BMA Banco Macro SA

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

Banco Macro SA (hereinafter, the Bank), is a stock corporation (sociedad anónima), organized in the Republic of Argentina that offers traditional banking products and services to companies, including those companies operating in regional economies, as well as to individuals, thus strengthening its goal to be a multiservice bank. In addition, through its subsidiaries, the Bank performs transactions as a trustee agent, manager and administrator of mutual funds and renders stock exchange services.

Macro Compañía Financiera SA 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 SA. Subsequently, as a result of the merger process with other entities, it adopted other names (among them, Banco Macro Bansud SA) and since August 2006, Banco Macro SA.

The Bank’s shares have been publicly listed on Bolsas y Mercados Argentinos (BYMA) since November 1994; and as from March 24, 2006 they are listed on the New York Stock Exchange (NYSE). Additionally, on October 15, 2015, they were authorized to be listed on the Mercado Abierto Electrónico SA (MAE).

Since 1994, Banco Macro SA’s market strategy was mainly focused on the regional areas outside the City of Buenos Aires. Following this strategy, in 1996, Banco Macro SA started the process to acquire entities and assets and liabilities during the privatization of provincial and other banks.

On May 21, 2019, the Bank acquired 100% of Argenpay SAU for an amount of 100 conformed by 100,000 common, registered shares, with a face value of Ps. 1 each one and entitled to one vote. The Entity’s purpose is the development of its own network or the incorporation into other networks so that it can operate with individuals or companies, in-person or remotely, by using information and communication technologies, grant, offer or accept electronic payments online or offline, digital and virtual wallets and electronic commerce in general. As of the date of issuance of these condensed consolidated interim financial statements, this subsidiary has not started to develop its principal activities.

On August 7, 2019, the Board of Directors approved the issuance of these condensed consolidated interim financial statements.

The Bank and the Misiones Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a five-year term since January 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.

On November 25, 1999, and December 28, 2006, extensions to such agreement were agreed upon, making it currently effective through December 31, 2019. Additionally, on October 1, 2018, the above-mentioned agreement was extended for a ten-year term beginning on January 1, 2020, and being effective through December 31, 2029.

As of June 30, 2019 and December 31, 2018, the deposits held by the Misiones Provincial Government with the Bank amounted to 7,584,997 and 5,540,994 (including 491,785 and 430,545 related to court deposits), respectively.

The Bank and the Salta Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a ten-year term since March 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.

On February 22, 2005, and August 22, 2014, extensions to such agreements were agreed upon, making it currently effective through February 28, 2026.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

As of June 30, 2019 and December 31, 2018, the deposits held by the Salta Provincial Government with the Bank amounted to 4,327,421 and 2,630,532 (including 752,491 and 644,863 related to court deposits), respectively.

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.

On April 29, 2005 and July 8, 2014, extensions to such agreement were agreed upon, making it currently effective through September 30, 2024.

As of June 30, 2019 and December 31, 2018, the deposits held by the Jujuy Provincial Government with the Bank amounted to 3,186,756 and 1,387,236 (including 723,003 and 436,972 related to court deposits), respectively.

Banco del Tucumán SA acts as an exclusive financial agent and as revenue collection and obligation payment agent of the Tucumán Provincial Government, the Municipality of San Miguel de Tucumán and the Municipality of Yerba Buena. The services agreements with the Provincial and Municipalities Governments are effective through years 2031, 2023 and 2020, respectively.

On July 4, 2018 the legislative body of the province of Tucumán enacted, into law a bill issued by the provincial executive, authorizing the sale of the shares held by such province in Banco de Tucumán SA to Banco Macro SA as well as the continuity as a provincial finance agent for an additional period of ten years from the expiration of the contract, and if applicable, the possibility of merging both entities.

On August 10, 2018, the province of Tucumán transferred to Banco Macro SA, 43,960 Class B common registered nonendorsable shares, with a face value of Ps. 100 each one and entitled to one vote, which is equivalent to 10% of its common stock and votes. For this transaction, the Bank paid 456,462. In addition, the Bank acquired from an individual shareholder 59 shares for an amount of 295.

This transaction was registered in the Bank’s shareholders´ equity, derecognizing, at the carrying amount, the non-controlling interest. The difference between the adjustment of the controlling and non-controlling interests and the fair value of the consideration paid was registered in retained earnings. In the condensed separate interim financial statements this transaction was registered by the acquisition method (see additionally note 2 to the condensed separate interim financial statements).

On April 30, and July 19, 2019, the Shareholders' Meeting of Banco Macro SA and the Shareholders' Meeting of Banco del Tucumán SA, respectively, decided, among other issues, to approve a preliminary merger agreement, the special consolidated financial statement of merger as of December 31, 2018, the exchange relationship of shares, the legal feasibility Report and technical, economic and financial feasibility Report of the merger between Banco Macro SA and Banco del Tucumán SA - Consolidation of technical relationships regarding liquidity and solvency. Once the regulatory authorities approve the merger, Banco Macro SA will incorporate with retroactive effect as of January 1, 2019 Banco del Tucumán SA on the basis of the separate financial statements of each of the companies as of December 31, 2018 and of the special consolidated financial statement of merger status as of same date.

The exchange ratio has been agreed at 0.65258 ordinary shares of Banco Macro SA for each face value $ 1 of common share of Banco del Tucumán SA. Therefore, the minority shareholders of Banco del Tucumán SA will be entitled to receive at 0.65258 common shares of Banco Macro SA, for each face value $ 1 of ordinary shares they hold in the capital of Banco del Tucumán SA. Consequently, Banco Macro will issue 15,662 Class B common, registered shares, with a face value of Ps. 1 each one and entitled to one vote, to be delivered to minority Shareholders’ of Banco del Tucumán SA.

As of the date of issuance of these condensed consolidated interim financial statements, the merger has not been approved by the regulatory authorities. 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

As of June 30, 2019 and December 31, 2018, the deposits held by the Tucumán Provincial Government, the Municipality of San Miguel de Tucumán and the Municipality of Yerba Buena with Banco del Tucumán SA amounted to 4,065,531 and 6,047,312 (including 2,145,901 and 1,890,398 related to court deposits), respectively.

Presentation basis

Applicable Accounting Standards

On February 12, 2014, through Communiqué “A” 5541, the Central Bank of Argentina (BCRA, for its acronym in Spanish) established the general guidelines towards conversion to the IFRS issued by the International Accounting Standards Board (IASB) for preparing financial statements of the entities under its supervision, for the annual fiscal years beginning on January 1, 2018, as well as those of interim-periods.

Additionally, through Communiqués “A” 6114, the BCRA set specific guidelines within the scope of such convergence process, among which it defined (i) the transitory exception to the application of section 5.5 “Impairment” of the IFRS 9 “Financial Instruments” (sections B5.5.1 to B5.5.55) up to the fiscal years beginning as of January 1, 2020; and (ii) in order to calculate the effective interest rate of assets and liabilities so requiring it for the measurement thereof, pursuant to IFRS 9, up to December 31, 2019, the Bank may transitorily make a global estimate of the calculation of the effective interest rate on a group of financial assets or liabilities with similar characteristics which shall be applied such effective interest rate. If section 5.5 “Impairment”, mentioned in (i) above had applied, according to a global estimation performed by the Bank, as of June 30, 2019 and December 31, 2018, the shareholders’ equity would have increased by 1,422,382 and 280,978, respectively. The figures stated as of June 30, 2019 includes 1,183,817 generated by the allowance mentioned in note 9.

As of June 30, 2019 the conditions to apply inflation adjustment in the condensed consolidated interim financial statement for the six-month period ended on that date, as established by IAS 29 “Financial Reporting in Hyperinflationary Economy” were met. However, for the reasons described in section “measuring unit” of this note, financial institutions, transitorily, cannot apply the above-mentioned standard.

These condensed consolidated interim financial statements of the Bank were prepared pursuant with Conceptual Framework as established by BCRA based on IFRS (Communiqué “A” 6114 and supplementary rules of the BCRA), with the exceptions described in the preceding paragraphs. Taking into account these exceptions, the Conceptual Framework comprises the Standards and Interpretations adopted by the IASB and includes:

Generally, the BCRA does not allow the anticipated application of any IFRS, unless otherwise expressly stated.

Basis for the preparation and consolidation

These condensed consolidated interim financial statements for the six-month period ended on June 30, 2019, have been prepared in accordance with the framework set forth by the BCRA as mentioned in the previous section “Applicable accounting standards” which, particularly for condensed consolidated interim financial statements, is based on IAS 34 “Interim Financial Reporting”.

For the preparation of these condensed consolidated interim financial statements, in addition to section “new standards adopted” of this note, the Bank has applied the basis for the preparation and consolidation, the accounting policies and the material accounting judgements, estimates and assumptions described in the consolidated financial statements for the fiscal year ended on December 31, 2018, already issued.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

These condensed consolidated interim financial statements include all the necessary information for an appropriate understanding, by the users thereof, of the basis for the preparation and disclosure used therein, as well as the relevant events and transactions occurred after the issuance of the last annual consolidated financial statements for the fiscal year ended on December 31, 2018, already issued. Nevertheless, the present condensed consolidated interim financial statements do not include all the information or all the disclosures required for the annual consolidated financial statements prepared in accordance with the IAS 1 “Presentation of Financial Statements”. Therefore, these condensed consolidated interim financial statements must be read together with the annual consolidated financial statements for the fiscal year ended December 31, 2018, already issued.

As of June 30, 2019 and December 31, 2018, the Bank has consolidated its financial statements with the financial statements of the following companies:

(c)  Consolidated with Sud Asesores (ROU) SA (100% voting rights – Equity interest 7,539).

The table below shows the Bank’s equity interest and voting rights in the companies it consolidates as of June 30, 2019 and December 31, 2018:

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

Total assets, liabilities and net equity of the Bank and each of its subsidiaries as of June 30, 2019 and December 31, 2018, are as follows:

Transcription in the Books of Accounts

As of the date of these condensed consolidated interim financial statements, the same are in the process of being transcribed in the Books of Accounts of Banco Macro SA.

Figures expressed in thousands of pesos

These condensed consolidated interim financial statements disclose figures expressed in thousands of Argentine pesos and are rounded up to the nearest amount in thousands of pesos, unless otherwise expressly stated.

Comparative information

The present condensed consolidated interim statement of financial position as of June 30, 2019, is presented comparatively with year-end data of the immediately preceding fiscal year, while the statement of income and the statement of other comprehensive income for the three-month and six-month periods ended June 30, 2019, and the statement of changes in shareholders’ equity and the statement of cash flows and cash equivalents for the six-month period ended June 30, 2019, are presented comparatively with data as of the same period of the immediately preceding fiscal year.

Measuring unit

IFRS require that the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy be restated in terms of measuring unit current at the end of the reporting period. To achieve consistency in identifying an economic environment of that nature, IAS 29 establishes (i) certain qualitative indicators, not limited to, consisting of analyzing the general population behavior, prices, interest rates and wages with changes to a price index and the loss of purchasing power, and (ii) a quantitative indicator which is the most common in practice, consisting of a three-year cumulative inflation rate of 100% or above. Whilst in the recent years there was an important increase in the general level of prices, the three-year cumulative inflation had maintained in Argentina below 100%. However, due to miscellaneous macroeconomic factors the three-year inflation rate exceeds that figure, and, also the Argentine government goals and other available estimates indicate that this trend will not be reversed in the short term.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

Consequently, the Argentine economy is currently considered hyperinflationary under IAS 29 and the Argentine financial entities that are required to apply the IFRSs adopted by the BCRA through Communiqué “A” 6114 and the functional currency of which is the Argentine peso should restate their financial statements. Such restatement should be applied as if the economy had always been hyperinflationary, using a general price index that reflects changes in general purchasing power. To apply the restatement, a series of indexes will be used, as prepared and published on a monthly basis by the Argentine Federation of Professionals Councils in Economic Sciences (FACPCE, for its acronym in Spanish), which combines consumer price index (CPI) on a monthly basis published by the Argentine Institute of Statistics and Censuses (INDEC, for its acronym in Spanish) since January 2017 (baseline month: December 2016) with the wholesale prices indexes published by the INDEC until that date. For the months of November and December 2015, for which the INDEC did not publish the wholesale price index (WPI) variation, the CPI variation for the CABA is used.

Considering the abovementioned indexes, the inflation rate was 22.40% and 16.03% for the six-month periods ended on June 30, 2019 and 2018, respectively, and 47.64% for the fiscal year ended on December 31, 2018.

Notwithstanding the above, as established by BCRA Communiqué “A” 6651, financial institutions shall start the inflation adjustment on its financial statements according to IAS 29, for the fiscal years beginning on January 1, 2020.

The nonrecognition of changes in the general purchasing power under hyperinflationary conditions, may distort accounting information and, therefore, this situation should be taken into account in the interpretation of the Bank’s information on these condensed consolidated interim financial statements over financial position, the result of its operations and its cash flows.

Below there is a description of the main impacts if IAS 29 were to be applied:

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

If the Bank, according to a global estimation, had applied IAS 29 the Shareholders’ equity as of June 30, 2019 and December 31, 2018 would have increased by 9,853,086 and 19,919,763, respectively, including the effects for the application of section 5.5. “Impairment” of the IFRS 9 abovementioned; on the other hand, the comprehensive income for the six-month period would have decreased by 9,691,976.

New standards adopted

For the fiscal year beginning on January 1, 2019, the following IFRS amendments and interpretation (hereinafter, “IFRIC”) are applicable and they did not have a material impact over these condensed consolidated interim financial statements, as a whole.

IFRS 16 “Leases”

IFRS 16 replaced IAS 17 “Leases” and sets out the principles for the recognition, measurement, presentation and disclosure of leases, introducing significant changes when the Bank acts as lessee. When the Bank acts as a lessor, no significant changes were generated with respect to the preceding IAS.

When the Bank acts as a lessee, the lease contracts (and sub lease) are recognized under a single accounting model which eliminates the dual accounting method that distinguishes between operating leases and finance leases and implies the recognition of an asset for the right of use of the leased asset and a liability that represents the obligation to make future payments for the lease.

Additionally, on a separate basis, interest expenses on the lease liabilities and depreciation charges for the right of use of the asset are recognized.

The Bank adopted IFRS 16 under the modified retrospective approach from January 1, 2019, as the date of initial application.

The effect of adoption of IFRS 16 as of January 1, 2019 was an increase of the Bank’s assets and liabilities for the following amounts:

The weighted average of the incremental borrowing rate applied to lease liabilities was 45.98% for leases in pesos and 4.63% for leases in US Dollars.

The Bank has lease contracts for real property in the Item “Property, plant and equipment”. Before the adoption of IFRS 16, the Bank classified its leases (as lessee) at the inception date as either a finance lease or an operating lease. The Bank has neither acted nor acts as a leese in agreements classified as finance lease. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

Since the adoption of IFRS 16, the Bank has applied a single accounting model for the recognition and measurement of all its leases. Additionally, the Bank applied the following practical expedients established by the standard:

·   Used a single discount rate to a portfolio of leases with reasonably similar characteristics.

·   Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application.

·   Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.

Set out below are the new accounting policies of the Bank upon adoption of IFRS 16, which have been applied from the date of initial application:

·    Right-of-use assets

The Bank recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The right of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

·    Lease liabilities

At the commencement date of the lease, the Bank recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Bank and payments of penalties for terminating a lease, if the lease term reflects the Bank exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Bank uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

As of June 30, 2019, the carrying amount of assets recognized for the right-of-use assets identified in the lease contracts, depreciation expense for the period and the additions to right-of-use assets are disclosed in Exhibit F to these condensed consolidated interim financial statements. Additionally, the short term leases recognized as rent expense for the period amounted to 57,957.

On the other hand, the carrying amount of liabilities generated by lease contracts as of June 30, 2019, amounted to 560,365 and were recorded in the item “Other financial liabilities” (see additionally note 11 to these condensed consolidated interim financial statements). The accrued interests of such liabilities for the six-month period ended on June 30, 2019, amounted to 37,531 and are recognized in the Item “Other operating expenses”.

IFRIC 23 “Uncertainty over income tax treatment”

This interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 “Income tax”. This interpretation addresses specifically the following:

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

·          whether an entity considers uncertain tax treatments separately;

·          the assumptions an entity makes about the examination of tax treatments by taxation authorities;

·          how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and

·          how an entity considers changes in facts and circumstances.

This interpretation did not have a material impact on these condensed consolidated interim financial statements since, currently, there are not material uncertainties over income tax treatments.

New pronouncements

Pursuant to Communiqué “A” 6114 of the BCRA, as new IFRS are approved and existing IFRS are amended or revoked and, once these changes are approved through the notices of approval issued by FACPCA, the BCRA shall issue a statement on the approval thereof for financial entities. Generally, financial institutions shall not apply any IFRS in advance, except as specifically authorized at the time of the adoption thereof. In this case, the Bank shall adopt the following standards:

In order to meet specific financial needs of customers, the Bank’s credit policy also includes, among others, the granting of guarantees, securities, bonds, letters of credit and documentary credits. Although these transactions are not recognized in the statement of financial position, since they imply a possible liability for the Bank, they expose the Bank to credit risks other than those recognized in statement of financial position and they are, therefore, an integral part of the total risk of the Bank.

As of June 30, 2019 and December 31, 2018, the Bank maintains the following contingent transactions:

Risks related to the contingent transactions described above have been evaluated and are controlled within the framework of the Bank’s credit risk policy described in note 39 to consolidated financial statements as of December 31, 2018, already issued.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

The fair value is the amount at which an asset can be exchanged, or at which a liability can be settled, in mutual independent terms and conditions between participants of the principal market (or the most advantageous market) who are duly informed and willing to transact in an orderly and current transaction, at the measurement date under the current market conditions whether the price is directly observable or estimated using a valuation technique under the assumption that the Bank is an ongoing business.

When a financial instrument is quoted in a liquid and active market, its price in the market in a real transaction provides the most reliable evidence of its fair value. Nevertheless, when there is no quoted price in the market or it cannot be an evidence of the fair value of such instrument, in order to determine such fair value, the entities may use the market value of another instrument with similar characteristics, the analysis of discounted cash flows or other applicable techniques, which shall be significantly affected by the assumptions used.

Notwithstanding the above, the Bank’s Management has used its best judgment to estimate the fair values of its financial instruments; any technique to perform such estimate implies certain inherent fragility level.

Fair value hierarchy

The Bank uses the following hierarchy to determine and disclose the fair value of financial instruments, according to the valuation technique applied:

The following tables show the hierarchy in the Bank’s financial asset and liability at fair value measurement, as of June 30, 2019 and December 31, 2018:

Description of valuation process

The fair value of instruments categorized as Level 1 was assessed by using quoted prices effective at the end of each period or fiscal year, as applicable, in active markets for identical assets or liabilities, if representative. Currently, for government and private securities, there are two principal markets in which the Bank operates: BYMA and MAE. Additionally, in the case of derivatives, both MAE and Mercado a Término de Rosario SA (ROFEX) are deemed active markets.

On the other hand, for certain assets and liabilities that do not have an active market, categorized as Level 2, the Bank used valuation techniques that included the use of market transactions performed under mutual independent terms and conditions, between interested and duly informed parties, provided that they are available, as well as references to the current fair value of another instrument being substantially similar, or otherwise the analysis of cash flows discounted at rates built from market information of similar instruments.

In addition, certain assets and liabilities included in this category were valued using price quotes of identical instruments in “less active markets”.

Finally, the Bank has categorized as level 3 those assets and liabilities for which there are no identical or similar transactions in the market. In order to determine the market value of these instruments, the Bank used valuation techniques based on its own assumptions. For this approach, the Bank mainly used the cash flow discount model.

As of June 30, 2019 and December 31, 2018, the Bank has neither changed the techniques nor the assumptions used to estimate the fair value of the financial instruments.

Below there is the reconciliation between the amounts at the beginning and at the end of the period or fiscal year, as applicable, of the financial instruments recognized at fair value, using the valuation technique based on the Bank’s own assumptions, as of June 30, 2019 and December 31, 2018:

(*) It is related to the reclassification from non current assets held for sale. Additionally, see note 9 to these condensed consolidated interim financial statements.

Instruments measured as level 3 include mainly Equity instruments at fair value through profit or loss and debt securities, for which the construction of fair values was obtained based on the Bank’s own assumptions that are not easily available in the market.

Changes in fair value levels

The Bank monitors the availability of information in the market to evaluate the classification of financial instruments into the fair value hierarchy, as well as the resulting determination of transfers between levels 1, 2 and 3 at each period end.

As of June 30, 2019 and December 31, 2018, the Bank has not recognized any transfers between levels 1, 2 and 3 of the fair value hierarchy.

Financial assets and liabilities not recognized at fair value

Next follows a description of the methods and assumptions used to determine the fair values of financial instruments not recognized at their fair value in these condensed consolidated interim financial statements:

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

The following table shows a comparison between the fair value and the carrying amount of financial instruments not measured at fair value as of June 30, 2019 and December 31, 2018: