
(1)
See Note 9.
During 2010, 2009 and 2008, the Bank paid 208,070, 148,335 and 170,995, respectively, in cash dividends. Dividend per share amounted to Ps. 0.35, 0.25 and 0.25 respectively. In addition, on April 26, 2011, the Regular and Special General Shareholders’ Meeting of Banco Macro S.A. approved, among other issues, the distribution of cash dividends for an amount of up 505,312.
32.14.
Corporate Bonds
a)
Issuance Cost of Corporate Bonds and Interest recognition
As mentioned in Note 10., on December 18, 2006, the Bank issued the 1st series of Class 1 subordinated Corporate Bonds for a face value of USD 150,000,000.
In addition, on January 29, 2007 and on June 7, 2007, the Bank issued the 1st series of Class 2 nonsubordinated Corporate Bonds for a face value of USD 150,000,000 and the 1st series of Class 3 nonsubordinated Corporate Bonds (peso-linked Notes) for a face value of USD 100,000,000, respectively.
In the issuance of these bonds, the Bank incurred direct incremental costs (mainly underwriting and legal fees).
Under Central Bank rules, the Bank has been recognized as expenses these costs when they are incurred and the interest has been accrued according to the contract terms of the bonds in the period in which it was generated.
Under US GAAP, the Bank recognizes direct incremental costs and interest based on the effective interest method over the life of the loan.
Had US GAAP been applied, the Bank’s assets would increase by 3,407, 7,970 and 13,211 as of December 31, 2010, 2009 and 2008, respectively. In addition income for the years ended December 31, 2010, 2009 and 2008 would decrease by 4,563, 5,241 and 5,189, respectively.

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b)
Repurchased Own Corporate Bonds
During 2008 and 2009, the Bank repurchased nonsubordinated corporate bonds of Class 2 and 3 issued for itself (see Note 10). Under Central Bank rules, at the repurchase date, the Bank records an asset under Other receivables from financial intermediation, valued as mentioned in Note 4.4.h.5), but it does not derecognize the liabilities generated by the issuance thereof under Other liabilities from financial intermediation, valued as mentioned in Note 4.4.h.6). Such repurchased corporate bonds are only considered extinguished and income is recognized when the Bank’s Board of Director approved the legal cancellation of such bonds.
As of December 31, 2008, the Bank had recorded an asset for repurchases of nonsubordinated corporate bonds for an amount of 29,105 and still had recorded liabilities generated by the issuance thereof for an amount of 56,738 cancelled during 2009.
Under US GAAP, FASB ASC 405-20, such repurchased corporate bonds should be considered extinguished when repurchased. As a consequence, the liabilities should have been decreased and income should have been recognized.
Had US GAAP been applied, the Bank’s shareholder’s equity would increase by 27,633 for the year ended December 31, 2008. In addition net income would decrease and increase by, 27,633 for the years ended December 31, 2009 and 2008, respectively.
32.15.
Foreclosed assets
As mentioned in Note 23.2, the Bank has real foreclosed assets and building not affected by banking activities. Under Central Bank rules, these assets are carried at cost adjusted by depreciation over the life of the assets (see Note 4.4.k)).
Under US GAAP, in accordance with FASB ASC 360 “Property, Plant and Equipment”, such assets classified as held for sale shall be measured at the lower of its carrying amount or fair value less cost to sell. If the asset is newly acquired the carrying amount of the asset shall be established based on its fair value less cost to sell at the acquisition date. A long-lived asset shall not be depreciated while it is classified as held for sale.
Had US GAAP been applied, the Bank’s assets would increase by 12,908, 12,446 and 11,093 as of December 31, 2010, 2009 and 2008, respectively. In addition income would increase by 462 and 1,353 for the years ended December 31, 2010 and 2009, respectively, and would decrease by 2,112 for the year ended December 31, 2008.
32.16.
Noncontrolling Interests in Subsidiaries
In December 31, 2007, the FASB issued former SFAS 160 (FASB ASC 810) which amend the accounting of noncontrolling interests (formerly known as “minority interests”). For Banco Macro S.A., it became effective for fiscal years beginning January 1, 2009. The Bank gave it retroactive effect as of December 31, 2008, so as to compare them with the current consolidated financial statements.
Central Bank rules requires to record noncontrolling interests as a component of the liabilities. FASB ASC 810 requires to record such interests as shareholders’ equity.
Had US GAAP been applied, the Bank’s shareholder’s equity would increase by 27,499, 20,684 and 15,568 as of December 2010, 2009 and 2008, respectively. In addition income would increase by 6,815, 5,116 and 2,928 for the years ended December 31, 2010, 2009 and 2008.

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32.17.
Set forth below are the significant adjustments to consolidated net income and shareholders’ equity which would be required if US GAAP instead of Central Bank rules had been applied:
Increase / (decrease)
Consolidated Net Income
Years ended December 31,
Ref. 2010 2009 2008
Net income in accordance with Central Bank rules
1,010,430 751,930 660,050
Income taxes
Deferred taxes, net of allowances
32.1.a) (84,365 ) 170,877 (58,608 )
Exposure to the Argentine public sector and private securities
Loans — Non-financial federal government sector
32.2.a) (86,396 ) 202,783 3,726
Government securities
32.2.b) 20,305 (92,109 ) 19,139
Instruments issued by Central Bank of Argentina
32.2.c) 13,467 3,008 (3,758 )
Other unlisted securities
32.2.d) (11,618 ) 9,653 (11,262 )
Loan origination fees
32.3 (7,881 ) (4,877 ) (13,880 )
Allowance for loan losses
Credit Card Loans
32.4.b) (5,310 ) (899 ) (2,297 )
Impaired Loans — Non Financial Private Sector and residents abroad
32.4.c) 583 1,604 3,667
Interest recognition — non accrual loans
32.4.d) 4,298 (3,251 ) (1,824 )
Intangible assets
Judgments due to court decisions related to foreign currency — denominated deposits
32.5.a) (3,244 ) (15,554 ) 25,677
Software costs
32.5.b) 9,344 12,017 1,431
Organizational costs
32.5.c) 6,139 263 365
Vacation accrual
32.6 (22,385 ) (11,554 ) (19,341 )
Business combination
Acquisition of Banco de Tucumán S.A.
32.7.a) (2,995 ) (1,883 ) (5,740 )
Acquisition of Nuevo Banco Bisel S.A. — Merger with and into Former Nuevo Banco Bisel S.A.
32.7.b) 12,094 13,567 (7,868 )
Acquisiton of Banco Privado de Inversiones S.A.
32.7.c) (10,903 ) — —
Gain as result of adquisition of Banco Privado de Inversiones S.A.
32.7.c) 253 — —
Other
32.7.d) 19,796 4,306 4,821
Derivative instruments
32.10 8,840 (19,722 ) 4,754
Foreign currency translation
32.11 (7,951 ) 15 8,859
Corporate Bonds
Issuance Cost of Corporate Bonds and Interest recognition
32.14.a) (4,563 ) (5,241 ) (5,189 )
Repurchased Own Corporated Bonds
32.14.b) — (27,633 ) 27,633
Foreclosed assets
32.15 462 1,353 (2,112 )
Noncontrolling interest in subsidiaries
32.16 6,815 5,116 2,928
Net income in accordance with US GAAP
865,215 993,769 631,171
Less: Net income attributable to the noncontrolling interest
5,943 7,484 2,928
Net income attributable to the controlling interest in accordance with US GAAP
859,272 986,285 628,243

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2010 2009 2008
Net income in accordance with US GAAP
865,215 993,769 631,171
Other comprehensive income, net of tax:
(158,324 ) 272,117 (78,246 )
Total comprehensive income, net in accordance with US GAAP
706,891 1,265,886 552,925
Less: Comprehensive income attributable to noncontrolling interest
6,053 7,429 2,761
Comprehensive income attributable to controlling interest
700,838 1,258,457 550,164
Total earning per share attributable to controlling interest in accordance with US GAAP — stated in pesos
1.45 1.66 0.95
Weighted average number of shares outstanding (in thousands)
594,485 595,634 658,124
Increase / (decrease)
Consolidated Shareholders’ Equity
as of December 31,
Ref. 2010 2009 2008
Shareholders’ equity in accordance with Central Bank rules
4,152,842 3,358,801 2,821,911
Income taxes
Deferred taxes, net of allowances
32.1.a) 132,250 131,364 107,012
Exposure to the Argentine public sector and private securities
Loans — Non-financial federal government sector
32.2.a) (168,933 ) (82,537 ) (285,320 )
Government securities
32.2.b) 363 237,869 (39,639 )
Instruments issued by Central Bank of Argentina
32.2.c) (3,986 ) 711 (33,729 )
Other unlisted securities
32.2.d) 7,877 (4,954 ) (32,215 )
Loan origination fees
32.3 (46,801 ) (38,920 ) (34,043 )
Allowance for loan losses
Credit Card Loans
32.4.b) (12,106 ) (6,796 ) (5,897 )
Impaired Loans — Non Financial Private Sector and residents abroad
32.4.c) (8,352 ) (8,935 ) (10,539 )
Interest recognition — non accrual loans
32.4.d) (3,396 ) (7,694 ) (4,443 )
Intangible assets
Judgments due to court decisions related to foreign currency — denominated deposits
32.5.a) (103,772 ) (100,528 ) (84,974 )
Software costs
32.5.b) (17,514 ) (26,858 ) (38,875 )
Organizational costs
32.5.c) (1,889 ) (8,028 ) (8,291 )
Vacation accrual
32.6 (95,061 ) (72,676 ) (61,122 )
Business combination
Acquisition of Banco de Tucumán S.A.
32.7.a) (10,531 ) (7,536 ) (5,653 )
Acquisition of Nuevo Banco Bisel S.A. — Merger with and into Former Nuevo Banco Bisel S.A.
32.7.b) (20,746 ) (32,840 ) (51,721 )
Acquisition of Banco Privado de Inversiones S.A.
32.7 d) (10,650 ) — —
Other
32.7.d) (46,298 ) (66,094 ) (70,400 )
Derivative instruments
32.10 (3,682 ) (12,522 ) 7,200
Corporate Bonds
Issuance Cost of Corporate Bonds and Interest recognition
32.14.a) 3,407 7,970 13,211
Repurchased Own Corporate Bonds
32.14.b) — — 27,633
Foreclosed assets
32.15 12,908 12,446 11,093

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Increase / (decrease)
Consolidated Shareholders’ Equity
as of December 31,
Ref. 2010 2009 2008
Noncontrolling Interests in Subsidiaries
32.16 27,499 20,684 15,568
Banco Macro S.A. Shareholders’ equity in accordance with US GAAP (1)
3,783,429 3,292,927 2,236,767
Noncontrolling interests (2)
(28,995 ) (23,052 ) (15,568 )
Shareholders’ equity attributable to the controlling interest in accordance with US GAAP
3,754,434 3,269,875 2,221,199
(1)
Includes the effects of other comprehensive income.
(2)
It includes the amount recorded under Central Bank rules and the effect of adjustments mentioned above.
32.18.
Set forth below are the accumulated other comprehensive income (loss) balances, as of December 31, 2010, 2009 and 2008 — net of related income tax effects:
Accumulated
Unrealized Other
Foreign Gains/ Comprehensive
Currency (losses) on Income /
Items (1) securities (2) (Loss) (3)
Balances as of December 31, 2007
9,307 4,372 13,679
Current-fiscal year change
(8,859 ) (111,519 ) (120,378 )
Tax effects
3,100 39,032 42,132
Balances as of December 31, 2008
3,548 (68,115 ) (64,567 )
Current-fiscal year change
(15 ) 418,657 418,642
Tax effects
5 (146,530 ) (146,525 )
Balances as of December 31, 2009
3,538 204,012 207,550
Current-fiscal year change
7,951 (251,526 ) (243,575 )
Tax effects
(2,783 ) 88,034 85,251
Balances as of December 31, 2010 .
8,706 40,520 49,226
(1)
See Note 32.11.
(2)
See Note 32.2.
(3)
Includes amounts attributable to the non controlling interest for 110, (55) and (167) for the years ended December 31, 2010, 2009 and 2008, respectively.

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32.19.
Statement of Cash flows
According to FASB ASC 230, a statement of cash flows for a period shall report net cash provided or used by operating, investing, and financing activities and the net effect of those flows on cash and cash equivalents during the period in a manner that reconciles beginning and ending cash and cash equivalents.
The statement of cash flows under Central Bank rules differs from the statement of cash flows under US GAAP (see additionally Note 4.4.s).
In accordance with Central Bank Communiqué “A” 4,667, cash equivalents includes all liquidity investment with original maturities of three months or less.
Under US GAAP rules, in accordance with FASB ASC 230-10, certain securities did not meet the requirements to be classified as cash equivalents, and instead, are classified as available for sale.
The Bank’s transactions that did not provide an actual movement of funds in each year (non cash transactions) were eliminated from the respective cash changes. As of December 31, 2010, 2009 and 2008, the main non cash transactions, based on their book values under Central Bank rules, were generated by transactions with government securities and guaranteed loans exchanging non cash assets or liabilities for other non cash assets or liabilities (among others, redemption in kind of financial trusts, forwards, unsettled spot and repurchase contracts to buy or sell foreign currencies, listed Government and other securities at future dates and exchanged non cash assets or liabilities for other non cash assets or liabilities, and the exchange agreements mentioned in Note 2) with a book value of 1,775,501, 850,877 and 798,827, respectively.
The statement of cash flows under US GAAP based on Central Bank figures is shown below:
Year ended December 31,
2010 2009 2008
Causes of changes in cash and cash equivalents
Cash provided by (used in) operating activities
Interest received on loans, leases and investments
3,002,918 3,424,863 2,904,605
Fees and commissions received
1,312,098 1,043,723 882,354
Purchases and sales of trading securities
(69,890 ) 734,902 21,547
Other sources of cash
97,274 4,920 28,909
Less:
Interest paid
(1,238,296 ) (1,667,293 ) (1,196,698 )
Fees and commissions paid
(278,375 ) (220,860 ) (168,091 )
Cash paid to suppliers and employees
(1,780,237 ) (1,405,088 ) (1,120,663 )
Increase in intangible assets
(99,725 ) (74,471 ) (61,991 )
Increase in other receivables from financial intermediation and other assets
(1,917,996 ) (431,579 ) (358,736 )
Other uses of cash
(705,129 ) (376,475 ) (111,360 )
Net cash (used in) provided by operating activities
(1,677,358 ) 1,032,642 819,876
Plus:
Cash provided by (used in) investing activities
Available for sale
- Purchases of investment securities
(15,874,417 ) (15,105,006 ) (10,668,191 )
- Proceeds from sales of investment securities
18,177,041 13,257,958 10,294,965
Increase in loans and leases, net
(4,685,658 ) (469,106 ) (1,562,881 )
Proceeds from sale of Bank premises and equipment
5,050 2,795 9,694
Purchases of Bank premises and equipment
(62,484 ) (37,124 ) (82,513 )
Purchase of Banco Privado de Inveriones S.A, net of cash acquired
(55,017 ) — —
Net cash used in investing activities
(2,495,485 ) (2,350,483 ) (2,008,926 )

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Year ended December 31,
2010 2009 2008
Cash provided by (used in) financing activities
Increase in deposits, net
4,499,041 2,742,903 2,258,332
Increase in long term borrowings
100,486 47,494 101,711
Decrease in long term borrowings
(400,279 ) (143,024 ) (132,490 )
Increase / (Decrease) in other short term liabilities, net
186,450 747,649 (80,864 )
Own shares reacquired
— (56,665 ) (380,164 )
Cash dividends paid
(208,124 ) (148,350 ) (171,004 )
Net cash provided by financing activities
4,177,574 3,190,007 1,595,521
Increase in cash and cash equivalents
4,731 1,872,166 406,471
Cash at the beginning of fiscal year
5,396,063 3,523,897 3,117,426
Cash at the end of fiscal year
5,400,794 5,396,063 3,523,897
Set forth below is the reconciliation of net income as per Central Bank rules to net cash flows from operating activities, as required by FASB ASC 230:
Year ended December 31,
2010 2009 2008
Net income for the fiscal year
1,010,430 751,930 660,050
Adjustments to reconcile net income to net cash from operating activities:
Amortization and depreciation
133,000 123,220 116,199
Provision for loan losses and special reserves, net of reversals
213,513 210,200 290,778
Net (income)/loss from government and private securities
(655,756 ) 104,598 (50,788 )
Foreign exchange differences
(160,209 ) (133,731 ) (143,094 )
Equity (gain)/ loss of unconsolidated subsidiaries
(6,168 ) (7,618 ) 25,847
Increase from intangible assets
(99,725 ) (74,471 ) (61,991 )
Non-computable VAT credit
28,132 21,499 23,037
Valuation allowance of loans to the government sector
— — 66,125
(Decrease)/Increase in taxes payable
(187,332 ) 446,637 168,862
Decrease in other receivables from financial intermediation and other assets
(1,917,996 ) (431,579 ) (358,736 )
Net Increase in interest receivable and payable and other accrued income and expenses
(52,951 ) (10,571 ) (12,798 )
Non controlling interest in subsidiaries
6,868 5,092 3,354
Net Increase in other sources of cash
10,836 27,436 93,031
Net cash (used in) provided by operating activities
(1,677,358 ) 1,032,642 819,876
32.20.
Forward transactions pending settlement
The Bank enters into forward transactions pending settlement for trading purposes.
Under Central Bank rules for such forward transactions, the Bank recognizes both a receivable and a payable upon the agreement, which reflect the amount of cash, currency or securities to be exchanged at the closing date. The receivable or payable representing the receipt or delivery of securities or currency is stated at market value.
Under US GAAP, accountings for forward contracts are governed by FASB ASC 815. This standard requires that such derivatives be accounted for at fair value. The instruments outstanding at each balance sheet are short term and recorded at their fair value.

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Had US GAAP been applied, the Bank’s assets and liabilities would have decreased by approximately 140,186 and 30,446 as of December 31, 2010 and 2009, respectively.
32.21.
Fair value Measurement Disclosures
FASB ASC 820 defines fair value, establishes a consistent framework for measuring fair value, and enhances disclosures about fair value measurements. Effective January 1, 2010, the Bank adopted new accounting guidance under FASB ASC 820 that requires additional disclosures including, among other things, (1) the amounts and reasons for certain significant transfers among the three hierarchy levels of inputs, (2) the gross, rather than net, basis for certain Level 3 rollforward information, (3) use of a “class” basis rather than a “major category” basis for assets and liabilities, and (4) valuation techniques and inputs used to estimate Level 2 and Level 3 fair value measurements. The following information incorporates these new disclosure requirements except for the Level 3 rollforward information which is not required until the first quarter of 2011.
Fair Value Measurements
FASB ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, FASB ASC 820 has established a hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:
Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market that Banco Macro S.A. has the ability to access.
Level 2: Other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following:
a)
Quoted prices for similar assets or liabilities in active markets;
b)
Quoted prices for identical or similar assets or liabilities in less-active markets;
c)
Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d)
Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.
Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
The Bank uses fair value to measure certain assets and liabilities on a recurring basis when fair value is the primary measure for accounting. This is done primarily for government and private securities (debt instruments issued by National Government and Central Bank, shares, mutual funds and corporate bonds) classified as available for sale or trading account, forward transactions pending settlement and derivatives (forward transactions without delivery of underlying assets and interest rate swaps).

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Assets and liabilities valued at their fair recurrent value as of December 31, 2010 and 2009 are as follows:
Fair value measurements on a recurring basis as of
December 31, 2010
DESCRIPTION Level 1 Level 2 Level 3 TOTAL
ASSETS
Government and private securities
Trading
- Government securities
295,533 — — 295,533
- Equity securities
17,588 — — 17,588
Available for sale
- Government securities
214,680 183,585 — 398,265
- Instruments issued by Central Bank
681,949 3,148,912 (*) — 3,830,861
Other receivables from financial intermediation
Trading
- Mutual funds
29,225 — — 29,225
Available for sale
- Unlisted Corporate Bonds
17,081 278,804 — 295,885
- Debt securities in financial trust
— — 117,039 117,039
Forward transactions pending settlement
72,683 551 — 73,234
Other receivables in securities
4,286 — — 4,286
Derivative instruments
2,085 — — 2,085
TOTAL ASSETS
1,335,110 3,611,852 117,039 5,064,001
LIABILITIES
Other liabilities from financial intermediation
Forward transactions pending settlement
83,261 680 — 83,941
Derivative instruments
— — 3,682 3,682
TOTAL LIABILITIES
83,261 680 3,682 87,623
Fair value measurements on a recurring basis as
of December 31, 2009
DESCRIPTION Level 1 Level 2 Level 3 TOTAL
ASSETS
Government and private securities
Trading
- Government securities
465,037 — — 465,037
- Equity securities
43,047 — — 43,047
- Mutual funds
37,829 — — 37,829

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Fair value measurements on a recurring basis as of
December 31, 2009
Level 1 Level 2 Level 3 TOTAL
ASSETS (Cont.)
Available for sale
- Government securities
894,306 84,053 — 978,359
- Instruments issued by Central Bank
264,485 4,889,029 (*) — 5,153,514
Other receivables from financial intermediation
Available for sale
- Unlisted Corporate Bonds
— 71,903 8,736 80,639
- Debt securities in financial trust
— — 39,558 39,558
Forward transactions pending settlement
15,486 1,023 — 16,509
Other receivables in securities
5,214 — — 5,214
Derivative instruments
5,295 — — 5,295
TOTAL ASSETS
1,730,699 5,046,008 48,294 6,825,001
LIABILITIES
Other liabilities from financial intermediation
Forward transactions pending settlement
15,204 246 — 15,450
Derivative instruments
— — 12,522 12,522
TOTAL LIABILITIES
15,204 246 12,522 27,972
(*)
Mainly includes instruments issued by Central Bank of Argentina with less than one year maturity.
Interest rate swaps, unlisted corporate bonds and debt securities in financial trust are fair valued primarily under Level 3 using discounted cash flow methodologies, which requires significant management judgment or estimation (discount interest rate, projected Libor and projected exchange rate).

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The following is the reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the periods:
Fair value measurements using significant
unobservable inputs (Level 3)
December 31, 2010
Debt
securities in
Corporate financial
Description Derivatives Bonds trust Total
Beginning balance
(12,522 ) 8,736 39,558 35,772
Transfer into Level 3
— — — —
Transfer out of Level 3
— (8,736 ) — (8,736 )
Total gains or losses (realized/unrealized)
- Included in earnings (or changes in net assets)
8,840 — 142 8,982
- Included in other comprehensive income
— — 2,505 2,505
Purchases, issuances, sales, and settlements
- Purchases
— — 86,951 86,951
- Issuances
— — — —
- Sales
— — — —
- Settlements
— — (12,117 ) (12,117 )
Ending balance
(3,682 ) — 117,039 113,357
Fair value measurements using significant
unobservable inputs (Level 3)
December 31, 2009
Debt
securities in
Corporate financial
Description Derivatives Bonds trust Total
Beginning balance
7,200 — — 7,200
Transfer into Level 3
— — — —
Transfer out of Level 3
— — — —
Total gains or losses (realized/unrealized)
- Included in earnings (or changes in net assets)
(19,722 ) — — (19,722 )
- Included in other comprehensive income
— — — —
Purchases, issuances, sales, and settlements
- Purchases
— 8,736 39,558 48,294
- Issuances
— — — —
- Sales
— — — —
- Settlements
— — — —
Ending balance
(12,522 ) 8,736 39,558 35,772

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Fair Value Option
FASB ASC 825 allows for the option to report certain financial assets and liabilities at fair value initially and at subsequent measurement dates with changes in fair value included in earnings. The option may be applied instrument by instrument, but is on an irrevocable basis. As of December 31, 2010, 2009 and 2008, the Bank did not elect to apply the fair value option.
Fair Value Disclosures
FASB ASC 825 requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practicable to estimate fair value.
A significant portion of the Bank’s assets and liabilities are in short-term financial instruments, with a remaining maturity of less than one year, and/or with variable rates. These short-term and variable-rate financial instruments are considered to have a fair value equivalent to their carrying value at the balance sheet date.
For financial instruments with remaining maturity over a short term period and with fixed-rates, and financial instruments not included in Fair Value Measurement section; the following methods and assumptions were used to estimate their fair value:
- Loans and assets subject to financial leases: fair value is estimated, mainly, by discounting future cash flows using the current rates at which loans would be made to borrowers with similar credit ratings and for the same remaining maturities, considering the contractual terms in effect as of December 31, 2010 and 2009.
- Deposits: the Bank’s deposits as of December 31, 2010 and 2009, that have a remaining maturity of under a short period were considered to have a fair value equivalent to their carrying value at the balance sheet date while for those that have a remaining maturity of over a short period (investments accounts and time deposits), the fair value was taken to be equal to the present value of future cash flows discounted at the average year-end market interest rates for similar deposits.
- Other liabilities from financial intermediation and Other liabilities: fair value for long-term loans is estimated by discounting future cash flows using current rates at which liabilities were received while fair value for short-term loans was considered to be equivalent to their carrying value at the balance sheet.
- Subordinated and Nonsubordinated corporate bonds: as of December 31, 2010 and 2009, fair value was taken to be equal to the present value of future cash flows discounted at the average year end market interest rates for securities of similar interest rate, credit risk and duration.
- Off-Balance sheet: commitments to extending credit, standby letters of credit, guarantees granted and foreign trade acceptances: it is estimated that the differential, if any, between the fees the Bank charged for these transactions and the fair value would not give rise to a material variance.

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The following is a summary of carrying amounts under Central Bank rules and estimated fair values of financial instruments as of December 31, 2010 and 2009:
As of December 31,
2010 2009
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
FINANCIAL ASSETS
Cash
5,202,004 5,202,004 5,016,192 5,016,192
Government and private securities
7,030,074 6,987,214 6,901,041 7,091,594
Loans
15,910,103 14,711,084 11,096,807 10,287,409
Other receivables from financial intermediation
3,599,297 3,537,913 2,433,295 2,392,905
Receivables to financial leases
247,399 226,700 274,051 250,675
Other receivables
597,011 596,718 366,495 366,090
32,585,888 31,261,633 26,087,881 25,404,865
FINANCIAL LIABILITIES
Deposits
23,407,393 23,398,148 18,592,866 18,586,443
Other liabilities from financial intermediation
4,591,283 4,515,271 3,338,070 3,173,908
Other Liabilities
633,691 633,691 884,082 884,082
Subordinated Corporate Bonds
598,470 686,470 572,473 573,681
29,230,837 29,233,580 23,387,491 23,218,114
These fair value disclosures represent the Bank’s best estimates based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the various instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates.
Fair value is used on a nonrecurring basis to measure certain assets when applying lower of cost or market accounting or when adjusting carrying values, such as for loans held for sale, impaired loans, and other real estate owned. Fair value is also used for annual disclosures required by FASB ASC 825 “Financial Instruments”.
Further, because of the characteristics of all nonfinancial instruments there were no disclosure required regarding such assets. Therefore, the fair value amounts shown in the schedule do not, by themselves, represent the underlying value of the Bank as a whole.
As of December 31, 2010, 2009 and 2008, the Bank has no assets measured at fair value on a nonrecurring basis.
32.22.
Joint venture
As mentioned in Note 3.5., the Bank participates in the “Banco Macro S.A. — Siemens Itron Business Services S.A. — Unión Transitoria de Empresas”, in the “Banco Macro Bansud S.A. -Montamat & Asociados S.R.L. — Unión Transitoria de Empresas” and in the “Banco Macro S.A. — Gestiva S.A. — Unión Transitoria de Empresas” (these joint ventures jointly controlled having an interest of 50%). Under Central Bank rules this interest is consolidated through the proportional consolidation method.
Under US GAAP, that method of consolidation is not appropriate for such investments and they are accounted for using equity method.
Therefore, had US GAAP been applied as of December 31, 2010 and 2009, “Other assets” would have increased by 7,797 and 3,996, respectively, with an offsetting decrease in various assets and liabilities accounts. Additionally, as of December 31, 2010 and 2009, income from equity in other companies would have increased by 18,487 and 7,334, respectively, with an offsetting decrease in various income and expense accounts, with no net effect in net income or equity.

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32.23.
Items in process of collection
The Bank does not give accounting recognition to checks drawn against the Bank or other Banks or other items to be collected, until such time as the related item clears or is accepted. Such items are recorded by the Bank in Memorandum accounts. U.S. banks, however, account for such items through balance sheet clearing accounts at the time the items are presented for collection.
Had US GAAP been applied, the Bank’s assets and liabilities would decrease by approximately 1,120,481 and 736,286 as of December 31, 2010 and 2009, respectively.
32.24.
Acceptances
Foreign trade acceptances are not recorded on the balance sheet by the Bank. In accordance with Regulation S-X, acceptances and related customer liabilities should be recorded on the balance sheet. Adjustment required to state balance sheets in accordance with Regulation S-X would be to increase assets (due from customers on acceptances) and increase liabilities (bank acceptances outstanding) by 220,855 and 381,501 as of December 31, 2010 and 2009, respectively.
32.25.
Repurchase agreements
The Bank entered into Repo and Reverse Repo agreements of financial instruments as disclose in Note 25.
In accordance with Central Bank Rules, the Bank derecognizes the securities transferred under the repurchase agreement and records an asset related to the future repurchase of these securities. Contemporaneously, the Bank records a liability related to the cash received in the transaction. As mentioned in Note 4.4, the asset related to securities to be repurchased is measured as the same criteria as the transferred securities.
Similar treatment applies to reverse repo agreements.
Under US GAAP, FASB ASC 860, these transactions have not qualified as sales and therefore these transactions are recorded as secured financings.
Had US GAAP been applied, the Bank’s assets and liabilities would have decreased by approximately 2,480,015 and 1,060,872 as of December 31, 2010 and 2009, respectively.
In addition, the measurement adjustments of those securities are included in Note 32.2.
32.26.
Variable Interest Entities and other trusts
As mentioned in Note 13., Banco Macro S.A., is involved in several trust agreements.
Under Central Bank Rules, the Bank is not required to consolidate these trusts (see Note 4.4.h.4).
Under US GAAP, FASB ASC 810 addresses consolidation of variable interest entities, as defined in the rules, which have certain characteristics.
In June 2009, the FASB issued guidance now codified within FASB ASC Topic 810 which requires entities to perform an analysis to determine whether the reporting entity’s variable interest give it a controlling financial interest in a VIE and, thus, is the VIE’s primary beneficiary. This analysis identifies the primary beneficiary of a VIE as one with (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE. The guidance was effective as of the beginning of the annual reporting period commencing after November 15, 2009. The Bank adopted these provisions as of January 1, 2010. The adoption of the guidance codified within FASB ASC 810 did not have a material impact on our consolidated financial statements.

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The methodology for evaluating trust and transactions under the VIE requirements includes the following two steps:
•
Determine whether the entity meets the criteria to qualify as a VIE and;
•
Determine whether the Bank is the primary beneficiary of a VIE.
In performing the first step the significant factors and judgments that were considered in making the determination as to whether an entity is a VIE include:
•
The design of the entity, including the nature of its risks and the purpose for which the entity was created, to determine the variability that the entity was designed to create and distribute to its interest holders;
•
The nature of the involvement with the entity;
•
Whether control of the entity may be achieved through arrangements that do not involve voting equity;
•
Whether there is sufficient equity investment at risk to finance the activities of the entity and;
•
Whether parties other than the equity holders have the obligation to absorb expected losses or the right to received residual returns.
For each VIE identified, the Bank performs the second step and evaluates whether it is the primary beneficiary of the VIE by considering the following significant factor and criteria:
•
Whether the Bank have the power to direct the activities that most significantly impact the VIE’s economic performance and;
•
Whether the Bank absorb a the majority of the VIE’s expected losses or the Bank receive a majority of the VIE’s expected residual returns.
The Bank determined that the trusts described below are variable interest entities.
As of December 31, 2010 and 2009, under FASB ASC 810, San Isidro and Bisel Trusts were considered variable interest entities. In accordance with FASB ASC 810, the Bank was deemed to be the primary beneficiary of these trusts and, therefore, the Bank included them in its consolidated financial statements. However, there were no significant impacts in the US GAAP shareholders’ equity or net income reconciliation.
As of December 31, 2009, Lujan Trust was considered a VIE. As of December 31, 2009, the Bank acquired interest in this trust and was deemed to be the primary beneficiary. In consequence, the Bank was required to consolidate it. However, there were no significant impacts in the US GAAP shareholders’ equity or net income reconciliation. In 2010, the Bank sold its interest in this trust and derecognized the Trust in its consolidated financial statement.
As of December 31, 2010 and 2009, the table below presents the carrying amount and classification of the VIE’s assets and liabilities which have been consolidated for US GAAP purposes in accordance with FASB ASC 810 (Control based on variable interest model). As mentioned in Note 13., under Central Bank rules, those amounts were recorded under “Other receivables from financial intermediation — Other receivables not covered by debtors classification regulations”. Therefore, there were no significant impact in the US GAAP shareholders ´ equity or net income reconciliation:
As of December 31,
2010 2009
Cash (a)
1,593 2,458
Premises and equipment
— 228,166
Other assets
153,794 27,566
Total Assets (b)
155,387 258,190
Other liabilities
67,467 97,917
Total Liabilities (c)
67,467 97,917
Net Assets
87,920 160,273

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(a)
Includes non interest-bearing deposits in Banco Macro and Macro Bank Limited by 1,585 and 1,297 as of December 31, 2010 and 2009, respectively.
(b)
Assets that can be used only to settle obligations of the consolidated variable interest entities.
(c)
Creditors (or beneficial interest holders) of these liabilities do not have recourse against the general credit of the primary beneficiary.
The involvements in variable interest entities do not have a material impact on the primary beneficiary’s financial position, financial performance and cash flows.
See also Note 13 for additional information of the trusts which have been considered variable interest entities.
Additionally, as of December 31, 2010 and 2009, Tucumán Trust was not considered a VIE. The Bank has the control of the Trust and, in accordance with FASB ASC 810 (under Control Based on Voting Interest model), was required to consolidate it. However, there were no significant impacts in the US GAAP shareholders’ equity or net income reconciliation.
As of December 31, 2010 and 2009, TST & AF Trust was not considered a VIE. In accordance with FASB ASC 810 (Control based on voting interest model) the trust was considered a joint venture investment because it was jointly controlled by holders. Therefore, as of December 31, 2009 the Bank measured it at the equity method.
As on March 16, 2010, the Bank acquired additional certificates of participation and took the total control of the TST trust. In consequence, the Bank recorded this additional purchase under FASB ASC 805 (Business Combination — steps acquisition). The Bank has allocated the total purchase price (90,959) to the net assets acquired measured at fair value. The excess of the fair value of the acquired net asset over the purchase price was no significant.
As of December 31, 2010 in accordance with FASB ASC 810 the Bank was required to consolidate it. However, there were no significant impacts in the US GAAP shareholders ´ equity or net income reconciliation.
As a result of consolidating the trusts mentioned in this Note, total assets and liabilities would increase by 63,881 and 98,490 as of December 31, 2010 and 2009, respectively.
32.27.
New accounting pronouncements (US GAAP)
a)
ASU 2010 — 28 — Intangibles — Goodwill and Other (Topic 350), when to perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying amounts.
This ASU modifies Step 1 (When a goodwill impairment test is performed, an entity must assess whether the carrying amount of a reporting unit exceeds its fair value) of the goodwill impairment test for reporting units with zero or negative carrying amount. Current GAAP will be improve by eliminating an entity’s ability to assert that a reporting unit is not required to perform Step 2 because the carrying amount of the reporting unit is zero or negative despite the existence of qualitative factors that indicate the goodwill is more likely than not impaired. For public entities, the amendments in this update are affective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Bank has not yet determined the effect, if any, of this new pronouncement.
b)
ASU 2010- 29 — Business Combinations (Topic 805). Disclosure of Supplementary Pro Forma Information for Business Combinations.
This ASU specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.

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The amendments expand disclosures under topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.
Amendments are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Bank has not yet determined the effect, if any, of this new pronouncement.
c)
ASU 2011-01 — Receivables (topic 310). Deferral of the Effective Date of Disclosures about Trouble Debt Restructurings in Update No. 2010-20.
This update temporarily delays the effective date of the disclosures about troubled debt restructuring in Update 2010-20 for public entities. The deferral in this update will result in more consistent disclosures about troubled debt restructuring. This amendment does not defer the effective of the other disclosure requirements in Update 20-2010. The deferral was effective upon issuance.
d)
ASU 2011-02 — Receivables (Topic 310). A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.
This ASU provide a guidance to creditors in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purpose of determining whether a restructuring constitutes a troubled debt restructuring, in addition amendments clarify that a creditor is preclude from using the effective interest rate test in the debtor’s guidance on restructuring constitutes a troubled debt restructuring. Amendments are affective for the first interim or annual period beginning on or after June, 15, 2011. The Bank has not yet determined the effect, if any, of this pronouncement.

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