ITEM 4. INFORMATION ON THE COMPANY

ORGANIZATION

We were incorporated on September 14, 1999, as a stock corporation (sociedad anonima) under the laws of Argentina. Our domicile is in Buenos Aires, Argentina. Under our bylaws, our corporate duration is until June 30, 2100. Our duration can be extended by resolution taken at a general extraordinary shareholders' meeting. Our principal executive offices are located at Teniente General Juan D. Peron 456, Second Floor, (1038) Buenos Aires, Argentina. Our telephone number is (54-11) 4343-7528.

Our agent for service of process in the United States is C T Corporation System, presently located at 111 Eighth Avenue, 13th Floor, New York, New York 10011.

ORGANIZATIONAL STRUCTURE

The following chart illustrates our organizational structure as of December 31, 2003. Percentages indicate the ownership interests held. All of the companies shown in the chart are incorporated in Argentina, except for:

- Banco Galicia Uruguay S.A., incorporated in Uruguay;

- Galicia Pension Fund Ltd. and Banco de Galicia (Cayman) Ltd. ("Galicia Cayman"), incorporated in the Cayman Islands and currently in provisional liquidation;

- Net Investment BV (Netherlands), incorporated in the Netherlands; and

- Tradecom Holanda, incorporated in the Netherlands.

Since February 13, 2002, Galicia Uruguay's activities have been suspended. See " -- Business Overview -- Banco Galicia -- Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Ltd."

[ORGANIZATIONAL STRUCTURE CHART DEPICTING OUR SUBSIDIARIES:

Galicia Warrants S.A.
Sudamericana Holding S.A.
Net Investment S.A.
Banco de Galicia y Buenos Aires S.A.
Banco Galicia Uruguay S.A.
Banco de Galicia (Cayman) Ltd. (In Provisional Liquidation) Galicia Pension Fund Ltd.
Galicia Administradora de Fondos S.A.
Tarjetas Regionales S.A.
Tarjeta Naranja S.A.
Tarjetas Cuyanas S.A.
Tarjetas del Mar S.A.
Galicia Vida Compania de Seguros S.A.
Galicia Retiro Compania de Seguros S.A.
Instituto de Salta Compania de Seguros de Vida S.A. Medigap Salud S.A.
Sudamericana Asesores de Seguros S.A.
Galicia Patrimoniales Compania de Seguros S.A. Duenovende S.A. (In Liquidation)
B2 Agro S.A.
Net Investment BV (Netherlands)
Tradecom International (Netherlands)
Tradecom Argentina S.A.
Galicia Capital Markets S.A.
Galicia Valores S.A. Sociedad de Bolsa
Galicia Factoring y Leasing S.A.
Agro Galicia S.A.
Banelco S.A.
Galicia Immobiliaria S.A.
Privatized Companies(1)
Other Subsidiaries(2)]

1) Aguas Provinciales de Santa Fe S.A. 12.5%; Inversora Diamante S.A. 12.5%; Electrigal S.A. 12.5%; Inversora Nihuiles S.A. 12.4991%; Correo Argentino S.A. 11.77%; Aguas Cordobesas S.A. 10.833%; Aguas Argentinas S.A. 8.26%;
A.E.C. S.A. 6.965%, Caminos de las Sierras S.A. 2.4835%.

2) Coelsa 13.682%; Alfer S.A. 9.8024%; Corporacion Financiera S.A. 9.09%; Interbanking S.A. 8.33%; Seguros de Depositos S.A. ("Sedesa") 7.2296%; Finanban S.A. 6.67%; Ocye S.A. 6.0%; Argencontrol S.A. 5.766%; Visa 5.0%; Mercado Abierto Electronico S.A. 1.4851%; AIG-GE Capital Latin American Infrastructure Fund LP 1.396214%; Banco Latinoamericano de Exportaciones S.A. 0.22%; S.W.I.F.T. S.C. 0.02%.

When we refer to our business or when we use the terms "Grupo Galicia" or the "Group," we mean the businesses of Grupo Galicia, the holding company, Galicia Warrants S.A., Sudamericana Holding S.A. and its subsidiaries, Net Investments S.A. and its subsidiaries, and Banco Galicia consolidated with Galicia Uruguay and its subsidiaries, Tarjetas Regionales S.A. and its subsidiaries, and the following consolidated subsidiaries: Galicia Valores S.A., Sociedad de Bolsa, Galicia Capital Markets S.A. and its subsidiaries, Galicia Factoring y Leasing S.A. and AgroGalicia S.A. (collectively, the "Bank" or "Banco Galicia").

HISTORY

We were formed as a financial services holding company to hold all of the shares of capital stock of Banco Galicia held by members of the Escasany, Ayerza and Braun families. We were formed with an initial nominal capital of 24,000 common shares, 12,516 of which were designated class A shares and 11,484 of which were designated as class B shares. Following the formation of Grupo Galicia, the holding companies which held the shares in Banco Galicia on behalf of the Escasany, Ayerza and Braun families were merged into Grupo Galicia. Following the merger, we held 46.34% of the outstanding shares of Banco Galicia. Simultaneously with the merger, we increased our capital from 24,000 to 543,000,000 common shares, 281,221,650 of which were designated as class A shares and 261,778,350 of which were designated as class B shares. Following this capital increase, all of our class A shares were held by EBA Holding S.A., an Argentine corporation that is 100% owned by our controlling shareholders, and our class B shares were held directly by our controlling shareholders in an amount equal to their ownership interests in the holding companies that were merged into Grupo Galicia.

On May 16, 2000, we held an extraordinary shareholders' meeting during which the shareholders unanimously approved a capital increase of up to Ps. 628,704,540 and approved the public offering and listings of our class B shares. All of the new common shares were designated as class B shares, with a par value of Ps. 1.00. During this extraordinary shareholders' meeting, all of our existing shareholders waived their preemptive rights in order to establish the basis for the exchange offer of our shares for Banco Galicia shares. At the same shareholders' meeting, the shareholders determined that the exchange ratio for the exchange offer would be one class B share of Banco Galicia for 2.5 of our class B shares and one ADS of Banco Galicia for one of our ADSs. We completed the exchange offer in July 2000 with a capital increase of Ps. 549,407,017. At the completion of the exchange offer, our only significant asset was our 93.23% interest in Banco Galicia. By the end of 2003, our interest was 93.59% as a result of open-market purchases.

We are a holding company whose corporate purpose is exclusively related to financial services and investment. Under our bylaws, we may not carry out transactions described in the Financial Entities Law (Ley de Entidades Financieras). Therefore, it is not our intention to compete with Banco Galicia. Rather, we seek to broaden and complement Banco Galicia's operations and businesses through holdings in companies and undertakings whose objectives are related to financial activities. Consequently, we operate in financial and related activities that Banco Galicia cannot carry out or in which it can only participate in a limited way or in those activities that would not be profitable for the Bank due to current regulations.

In September 2000, we acquired 87.5% of the capital stock and voting rights of Net Investment S.A., a company in which Banco Galicia holds the remaining 12.5% interest.

In December 2000, we acquired 37.5% Sudamericana Holding S.A., while Banco Galicia purchased 12.5%.

In August 2001, we acquired 87.5% of the capital stock and voting rights of Galicia Warrants S.A., a company in which Banco Galicia holds the remaining 12.5% interest.

In September 2001, we made a new investment in the insurance business by acquiring from Hartford Life International Ltd. (U.S.A.) and Hartford Life Ltd. (Bermuda) 50% of the capital stock and voting rights of Sudamericana Holding S.A. As a result of this transaction, we increased our interest in that company to 87.5%, while the remaining 12.5% continues to belong to Banco Galicia.

CAPITAL INVESTMENTS AND DIVESTITURES

GRUPO GALICIA

During 2003, our only capital contribution was to Net Investment S.A. for Ps. 3.6 million. During 2002, we made capital contributions in the amount of Ps. 4.20 million to Net Investment. During 2001, Grupo Galicia made the following capital investments:

- invested Ps. 5.4 million in aggregate in Banco Galicia through open-market purchases of the Bank's common shares;

- made capital contributions of Ps. 5 million in Net Investment;

- contributed Ps. 0.6 million to BtoB Comercial S.A. and, along with Banco Galicia, assigned along our interests in BtoB Comercial to Net Investment so that the business could be carried out by Tradecom International N.V., in which Net Investment has a minority stake;

- invested Ps. 21.04 million in the insurance business by acquiring from Hartford Life International Ltd. (U.S.A.) and Hartford Life Ltd. (Bermuda) 50% of the capital stock and voting rights of Sudamericana Holding S.A., raising our stake to 87.50% (the remaining 12.50% was held by Banco Galicia).

For 2004, we have budgeted investments amounting to Ps. 0.8 million to be applied to Net Investment.

BANCO GALICIA

During 2003, the Bank's capital expenditures amounted to Ps. 21.2 million, distributed as follows:

- Ps. 2.6 million in fixed assets;

- Ps. 10.3 million in construction in progress; and

- Ps. 8.3 million in intangible assets.

During 2003 the Bank did not make any significant investments or divestitures. The Bank has budgeted capital expenditures for the fiscal year ended December 31, 2004, for the following purposes and amounts:

Construction of the Banco Galicia tower          Ps. 48.0 million
Hardware, software and system maintenance            29.5 million
Other                                                 5.5 million
                                                 ----------------
Total                                            Ps. 83.0 million

Banco Galicia expects to finance its capital expenditures from the cash flow derived from operations.

During 2002, the Bank's capital expenditures totaled Ps. 56.2 million, distributed as follows:

- Ps. 12.9 million in fixed assets;

- Ps. 23.6 million in construction in progress; and

- Ps. 19.7 million in intangible assets.

During 2002 the Bank did not make any significant investments or divestitures.

During 2001, the Bank's capital expenditures totaled Ps. 226.9 million, distributed as follows:

- Ps. 79.1 million in fixed assets;

- Ps. 38.1 million in construction in progress; and

- Ps. 109.7 million in intangible assets.

On October 15, 2001, the Bank acquired the assets and liabilities of the retail division of ABN Amro Bank Argentina, principally deposits, mortgage loans, credit cards and insurance policies. The Bank paid US$46 million, of which US$42 million was paid in cash and the remaining US$4 million through an agreement to distribute ABN Amro's financial products. Banco Galicia acquired 22 branches and 270 employees in this transaction.

On March 21, 2001, the Bank's board of directors decided to sell the Bank's equity interest in Banco Barclays e Galicia S.A. (10,449,541 shares equivalent to a 22.71% interest) under the terms of a public tender offer,

which was conducted in Brazil by Barclays Bank plc, to purchase all of the shares of Banco Barclays e Galicia. The price set by Barclays Bank plc was R$
5.77 (5.77 Brazilian reais) (equivalent to Ps. 2.67 per share at the March 19, 2001, exchange rate of R$ 2.165 per peso and equivalent to Ps. 5.88 per share in constant pesos of February 28, 2003). The acquisition price was adjusted for Brazilian inflation (as measured by the Monetary Correction Rate index) between that date and the settlement date (August 2001). As of December 31, 2000, the book value of the Bank's interest in Banco Barclays e Galicia S.A. had been Ps. 78.9 million.

OUR STRATEGY

Our main objective is to be one of Argentina's leading comprehensive financial services companies while continuing to strengthen Banco Galicia's position as one of Argentina's leading banks. Our holding company structure enhances the Bank's ability to compete more effectively and to enter into new finance-related businesses (that are restricted to banks by the applicable regulatory framework), and to profit from the trends in the financial industry worldwide. We can summarize our strategy in six main points:

- Establish a platform to enhance value for our shareholders and customers: By facilitating the creation of autonomous businesses, we will be able to leverage the experience and knowledge of the market of our various companies in a more targeted and efficient manner. Furthermore, this platform will provide us with greater flexibility to react to market trends and to respond rapidly to client needs with respect to new products, markets and distribution channels.

- Take advantage of maximum flexibility to enter into potential strategic alliances: By organizing certain of our business lines into separate subsidiaries, we will optimize the potential for strategic alliances in our businesses. This will provide additional flexibility to develop new businesses in the most effective manner.

- Obtain appropriate levels of participation in certain high-growth businesses and take advantage of the potential cross-selling opportunities: The Argentine Central Bank limits the ability of financial institutions to make investments in subsidiaries that develop activities that are considered "noncomplementary" to banking activity. We believe that some of these businesses have future growth potential in Argentina. Unlike Banco Galicia, we have no limits on our investments in noncomplementary businesses such as insurance. Moreover, we have established controlling interests in some of these businesses to leverage Banco Galicia's and other companies' customer bases into cross-selling opportunities.

- Establish a corporate structure by business units: We intend to create an appropriate corporate structure aligned to the evolution of our several business sectors. We expect that this will allow a more accurate assessment of sources of income and cost control, facilitate benchmarking of those businesses against other similar ones and therefore facilitate our commercial effectiveness and efficiency in the use of resources.

- Optimize the capital structure of our subsidiaries: With a structure of separate subsidiaries, we can allocate capital more effectively by designing optimal capital structures for our subsidiaries, thereby reducing their cost of capital and investment and further expanding their growth.

- Adapt the business to current economic conditions: Since January 1, 2002, economic, financial and business conditions have radically changed in Argentina. We are making our best efforts to finance the companies we control with their own respective cash flows and to minimize the need for any cash contributions. In addition, we have suspended the payment of any cash dividends in order to preserve an appropriate level of liquidity in order to fund our own expenses and existing projects.

BUSINESS OVERVIEW

BANCO GALICIA

Overview

In 2001 and 2002, the Bank operated in an economy that was experiencing significant economic difficulties including, among other things, several runs on the financial system's deposits and the deepening of a prolonged

recession. The Argentine economic and financial crisis was aggravated by significant political instability and in 2002 by a radical change in the regulatory framework for doing business in Argentina, both generally and for the financial system in particular. In addition, in 2002, the peso was devalued approximately 70.0%, the financial condition of the public and the private sectors (including businesses as well as individuals) deteriorated and inflation rose.

In 2003, the Bank's financial condition improved along with the overall economic situation in Argentina, and the macroeconomic environment stabilized. In addition, new government regulations were implemented, principally to deal with some of the impacts of the crisis on financial institutions, as more fully described in this annual report. Nevertheless, the improvements in the overall economic environment were not sufficient for large financial institutions such as the Bank to overcome all of the effects of the crisis on their financial condition. As a result, the Bank suffered a Ps. 199.0 million net loss in 2003, which was nonetheless substantially lower than the Ps. 1,184.9 million net loss for 2002. As of December 31, 2003, the Bank's shareholders' equity was Ps. 1,352.8 million, its consolidated assets amounted to Ps. 22,707.8 million, its consolidated net loans were Ps. 10,934.8 million and its consolidated deposits amounted to Ps. 5,595.1 million.

In May 2002, the Bank implemented the Galicia Capitalization and Liquidity Plan, which the Bank designed to address the liquidity shortage caused by the deposit run, the unavailability of other sources of funds and other negative impacts of the Argentine crisis on it. To date, the Bank has successfully implemented the measures contemplated by the Bank's capitalization and liquidity plan as described under " -- Galicia Capitalization and Liquidity Plan."

Following the implementation of its capitalization and liquidity plan, the Bank has seen its deposits in Argentina increase. Based on daily information published by the Argentine Central Bank, as of December 31, 2003, the Bank's estimated deposit market share of "voluntary" deposits in Argentina (i.e., deposits in current and savings accounts and voluntary time deposits) was 4.75% compared to 4.34% as of December 31, 2002.

The Bank is principally engaged in commercial banking and provides a wide variety of banking products and services to large corporations, medium- and small-sized companies and individuals. Depending on the type of customer, these services include personal and corporate loans, deposit-taking, credit and debit cards, residential mortgage loans, fiduciary and custodial services and electronic banking. The Bank is also involved in other finance-related businesses, such as investment banking, insurance distribution and asset management. During 2003, the Bank's lending activity was limited, but currently the Bank is increasingly originating new loans to individuals as well as to the commercial sector.

The Bank provides services through one of the most extensive and diversified distribution platforms of all private-sector banks in Argentina, with 226 full-service branches, 555 automated teller machines ("ATMs") and 524 self-service terminals as of December 31, 2003, along with other electronic banking facilities such as phone banking and e-banking. As of December 31, 2003, our branch network covered all of the Argentine provinces, except for Tierra del Fuego, and all the main cities of Argentina.

Banco Galicia's Strategy

In light of the effects that the 2001 - 2002 Argentine crisis had had on its financial condition and given that the crisis significantly impaired the financial system's ability to act as an intermediary between the public's savings and the supply of credit, the Bank directed its efforts in 2002 toward:

- implementing its capitalization and liquidity plan in order to restore the Bank's liquidity and solvency (explained in more detail below);

- dealing with its portfolio of nonperforming loans, which had increased significantly as a result of the crisis, including ensuring adequate provisions for loan losses;

- focusing more than in the past on the generation of fee income from a variety of transactional financial services;

- improving the efficiency of its operations through cost reductions;

- regaining deposit market share; and

- maintaining a high liquidity ratio after the immediate increase achieved through the capitalization and liquidity plan.

Facing a better overall Argentine economic and business environment in 2003, in order to generate revenue, the Bank:

- continued to concentrate on the provision of transactional financial services, supported by a more aggressive marketing strategy;

- resumed certain credit activities of a short-term nature, mainly through advances on current accounts, credit-card financing and the purchase of checks;

- concentrated on advancing the restructuring of its commercial loan portfolio;

- remained committed to strict cost controls;

- continued to increase its deposit market share; and

- maintained a high liquidity ratio.

In 2003, with respect to its capitalization and liquidity plan, the Bank continued the process of restructuring its foreign debt, mainly by focusing on renegotiation of the foreign debt of its head office in Argentina and its Cayman branch. This renegotiation was successfully concluded on May 18, 2004, marking the last of the measures set out in the Bank's capitalization and liquidity plan. In addition, in 2003, the Bank focused on restructuring its debt with the Argentine Central Bank into a long-term liability. This restructuring was successfully concluded on February 3, 2004. As a result of these developments, the Bank increased its capitalization to a level that management believes will assure capital availability for an extended period. See " -- Restructuring of the Foreign Debt of the Bank's Head Office in Argentina and its Cayman Branch" and " -- Capitalization."

In the restructuring of its liabilities, the Bank sought to create a new debt profile consistent with the expected cash flow of its assets and to prevent servicing of the restructured debt from affecting the growth prospects of its business. Based on this objective as well as several competitive strengths that were unaffected by the crisis, the Bank's current strategy is to:

- reposition the Bank as the leading Argentine bank;

- exploit fully the strengths represented by the Bank's extensive distribution platform and significant market penetration;

- continue to increase its deposit market share in order to recover its historical market share of approximately 10% over the next few years;

- increase significantly its peso-denominated lending in order to increase its financial income and reduce its asset and liability mismatches;

- maintain and develop further the Bank's leadership in transactional and electronic banking products;

- rebuild relationships with corporates and consolidate leadership in the agribusiness and middle-market sectors;

- maintain cost efficiency and expense control; and

- maintain an adequate capital base.

On a consolidated basis, including its regional credit card companies, the Bank has a large base of approximately 2.3 million customers. The Bank's competitive capacity remains intact and is based on the following strengths:

- its significant share of the financial system's deposits;

- its ability to retain customers (neither the streamlining of the Bank's distribution network in 2002 nor the deposit runs experienced during the crisis resulted in a significant loss of customers);

- its extensive and diversified distribution platforms within the Argentine financial system;

- its leading position as a provider of transactional and electronic banking services, which are, and are expected to continue to be over the medium term, the core of financial activity in the Argentine financial system

- its wide product offerings, which are constantly adapted to the new economic environment and which include technology-based services;

- its brand image;

- its asset and liability structure: the Bank has a lower level of currency mismatches and less exposure to amparo claims and judgments than most of its competitors;

- its considerable fee income, which provides the highest coverage of expenses and the lowest breakeven spread among its competition; and

- its level of capitalization (after completion of its foreign debt restructuring, the Bank is one of the most highly capitalized banks in the Argentine financial system).

Galicia Capitalization and Liquidity Plan

On March 21, 2002, the Bank submitted a capitalization and liquidity plan to the Argentine Central Bank in order to restore its liquidity and solvency, which plan was supplemented on March 22, 2002, and April 11, 2002. The main objectives of the plan were (1) the immediate restoration of the Bank's liquidity through raising cash in amounts sufficient to allow the Bank to reimburse a significant portion of its demand deposits without having to rely on financial assistance from the Argentine Central Bank; (2) an increase in the Bank's capitalization in the context of the restructuring of its foreign debt;
(3) the orderly winding down of the Bank's operating units abroad; and (4) streamlining of the Bank's operations and a reduction in its administrative expenses in order to adapt to levels of financial activity significantly lower than those experienced in the precrisis period. The board of directors of the Argentine Central Bank approved the plan on May 3, 2002.

As of the date of this annual report, the Bank had accomplished all of the steps laid out in its capitalization and liquidity plan.

After the initial increase in the Bank's liquidity in May 2002, immediately after the launch of the Galicia capitalization and liquidity plan, the Bank continued to rebuild its liquidity position without requiring further financial assistance from the Argentine Central Bank. The initial increase in the Bank's liquidity was achieved through the securitization or sale of mortgage and commercial loan portfolios in exchange for cash and through loans from Sedesa (the entity that manages Argentina's deposit insurance fund) and the Fiduciary Fund for the Assistance of Financial Institutions and Insurance Companies (FFAEFyS). As of December 31, 2003, the Bank's liquid assets, on an unconsolidated basis, considering only those of the Argentine operation, amounted to 60.37% of

its transactional deposits (deposits in current and savings accounts) and 26.73% of its total deposits. Liquid assets include cash, the balance of the Bank's current account at the Argentine Central Bank, the balance of special escrow accounts held by the Bank at the Argentine Central Bank in favor of clearinghouses, holdings of Lebac (short-term Argentine Central Bank notes) and short-term placements in correspondent banks.

As part of the capitalization and liquidity plan, the Bank streamlined its operational structure and reduced its administrative expenses in order to adapt to the new economic and regulatory context that resulted from the crisis in 2002. Its strict cost-control policy has continued. See Item 5. "Operating and Financial Review and Prospects--Item 5A. Operating Results--Results of Operations of Grupo Galicia for the Fiscal Years Ending December 31, 2003, December 31, 2002 and December 31, 2001."

In accordance with its capitalization and liquidity plan, the Bank restructured the liabilities of its New York branch, which then totaled US$327.8 million, in 2002. This step was necessary to ensure the orderly winding down of the affairs of the New York branch, which was closed on January 30, 2003. As of the date of this annual report, US$115.8 million in aggregate principal amount of two negotiable obligations issued by the Bank's head office in Argentina to restructure the New York Branch debt remain outstanding.

Similarly, during 2002, the Bank restructured deposits at Galicia Uruguay. See "--Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Ltd.--Galicia Uruguay."

In addition, in accordance with the capitalization and liquidity plan, the Bank's representative offices in Sao Paulo and London, as well as the Bank's securities business incorporated in the United Kingdom, Galicia y Buenos Aires Securities (UK) Ltd., were closed on September 30, 2002.

The sections below summarize the progress made by the Bank during 2003 and 2004 toward completing implementation of the capitalization and liquidity plan's measures, including restructuring the foreign debt of the Bank's head office in Argentina and its Cayman branch, the increase in the Bank's capitalization tied to the foreign debt restructuring and other developments regarding the Bank's subsidiary in Uruguay.

Restructuring of the Foreign Debt of the Bank's Head Office in Argentina and its Cayman Branch

Overview

On June 12, 2002, the Bank announced that it would not pay any principal or interest on its foreign debt effective as of May 1, 2002, and announced its intention to restructure all of the foreign debt of the Bank's head office in Argentina and its Cayman branch within the framework of the capitalization and liquidity plan. In this connection, the Bank hired an international investment bank as an adviser in the restructuring process, and negotiations to restructure the foreign debt began in June 2002. On November 25, 2003, the Bank announced that it had reached a nonbinding agreement in principle with the members of an ad hoc steering committee representing the Bank's principal bank and multilateral agency creditors regarding terms for the proposed restructuring. We refer to these bank and multilateral agency creditors as "bank creditors" below.

In December 2003, the Bank announced the restructuring terms to its bank creditors and bondholders. The Bank offered its bank creditors and bondholders instruments with substantially similar economic terms. The instruments delivered to the bondholders, however, were issued under an indenture, and the instruments issued to the bank creditors were issued under various loan facilities that contain additional covenants not included in the indenture.

On May 18, 2004, the Bank successfully closed the restructuring of US$1,320.9 million of the foreign debt of its head office in Argentina and its Cayman Branch. This amount represented 98.2% of the foreign debt eligible for restructuring.

Approval of the Bank's Foreign Debt Restructuring and Argentine Central Bank Debt Restructuring

In accordance with Argentine Central Bank Communique "A" 3940, in order for a bank to be eligible to restructure the financial assistance for liquidity support it received from the Argentine Central Bank into long-term debt under the terms established by Decree No. 739/03 and No. 1262/03, the Argentine Central Bank had to approve the terms and conditions of the bank's foreign debt restructuring proposal before December 5, 2003.

On November 28, 2003, the Financial System's Restructuring Unit (Unidad de Reestructuracion del Sistema Financiero), the regulatory body responsible for restructuring the Argentine financial system after the 2001-2002 crisis, informed the Bank that it had authorized the Argentine Central Bank to extend the maturity of the Bank's debt with the Argentine Central Bank for liquidity support by up to 120 monthly installments in accordance with the repayment schedule presented by the Bank to the Argentine Central Bank and in accordance with the provisions of Decree No. 1262/03. For a description of the restructuring of the financial assistance granted by the Argentine Central Bank to the Bank for liquidity support, see Item 5. "Operating and Financial Review and Prospects--Item 5A. Operating Results--Funding."

On December 3, 2003, the Argentine Central Bank informed the Bank that its board of directors had approved the terms and conditions of the proposed restructuring of the foreign debt of the Bank's head office and the Bank's Cayman branch.

On February 3, 2004, the Argentine Central Bank informed the Bank that it had approved the Bank's request to adhere to the regime (established by Decree No. 739/03 and modified by Decree No. 1262/03) for the repayment of the debt for liquidity support owed to the Argentine Central Bank, as well as the amortization schedule for that debt proposed by the Bank. The schedule was based on the minimum amortization set up by the applicable rules and on the proceeds of the assets eligible as collateral for such debt pursuant to these rules. Therefore, the schedule contemplates repayment of the restructured debt in 92 monthly installments beginning in March 2004.

By Resolution No. 152/04, dated May 14, 2004, the Argentine Central Bank approved the economic terms of the restructuring of the foreign debt of the Bank's head office in Argentina and its Cayman branch.

Terms of the Foreign Debt Restructuring

In the Bank's foreign debt restructuring, the Bank offered its bondholders and bank creditors the ability to exchange their existing debt for units comprised of a new long-term debt instrument maturing in 2014 and a new subordinated debt instrument maturing in 2019 in a par-for-par first step exchange offer. The bondholders and bank creditors were then given the option to participate in a second step to the exchange, in which they could receive for their units:

- cash (at a discount) (the "cash offer");

- BODEN 2012 (at a discount) (the "BODEN offer");

- new long-term debt instruments (at par); or

- new medium-term debt instruments (at par) and up to 149 million preferred shares of our preferred shares (or, instead of such shares, cash, if any, paid to us by existing shareholders electing to subscribe for our preferred shares in a preemptive rights offering) (the "equity participation option").

In addition, creditors that agreed to sign firm commitments to the Bank for new trade facilities in an aggregate principal amount up to US$35 million were permitted to elect to receive new medium-term debt instruments maturing in 2010 (at par) (the "new money option").

Each of the optional second-step offers was subject to proration.

By offering the units, which contained a subordinated component, in the par-for-par first step exchange offer, the Bank's main objective was to generate complementary regulatory capital for an extended period. The second step was intended to satisfy creditors' varying investment preferences.

To make the Bank's foreign debt restructuring possible:

- We approved a capital increase through the issuance of up to 149 million preferred shares, each of them mandatorily convertible into one of our class B shares on May 13, 2005, the first anniversary date of issuance (or, if earlier, on the occurrence of a change of control of Grupo Galicia). As a result of the exercises made by the existing shareholders in our preemptive rights offering, creditors opting for the equity participation offer received 87.8 million preferred shares and US$30 million in cash and we received approximately US$100 million of subordinated bonds in exchange for those shares and cash. We issued the 149 million preferred shares on May 13, 2004.

- Our controlling shareholders assigned part of their preemptive and accretion rights to a trust established for the benefit of the Bank's creditors.

- We entered into a registration rights agreement for the benefit of the holders of our preferred shares in the United States in which we agreed to (1) file a shelf registration statement with the U.S. Securities and Exchange Commission covering the resale of those restricted preferred shares within 270 days of the expiration date of the exchange offer;
(2) use our reasonable best efforts to cause the shelf registration statement to become effective within 360 days of the offer's expiration date; and (3) use our reasonable best efforts to keep the shelf registration statement effective from on or before June 1, 2005, until the date on which all of the restricted preferred shares have been sold under the shelf registration statement or September 1, 2005, whichever comes first.

- We entered into an agreement with the Bank's bank creditors in which we agreed to maintain certain corporate governance standards and to provide them with certain financial information and reports on a quarterly and annual basis.

In addition, in accordance with the terms of the Bank's foreign debt restructuring, the Bank made a US$15.5 million cash payment for interest accrued until April 30, 2002, and applied US$42.4 million not used in the cash offer to prepay at par (plus capitalized interest) long-term instruments to be delivered to creditors participating in the restructuring.

Based on the final amounts validly tendered, on May 18, 2004, the Bank:

- paid US$13.6 million to creditors participating in the cash offer;

- transferred US$36.9 million of nominal value of BODEN 2012 to creditors participating in the BODEN offer; and

- issued the following new debt instruments:

- US$648.5 million of long-term dollar-denominated debt instruments, of which US$464.8 million were dollar-denominated negotiable obligations due 2014 issued under the indenture.

- US$399.8 million of medium-term dollar-denominated debt instruments, of which US$352.8 million were dollar-denominated negotiable obligations due 2010 issued under the indenture.

- US$230.0 million of subordinated dollar-denominated debt instruments, of which US$218.2 million were dollar-denominated negotiable obligations due 2019 issued under the indenture.

The Bank also restructured trade debt for a principal amount of US$25.3 million in exchange for US$26.6 million of new trade debt to be repaid in 12 equal, consecutive monthly installments beginning in June 2004.

In addition, the Bank entered into a new trade facility agreement for US$35 million with creditors participating in the new money option.

The following table shows certain information on the Bank's debt restructuring:

PRINCIPAL AMOUNT OF:                                                                      IN MILLIONS
a) Old debt to be restructured as of December 31, 2003.............................    U.S.$ 1,349.6

b) Old debt to be restructured as of April 27, 2004 (1)............................          1,344.7 (2)

c) Old debt participating in the restructuring as of April 27, 2004 (1)............          1,320.9

d) New debt, including past due interest capitalized (3) (4).......................          1,399.6

e) New debt issued (4) (5).........................................................          1,278.3

f) Old debt not restructured as of May 18, 2004 (6)................................             22.9 (7)

(1) Expiration date of the exchange offer.

(2) The decrease in the principal amount of debt to be restructured as compared to December 31, 2003, resulted from the fact that, in accordance with Argentine law, borrowers that were also holders of certain of the Bank's debt instruments under restructuring used such holdings to repay past-due loans granted to them by the Bank.

(3) Interest past due between May 1, 2002, and December 31, 2003, was capitalized at 4.75% per annum, except for trade debt for a principal amount of US$25.3 million for which interest was capitalized at Libor plus 1%. Interest past due until April 30, 2002, was paid in cash.

(4) Excludes trade debt.

(5) After having applied US$42.4 million not used in the cash offer to prepay long-term debt instruments included in (d).

(6) Settlement date of the exchange offer.

(7) Between the expiration date and the settlement date, the amount of debt not restructured decreased by US$0.9 million as a result of the repayment by borrowers that were also holders of debt subject to restructuring of past-due loans made to them by the Bank by using their holdings of such debt and, to a lesser extent, as a result of the renegotiation of debt not restructured under the terms of the restructuring.

Capitalization

The Bank's capitalization and liquidity plan considered the Bank's capitalization as an integral part of the restructuring of its foreign debt. Accordingly, as part of that plan, the Bank proposed to the Argentine Central Bank a capitalization increase of up to US$300 million.

The Bank's shareholders' meeting held on September 30, 2003, approved the establishment of a global debt program under Argentine law for the issuance of the Bank's new debt, in order to consummate the Bank's foreign debt restructuring through the public offering of securities issued pursuant to such program, which securities were not to be convertible into shares of the Bank. In addition, the Bank's shareholders resolved that securities issued under the global debt program could be subordinated in order to be computed as capital solely for Argentine Central Bank regulatory purposes and not as capital stock.

As a result of the restructuring of the foreign debt of the Bank's head office in Argentina and its Cayman branch, the Bank increased its capitalization by US$278.9 million. Specifically, this capital increase resulted from:

- the exchange of debt subject to restructuring for cash and BODEN 2012 at a discount and the capitalization of interest at a rate lower than the contractual rate recorded in the Bank's books, which generated in aggregate a US$48.9 million increase in shareholders' equity; and

- the issuance of US$230.0 million of subordinated debt computable as supplemental capital in accordance with the Argentine Central Bank's capital adequacy rules.

As a result of the earlier restructuring of the debt of the Bank's New York branch in 2002, the Bank had increased its capitalization by US$42.6 million by exchanging the old debt for new debt or cash at a discount.

Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Ltd.

Galicia Uruguay

As of December 31, 2003, Galicia Uruguay was intervened and its activities were suspended. The Central Bank of Uruguay had imposed this status in early 2002 as a result of the effects of the Argentine crisis on Galicia Uruguay, but postponed its effect until May 31, 2004. As discussed below, the Central Bank of Uruguay has again postponed Galicia Uruguay's intervention and suspension of activities until the measures agreed upon between Galicia Uruguay and the Uruguayan and Argentine regulatory authorities mentioned below in the last paragraph of this section are implemented.

As a result of the intervention of Galicia Uruguay by the Central Bank of Uruguay, during 2002 and in early 2003, audited financial statements prepared in accordance with Argentine Banking GAAP were not available for Galicia Uruguay. As disclosed in the Bank's financial statements for the fiscal year ended December 31, 2002, prepared in accordance with Argentine Banking GAAP, the Bank decided to fully provision its investment in Galicia Uruguay and its subsidiary Banco de Galicia (Cayman) Ltd. for the amounts recorded in its books as of December 31, 2001. Likewise, the Bank deemed it appropriate to discontinue line-by-line consolidation of both subsidiaries' financial statements with those of the Bank for as long as these circumstances continue. However, the Bank established a reserve, under the liability account "Provisions--Other Contingencies" on its unconsolidated balance sheet to cover the estimated negative consolidated shareholders' equity of the two subsidiaries.

Subsequent to the preparation, in accordance with Argentine Banking GAAP, of our consolidated financial statements for the fiscal year ended December 31, 2002, we received additional information related to the consolidated financial information of Galicia Uruguay. Therefore, the December 31, 2002, audited consolidated financial statements included in this annual report include line-by-line consolidation of the consolidated financial statements of Galicia Uruguay. Beginning September 30, 2003, the Bank's access to financial information for Galicia Uruguay and its subsidiaries was regularized. The Bank has therefore resumed line-by-line consolidation of the consolidated financial statements of Galicia Uruguay.

As of December 31, 2003, Galicia Uruguay's shareholders' equity was US$(244.8) million.

On December 23, 2002, Galicia Uruguay restructured its deposits with a high degree of participation by its depositors (participation exceeded the legal majority required under Uruguayan law). The restructuring became binding on all creditors once approved by a court in Montevideo on that date. The restructuring provided for an initial cash payment in dollars equivalent to 3% of the credit balance of each creditor. The remaining balances were to be paid, at the particular creditor's election, in time deposits or negotiable obligations issued by Galicia Uruguay, both maturing in September 2011, with principal amortization in nine annual installments in September of each year (each of the first two installments representing 15% of the remaining balance, with each of the other seven installments 10% of the balance) at a 2% fixed annual interest rate, payable annually each September. On June 20, 2002, the Bank offered a pledge of Galicia Uruguay's commercial loan portfolio as guarantee of payment of the restructured deposits.

On January 9, 2003, Galicia Uruguay made payment of the first installment under the extrajudicial agreement.

On June 17, 2003, Galicia Uruguay opened a period in which it received expressions of interest from customers for different options to exchange deposits restructured in 2002 (as time deposits or negotiable obligations) for different proportions of BODEN 2012 and/or new negotiable obligations to be issued by Galicia Uruguay and cash. The objective of this exchange was to reprofile on a voluntary basis the already restructured deposit base, both to satisfy differing depositors' liquidity-return preferences and to improve the distribution of cash flows over time. This voluntary exchange period ended on July 24, 2003. Galicia Uruguay received expressions of interest from customers for an aggregate amount of US$185 million, which reflected customers' choice to receive BODEN 2012

in an aggregate amount of US$137 million, together with new negotiable obligations to be issued by Galicia Uruguay in an aggregate amount of US$44 million.

On August 14, 2003, the Argentine Central Bank approved the terms and conditions for the restructuring of the Bank's US$399.5 million debt with Galicia Uruguay through its Cayman branch as well as the transfer to Galicia Uruguay through the Cayman branch of cash for US$72.1 million and BODEN 2012 for a nominal amount of US$137 million, corresponding to the first principal amortization of the Bank's debt with Galicia Uruguay and to interest due as of August 15, 2003, on such debt. This debt corresponds to deposits made by Galicia Uruguay in the Cayman branch and later placed with the Bank by means of credit lines. The Argentine Central Bank must preapprove future payments of principal and interest. As of December 31, 2003, this debt amounted to US$221.6 million.

In September 2003, as scheduled, Galicia Uruguay paid the second installment due under the original restructuring schedule (as modified by the results of the exchange offer) and settled the exchange offer.

On December 9, 2003, Galicia Uruguay commenced a period in which it solicited expressions of interest from its customers to participate in a second voluntary exchange of all restructured deposits and negotiable obligations or certificates issued by Galicia Uruguay or its subsidiary Banco de Galicia (Cayman) Ltd. (in provisional liquidation) to restructure deposits. The consideration offered consisted of a cash payment for 17.5% of the principal amount owed (equivalent to paying in advance the installment due in September 2004) and BODEN 2012 for the remaining balance. The exchange was limited to an aggregate amount of US$300 million. On March 15, 2004, the exchange offer was settled for an aggregate amount of US$206 million.

As of December 31, 2003, compensation to the Bank for the effects of asymmetric pesification on a consolidated basis (but excluding domestic subsidiaries with complementary activity) was determined to be US$2.2 billion of BODEN 2012 (nominal value). This amount, which as of the date of this annual report is under review by the Argentine Central Bank, has been recorded in the books of the Bank's head office in Argentina and includes compensation for Galicia Uruguay's pesified loans.

On June 1, 2004, the Bank announced the decision by the Central Bank of Uruguay and Argentine regulatory authorities to authorize the creation of a trust to hold assets of Galicia Uruguay, the proceeds of which will be used for the repayment of Galicia Uruguay's obligations under the restructuring agreement reached with its depositors in 2002. The creation of the trust does not alter the rights of Galicia Uruguay's depositors in connection with the 2002 agreement or in connection with subsequent exchanges of restructured deposits. The Central Bank of Uruguay also resolved that, concurrently with the implementation of the trust, Galicia Uruguay's intervention will be lifted and Galicia Uruguay's board of directors will be restored. Given that the license to operate as a domestic commercial bank, which is granted by the Central Bank of Uruguay, is not necessary to such effects, such license will be revoked. However, Galicia Uruguay will retain the authorization that had been granted to it by the Executive Branch of the Uruguayan government.

Banco de Galicia (Cayman) Ltd.

Galicia Uruguay's situation affected its subsidiary Galicia Cayman. As a consequence, on July 18, 2002, at the request of Galicia Cayman, the Cayman Islands courts designated two joint provisional liquidators in order to allow a voluntary debt restructuring agreement to be reached between Galicia Cayman and its creditors. By late May 2003, Galicia Cayman together with the provisional liquidators, completed a debt restructuring proposal and, with the authorization of the Cayman Islands court, presented it to all Galicia Cayman creditors for their consideration.

On May 29, 2003, the restructuring proposal made to creditors was submitted before the Cayman Islands court. Galicia Cayman proposed to pay to its class A creditors an initial cash payment equivalent to 5% of the amount owed for principal and interest accrued through July 18, 2002, plus a transferable certificate equivalent to 95% of the amount owed for principal and interest accrued through July 18, 2002. The terms of the certificate are the following:
(1) principal amortization in nine annual installments (the first two for 15% of principal and the remaining for 10%), payable each September; (2) a 2% annual interest rate (plus 1% if after the payment of all creditors pursuant to the proposal and repayment of the subordinated loan, as described below, any assets remain);

(3) the certificate will bear interest beginning the effective date of the agreement; and (4) interest will be payable annually, together with principal, and calculated on the remaining debt balance. Once all class A creditors are paid, the remainder of the assets of Galicia Cayman will be applied to the payment of the claim of its class B creditor, Galicia Pension Fund Ltd. (a subsidiary of Galicia Cayman) for US$2.9 million, which has been subordinated to the payment of all class A creditors. In addition, Grupo Galicia made a US$1.2 million subordinated loan in favor of Galicia Cayman, which will accrue interest at an annual rate of 2% and will be repaid once all creditors of Galicia Cayman have been paid in accordance with the restructuring.

By a vote of creditors representing in number and debt held, 99.7% of the votes issued, Galicia Cayman's restructuring proposal was approved in whole on July 10, 2003. The degree of acceptance exceeded the legal majority required. With the approval of the restructuring proposal by the Cayman Islands court and its filing with the Cayman Islands Corporate Record, both on July 16, 2003, the restructuring plan became effective and mandatory on that same date for all creditors. The initial cash payment was made on August 8, 2003.

In accordance with the restructuring plan, Galicia Cayman commenced voluntary liquidation and surrendered its banking license effective December 31, 2002.

Banco Galicia's Operations

Retail Banking

The retail banking division oversees all of the areas that provide financial services to individuals and manages distribution channels. Banco Galicia provides a wide range of financial products and services to individuals, covering both transactions and investments. On the transactions side, Banco Galicia offers customers checking and savings accounts, credit and debit cards, foreign exchange brokerage and payroll direct deposit. On the investments side, its products and services include certificates of deposit, mutual funds and insurance products. In addition, Banco Galicia provides credit for the acquisition of consumer goods and housing through personal loans, residential mortgages, pledge and credit card loans. During 2002 and 2003, credit provision was not significant.

Consumer Banking

Deposits and Accounts - During fiscal year 2003, the Bank's efforts were aimed at strengthening relations with its customers having investment products based on individualized professional advice. In this way, the Bank succeeded in increasing the portfolio of retail-sector deposits by 86% during the fiscal year, outperforming the overall development of the financial system, which grew 53%. With respect to retail time deposits, 105% growth was recorded, which was also higher than the 67% growth experienced by the system as a whole. In April 2003, the Argentine government offered a voluntary mechanism to reimburse restructured deposits (known as CEDROS, for the initials in Spanish of "Certificates of Restructured Deposits"). Adherence to this mechanism reached 40% of the Bank's CEDROS, and there was a high level of reinvestment of released funds.

Beginning in June 2003, the number of current accounts reversed the decreasing trend present in the early part of 2003, ending the fiscal year with a reduction of only 1.9% compared to December 2002. The number of account closings dropped 60%, while sales progressively recovered. New account openings grew 188%, which was influenced by promotional campaigns of product packages carried out in April and May that targeted the Bank's customers who did not have current accounts. The number of savings accounts decreased 14%, in part due to the closing of accounts with no activity. However, monthly balances deposited in these accounts grew 80%, while average balance per account increased 100% over the period.

Loans - In 2003, the credit market showed slightly increasing demand while the supply of credit started to recover. Consistent with this trend, the Bank has launched new credit lines aimed at meeting the needs of its existing customer base and also resumed prequalifying customers for personal loans.

The Bank's portfolio of loans to individuals (excluding the regional credit-card companies' portfolio) only decreased 2% in 2003, compared to the sharp reduction in 2002. This was the result of lower prepayments made by customers, the reactivation of credit supply and the launching of new credit lines.

Credit and Debit Cards - During 2003, the Bank maintained its leadership in the credit card business. At the end of the fiscal year, the Bank was ranked first in credit card use in the Visa system, with a market share of 15.8%. The Bank has a 10.8% share of the total cards managed by financial institutions. The Bank's share in American Express amounted to 31.9% as measured by credit card use and 22.5% as measured by the number of cards managed. Purchases made with Visa cards during 2003 increased over 24% and those made with American Express cards grew 30% compared with the prior year. This increase was favored by plans for the repayment of purchases in installments, beginning mainly in the second half of the year. Other factors that acted as an incentive to channeling purchases through credit cards were the 3% VAT refund provided for by the government beginning in October 2003, as well as the Felices Compras ("happy shopping") campaign launched by the Bank at the end of the year, in which more than 39,500 customers were awarded a prize for purchases made with their credit and debit cards.

With respect to debit cards, the Bank's market share reached 12.4% at the end of the year, measured by debit card use and 15.6% measured by number of cards. In addition, the Bank has launched continuous consumption incentive plans for this portfolio, encouraging customers to replace cash with the use of debit cards even for small purchases. In addition to these plans, the government provided for a 5% VAT refund. As a result, debit card use increased 9% during 2003 compared with the prior year.

Foreign Exchange Brokerage - During 2003, the Bank continued to operate actively in the consumer segment of the foreign exchange market. Beginning in June 2003, the Bank introduced, as part of its services, foreign exchange transactions in euros in its branches located in the Federal Capital, the Buenos Aires metropolitan area and the main cities of Argentina's provinces. Moreover, the Bank promoted this service among its customers by direct marketing and advertising campaigns aimed at noncustomers. The monthly average amount of transactions conducted at the Bank's branches increased 19% with respect to the volume in December 2002.

Regional Credit Card Companies - The Banks pursues the consumer finance business aimed at the lower-income segment of the population through subsidiaries of Tarjetas Regionales S.A., a holding company. These companies (the "regional credit cards companies") issue credit cards in certain regions of Argentina and provide financing through these credit cards as well as personal loans.

As of December 31, 2003, Banco Galicia held 68.22% of Tarjetas Regionales while Galicia Cayman holds the remaining 31.78%. At the same date, the Bank held directly or indirectly (through Tarjetas Regionales) majority interests in the following regional credit card and consumer finance companies:

- 80.0% in Tarjeta Naranja S.A., a company operating in central and southern Argentina. In March 2001, Tarjetas del Sur S.A., a regional credit card company that operated in the southern part of Argentina that was directly and indirectly controlled by the Bank, was merged into Tarjeta Naranja.

- 60.0% in Tarjetas Cuyanas S.A., a company operating in the provinces of the Cuyo region.

- 60.0% in Tarjeta Comfiar S.A., a company operating mostly in the province of Santa Fe. Tarjeta Naranja acquired a 40.0% equity interest in Tarjeta Comfiar in July 2000. As a result, as of December 31, 2003, Tarjetas Regionales controlled, directly or indirectly, 92.0% of Tarjeta Comfiar.

- 99.99% in Tarjetas del Mar S.A., a company operating in the city of Mar del Plata and the surrounding area.

Along with the purchase of 40% of the shares of Tarjeta Comfiar, Tarjeta Naranja took over management of this company.

The performance of the regional credit card companies showed a significant improvement in 2003 as a result of the overall improvement experienced by the Argentine economy, low competition and higher operating efficiency.

Greater activity levels led to an increase in the number of credit card statements issued, and these companies experienced a strong increase in their customer base, in credit card purchases and in the financing of these purchases. All of this contributed to 71% growth in the operating companies' income. In terms of expenses, the restrictive staffing and general cost-control policies initiated in mid-2001 were maintained, and projects on operating concentration were resumed. Moreover, debtor delinquency decreased throughout the fiscal year. At year-end, the nonaccrual portfolio represented 3.9% of the total portfolio, the lowest level reached in the history of these companies. The reduction in the exchange rate during 2003 had a favorable effect on these companies' results in view of their short foreign-currency position. In aggregate, in 2003, the regional credit card companies showed net income of Ps. 88.5 million, of which Ps. 59.2 million pertained to the Bank.

With respect to their obligations denominated in foreign currency and obtained through the issuance of dollar-denominated negotiable obligations prior to the 2001-2002 crisis, in early 2002, these companies offered their creditors the payment in accordance with the pesification provisions established by the government (i.e., pesification at the Ps. 1.0 per US$1.00 exchange rate with principal adjustment by the CER index) or, alternatively, their restructuring by means of agreements for the settlement of the negotiable obligations and the subscription by its holders of new debt certificates secured by a trust. Tarjeta Naranja, Tarjetas Cuyanas and Tarjetas del Mar invited holders of their negotiable obligations to exchange those obligations for debt certificates issued under a trust, assigning a percentage of their cash flows to secure the payment of their obligations through this trust. By means of these payment alternatives, at the close of fiscal year 2003, 98.5% of the original negotiable obligations issued had been settled.

As of December 31, 2003, Tarjeta Comfiar and Tarjetas del Mar recorded negative shareholders' equity and their accumulated losses exceeded 50% of their capital stock and of the shareholders' irrevocable contributions. Tarjetas Regionales was in the same condition. Decree No. 1293/03, published on December 23, 2003, in the Official Gazette, extended to December 10, 2004, the suspension of the applicability of the sections of the Argentine Companies Law that require that a company be liquidated due to the loss of its capital stock and that a mandatory capital reduction be made when losses exceed the company's reserves and 50% of the capital stock.

On September 15, 2003, the boards of directors of Tarjeta Comfiar and Tarjeta Naranja approved a preliminary agreement for the merger of these companies, whereby Tarjeta Naranja would absorb Tarjeta Comfiar with management of the two companies to be unified as of January 1, 2004. This preliminary agreement was approved by both Tarjeta Comfiar's and Tarjeta Naranja's extraordinary shareholders' meetings held on October 2, 2003. The final agreement was approved November 14, 2003.

After the close of fiscal year 2003, the debt of Tarjeta Naranja, Tarjeta Comfiar and Tarjetas del Mar with the Bank and its Cayman branch for an aggregate amount of Ps. 255 million was restructured. The principal terms of the plan for this restructuring were as follows:

- Debt of Tarjeta Naranja and Tarjeta Comfiar (which has been merged into Tarjeta Naranja): The Bank and Tarjeta Naranja's minority shareholders made irrevocable contributions for future share issues for a total amount of Ps. 25 million. The debt remaining (in the amount of Ps. 167 million) was restructured through the creation of a trust that issued, for an equal amount, peso-denominated notes secured by a fiduciary guarantee with a 6 1/2-year maturity and a floating interest rate. The fiduciary guarantee consists of the higher of 2% of Tarjeta Naranja's monthly cash flow and 1.28205% of the trust notes' face value plus interest. Trust notes amounting to Ps. 100 million were transferred to the Bank in exchange for Tarjeta Naranja's and Tarjeta Comfiar's past-due and unpaid loans. Debt owed by Tarjeta Comfiar to the Bank's Cayman branch, amounting to US$22.4 million plus interest, was canceled: the Bank granted Tarjeta Naranja a Ps. 67 million peso-denominated loan, which was canceled through the delivery of trust notes for a total amount of Ps. 67 million.

- Debt of Tarjetas del Mar: Tarjetas del Mar restructured its debt with the Bank and its Cayman branch through a Ps. 51 million irrevocable contribution for future share issuances and restructured its remaining Ps. 12 million debt with the Bank with a four-year loan with principal amortization of 5%, 10%, 15% and 70% per year, payable in quarterly equal installments each year, at an interest rate equal to the Tasa Encuesta Corregida (an interest rate published daily by the Argentine Central Bank) plus 2%. As part of this agreement, Tarjeta Naranja, together with Tarjetas del Mar, assumed this new debt.

In this way, on January 30, 2004, these companies' debt with the Bank and its Cayman branch was regularized, and Tarjeta Comfiar S.A. was absorbed by Tarjeta Naranja S.A. on January 1, 2004.

Insurance - In 1996, Banco Galicia established a joint venture with Hartford Life International, creating Galicia Vida Compania de Seguros S.A. to sell life insurance and annuities. The Bank's interest in Galicia Vida was 12.5%. Toward the end of 1996, Galicia Vida began to market products specifically designed for distribution through the Banco Galicia network. In December 2000, the Bank sold its interest in Galicia Vida Compania de Seguros S.A. and purchased 12.5% of Sudamericana Holding S.A., a life and retirement insurance holding company. The other shareholders of Sudamericana Holding were Hartford Life International Corp. (U.S.) and Hartford Life Limited (Bermuda) (with a 50% stake) and Grupo Galicia (with the remaining 37.5%). In September 2001, we acquired the Hartford Life International Corp. (U.S.) and Hartford Life Limited (Bermuda) stakes, raising our interest to 87.5%, while Banco Galicia continued to hold the remaining 12.5%.

The Bank markets Sudamericana's life and life-related insurance products through its own distribution network. Sudamericana's subsidiaries also sell their products through the company's own distribution capabilities. The Bank also sells through its distribution network property and casualty insurance from other companies.

During 2003, the Bank continued consolidating its position as an insurance provider with a wide offering of products and greater functional integration with insurance companies and achieved improvements in efficiency ratios as well as in business volume. Income derived from the bank assurance business amounted in 2003 to Ps. 22.0 million. Insurance policies not related to credit operations grew 46% in comparison to the previous year, while credit-related policies showed a 33% reduction. This decline was the result of prepayments and the slow increase in the Bank's loan portfolio. Promotional actions taken during the period resulted in a 30% increase in the number of policies managed by the Bank, with an increase from 16% to 22% in the share of insurance products in the Bank's customer database. At the close of fiscal year 2003, the Bank managed approximately 300,000 insurance policies, 30% higher than at the end of 2002.

Within the Bank, the branch network continues to lead in sales of insurance products. However, nontraditional channels have shown significant sales growth.

Traditional distribution channels - Due to its extensive and broad geographic distribution, the branch network is one of the Bank's most important competitive advantages. This is reinforced by a unified management system through the use of the Bank's Intranet, modern systems and communication technology and a service model that is continuously being improved.

Fiscal year 2003 was characterized by the branch network's strong focus on sales activities.

At the end of 2003, the Bank's branch network in Argentina totaled 226 branches, one branch less than in December 2002. These branches are located in all of the Argentine provinces except Tierra del Fuego.

Automated Banking - The alternative channels department is responsible for managing those customer service, transactions and sales channels that differ from traditional branches. Its operations cover both individual and corporate customers and are mainly carried out through the Customer Contact Center, e-galicia.com and "Red Galicia 24" (the Bank's network of automated teller machines and self-service terminals).

As in prior fiscal years, the trend of increasing use of alternative channels among the Bank's customers continued. In December 2003, 68.4% of all customer transactions were carried out through the Bank's alternative channels, showing a 10% improvement with respect to same month over the prior year.

The Customer Contact Center currently has 260 staff positions and consists of the following departments: Fonobanco, Fonobanco Seguros, Foreign Trade, Galicia Responde, Telemarketing, the Investment Center, the Collection Center and the switchboard. These units also have support areas for ongoing improvement in service quality. During the fiscal year, the Customer Contact Center handled over 14 million incoming and outgoing calls. This volume was similar to that recorded during previous fiscal year.

e-galicia.com has operating segments for both individuals ("Home Banking") and companies ("Galicia Office"), enabling its customers to operate as if they were carrying out their transactions over the telephone, at an automated teller machine or in a traditional branch. Furthermore, through e-galicia.com, visitors have access to information about the products and benefits offered by the Bank, as well as specific sections that advise users on issues of interest to them: foreign trade, insurance, taxes, up-to-the-minute news on the financial market and several current topics. Through Home Banking, Banco Galicia's individual customers can make inquiries and requests and conduct transactions from any computer with access to the Internet.

e-galicia.com has shown exponential growth since it was launched. Today, the website receives almost 1.2 million visits monthly. Through Home Banking, 1.8 million inquiries and transactions are carried out every month. These numbers represent a 20% growth compared to the end of 2002. The number of Home Banking customers continued to grow in 2003, with an 8% increase compared to December 2002. Among the large variety of available transactions, the payment of taxes and accounts through direct connection to the website Pagomiscuentas.com increased 51% for fiscal year 2003, while the transfer of funds to third-party accounts increased 32%. Likewise, the monetary volume managed through Home Banking grew 66%.

At the end of 2003, Red Galicia 24 was made up of 1,079 state-of-the-art technology terminals located throughout the country in traditional branches as well as in neutral positions (gas stations and supermarkets), in line with the Bank's strategy to be close to its customers and provide them with the means to solve their transactional requirements in a dynamic, simple and safe way.

Network of Automated Banking Terminals

During 2003, more than 30 million transactions were carried out in the Bank's 555 ATMs, one of the largest networks in Argentina, while 9 million transactions were conducted at the Bank's 524 self-service terminals. These figures show a 7% decrease in comparison with the number of transactions conducted during 2002, which is in line with the change seen by the rest of the financial system for these types of transactions.

Private Banking

This business unit provides private-banking and advisory services to medium- and high-net worth individuals and manages collective investment portfolios. During 2003, it focused its effort on strengthening customer relations and on recovering those customers who had stopped having contact with the Bank. As a consequence, deposits managed by this sector increased 162% and the number of managed portfolios grew 31% during the year. Relations with the Bank's customers were encouraged by providing more sophisticated investment options, such as securities, stock options and participation in various restructuring processes of corporate debt instruments carried out during the year.

Wholesale Banking

The wholesale banking division encompasses the areas that provide commercial and investment banking services as well as international services. The wholesale banking division is also responsible for managing the Bank's commercial portfolio credit risk.

Corporate and Middle Market Banking

Corporate and middle market banking provides commercial banking services to all types of businesses and all sectors of the economy, organized by type of customer. In addition, in 2003, the Bank established a corporate restructuring department.

There was an increase in activity both in the financial system and in the economy as a whole in 2003, with the return of deposits and the resumption of banking business generally. In this new scenario, the Bank adapted its product and service offering to the needs of businesses and updated it both regarding technological and financial resources in order to make it competitive in the new financial market.

During 2003, the corporate and middle market banking departments mainly focused on rebuilding relationships with customers and generating income from services by means of the integral management of the treasury of corporate customers. Services were adapted to the new business scenario, covering the transactional needs of customers and providing them with financial solutions to increase their working capital and thereby improve their business activity. That was attained in the different segments in which the Bank offers services, thus strengthening the relationship-banking model applied by the Bank.

Presence in the small- and medium-sized companies ("PYMEs") sector, where the Bank has a leading position, was consolidated through different commercial actions. The "add Banco Galicia's benefits to your company" campaign positioned the Bank as the first bank that launched working-capital credit lines to the market. The Bank also was a leader in the "Sepyme" line bid (a credit line created to subsidize the interest rate for the purchase of highly liquid instruments within a government program to promote the growth of micro-, small- and medium-sized companies), offering a Ps. 25 million credit line at a 12% interest rate, which resulted in a 9% interest rate for customers.

Through the "Banco Galicia, always with the agriculture and livestock sector" campaign, as well as through participation in various agribusiness events, the Bank strengthened its leading presence in a key sector of the economy.

Within the corporate segment, a highly competitive product was developed: Cobranzas Integradas Galicia (Galicia Integrated Collections), which is aimed at meeting the needs of companies that have a substantial volume of invoices and allowing companies, among other things, to identify their customers. Furthermore, in view of the importance that transactions in dollars have started to have and with the purpose of reinforcing the Bank's service offering, special current accounts and collections and transfers in dollars were added to the product menu. Banco Galicia was the first bank to offer collection in dollars for customers' integral treasury management. In addition, the Bank continued adding improvements to its payment and collection systems, seeking to migrate the highest possible number of customers to this channel and to optimize such services. These improvements were mainly reflected in more and better information through electronic channels. Another outstanding event was the addition of Tradecom's advantages to the electronic services offering.

There was also a resumption of credit activities in 2003, initially through 90-day loans, mainly by means of the purchase of checks to date and deferred checks, which are highly liquid documents. In mid-2003, financial loans in pesos and prefinancing of exports in dollars were added, both with a 180-day term. With the improvement in the Bank's liquidity position, the terms for peso-denominated loans were extended to three years. As of December 31, 2003, the Bank's total loan portfolio to small- and medium-sized companies, including loans to the agriculture and livestock sector, amounted to Ps. 850.3 million, 4.5% lower than at the close of the previous fiscal year, while the loan portfolio to large corporations amounted to Ps. 1,820.4 million, showing a 14.6% decrease during the fiscal year.

Galicia Office

Galicia Office is e-galicia.com's exclusive section for corporations.

Through Galicia Office, companies may, at no cost, review the statements of all their bank products (such as accounts, loans, investments and receivables from Visa and Galicia Rural transactions). They may also access a range of information about their entire portfolio of checks and checks returned, request and confirm checkbooks, make transfers between their accounts and to those of third parties within or outside the Bank, make investments, inquire about their foreign trade transactions, pay their employees' salaries safely, renew their digital signature online and pay their suppliers.

Galicia Office expanded significantly during 2003, both in terms of number of customers and volume of transactions. During fiscal year 2003, new functionalities were added to the service, which contributed to higher-quality service and higher customer satisfaction levels. Likewise, marketing campaigns were conducted for customers who use the Bank's direct deposit system in order to migrate such customers to the "e-model," thus optimizing time and costs, as well as offering them a more dynamic and safe service. During 2003, the number of

customers increased 22% over the previous fiscal year. The level of transactions increased 256%, with more than 210,000 transactions conducted.

Investment Banking

Investment banking services include advisory and structured finance services for corporations, institutions and governments, both national and provincial. These services are provided by the Bank through its investment banking department, which oversees the activity of the Bank's subsidiary Galicia Capital Markets S.A. ("GCM"). In addition, the department manages the Bank's own industrial investments and private equity funds. GCM is a 99.99%-owned subsidiary of Banco Galicia. GCM recorded a Ps. 22.1 million loss for fiscal year 2003 and negative net worth of Ps. 6.2 million as of December 31, 2003.

Investment banking activities include advising the Bank with respect to its funding strategy in the capital markets; providing financial advisory and structured finance services to customers both from the private and public sectors, including mergers and acquisitions; and managing the Bank's investments in utility and infrastructure companies.

Regarding the advice provided to the Bank on its funding strategy, the department continued working under the guidelines of the Galicia capitalization and liquidity plan. Once the Bank recovered a satisfactory liquidity position in 2002, the investment banking department concentrated its efforts on restructuring the Bank's foreign debt. Furthermore, during fiscal year 2003, it advised Galicia Uruguay on the exchange offer made to the customers of this subsidiary. With respect to advising and structuring of financial transactions for customers both from the private and public sectors, during 2003, the department continued working within a complex macroeconomic environment characterized by the restriction, for both sectors, of access to mid- and long-term financing. Therefore, during 2003, the department focused on the development of products such as trusts, which are expected to have an increasing presence in the financial market during the current year, on providing advice concerning the restructuring of the Bank's commercial loan portfolio and, to a lesser extent, on mergers and acquisitions.

The portfolio of industrial investments acquired by the Bank as a result of its participation in the privatizations that took place during the 1990s amounted, after valuation reserves, to Ps. 68.8 million, the largest investments being an 8.26% interest in Aguas Argentinas S.A. with a Ps. 23.4 million net book value, and interests, both of 12.5%, in Inversora Nihuiles S.A. and Inversora Diamante S.A. (two holding companies in the electricity generation business) with a net book value of Ps. 15.7 million and Ps. 12.9 million, respectively.

In August 1997, the Argentine executive branch granted Correo Argentino S.A., a company in which the Bank had a 12.5% minority interest (which declined to 11.77% in 1999), the license to provide all postal, monetary and telegraph services previously provided by Empresa Nacional de Correos y Telegrafos S.A. (ENCOTESA), a public-sector company running the Argentine postal service. The term of the license was for 30 years, beginning on September 1, 1997. On September 18, 2001, Correo Argentino filed for bankruptcy protection (concurso preventivo) under the terms of Law No. 24,522. Among other reasons, the failure by Correo Argentino to pay the government for the use of the license, the filing for bankruptcy protection and the bankruptcy of Correo Argentino constituted events causing the termination of the right to operate the license that had been granted.

On November 19, 2003, the Bank was informed of the executive branch's decision to rescind the contract between the government and Correo Argentino. On December 16, 2003, an Argentine court declared Correo Argentino bankrupt. That decision was not final as of the date of this annual report because it has been appealed, and it did not have an impact on the Bank's shareholders' equity or results of operations during 2003, as both the investment in, and the credit exposure to, Correo Argentino had been fully provisioned since 2002. Likewise, the related estimated contingencies were also provisioned.

On March 25, 2004, a guaranty granted by the Bank in favor of the Argentine government in connection with Correo Argentino's compliance with the contract for Ps. 7.3 million was called. The related claim has been proved as a possible claim in the reorganization proceedings involving Correo Argentino. The claim is fully covered by an allowance. The Bank will pay this guaranty as provided in accordance with conditions to be established by the National Communications Commission, as applicable.

International

The Bank's international department provides services involving international financing, credit and services related to foreign trade and factoring activities. In addition, the division manages the Bank's foreign network and fund-raising from international commercial banks. This department also manages relations with correspondent banks and international credit agencies.

Accordingly, since 2002 this department's activities mainly concentrated on its participation in the implementation of the Galicia capitalization and liquidity plan, especially relating to the Bank's foreign debt restructuring process, which started with the restructuring of the New York branch's debt and Galicia Uruguay's deposits and the winding down of the Bank's operating units abroad in 2002, and continued in 2003 with the closing of the New York branch in January, the restructuring of Galicia Cayman's deposits in July and the negotiations to restructure the foreign debt of the Bank's head office in Argentina and its Cayman Branch during most of 2003. On December 23, 2003, the Bank launched the exchange offer to carry out that restructuring.

The restructuring of the foreign debt of the Bank's head office in Argentina and its Cayman branch was completed in May 2004. See "--Restructuring of the Foreign Debt of the Bank's Head Office in Argentina and its Cayman Branch."

Before the 2001-2002 crisis, the New York branch concentrated on providing international financial services to the Bank's customers, mainly Argentine corporations and individuals.

In its capacity as a domestic financial institution in Uruguay, Galicia Uruguay was allowed to perform all permitted financial activities in Uruguay, with residents and nonresidents. As of December 31, 2001, Galicia Uruguay had representative offices in Buenos Aires and New York and branch offices in five Uruguayan cities. As of December 31, 2001, Galicia Uruguay was Uruguay's largest private financial institution in terms of shareholders' equity. Galicia Uruguay's activities are currently suspended. See "--Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Ltd."

Galicia Cayman was established as another alternative deposit location for the Bank's customers. As of December 31, 2003, Banco Galicia owned 34.7% and Galicia Uruguay owned 65.3% of Galicia Cayman's capital stock. The company is currently in provisional liquidation. See "--Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Ltd."

Regarding foreign trade activities, fiscal year 2003 witnessed a gradual loosening of the foreign exchange regulations set forth in 2002 that affect both trading and financial activities. This change made trading transactions easier for exporters and importers and also expanded trade and working capital financing alternatives. The year ended with regulations that allow advancing the payment of imports, even before the shipment of goods, admitting, on the other hand, extended terms for the liquidation of exports proceeds. In addition, Argentine foreign trade expanded significantly, particularly imports. See Item 5. "Operating and Financial Review and Prospects--Item 5A. Operating Results--Argentine Economy in 2003." Within this environment, the Bank recorded a 29.2% increase in the annual volume of foreign-trade transactions in comparison with the prior fiscal year to US$1,351 million in 2003, representing 3.17% of the Argentine foreign trade for that year. This share was higher than that achieved in the previous fiscal year, which was 3%. This positive result was due to the strong repositioning the Bank attained through its strategy of providing customers with assistance and collaboration in all the regions in Argentina. In addition, the Bank's information technology tools facilitated companies' transactions and greatly contributed to their efficiency, a factor that clearly differentiated the Bank from its competitors.

Until mid-2002, through Galicia Factoring y Leasing S.A., Banco Galicia provided leasing and domestic and international factoring services to small- and medium-sized businesses. Banco Galicia owns 99.98% of Galicia Factoring. Galicia Factoring is a member of Factors Chain International, an organization based in Amsterdam that has more than 120 members in 44 countries. Banco Galicia finances the factoring provided by Galicia Factoring, while the latter administers the transactions. In mid-2002, the administration of domestic factoring and leasing transactions was transferred to the Bank in order to make the cost structure more efficient and achieve economies of scale in an uncertain and unfavorable economic environment. International factoring was retained within Galicia Factoring.

In 2003, Galicia Factoring ended its eighth fiscal year. The company adapted its international factoring services to the new regulations and incorporated forfaiting. (Forfaiting is a method of trade financing that allows exporters to obtain cash and eliminate risk by selling their medium-term receivables on a "without recourse" basis.) In this way, the Bank's offering was supplemented, and customers were provided with all the tools necessary for the conduct of foreign-trade transactions.

Treasury Division

During fiscal year 2003, the treasury division began to report to the Bank's board of directors.

The treasury division is responsible for the management of the Bank's treasury operations and its proprietary liquidity, foreign exchange and securities positions and participates in the management of market, liquidity, interest-rate and currency risks. To this end, it develops the necessary data and strategies to keep such risks within the limits established by the Bank's board of directors. Similarly, it is responsible for the administration of third-party assets, mainly the FIMA mutual fund portfolios. The division provides services to corporations, financial institutions, mutual funds, pension/retirement funds and insurance companies. Intermediation services in various markets are carried out by the Bank, sometimes in its capacity as agent of the Mercado Abierto Electronico, the Argentine over-the-counter market, and through Galicia Valores S.A., a brokerage firm that operates on the Buenos Aires Stock Exchange.

Banco Galicia offers brokerage services through its branch network. All equity brokerage activities are conducted by Galicia Valores, a 99.99%-owned subsidiary of Banco Galicia. Galicia Valores provides equity securities trading and custodial services to Banco Galicia customers. Galicia Valores is a shareholder of the Buenos Aires Stock Market, affiliated with the BASE, and therefore effects transactions as either principal or agent on that exchange. Galicia Valores does not make investment decisions for its customers.

Financial Operation

During 2003, events took place that contributed to considerable improvement in the domestic capital markets in comparison to 2002. A significant change was evidenced in the corporate sector's situation in view of the general improvement in the economy, which had started to show as of the second half of 2002, after a first semester dominated by uncertainty and a strong contraction in the level of activity. Likewise, the bond market resumed a certain surge with the appearance of new instruments issued by the national government during the last two years. This situation, together with the stability shown by the exchange rate and the pronounced decrease of interest rates, led to a renewed interest both in the stock market and the bond market in search for more attractive yields. Volumes traded in the local market increased significantly during 2003. The volume of government securities traded during 2003 on the Mercado Abierto Electronico reached an estimated US$19,949 million, compared with US$5,082 million in 2002. In this market, the Bank's share of the total volume traded was 0.94%, higher than the 0.05% for 2002. The total traded on the stock market in 2003 was Ps. 10,150 million. Galicia Valores contributed Ps. 73.5 million of this amount, which represented a 0.7% market share.

Continuing with the policy it adopted in 2002, the Argentine Central Bank greatly increased its issuance of short-term bills known as LEBAC. The net placement of peso-denominated LEBAC amounted to Ps. 6,430 million, a figure that includes CER-adjusted LEBAC, which had an increasing participation throughout the year. By contrast, dollar-denominated LEBAC greatly reduced their participation as a way to sterilize the monetary supply on the part of the Argentine Central Bank. Within this context, the Bank had a higher share in this market when compared to 2002, reaching almost 3% of total issuances.

Asset Management

This business unit is responsible for managing third-party funds, mainly the FIMA mutual funds, for which the Bank acts as distributor and custodian. Galicia Administradora de Fondos S.A. is the fund manager for the FIMA mutual funds. These funds are invested in different assets, such as government securities, shares or bank deposits, depending on the risk profile of each mutual fund.

After the difficult climate created for investors by the economic and financial crisis of 2001 and 2002 interest in this kind of product returned in 2003. Interest was greatest in time deposit funds or money market' funds, which were mainly requested by corporations and institutional investors. To a lesser extent, investors who wished to take advantage of the low price of Argentine equities and fixed-income securities invested in such funds. Both equities and bonds performed well in 2003, with the Buenos Aires Stock Exchange, as measured by the Merval Index, rising 104% and bonds, as measured by the performance of the Fima Renta Dolares (the FIMA dollar fixed-income fund), climbing 20%.

FIMA funds under management increased from Ps. 108 million as of December 31, 2002, to Ps. 170 million at the close of fiscal year 2003. Of this amount, Ps. 120 million corresponded to operational funds (funds that can undergo subscription and redemption transactions) and Ps. 50 million corresponded to funds the shares of which have been restructured or had been invested in national treasury bills due and unpaid.

Internet

The Bank carries out its Internet businesses primarily through Net Investment S.A. Banco Galicia's stake in the company is 12.5%, while the remaining 87.5% is held by Grupo Galicia. See "--Net Investment S.A."

SUDAMERICANA HOLDING S.A.

Sudamericana Holding S.A. is a group of life and retirement insurance companies.

The insurance business we have undertaken through our interest in Sudamericana is part of our strategy to strengthen our position as a leading financial services provider, thus supplementing those businesses that Banco Galicia may only conduct to a limited extent in line with prevailing regulations.

Total written premiums of all companies controlled by Sudamericana during this fiscal year represented 2.5% of the Argentine individual insurance market, ranking Sudamericana eighth among Argentine life insurance companies. Sudamericana companies insured 1,365,039 persons and managed 43,973 policies as of December 31, 2003.

In 2002, the company continued with the cost-cutting program it started during the previous fiscal year. The streamlining of its organizational structure significantly contributed to the general improvement in efficiency it experienced.

From a purely commercial point of view, and within the framework of stability the insurance industry experienced during a significant portion of 2003, the company adopted measures aimed at maintaining and gradually improving portfolio profitability through the following activities:

- Fidelity programs were implemented for life insurance individual customers and two new products were launched: Protection against Accidents and Health Protection. With respect to insurance, portfolios were analyzed and adjusted if necessary to improve their profitability.

- Distribution efforts were focused on Banco Galicia and Tarjetas Regionales, and the development of the insurance broker network was intensified. Likewise, the productivity of telephone sales and direct marketing efforts rose.

- Instituto de Salta continued consolidating its regionalization project in the northwestern provinces of Argentina.

With the purpose of diversifying insured risks and making good use of the growing demand for property insurance, new insurance products for homeowners and theft in ATMs were launched. The merger of Galicia Vida and Aseguradora de Personas, together with the transfer of Medigap Salud S.A.'s business to Galicia Vida represent a significant improvement in terms of operating efficiency and expense reduction.

The Argentine Superintendency of Insurance approved, by means of Resolution No. 29,302, the Regularization Plan submitted by Galicia Retiro with the purpose of renegotiating policies originally issued in

dollars (Inversion Garantizada and Ahorro Planeado), which were later pesified. The main characteristic of this restructuring plan was the offer of a conversion into pesos higher than that provided for by the regulations in force or the possibility of acquiring a life annuity. Approximately 69% of Galicia Retiro's customers accepted one of the alternatives offered and 31% decided to remain within the legal framework.

During 2004, Sudamericana aims to attain a higher volume of premiums with a substantial improvement in profitability by:

- generating business through products both profitable and highly appreciated by our mid-income segment customers.

- converting channels (Organizers and Brokers Network - Banco Galicia - Tarjetas Regionales) into differentiating factors by level of advice, which would allow for the creation of long-term relationships with insureds.

- improving insurance policy periods.

- consolidating Instituto de Salta's regionalization.

- improving the loss experience level through a sensible risk underwriting and loss adjustment program, as well as fighting illegitimate practices.

- searching for greater cost-effectiveness by revising and adjusting processes and systems.

NET INVESTMENT S.A.

We carry out our Internet businesses primarily through Net Investment S.A., a holding company dedicated to investing in and developing businesses involved in technology, communications, the Internet, connectivity, and content. The objective of Net Investment is to create value for its shareholders, investing in projects in which the business model is based on positive cash flows and profits. Our stake in the company is 87.5%, while the remaining 12.5% is held by Banco Galicia.

Net Investment's strategy during 2003 was to carry on projects with minimum investments with the purpose of redesigning and adjusting such projects to the new market conditions. It also seeks to offer, among other things, mobile payment solutions, content, connectivity, B2B electronic services, development of high-bandwidth Internet projects and content for wireless and satellite technology services. In all cases, it seeks to create and benefit from synergies with Banco Galicia's operations.

Net Investment's primary purpose is not to become a player whose e-business operations are only made through capital investments. Rather, its intention is that the opportunities that can be realized contribute to Banco Galicia's and our comprehensive business structure, thus boosting the comparative advantages of our companies and each of our business units.

During fiscal year 2003, Net Investment carried out businesses through its controlled companies Tradecom and Red de Campo. Net Investment has an indirect stake of 16.19% in Tradecom International N.V., a holding company that carries out its commercial activities by means of subsidiaries in Argentina and Brazil. These companies render B2B e-commerce support services and virtual markets for transactions between companies and suppliers. The award of the Panama Channel reverse-auction bid renewal confirms Tradecom International's strategy of acting as an electronic supply solutions provider. Tradecom Argentina continued implementation of its project at Clariant, a customer of Tradecom Argentina and Brazil. Clariant is also expected to transfer technology from Tradecom Argentina for utilization in Venezuela and Mexico during 2004. With respect to commercial developments, Tradecom International began to implement an electronic supply project at Gestion Compartida, which is owned by Grupo Clarin and which manages the group's purchase transactions. Tradecom Brazil continues to grow and develop through the operation of vertical markets and rendering services to large customers in Brazil together with Unibanco, a major stakeholder of the company. In November 2003, Tradecom Argentina renegotiated

its foreign debt, which financed the software-license royalties the company had to pay to operate in Argentina. The renegotiated terms provide for principal reductions, together with a refinancing scheme with a five-year grace period. This plan should make it possible for Tradecom Argentina to pay its international obligations from its own cash flow and to consolidate its financial position.

B2Agro S.A. operates under the trade name of "Red de Campo" in the agricultural sector, one of the most important areas of the Argentine economy. It is a commercial services company that provides solutions specifically designed for each of the participants in the agricultural and livestock production chain in order to facilitate their management, business and integration to the productive process.

As indicated in the annual report for the previous fiscal year, the Internet portal Soloduenos, operated by Dueno Vende S.A., ceased to operate on January 1, 2003. The decision to close down was made due to the difficult macroeconomic situation and the government response to the crisis in early 2002. Two developments impacted what had been the main sources of incoe for the company: the drying up of mortgage lending and the significant decrease in the number of purchase-and-sale transactions. This situation led Dueno Vende's shareholders to approve the dissolution and subsequent liquidation of the company at ordinary and extraordinary shareholders' meetings held on April 21, 2003.

GALICIA WARRANTS S.A.

Galicia Warrants S.A. was founded in April 1993 to issue deposit certificates and warrants, as provided for by Law No. 9,643, both regarding its own deposits and third-party deposits. We own 87.5% of Galicia Warrants and the remaining 12.5% stake is owned by Banco Galicia. Galicia Warrants is a leading company in the deposit certificates and warrants issuance market. It has been continuously conducting transactions since 1994, supporting both medium- and large-size companies in regard to the custody of stocks. Galicia Warrants' main objective is to enable its customers to access credit and financing, which are guaranteed by the property kept in custody as of the issuance of the corresponding certificates. Galicia Warrants has rendered property custody and control services to over 600 companies in more than 800 warehouses distributed throughout the country, having generated the highest business concentration in the humid pampas.

Galicia Warrants owns a plant at San Salvador, province of Entre Rios, for the conditioning and storage of 40,000 tons of paddy rice, which began operations in 1998.

As of the end of 2001, the warrants business suffered a substantial change of direction due to the lack of credit and the pronounced drop in demand from sectors that traditionally used these products.

The stabilization of economic variables that occurred during much of 2003 justifies better growth expectations, but with products and company portfolios different from those seen before the crisis. This situation is a great opportunity for the company to reposition with new companies and economic sectors that will now start demanding the products it offers. Galicia Warrants forecasts a significant activity increase in its cereal storage plant in Entre Rios, in view of the increase in rice sector production levels boosted by firm prices throughout 2003.

During Galicia Warrants' fiscal year ended April 2003, the volume of transactions amounted to US$34.71 million, with a turnover of Ps. 3.85 million. The turnover amount for the following eight-month period, until December 2003, was Ps. 2 million.

COMPETITION

In general terms, the competitive business environment in Argentina is still being influenced by the effects of the devaluation together with the measures adopted by the government since 2002. Changes and new regulatory frameworks are expected, especially in the financial industry and in some privatized utilities companies. The country's sovereign debt is still in default pending restructuring.

Due to our financial holding structure, competition is not felt directly at the holding company level but rather at the level of the operating subsidiaries. We face fierce competition in most of the areas in which we are active.

BANKING

Banco Galicia faces significant competition in all of its principal areas of operation. Until late 2001, mainly large foreign banks operating in Argentina as universal banks, but also Argentine national and provincial government-owned banks, private-sector domestic banks and to a lesser extent cooperative banks, competed with Banco Galicia in traditional commercial banking, investment banking, private banking and the provision of services such as credit cards, asset management, securities brokerage and insurance products. With capital movements completely free during most of the 1990s and until November 30, 2001, Banco Galicia also faced competition from foreign banks established abroad, mainly in corporate and investment banking as well as private banking. Nonbank financial institutions in Argentina also competed for customers' funds and in the provision of certain banking services, such as consumer finance, credit cards and insurance products.

As a result of the 2001-2002 crisis, financial activity was almost paralyzed during the first part of 2002. Short-term deposit-taking resumed in the second half of 2002. Lending activities resumed somewhat in 2003 and more strongly in the first half of 2004, but remained limited to the provision of short-term loans through the discount of checks, foreign trade financing and credit card lending. Mortgage and pledge loans have not resumed yet. In general, bank activity is currently concentrated mostly in the management of means of payment, foreign trade services and foreign exchange brokerage. With respect to the activities currently being developed by banks, the Bank faces competition from the large universal foreign banks operating in Argentina, from Argentine national and provincial government-owned banks private-sector domestic banks and to a lesser extent from cooperative banks, as well as from nonbank financial institutions. Competition from public-sector banks has decreased from the immediate post-crisis period as the public that initially turned to them as a safe harbor during the crisis has begun to exit those banks in search of better service. Competition is expected to increase from certain domestically owned private-sector banks, which prior to the crisis operated in merchant or private banking and acquired the retail operations of banks that left the business as a result of the crisis.

The estimated deposit market share of "voluntary" deposits of the Bank (in the Argentine financial system only) based on daily information published by the Argentine Central Bank increased to 4.75% as of December 31, 2003, compared to 4.34% as of December 31, 2002, 3.83% as of June 30, 2002, and 10.0% as of June 30, 2001.

Despite the market-share loss due to the crisis, the Bank continues to be one of the leading banks in Argentina and the largest domestically owned private-sector bank. As of December 31, 2003, and measured by its deposits in Argentina only, the Bank was ranked sixth in the whole financial system and third among private-sector banks (including foreign banks). Measured in the same way, as of December 31, 2002, the Bank was ranked ninth in the whole financial system and sixth among private-sector banks (including foreign banks).

For information on the Argentine banking system, see "--Argentine Banking System and Regulation--Argentine Banking System."

REGIONAL CREDIT CARD COMPANIES

No official data is available about the Argentine consumer finance market in which the companies that issue regional credit cards operate. The 2001-2002 economic crisis significantly affected these companies' competitors, with most of them having ceased operations. Therefore, in general, competition is currently almost nonexistent for these companies and much lower than in the precrisis period. There are certain consumer finance-oriented players, whose business model is based on the provision of loans, and therefore do not exactly participate in the same business.

INSURANCE INDUSTRY

After the collapse suffered by the Argentine economy in 2002, the insurance business managed to stabilize throughout 2003, and a moderate recovery is expected for 2004. Insurance growth estimates are calculated at around 8% to 10%, still above the growth line of the GDP.

Total insurance for the last 12 months increased, at constant values, 1.4% with respect to the previous year, reaching, according to official estimates, Ps. 9,545 million, at constant values as of November 2003.

The current growth is mainly driven by the following sectors:
pension-linked life insurance (vida previsional), life annuities and automotive and home insurance. With respect to distribution, the business is expected to continue being channeled mainly through insurance brokers, who are expected to exert greater pressure on the part of the channel represented by banks.

Industry consolidation is expected to continue due to the fact that foreign companies find this sector less attractive as a consequence of the end of fixed, one-to-one parity between the peso and the U.S. dollar, higher capital requirements and lower financial results, which force companies to attain higher technical results.

The property insurance sector's volume of premiums was Ps. 6,300 million for the fiscal year, at constant values as of November 2003. The main segment of this sector is automotive insurance (52%), followed by fire and homeowners, insurance (35%) and workers' compensation.

Even though automotive insurance is the most important segment in terms of volume of premiums written, the current security situation in Argentina makes it the segment with the highest loss experience.

The volume of premiums of the individual insurance sector was approximately Ps. 2,500 million in 2003. The most important segments of this sector are life insurance (44%), pension-linked life annuities (rentas vitalicias previsionales) (32%), pension-linked life insurance (15%) and retirement plans (7%). There has been a marked growth in life and ordinary annuities, which are first among the individual insurance sector and are shaping up as the insurance products that will grow the fastest in 2004.

During 2003, individual insurance adapted and consolidated in response to the needs of a new market that requires insurance coverage focused mainly on protection, leaving behind retirement insurance with capitalization, the most important product within the stable environment of the 1990s. This new situation led many companies to change strategies and move toward life insurance products with health components or to develop strategies that involved the acquisition of semipublic health-care providers or prepaid medical assistance companies.

SALES AND MARKETING

Banco Galicia operates one of the most extensive and diversified distribution networks among private-sector banks in Argentina. Banco Galicia's distribution capabilities are our principal marketing channel.

While continuing with its long-term objective to consolidate its leadership in the Argentine financial system, the Bank significantly reduced its distribution platform during 2002 as a result of the crisis and did not expand it in 2003. Despite the reduction, the Bank's distribution network continues to be one of the largest and most flexible distribution platforms in the country and the Bank has kept nationwide coverage.

The Bank markets all of its financial products and services to high-, medium- and medium-low-income individuals, including insurance and FIMA mutual funds, through its branch network. Within the branches, the sales force is specialized by segment. The Bank's sales policy encourages tellers to perform sales functions too. Wealthy individuals who are private banking customers are served by specialized officers through a special network of service centers and a head office facility. The Bank's distribution channel for the lower-income segment of the population is the network of offices of the regional credit card companies. Until mid-2002, the Bank also served this segment through the Galicia Ahora network, which has been merged into the branch network.

Commercial banking services to large corporations (including medium to large companies) and banks are provided in a centralized manner. Branch officers are responsible for the Bank's relationship with middle-market and small businesses and most of the agriculture/livestock sector customers.

All of the Bank's individual and corporate customers have access to the Bank's electronic distribution channels, including the ATM network, a multifunction call center and an e-banking website. The Bank's call center performs telemarketing and credit recovery functions.

Special mobile sales forces are maintained to market various products and services to individuals and employees of client corporations.

The Bank uses a data warehouse, to perform segmentation and profitability analyses, estimate performance patterns and cross-selling indices and forecast client response based on historical information and data-mining. It has turned its focus to a segmented marketing approach. In the late 1990s, the data warehouse capabilities began to be used to design marketing campaigns focused on specific segments of the Bank's customer base. In addition, the Bank began to focus its marketing strategy on the development of long-term relationships with customers based on its knowledge of those customers. As part of this client-oriented strategy, the Bank began to implement customer relationship management ("CRM") technology to support continuous improvement of its relationship with customers. The Bank continues with this strategy.

In 2002, the economic crisis and the measures taken by the government to deal with the crisis had a strong impact on financial institutions' relations with customers. After the first semester of the year, the Bank implemented several initiatives to retain and recover customers by focusing on quality of service, which according to surveys, appeared to be customers' most valued attribute of a bank. During 2002, the Bank worked to offer its customers transactional banking services and concrete benefits originated from the use of its means of payment. The goal was to make the customer the main beneficiary of services different from those offered in the market. The Bank's media presence remained low until September when a promotional campaign with heavy advertising was launched.

In 2003, as the crisis that affected the financial system was largely overcome, the Bank implemented the Lideres de Calidad de Servicio (Service Quality Leaders) program in its branch network aimed at improving customer focus among Bank team members. In that year, Banco Galicia's image and "top of mind" (immediate brand recollection) improved significantly, boosted by highly accepted advertising campaigns and by important investments in the media. In that regard, the development of constant promotional and loyalty campaigns that highlighted the targeted attributes of the brand contributed to rebuilding customer relations with the Bank. The customer satisfaction survey for the last quarter of 2003 showed a significant upturn in the satisfaction rate, which regained the peak reached before the crisis that took place at the end of 2001.

PROPERTY

GRUPO GALICIA

We currently own 150 square meters of office space at Tte. Gral. Juan D. Peron 456, 2nd floor, Buenos Aires, Argentina, to house its management, accounting, administrative and investor relations functions.

In addition, we also own a building containing eight functional units, equivalent to 1,618.48 square meters, located at Maipu 241, Buenos Aires. Currently, we lease one functional unit, equivalent to 201 square meters, receiving Ps. 3,200 per month, and hold two functional units vacant for leasing. The remaining five functional units are being occupied by the following subsidiaries: Sudamericana Holding S.A., B2Agro S.A., Galicia Vida Compania de Seguros S.A. and Galicia Retiro Compania de Seguros S.A.

BANCO GALICIA

Banco Galicia's principal executive offices consist of approximately 17,270 square meters at Tte. Gral. Juan D. Peron 407, Buenos Aires. In addition, Banco Galicia owns approximately 7,340 square meters at Florida 361, Buenos Aires, and rents approximately 9,325 square meters of space at Tte. Gral. Juan D. Peron 525, Buenos

Aires and approximately 3,630 square meters of space at San Martin 178/200, Buenos Aires. All spaces serve as annexes to the Bank's principal executive offices.

In 1994, Banco Galicia purchased the building located at Reconquista 188/200, Buenos Aires, and between 1992 and 2000 it purchased the building located at Tte. Gral. Juan D. Peron 444, Buenos Aires. In these locations, construction was begun of a new corporate tower. The Bank plans to centralize a significant portion of its offices that are currently in the vicinity in this building.

As of December 31, 2003, Banco Galicia's branch network consisted of 226 branches in Argentina, 137 of which were owned and 89 of which were rented by Banco Galicia. The Argentine branches were located in 22 of Argentina's 23 provinces.

The head office of Galicia Uruguay is located at Luis Alberto Herrera 1248, 21st and 22nd floors, Edificio World Trade Center, Montevideo, Uruguay, and consist of approximately 880 square meters. Galicia Uruguay also rents a warehouse in Montevideo, where it stores documents. As of December 31, 2003, Galicia Uruguay had three branches, including the head office, two of which it owned and one of which it rented. Banco Galicia Cayman Ltd. and the Cayman Islands branch are located in the Cayman Islands and The Bank of Nova Scotia Trust Co. acts as its registered office.

Tarjeta Naranja S.A. owns two buildings at Sucre 152 and Sucre 154, Cordoba, Argentina, to house part of its management and administrative functions. These buildings contain approximately 1,390 square meters. The company rents office space at Sucre 145/151 and La Rioja 375, Cordoba, which, in aggregate is approximately 3,670 square meters. These locations serve as annexes to its principal executive offices. It also rents warehouse space at Humberto 1 degrees 2165, Cordoba, which consists of approximately 1,115 square meters, at La Rioja 364, Cordoba, which is approximately 350 square meters and serves as a printing center for marketing material and Los Andes 197, Cordoba, which is approximately 1,765 square meters. As of December 31, 2003, Tarjeta Naranja operated 75 sales points located in 17 of the 23 Argentine provinces, 73 of which were rented by the company. This figure includes the branches that previously comprised Tarjeta Comfiar's branch network.

Tarjetas Cuyanas S.A's principal executive offices are rented. They consist of approximately 1,160 square meters of space at Belgrano 1415, Mendoza, Argentina. As of December 31, 2003, its distribution network consisted of 10 sales points located in the provinces of Mendoza, San Juan and San Luis. All of them were rented by the company.

Tarjetas del Mar S.A.'s principal executive offices are located at Maipu 241, 2nd Floor, Buenos Aires, Argentina. They contain approximately 240 square meters of space. As of December 31, 2003, its distribution network consisted of three sales points located in the province of Buenos Aires. Both the head office and the branches were rented by the company.

SELECTED STATISTICAL INFORMATION

You should read this information in conjunction with the other information provided in this annual report, including our audited consolidated financial statements and Item 5. "Operating and Financial Review and Prospects." We prepared this information from our financial records, which are maintained under accounting methods established by the Argentine Central Bank under Argentine Banking GAAP, and do not reflect adjustments necessary to reflect the information in accordance with U.S. GAAP. We have expressed all amounts in millions of pesos, except percentages, ratios, multiples and per-share data.

Unless otherwise stated, in this section the exchange rate used to convert foreign currency amounts into pesos was the exchange rate as of each relevant date or period end that Banco Nacion or the Argentine Central Bank quoted. In the case of dollars, until December 31, 2001, the Banco Nacion quotes for such exchange rates were Ps. 1.0 per US$1.0. The exchange rate used for the preparation of the financial statements as of December 31, 2002 was Ps. 3.363 per US$1.0 and Ps. 2.933 per US$1.0 for the preparation of the financial statements as of December 31, 2003. See Item 3. "Key Information--Exchange Rate Information," Item 3. "Key Information--Risk Factors," and "--Main Regulatory Changes in 2002 and 2003."

The dollar-denominated assets and liabilities reflect balances held by Banco Galicia, Galicia Uruguay, the New York and Cayman branches and the nonbank affiliated companies required to be consolidated. Until the suspension of its activities, the Bank's foreign branches or subsidiaries operated mainly in dollars.

Until December 31, 2001, Banco Galicia and the nonbank affiliated companies required to be consolidated operated both in dollars and in pesos. This was a consequence of the dual currency system of the Argentine economy. After that date, transactions in the financial system denominated in dollars have been significantly reduced and the dollar-denominated balances as of December 2002 and 2003 are mainly nonpesified assets and liabilities and the compensatory and hedge bonds received or to be received as compensation for asymmetric pesification.

In 2002, Argentina experienced a high rate of inflation. The WPI increased approximately 118.44% between January 1, 2002 and December 31, 2002. Between January 1, 2003 and February 28, 2003, the WPI increased 0.87%. Between January 1, 2002 and February 28, 2003, the WPI increased 120.35%. In accordance with the then applicable accounting rules, starting January 1, 2002, our financial statements and those of the Bank began to be adjusted for inflation. Subsequently, as a result of the stabilization of the WPI during the first half of 2003, the requirement that financial statements be prepared in constant currency was eliminated for financial periods ending on or after March 1, 2003.

Accordingly, information included in this section as of and for the fiscal year ended December 31, 2003 include the effects of inflation accounting through February 28, 2003, with the WPI increasing 0.87% between January 1, 2003 and February 28, 2003, while the information for periods prior to February 28, 2003 has been restated in constant pesos as of February 28, 2003 applying the approximately 120.35% change in the WPI for the period from January 1, 2002 to February 28, 2003. High rates of inflation affect the comparability of financial performance on a period-to-period basis. Although inflation accounting improves the comparability of the financial information, it does not eliminate or correct many of the distortions created by inflation that will affect period-to-period comparisons of financial information.

AVERAGE BALANCE SHEET AND INCOME FROM INTEREST-EARNING ASSETS AND EXPENSES FROM INTEREST-BEARING LIABILITIES

The average balances of interest-earning assets and interest-bearing liabilities, including the related interest receivable and payable, are calculated on a daily basis for Banco Galicia and Galicia Uruguay. The average balances of interest-earning assets and interest bearing liabilities are calculated on a monthly basis for Tarjetas Regionales S.A. and the regional credit card companies in which it holds majority interests and for Grupo Galicia and its nonbanking subsidiaries.

Average balances have been separated between those denominated in pesos and those denominated in dollars. The nominal interest rate is the amount of interest earned or paid during the period divided by the related average balance.

Net gains/losses on government securities and related differences in market quotations are included in interest earned. Banco Galicia manages its trading activities in government securities as an integral part of its business. Banco Galicia does not distinguish between interest income and market gains or losses on its government securities portfolio. The nonaccrual loans balance is included in the average loan balance calculation.

For fiscal year 2002, the average nominal interest rates were converted to real rates using the following formula:

                1 + N(p)                     (1 + N(d) (1 + D)
    R(p) =     ----------  - 1    R(d) =    -------------------  -  1
                 1 + I                             1 + I

Where:

   R(p) =  real average rate for peso-denominated assets and liabilities for
           the period;

   R(d) =  real average rate for foreign currency-denominated assets and
           liabilities for the period;

   N(p) =  nominal average rate for peso-denominated assets and liabilities for
           the period;

                                      -49-

   N(d) =  nominal average rate for foreign currency-denominated assets and
           liabilities for the period;

   D    =  devaluation rate of the peso to the dollar for the period; and

   I    =  inflation rate in Argentina for the period (based on the variation of
           CER).

         The real interest rate can be negative for a portfolio of

peso-denominated loans when the inflation rate for the period is higher than the average nominal rate of the loan portfolio for the same period. A similar effect could occur for a portfolio of foreign currency-denominated loans when the inflation rate for the period is higher than the sum of the devaluation rate for the period and the corresponding average nominal rate of the portfolio.

The formula for the average real rate for foreign currency-denominated assets and liabilities (R(d)) reflects a gain or loss in purchasing power caused by the difference between the devaluation rate of the Argentine peso and the inflation rate in Argentina during the period.

The following example illustrates the calculation of the real interest rate for a U.S. dollar asset bearing a nominal annual interest rate of 10% (Nd = 0.10), assuming a 5% annual devaluation rate (D = 0.05) and a 12% annual inflation rate (I = 0.12):

(1 + 0.10) (1 + 0.05)

R(d) = --------------------- - 1 = 3.125% per year 1 + 0.12

In the example, since the inflation rate was higher than the devaluation rate, the real rate is lower than the nominal rate in dollars. If, for example, the annual devaluation rate were 15%, using the same numbers, the real rate in Argentine pesos would be 12.9%, which is higher than the nominal rate in dollars. Using the same numbers, if the annual inflation rate were greater than 15.5%, the real rate would be negative.

The following table shows Grupo Galicia's consolidated average balances, interest earned or paid and nominal interest rates for interest-earning assets and interest-bearing liabilities for the fiscal year ended December 31, 2003.

                                          GRUPO GALICIA, FISCAL YEAR ENDED DECEMBER 31, 2003 (*)
                             --------------------------------------------------------------------------------
                                                        PESOS                            DOLLARS
                             --------------------------------------------------------------------------------
                                            INTEREST   AVERAGE                INTEREST   AVERAGE
                               AVERAGE       EARNED/    YIELD/    AVERAGE      EARNED/    YIELD/    AVERAGE
                               BALANCE        PAID      RATE      BALANCE       PAID      RATE      BALANCE
-------------------------------------------------------------------------------------------------------------
                                                   (in millions of pesos, except rates)
ASSETS

Government Securities......  Ps.   250.5   Ps.   23.3    9.30%  Ps. 1,832.3   Ps. 48.2     2.63%  Ps. 2,082.8
Loans
   Private Sector..........      2,981.0        705.6   23.67         986.2       89.2     9.04       3,967.2
   Public Sector...........      7,589.5        342.6    4.51             -          -        -       7,589.5
                             -----------   ----------   -----   -----------   --------    -----   -----------
Total Loans................     10,570.5      1,048.2    9.92         986.2       89.2     9.04      11,556.7
Other......................      1,309.3         61.1    4.67       5,776.3       64.4     1.11       7,085.6
                             -----------   ----------   -----   -----------   --------    -----   -----------
TOTAL INTEREST-EARNING
ASSETS.....................     12,130.3      1,132.6    9.34%      8,594.8      201.8     2.35%     20,725.1
Cash and Gold..............        207.0            -       -         135.5          -        -         342.5
Equity in Other Companies..        462.1            -       -         140.4          -        -         602.5
Other Assets...............      2,275.1            -       -         128.2          -        -       2,403.3
Allowances.................     (1,291.7)           -       -        (251.4)         -        -      (1,543.1)
                             -----------   ----------   -----   -----------   --------    -----   -----------
TOTAL ASSETS...............  Ps.13,782.8            -       -   Ps. 8,747.5          -        -   Ps.22,530.3

LIABILITIES AND EQUITY

Deposits
   Current Accounts........  Ps.   185.1   Ps.    3.0    1.62%  Ps.    30.5          -        -   Ps.   215.6
   Saving Accounts.........        434.6          3.4    0.78         178.5          -        -         613.1
   Time Deposits...........      2,185.4        230.6   10.55       1,422.9   Ps. 26.8     1.88%      3,608.3
                             -----------   ----------   -----   -----------   --------    -----   -----------
TOTAL INTEREST-BEARING
DEPOSITS                         2,805.1        237.0    8.45       1,631.9       26.8     1.64       4,437.0
Argentine Central Bank.....      8,062.0        473.1    5.87           0.7          -        -       8,062.7
Other Financial Entities...        174.4         69.9   40.08       1,900.0      121.0     6.37       2,074.4
Debt Securities............            -            -       -       2,710.5      154.2     5.69       2,710.5
Other .....................         45.7          9.6   21.01       1,307.4       58.4     4.47       1,353.1
                             -----------   ----------   -----   -----------   --------    -----   -----------
TOTAL INTEREST-BEARING
LIABILITIES................     11,087.2        789.6    7.12%      7,550.5      360.4     4.77%     18,637.7
Demand deposits............        700.6            -       -          72.2          -        -         772.8
Other Liabilities..........        939.4            -       -         561.5          -        -       1,500.9
Minority Interests.........         89.5            -       -           0.0          -        -          89.5
Shareholders' Equity.......      1,529.4            -       -             -          -        -       1,529.4
                             -----------   ----------   -----   -----------   --------    -----   -----------
TOTAL LIABILITIES
AND EQUITY.................  Ps.14,346.1            -       -   Ps. 8,184.2          -        -   Ps.22,530.3
SPREAD AND NET YIELD
Interest Rate Spread.......                              2.22%                            (2.42)%
Cost of Funds Supporting
Interest-Earning Assets....                              6.51                              4.19
Net Yield on
Interest-Earning Assets....                              2.83                             (1.85)
                             ===========   ==========   =====   ===========   ========    =====   ===========

                                   GRUPO GALICIA, FISCAL YEAR
                                   ENDED DECEMBER 31, 2003 (*)
                                   ---------------------------
                                                    TOTAL
                                   ---------------------------
                                       INTEREST    AVERAGE
                                        EARNED/     YIELD/
                                         PAID       RATE
--------------------------------------------------------------

ASSETS

Government Securities......            Ps.  71.5     3.43%
Loans
   Private Sector..........                794.8    20.03
   Public Sector...........                342.6     4.51
                                       ---------   ------
Total Loans................              1,137.4     9.84
Other......................                125.5     1.77
                                       ---------   ------
TOTAL INTEREST-EARNING
ASSETS.....................              1,334.4     6.44%
Cash and Gold..............                    -        -
Equity in Other Companies..                    -        -
Other Assets...............                    -        -
Allowances.................                    -        -
                                       ---------   ------
TOTAL ASSETS...............                    -        -

LIABILITIES AND EQUITY

Deposits
   Current Accounts........            Ps.   3.0     1.39%
   Saving Accounts.........                  3.4     0.55
   Time Deposits...........                257.4     7.13
                                       ---------   ------
TOTAL INTEREST-BEARING
DEPOSITS                                   263.8     5.95
Argentine Central Bank.....                473.1     5.87
Other Financial Entities...                190.9     9.20
Debt Securities............                154.2     5.69
Other .....................                 68.0     5.03
                                       ---------   ------
TOTAL INTEREST-BEARING
LIABILITIES................              1,150.0     6.17%
Demand deposits............                    -        -
Other Liabilities..........                    -        -
Minority Interests.........                    -        -
Shareholders' Equity.......                    -        -
                                       ---------   ------
TOTAL LIABILITIES
AND EQUITY.................                    -        -
SPREAD AND NET YIELD
Interest Rate Spread.......                          0.27%
Cost of Funds Supporting
Interest-Earning Assets....                          5.55
Net Yield on
Interest-Earning Assets....                          0.89
                                       =========   ======

(*) Rates include the CER adjustment.

The following tables show Grupo Galicia's consolidated average balances, interest earned or paid and nominal and real interest rates for interest-earning assets and interest-bearing liabilities for the fiscal year ended December 31, 2002.

                                                          GRUPO GALICIA, FISCAL YEAR ENDED DECEMBER 31, 2002 (*)
                                         ----------------------------------------------------------------------------------------
                                                                    PESOS                                 DOLLARS
                                         ----------------------------------------------------------------------------------------
                                                       INTEREST    AVERAGE                   INTEREST     AVERAGE
                                           AVERAGE      EARNED/     YIELD/       AVERAGE      EARNED/      YIELD/     AVERAGE
                                           BALANCE       PAID        RATE        BALANCE       PAID        RATE       BALANCE
---------------------------------------------------------------------------------------------------------------------------------
                                                     (in millions of February 28, 2003, constant pesos, except rates)
ASSETS

Government Securities ................. Ps.   575.4   Ps.  213.7       37.14%  Ps. 1,680.2   Ps.   84.9        5.05%  Ps. 2,255.6
Loans
   Private Sector .....................     4,959.9      1,345.1       27.12       1,989.6        102.1        5.13      6,949.5
   Public Sector ......................     8,312.9      2,956.9       35.57             -            -           -      8,312.9
                                        -----------   ----------  ----------   -----------   ----------  ----------  -----------
Total Loans ...........................    13,272.8      4,302.0       32.41       1,989.6        102.1        5.13     15,262.4
Other .................................     1,338.9        448.8       33.52       8,096.6        161.6        2.00      9,435.5
                                        -----------   ----------  ----------   -----------   ----------  ----------  -----------

TOTAL INTEREST-EARNING ASSETS .........    15,187.1      4,964.5       32.69%     11,766.4        348.6        2.96%    26,953.5
Cash and Gold .........................       226.6            -           -         190.7            -           -        417.3
Equity in Other Companies .............       538.5            -           -         253.0            -           -        791.5
Other Assets ..........................     2,090.7            -           -         670.0            -           -      2,760.7
Allowances ............................    (1,281.3)           -           -        (140.8)           -           -     (1,422.1)
                                        -----------   ----------  ----------   -----------   ----------  ----------  -----------
TOTAL ASSETS .......................... Ps.16,761.6            -           -   Ps.12,739.3            -           -  Ps.29,500.9

LIABILITIES AND EQUITY

Deposits
   Current Accounts ................... Ps.   161.7   Ps.   17.1       10.58%  Ps.    32.9   Ps.    0.4        1.22% Ps.   194.6
   Saving Accounts ....................     1,000.3          6.6        0.66         451.5          2.5        0.55      1,451.8
   Time Deposits ......................     2,917.4      1,214.1       41.62       3,454.1        120.6        3.49      6,371.5
                                        -----------   ----------  ----------   -----------   ----------  ----------  -----------
TOTAL INTEREST-BEARING DEPOSITS .......     4,079.4      1,237.8       30.34       3,938.5        123.5        3.14      8,017.9
Argentine Central Bank ................     7,144.1      2,237.7       31.32           3.5          0.1        2.86      7,147.6
Other Financial Entities ..............       198.8         29.8       14.99       2,579.9        216.1        8.38      2,778.7
Debt Securities .......................        16.3          2.4       14.72       2,552.2        149.2        5.85      2,568.5
Other .................................       769.9        200.8       26.08       1,613.7        128.6        7.97      2,383.6
                                        -----------   ----------  ----------   -----------   ----------  ----------  -----------
TOTAL INTEREST-BEARING LIABILITIES ....    12,208.5      3,708.5       30.38%     10,687.8        617.5        5.78%    22,896.3
Demand deposits .......................       622.9            -           -         232.0            -           -        854.9
Other Liabilities .....................     2,455.7            -           -         714.7            -           -      3,170.4
Minority Interests ....................       147.4            -           -           0.0            -           -        147.4
Shareholders' Equity ..................     2,431.9            -           -             -            -           -      2,431.9
                                        -----------   ----------  ----------   -----------   ----------  ----------  -----------
TOTAL LIABILITIES AND EQUITY .......... Ps.17,866.4            -           -   Ps.11,634.5            -           -  Ps.29,500.9
SPREAD AND NET YIELD
Interest Rate Spread ..................                                 2.31%                                 (2.82)%
Cost of Funds Supporting
  Interest-Earning Assets .............                                24.42                                   5.25
Net Yield on Interest-Earning Assets ..                                 8.27                                  (2.29)

                                         GRUPO GALICIA, FISCAL YEAR
                                         ENDED DECEMBER 31, 2002 (*)
                                         ------------------------
                                                          TOTAL
                                         ------------------------
                                            INTEREST    AVERAGE
                                             EARNED/     YIELD/
                                              PAID        RATE
-----------------------------------------------------------------
                                          (in millions of February
                                          28, 2003, constant pesos,
                                                except rates)
ASSETS

Government Securities ..................   Ps.  298.6       13.24%
Loans
   Private Sector ......................      1,447.2       20.82
   Public Sector .......................      2,956.9       35.57
                                           ----------  ----------
Total Loans ............................      4,404.1       28.86
Other ..................................        610.4        6.47
                                           ----------  ----------

TOTAL INTEREST-EARNING ASSETS ..........      5,313.1       19.71%
Cash and Gold ..........................            -           -
Equity in Other Companies ..............            -           -
Other Assets ...........................            -           -
Allowances .............................            -           -
                                           ----------  ----------
TOTAL ASSETS ...........................            -           -

LIABILITIES AND EQUITY

Deposits
   Current Accounts ....................   Ps.   17.5        8.99%
   Saving Accounts .....................          9.1        0.63
   Time Deposits .......................      1,334.7       20.95
                                           ----------  ----------
TOTAL INTEREST-BEARING DEPOSITS ........      1,361.3       16.98
Argentine Central Bank .................      2,237.8       31.31
Other Financial Entities ...............        245.9        8.85
Debt Securities ........................        151.6        5.90
Other ..................................        329.4       13.82
                                           ----------  ----------
TOTAL INTEREST-BEARING LIABILITIES .....      4,326.0       18.89%
Demand deposits ........................            -           -
Other Liabilities ......................            -           -
Minority Interests .....................            -           -
Shareholders' Equity ...................            -           -
                                           ----------  ----------
TOTAL LIABILITIES AND EQUITY ...........            -           -
SPREAD AND NET YIELD
Interest Rate Spread ...................                     0.82%
Cost of Funds Supporting
  Interest-Earning Assets ..............                    16.05
Net Yield on Interest-Earning Assets ...                     3.66

(*) Rates include the CER adjustment.

                                                              GRUPO GALICIA, FISCAL YEAR ENDED DECEMBER 31, 2002 (*)
                                         ------------------------------------------------------------------------------------------
                                                                           PESOS                                        DOLLARS
                                         ------------------------------------------------------------------------------------------
                                                          INTEREST         AVERAGE                       INTEREST       AVERAGE
                                           AVERAGE         EARNED/          REAL/          AVERAGE        EARNED/        REAL/
                                           BALANCE          PAID            RATE           BALANCE         PAID          RATE
-----------------------------------------------------------------------------------------------------------------------------------
                                                       (in millions of February 28, 2003, constant pesos, except rates)
ASSETS

Government Securities ...............   Ps.   575.4      Ps.  213.7          (37.22)%   Ps. 1,680.2     Ps.   84.9         61.74%
Loans
   Private Sector ...................       4,959.9         1,345.1          (41.81)        1,989.6          102.1         61.85
   Public Sector ....................       8,312.9         2,956.9          (37.94)            0.0            0.0          0.00
                                        -----------      ----------      ----------     -----------     ----------    ----------
Total Loans .........................      13,272.8         4,302.0          (39.38)        1,989.6          102.1         61.85
Other ...............................       1,338.9           448.8          (38.88)        8,096.6          161.6         57.03
                                        -----------      ----------      ----------     -----------     ----------    ----------
TOTAL INTEREST-EARNING ASSETS .......      15,187.1         4,964.5          (39.26)%      11,766.4          348.6         58.52%
Cash and Gold .......................         226.6               -               -           190.7              -             -
Equity in Other Companies ...........         538.5               -               -           253.0              -             -
Other Assets ........................       2,090.7               -               -           670.0              -             -
Allowances ..........................      (1,281.3)              -               -          (140.8)             -             -
                                        -----------      ----------      ----------     -----------     ----------    ----------
TOTAL ASSETS ........................   Ps.16,761.6               -               -     Ps.12,739.3              -             -

LIABILITIES AND EQUITY

Deposits
   Current Accounts .................   Ps.   161.7      Ps.   17.1          (49.36)%   Ps.    32.9     Ps.    0.4         55.83%
   Saving Accounts ..................       1,000.3             6.6          (53.92)          451.5            2.5         54.82
   Time Deposits ....................       2,917.4         1,214.1          (35.17)        3,454.1          120.6         59.33
                                        -----------      ----------      ----------     -----------     ----------    ----------
TOTAL INTEREST-BEARING DEPOSITS .....       4,079.4         1,237.8          (40.33)        3,938.5          123.5         58.78
Argentine Central Bank ..............       7,144.1         2,237.7          (39.88)            3.5            0.1         58.05
Other Financial Entities ............         198.8            29.8          (47.37)        2,579.9          216.1         66.85
Debt Securities .....................          16.3             2.4          (47.54)        2,552.2          149.2         62.96
Other ...............................         769.9           200.8          (42.27)        1,613.7          128.6         66.23
                                        -----------      ----------      ----------     -----------     ----------    ----------
TOTAL INTEREST-BEARING
  LIABILITIES .......................      12,208.5         3,708.5          (40.32)%      10,687.8          617.5         62.85%
Demand deposits .....................         622.9               -               -           232.0              -             -
Other Liabilities ...................       2,455.7               -               -           714.7              -             -
Minority Interests ..................         147.4               -               -               -              -             -
Shareholders' Equity ................       2,431.9               -               -               -              -             -
                                        -----------      ----------      ----------     -----------     ----------    ----------
TOTAL LIABILITIES AND EQUITY ........   Ps.17,866.4               -               -     Ps.11,634.5              -             -
SPREAD AND NET YIELD
Interest Rate Spread ................                                          1.06%                                       (4.33)%
Cost of Funds Supporting
  Interest-Earning Assets ...........                                        (43.04)                                       62.03
Net Yield on Interest-Earning
  Assets ............................                                        (50.44)                                       50.43

                                                     GRUPO GALICIA, FISCAL YEAR ENDED DECEMBER 31, 2002 (*)
                                                --------------------------------------------------------------
                                                                                                 TOTAL
                                                --------------------------------------------------------------
                                                                       INTEREST                AVERAGE
                                                    AVERAGE             EARNED/                  REAL/
                                                    BALANCE              PAID                    RATE
--------------------------------------------------------------------------------------------------------------
                                               (in millions of February 28, 2003, constant pesos, except rates)
ASSETS

Government Securities .......................     Ps. 2,255.6         Ps.  298.6                   36.49%
Loans
   Private Sector ...........................         6,949.5            1,447.2                  (12.13)
   Public Sector ............................         8,312.9            2,956.9                  (37.94)
                                                  -----------         ----------              ----------
Total Loans .................................        15,262.4            4,404.1                  (26.18)
Other .......................................         9,435.5              610.4                   43.42
                                                  -----------         ----------              ----------
TOTAL INTEREST-EARNING ASSETS ...............        26,953.5            5,313.1                    3.43%
Cash and Gold ...............................           417.3                  -                       -
Equity in Other Companies ...................           791.5                  -                       -
Other Assets ................................         2,760.7                  -                       -
Allowances ..................................        (1,422.1)                 -                       -
                                                  -----------         ----------              ----------
TOTAL ASSETS ................................     Ps.29,500.9                  -                       -

LIABILITIES AND EQUITY

Deposits
   Current Accounts .........................     Ps.   194.6         Ps.   17.5                  (31.57)%
   Saving Accounts ..........................         1,451.8                9.1                  (20.11)
   Time Deposits ............................         6,371.5            1,334.7                   16.06
                                                  -----------         ----------              ----------
TOTAL INTEREST-BEARING DEPOSITS .............         8,017.9            1,361.3                    8.35
Argentine Central Bank ......................         7,147.6            2,237.8                  (39.83)
Other Financial Entities ....................         2,778.7              245.9                   58.68
Debt Securities .............................         2,568.5              151.6                   62.26
Other .......................................         2,383.6              329.4                   31.19
                                                  -----------         ----------              ----------
TOTAL INTEREST-BEARING
  LIABILITIES ...............................        22,896.3            4,326.0                    7.84%
Demand deposits .............................           854.9                  -                       -
Other Liabilities ...........................         3,170.4                  -                       -
Minority Interests ..........................           147.4                  -                       -
Shareholders' Equity ........................         2,431.9                  -                       -
                                                  -----------         ----------              ----------
TOTAL LIABILITIES AND EQUITY ................     Ps.29,500.9                  -                       -
SPREAD AND NET YIELD
Interest Rate Spread ........................                                                      (4.41)%
Cost of Funds Supporting
  Interest-Earning Assets ...................                                                       2.83
Net Yield on Interest-Earning
  Assets ....................................                                                      (6.41)

(*) Rates include the CER adjustment.

The following tables show Grupo Galicia's consolidated average balances, interest earned or paid and nominal interest rates for interest-earning assets and interest-bearing liabilities for the fiscal year ended December 31, 2001.

                                                            GRUPO GALICIA, FISCAL YEAR ENDED DECEMBER 31, 2001
                                         ----------------------------------------------------------------------------------
                                                                         PESOS                                   DOLLARS
                                         ----------------------------------------------------------------------------------
                                                          INTEREST      AVERAGE                     INTEREST     AVERAGE
                                          AVERAGE          EARNED/       YIELD/     AVERAGE          EARNED/      YIELD/
                                          BALANCE           PAID         RATE       BALANCE           PAID        RATE
---------------------------------------------------------------------------------------------------------------------------
                                                 (in millions of February 28, 2003, constant pesos, except rates)
ASSETS

Government Securities ................   Ps.   43.2      Ps.   6.9         15.97% Ps.  2,488.1     Ps. 270.5        10.87%
Loans
   Private Sector ....................      3,903.3          986.2         25.27       9,840.0       1,192.3        12.12
   Public Sector .....................        225.4           48.5         21.52       6,033.6         979.0        16.23
                                         ----------      ---------      --------  ------------     ---------     --------
Total Loans ..........................      4,128.7        1,034.7         25.06      15,873.6       2,171.3        13.68
Other ................................        136.3            8.2          6.02       4,584.3         317.5         6.93
                                         ----------      ---------      --------  ------------     ---------     --------
TOTAL INTEREST-EARNING ASSETS ........      4,308.2        1,049.8         24.37%     22,946.0       2,759.3        12.03%
Cash and Gold ........................        462.9              -             -         291.5             -            -
Equity in Other Companies ............        277.4              -             -         347.9             -            -
Other Assets .........................      3,019.6              -             -       1,074.9             -            -
Allowances ...........................       (317.3)             -             -        (443.7)            -            -
                                         ----------      ---------      --------  ------------     ---------     --------
TOTAL ASSETS .........................   Ps.7,750.8              -             -  Ps. 24,216.6             -            -

LIABILITIES AND EQUITY

Deposits
   Current Accounts ..................   Ps.  204.3      Ps.  17.1          8.37% Ps.    535.6     Ps.  35.7         6.67%
   Saving Accounts ...................      1,006.1           16.9          1.68       1,415.5          21.4         1.51
   Time Deposits .....................      2,285.2          320.7         14.03      11,965.1       1,067.8         8.92
                                         ----------      ---------      --------  ------------     ---------     --------
TOTAL INTEREST-BEARING DEPOSITS ......      3,495.6          354.7         10.15      13,916.2       1,124.9         8.08
Argentine Central Bank ...............        111.8           10.8          9.66          37.9           3.1         8.18
Other Financial Entities .............         37.7           14.3         37.93       1,670.8         132.9         7.95
Debt Securities ......................            -              -             -       2,934.2         245.7         8.37
Other ................................          1.5            0.2         13.33       1,841.6         138.8         7.54
                                         ----------      ---------      --------  ------------     ---------     --------
TOTAL INTEREST-BEARING
  LIABILITIES ........................      3,646.6          380.0         10.42%     20,400.7       1,645.4         8.07%
Demand deposits ......................      1,079.7              -             -         121.7             -            -
Other Liabilities ....................      1,070.3              -             -       2,335.7             -            -
Minority Interests ...................        259.3              -             -             -             -            -
Shareholders' Equity .................      3,053.4              -             -             -             -            -
                                         ----------      ---------      --------  ------------     ---------     --------
TOTAL LIABILITIES AND EQUITY .........   Ps.9,109.3              -             -  Ps. 22,858.1             -            -
SPREAD AND NET YIELD
Interest Rate Spread .................                                     13.95%                                    3.96%
Cost of Funds Supporting
  Interest-Earning Assets ............                                      8.82                                     7.17
Net Yield on Interest-Earning
  Assets .............................                                     15.55                                     4.85

                                               GRUPO GALICIA, FISCAL YEAR ENDED DECEMBER 31, 2001
                                         -----------------------------------------------------------
                                                                                              TOTAL
                                         -----------------------------------------------------------
                                                                      INTEREST               AVERAGE
                                            AVERAGE                    EARNED/                YIELD/
                                            BALANCE                     PAID                   RATE
-----------------------------------------------------------------------------------------------------
                                        (in millions of February 28, 2003, constant pesos, except rates)
ASSETS

Government Securities ................    Ps. 2,531.3                Ps.   277.4                10.96%
Loans
   Private Sector ....................       13,743.3                    2,178.5                15.85
   Public Sector .....................        6,259.0                    1,027.5                16.42
                                          -----------                -----------             --------
Total Loans ..........................       20,002.3                    3,206.0                16.03
Other ................................        4,720.6                      325.7                 6.90
                                          -----------                -----------             --------
TOTAL INTEREST-EARNING ASSETS ........       27,254.2                    3,809.1                13.98%
Cash and Gold ........................          754.4                          -                    -
Equity in Other Companies ............          625.3                          -                    -
Other Assets .........................        4,094.5                          -                    -
Allowances ...........................         (761.0)                         -                    -
                                          -----------                -----------             --------
TOTAL ASSETS .........................    Ps.31,967.4                          -                    -

LIABILITIES AND EQUITY

Deposits
   Current Accounts ..................    Ps.   739.9                Ps.    52.8                 7.14%
   Saving Accounts ...................        2,421.6                       38.3                 1.58
   Time Deposits .....................       14,250.3                    1,388.5                 9.74
                                          -----------                -----------             --------
TOTAL INTEREST-BEARING DEPOSITS ......       17,411.8                    1,479.6                 8.50
Argentine Central Bank ...............          149.7                       13.9                 9.29
Other Financial Entities .............        1,708.5                      147.2                 8.62
Debt Securities ......................        2,934.2                      245.7                 8.37
Other ................................        1,843.1                      139.0                 7.54
                                          -----------                -----------             --------
TOTAL INTEREST-BEARING
  LIABILITIES ........................       24,047.3                    2,025.4                 8.42%
Demand deposits ......................        1,201.4                          -                    -
Other Liabilities ....................        3,406.0                          -                    -
Minority Interests ...................          259.3                          -                    -
Shareholders' Equity .................        3,053.4                          -                    -
                                          -----------                -----------             --------
TOTAL LIABILITIES AND EQUITY .........    Ps.31,967.4                          -                    -
SPREAD AND NET YIELD
Interest Rate Spread .................                                                           5.56%
Cost of Funds Supporting
  Interest-Earning Assets ............                                                           7.43
Net Yield on Interest-Earning
  Assets .............................                                                           6.54

CHANGES IN NET INTEREST INCOME--VOLUME AND RATE ANALYSIS

The table on the following page allocates, by currency, changes in Grupo Galicia's consolidated interest income and interest expenses between changes in the average volume of interest-earning assets and interest-bearing liabilities and changes in their respective nominal interest rates for (i) the fiscal year ended December 31, 2003 compared with the fiscal year ended December 31, 2002; and (ii) the fiscal year ended December 31, 2002, compared with the fiscal year ended December 31, 2001. Differences related to rate or volume are allocated proportionally to the rate variance and the volume variance, respectively.

                                       FISCAL YEAR 2003/ FISCAL YEAR 2002,                FISCAL YEAR 2002/ FISCAL YEAR 2001,
                                      INCREASE (DECREASE) DUE TO CHANGES IN              INCREASE (DECREASE) DUE TO CHANGES IN
                                     -----------------------------------------        -------------------------------------------
                                      VOLUME          RATE         NET CHANGE          VOLUME            RATE          NET CHANGE
                                     -----------------------------------------        --------------------------------------------
                                               (in millions of pesos)             (in millions of February 28, 2003, constant pesos)
INTEREST EARNING ASSETS
Government securities
      Pesos..................        Ps. (81.8)   Ps.   (108.6)   Ps.   (190.4)       Ps.   186.6      Ps.   20.2      Ps.   206.8
      Dollars................              8.5           (45.2)          (36.7)             (70.1)         (115.5)          (185.6)
                                     -----------------------------------------        --------------------------------------------
Total .......................            (73.3)         (153.8)         (227.1)             116.5           (95.3)            21.2
Loans
Private Sector
      Pesos..................           (484.9)         (154.6)         (639.5)             282.3            76.6            358.9
      Dollars................             25.2           (38.1)          (12.9)            (632.8)         (457.4)        (1,090.2)
                                     -----------------------------------------        --------------------------------------------
Total .......................           (459.7)         (192.7)         (652.4)            (350.5)         (380.8)          (731.3)
Public Sector
      Pesos..................           (236.9)       (2,377.4)       (2,614.3)           2,856.5            51.9          2,908.4
      Dollars................                -               -               -             (489.6)         (489.4)          (979.0)
                                     -----------------------------------------        --------------------------------------------
Total .......................           (236.9)       (2,377.4)       (2,614.3)           2,366.9          (437.5)         1,929.4
Other
      Pesos..................             (9.7)         (378.0)         (387.7)             288.8           151.8            440.6
      Dollars................            (38.2)          (59.0)          (97.2)          (2,207.0)        2,051.1           (155.9)
                                     -----------------------------------------        --------------------------------------------
Total .......................            (47.9)         (437.0)         (484.9)          (1,918.2)        2,202.9            284.7
TOTAL INTEREST-EARNING ASSETS
      Pesos..................           (813.3)       (3,018.6)       (3,831.9)           3,614.2           300.5          3,914.7
      Dollars................             (4.5)         (142.3)         (146.8)          (3,399.5)          988.8         (2,410.7)
                                     -----------------------------------------        --------------------------------------------
TOTAL .......................        Ps.(817.8)   Ps. (3,160.9)   Ps. (3,978.7)       Ps.   214.7      Ps.1,289.3      Ps. 1,504.0
                                     -----------------------------------------        --------------------------------------------
INTEREST BEARING LIABILITIES
Demand Account
      Pesos..................              2.9           (17.0)          (14.1)                 -               -                -
      Dollars................                -            (0.4)           (0.4)             (19.0)          (16.3)           (35.3)
                                     -----------------------------------------        --------------------------------------------
Total .......................              2.9           (17.4)          (14.5)             (19.0)          (16.3)           (35.3)
Saving Account
      Pesos..................             (4.8)            1.6            (3.2)                 -           (10.3)           (10.3)
      Dollars................             (0.9)           (1.6)           (2.5)              (9.8)           (9.1)           (18.9)
                                     -----------------------------------------        --------------------------------------------
Total .......................             (5.7)            0.0            (5.7)              (9.8)          (19.4)           (29.2)
Time Deposits
      Pesos..................           (247.4)         (736.1)         (983.5)             110.1           783.3            893.4
      Dollars................            (52.6)          (41.2)          (93.8)            (510.2)         (437.0)          (947.2)
                                     -----------------------------------------        --------------------------------------------
Total .......................           (300.0)         (777.3)       (1,077.3)            (400.1)          346.3            (53.8)
With the Argentine Central Bank
      Pesos..................            331.4        (2,096.0)       (1,764.6)           2,149.4            77.5          2,226.9
      Dollars................                -            (0.1)           (0.1)              (1.7)           (1.3)            (3.0)
                                     -----------------------------------------        --------------------------------------------
Total .......................            331.4        (2,096.1)       (1,764.7)           2,147.7            76.2          2,223.9
With Other Financial Entities
      Pesos..................             (3.2)           43.3            40.1               18.1            (2.6)            15.5
      Dollars................            (49.8)          (45.3)          (95.1)              75.8             7.4             83.2
                                     -----------------------------------------        --------------------------------------------
Total .......................            (53.0)           (2.0)          (55.0)              93.9             4.8             98.7
Negotiable Obligations
      Pesos..................             (0.3)           (2.1)           (2.4)               2.4               -              2.4
      Dollars................              8.1            (3.1)            5.0              (29.2)          (67.3)           (96.5)
                                     -----------------------------------------        --------------------------------------------
Total........................              7.8            (5.2)            2.6              (26.8)          (67.3)           (94.1)
Other liabilities
      Pesos..................           (158.4)          (32.8)         (191.2)             200.5             0.1            200.6
      Dollars................            (21.2)          (49.0)          (70.2)             (19.2)            9.0            (10.2)
                                     -----------------------------------------        --------------------------------------------
Total .......................           (179.6)          (81.8)         (261.4)             181.3             9.1            190.4
TOTAL INTEREST BEARING LIABILITIES
      Pesos..................            (79.8)       (2,839.1)       (2,918.9)           2,480.5           848.0          3,328.5
      Dollars................           (116.4)         (140.7)         (257.1)            (513.3)         (514.6)        (1,027.9)
                                     -----------------------------------------        --------------------------------------------
TOTAL .......................        Ps.(196.2)   Ps. (2,979.8)   Ps. (3,176.0)       Ps. 1,967.2      Ps.  333.4      Ps. 2,300.6

                                                                                           GRUPO GALICIA
                                                                    -----------------------------------------------------------
                                                                                  FISCAL YEAR ENDED DECEMBER 31,
                                                                    -----------------------------------------------------------
                                                                            2003                  2002                 2001
                                                                    -----------------------------------------------------------
                                                                     (in millions of        (in millions of February 28, 2003,
                                                                    pesos, except rates)       constant pesos, except rates)
TOTAL AVERAGE INTEREST-EARNING ASSETS
     Pesos......................................................        Ps. 12,130.3          Ps. 15,187.1          Ps. 4,308.2
     Dollars....................................................             8,594.8              11,766.4             22,946.0
                                                                        -------------------------------------------------------
TOTAL...........................................................            20,725.1              26,953.5             27,254.2
NET INTEREST EARNED (1)
     Pesos......................................................               343.0               1,256.0                669.8
     Dollars....................................................              (158.6)               (268.9)             1,113.9
                                                                        -------------------------------------------------------
TOTAL...........................................................               184.4                 987.1              1,783.7
NET YIELD ON INTEREST-EARNING ASSETS (2) (%)
     Pesos......................................................                2.83%                 8.27%               15.55%
     Dollars....................................................               (1.85)                (2.29)                4.85
WEIGHTED-AVERAGE YIELD..........................................                0.89                  3.66                 6.54
INTEREST SPREAD, NOMINAL BASIS (3) (%)
     Pesos......................................................                2.22                  2.31                13.95
     Dollars....................................................               (2.42)                (2.82)                3.96
WEIGHTED-AVERAGE YIELD..........................................                0.27                  0.82                 5.56
NET YIELD ON INTEREST-EARNING ASSETS, REAL BASIS (4) (%)
     Pesos......................................................                   -                (50.44)                   -
     Dollars....................................................                   -                 50.43                    -
WEIGHTED-AVERAGE YIELD..........................................                   -                 (6.41)                   -
INTEREST SPREAD, REAL BASIS (4) (%)
     Pesos......................................................                   -                  1.06                    -
     Dollars....................................................                   -                 (4.33)                   -
WEIGHTED-AVERAGE YIELD..........................................                   -                 (4.41)                   -
                                                                        =======================================================

(*) Rates have been annualized.

(1) Net interest earned corresponds to the Group's or the Bank's net financial income plus:

- Credit related fees (included in "Income from Services - In Relation to Lending Transactions" in the Income Statement) - Contributions to the deposit insurance system, and contributions and taxes on financial income included in the income statement line "Financial Expenses - Other," less:

- Net income from the corporate securities included under "Financial Income/Expenses- Interest Income and Holdings Gains/Losses from Government and Corporate Securities," in the income statement and

- Differences in quotation of gold and foreign currency and premiums on foreign currency transactions, included in "Financial Income/Expenses - Other," in the income statement.

(2) Net interest earned, divided by average interest-earning assets.

(3) Interest spread, nominal basis is the difference between the average nominal interest rate on interest-earning assets and the average nominal interest rate on interest-bearing deposits.

(4) Net interest margin and interest spread, presented on a real basis, when compared with the corresponding information presented on a nominal basis, reflect the gain or loss in purchasing power of the dollar caused by the difference between the pesos fluctuation and inflation in Argentina for each period.

GOVERNMENT AND CORPORATE SECURITIES

The following table shows Grupo Galicia's holdings of government and corporate securities at the balance sheet dates, and the breakdown of the portfolio in accordance with the Argentine Central Bank classification system

and by the securities' currency of denomination. As of December 31, 2003, the Bank's holdings of government and corporate securities were identical to its net position as the Bank did not enter into any forward purchases or sales and no spot transactions pending settlement were outstanding as of that date.

                                                                                        GRUPO GALICIA,
                                                                       ---------------------------------------------
                                                                                      AS OF DECEMBER 31,
                                                                       ---------------------------------------------
                                                                             2003                        2002
                                                                       ---------------------------------------------
                                                                       (in millions of             (in millions of
                                                                            pesos)                February 28, 2003,
                                                                                                   constant pesos)
GOVERNMENT SECURITIES
Pesos
     Trading..........................................................    Ps.   313.1                 Ps.     2.5
     Investments......................................................              -                           -
     Available for Sale...............................................              -                           -
     Unlisted Securities..............................................           79.3                       140.4
                                                                          ---------------------------------------
TOTAL GOVERNMENT SECURITIES IN PESOS..................................    Ps.   392.4                 Ps.   142.9
Dollars
     Trading..........................................................    Ps.    14.5                 Ps.     4.8
     Investments......................................................        2,485.1                     1,673.0
     Available for Sale...............................................              -                           -
     Unlisted Securities .............................................            6.9                         6.2
                                                                          ---------------------------------------
TOTAL GOVERNMENT SECURITIES IN DOLLARS................................    Ps. 2,506.5                 Ps. 1,684.0
                                                                          ---------------------------------------
TOTAL GOVERNMENT SECURITIES...........................................    Ps. 2,898.9                 Ps. 1,826.9
CORPORATE EQUITY SECURITIES (QUOTED)
     Pesos............................................................              -                           -
     Dollars..........................................................              -                           -
                                                                          ---------------------------------------
TOTAL CORPORATE EQUITY SECURITIES ....................................              -                           -
                                                                          ---------------------------------------
TOTAL GOVERNMENT AND CORPORATE EQUITY SECURITIES .....................    Ps. 2,898.9                 Ps. 1,826.9
MUTUAL FUNDS..........................................................              -                           -
CORPORATE DEBT SECURITIES
     Pesos............................................................    Ps.     0.2                 Ps.     0.2
     Dollars..........................................................            1.0                         2.7
                                                                          ---------------------------------------
TOTAL CORPORATE DEBT SECURITIES.......................................    Ps.     1.2                 Ps.     2.9
                                                                          ---------------------------------------
TOTAL GOVERNMENT AND CORPORATE SECURITIES ............................    Ps. 2,900.1                 Ps. 1,829.8
                                                                          =======================================

As of December 31, 2003, the Group's portfolio of government securities amounted to Ps. 2,898.9 million. Of such total Ps. 2,897.3 million corresponded to the Bank and the remaining Ps. 1.6 million to Sudamericana Holding S.A. The Bank's total mainly comprised (i) peso-denominated Lebac for Ps. 305.5 million
(held for trading in the Argentine Central Bank classification system), (ii)
peso-denominated Fiscal Credit Certificates (unlisted) for Ps. 78.6 million, and
(iii) dollar-denominated Argentine Republic External Notes for Ps. 875.1 million and BODEN 2012 for Ps. 1,610.0 million (held for investment in the Argentine Central Bank classification system), all of them recorded by the Bank in Argentina. The BODEN 2012 corresponded to the bonds actually received by the Bank as compensation for the effects of asymmetric pesification (compensatory and hedge bonds).

The increase in the Group's holdings of government securities in 2003 over the Ps. 1,826.9 million held as of December 31, 2002, was mainly due to the receipt by the Bank of additional compensatory BODEN 2012 during 2003, in the amount of US$609.2 million of nominal BODEN 2012, net of US$137 million of nominal BODEN 2012 transferred to Galicia Uruguay and used by the latter to settle the exchange offer made to its depositors in 2003. This increase was partially offset by the decrease in the exchange rate during 2003, from Ps. 3.336 as of December 31, 2002 to Ps. 2.933 as of December 31, 2003.

The increase in the Group's holdings of government securities in 2002 as compared with the Ps. 273.2 million held as of December 31, 2001, was mainly due to the recording in 2002, by the Bank, of BODEN 2012 as compensation for asymmetric pesification, as established by Decrees No. 214/02, 494/02, 905/02 and 2167/02, the latter published in the Official Gazette on October 29, 2002. See "--Main Regulatory Changes in 2002 and 2003--

Compensation to Financial Institutions." This increase was also attributable to the increase in the exchange rate during 2002.

The BODEN 2012 effectively received by the Bank are recorded as government securities while the BODEN 2012 still to be received are recorded as "Other Receivables from Financial Brokerage."

In accordance with Argentine Central Bank rules, quoted government securities held-for-trading purposes are carried at their Argentine closing market quotation less estimated selling costs.

Argentine Central Bank Communique "A" 3857, dated January 7, 2003, established that financial institutions could record as investments, only those securities incorporated to their balance sheets through December 31, 2002. After that date, the value of any securities (except the compensatory and the hedge bonds received and to be received according to applicable compensation rules or other compensation to be received) incorporated into a bank's position will be marked-to-market.

As of December 31, 2003, in accordance with Argentine Central Bank accounting rules, the Bank recorded the BODEN 2012 already received and its right to acquire BODEN 2012 in the future as assets having equal value to 100% of the face value of such BODEN 2012. The estimated market value of these assets is significantly lower. As of June 25, 2004, the BODEN 2012 were trading at approximately 66.90% of par value. See Item 3. "Key Information--Risk Factors--Risk Factors Relating to the Bank--The Bank has recorded BODEN 2012 and its rights to receive or acquire future BODEN 2012 as assets having a value equal to the face amount of the BODEN 2012 received or to be received and acquired, which does not reflect its actual market value," Item 3. "Key Information--Risk Factors--Risk Factors Relating to the Bank--There is a possibility that the Bank receives less BODEN 2012 from the Argentine government than it believes it is entitled to receive," and Item 3. "Key Information--Risk Factors--Risk Factors Relating to the Bank--The BODEN 2012 may be subject to subsequent renegotiation." The Argentine Republic External Notes were held for investment and carried at their face value.

The Argentine Republic External Notes and the Tax Credit Certificates are in payment default.

Through its Communique "A" 3278, the Argentine Central Bank established that effective June 1, 2001, quoted government securities in investment accounts had to be valued at their acquisition cost increased by accruing their internal rate of return over the period elapsed since the date of inclusion of the securities in the investment account category. This was also applicable to the securities incorporated in investments accounts prior to June 1, 2001. In this case, the acquisition cost was established as their book value as of May 31, 2001, resulting from the previous valuation rules. The change in valuation rules was not be retroactive nor should it generate any accounting adjustments. For government securities previously included in trading accounts, the cost value is their closing market value as of the day before their transfer to an investment account. In accordance with Argentine Central Bank rules, the carrying value of investment-account securities must be reduced at each month end for the positive difference between their book value and their market value increased by 20%.

For the securities received by financial institutions as compensation for the effects of asymmetric pesification under the provisions of Decrees No. 905/02 and No. 2167/02 carried at their face value (in the Bank's case, BODEN 2012), the reduction mentioned in the preceding paragraph for the difference between book value and market value increased by 20.0% is not applicable. However, on October 29, 2002, Argentine Central Bank Communique "A" 3785 restricted the distribution of cash dividends by establishing that banks should adjust their earnings to be distributed as cash dividends with the difference between the market value and the carrying value of these bonds.

Beginning March 1, 2000, quoted government securities classified as investments began to be carried at their acquisition cost increased at the end of each service period by the corresponding coupon rate.

Unquoted government securities are carried at the lower of cost or net realizable value plus any applicable contractual adjustments for movements in price indices, or at their technical values, which are government-published schedules of value that increase over the term of the security.

We also own, manage and trade a portfolio of corporate securities. Unquoted corporate debt securities are carried at the residual value plus accrued interest. Quoted corporate debt and equity securities are considered as held for trading and, therefore, are carried at market value.

The following table analyzes the remaining maturity and weighted-average yield of Grupo Galicia's holdings of investment and trading government and corporate securities as of December 31, 2003. The Group's investment and trading portfolio yields do not contain any tax equivalency adjustments.

                                                                             MATURITY YIELD
                               -----------------------------------------------------------------------------------------------------
                                                                                                                MATURING
                                                                                          MATURING AFTER 1   AFTER 5 YEARS  MATURING
                                                     PAST                  MATURING      YEAR BUT WITHIN 5   BUT WITHIN 10   AFTER
                                                DUE/CALLABLE            WITHIN 1 YEAR          YEARS              YEARS     10 YEARS
                               -----------------------------------------------------------------------------------------------------
                                TOTAL BOOK    BOOK         BOOK                 BOOK     YIELD     BOOK        YIELD   BOOK   YIELD
                                  VALUE       VALUE        VALUE    YIELD (1)   VALUE     (1)      VALUE        (1)    VALUE   (1)
                               -----------------------------------------------------------------------------------------------------
                                                                   (in millions of pesos)
GOVERNMENT SECURITIES
 HELD FOR TRADING
 AND BROKERAGE PURPOSES
 (CARRIED AT MARKET VALUE)
  Pesos....................... Ps.   313.1  Ps.   2.8   Ps. 298.7      10.6%  Ps.  11.6    9.1%          -         -     -       -
  Dollars                             14.5        0.7         1.7       0.6         6.6    1.6   Ps.   5.5       1.6%    -       -
HELD FOR INVESTMENT
 (CARRIED AT AMORTIZED COST)
  Pesos.......................           -          -           -         -           -      -           -         -     -       -
  Dollars.....................     2,485.1      875.1           -         -       805.0    1.6       805.0       1.6     -       -
UNLISTED SECURITIES
  Pesos.......................        79.3          -         0.7       9.0        78.6   47.7           -         -     -       -
  Dollars.....................         6.9          -           -         -         2.6    1.3         4.3       1.3     -       -
TOTAL GOVERNMENT SECURITIES... Ps. 2,898.9  Ps. 878.6   Ps. 301.1      10.6%  Ps. 904.4    5.7%  Ps. 814.8       1.6%    -       -
CORPORATE DEBT SECURITIES.....         1.2          -           -         -         0.2      -         1.0         -     -       -
MUTUAL FUNDS..................           -          -           -         -           -      -           -         -     -       -
TOTAL PORTFOLIO............... Ps. 2,900.1  Ps. 878.6   Ps. 301.1      10.6%  Ps. 904.6    5.7%  Ps. 815.8       1.6%    -       -

(1) Effective yield based on December 31, 2003 quoted market values.

                                                                      AS OF DECEMBER 31,                        AS OF JUNE 30,
                                                --------------------------------------------------------   -------------------------
                                                    2003           2002           2001           2000          2000         1999
                                                ------------------------------------------------------------------------------------
                                               (in millions
                                                  of pesos )               (in millions of February 28, 2003, constant pesos)
Principal and Interest
Nonfinancial Public Sector...................   Ps.  7,751.4   Ps.  7,634.7   Ps.  8,669.7  Ps.  5,762.7   Ps. 5,516.8  Ps. 4,247.4
Local Financial Sector.......................          194.7          134.8          190.8       1,121.4         795.9        939.8
Nonfinancial Private Sector and Residents
 Abroad (1)
   Advances...................................         219.1          227.0          811.1         968.0       1,742.7      1,505.4
   Notes......................................       1,387.8        1,544.3        3,888.9       4,948.6       5,408.8      4,766.8
   Mortgage Loans.............................         719.6          864.0        3,298.2       3,504.6       2,991.9      2,780.8
   Pledge Loans...............................          54.6          191.5          841.8         875.9         858.5        905.0
   Personal Loans.............................          55.2          120.0          583.4         812.0         728.0        674.0
   Credit-Cards Loans.........................         818.8          585.0        1,875.3       1,667.1       1,445.0      1,230.9
   Placements in Correspondent Banks..........         172.4          158.3          377.5         770.6       1,229.5      1,679.7
   Other Loans................................         217.9          251.4          196.0         271.6         178.7        262.8
   Accrued Interest, Adjustment and
     Quotation Differences Receivable.........         523.1          608.5          392.1         353.5         313.6        290.0
   Documented Interest........................          (2.5)         (10.8)         (55.1)        (96.9)        (81.3)       (80.0)
                                                ------------   ------------   ------------  ------------  ------------  -----------
Total ........................................      12,112.1       12,308.7       21,069.7      20,959.1      21,128.1     19,202.6
Allowance for Loan Losses.....................      (1,177.3)      (1,681.8)      (1,050.3)       (596.0)       (576.9)      (591.2)
                                                ------------   ------------   ------------  ------------  ------------  -----------
TOTAL LOANS...................................  Ps. 10,934.8   Ps. 10,626.9   Ps. 20,019.4  Ps. 20,363.1  Ps. 20,551.2  Ps.18,611.4
                                                ------------   ------------   ------------  ------------  ------------  -----------

                                                                      AS OF DECEMBER 31,                        AS OF JUNE 30,
                                                --------------------------------------------------------   -------------------------
                                                    2003           2002           2001           2000           2000          1999
                                                ------------------------------------------------------------------------------------
                                               (in millions
                                                  of pesos )               (in millions of February 28, 2003, constant pesos)
Secured Loans
   With Preferred Guarantees (2) (3)..........  Ps.  1,228.8   Ps.  9,280.5   Ps. 13,389.8  Ps.  8,677.9   Ps.  9,128.3  Ps. 8,519.3
   Other Guarantees (3).......................       8,636.7          523.0        1,689.8       2,192.4        2,008.5      2,111.3
                                                ------------   ------------   ------------  ------------   ------------  -----------
TOTAL SECURED LOANS...........................  Ps.  9,865.5   Ps.  9,803.5   Ps. 15,079.6  Ps. 10,870.3   Ps. 11,136.8  Ps.10,630.6
                                                ============   ============   ============  ============   ============  ===========

(1) Categories of loans above include:

- Advances: short-term obligations drawn on by customers through overdrafts. Also, prefinancing of exporters and other customers in connection with documents evidencing the future receipt of cash.

- Notes: endorsed promissory notes, negotiable obligations and other promises to pay signed by one borrower or group of borrowers and factored loans.

- Mortgage loans: loans granted to purchase or improve real estate and collateralized by such real estate and commercial loans secured by a real estate mortgage.

- Pledge loans: loans secured by collateral (such as cars or machinery) other than real estate, were such collateral is an integral part of the loan documents.

- Personal loans: loans to individuals.

- Credit Cards Loans: loans granted through credit cards to credit card holders.

- Placements in correspondent banks: short-term loans to other banks and short-term loans from Banco Galicia Uruguay S.A. to major international banks outside of Uruguay.

- Other loans: loans not included in other categories.

- Documented interest-discount on notes and bills.

(2) Preferred guarantees include mortgages on real estate property or pledges on movable property, such as cars or machinery, where the Bank has the priority right, endorsements of the Federal Office of the Secretary of Finance, pledges of Argentine Government securities, or gold or cash collateral.

(3) Pursuant to Argentine Central Bank Communique "A" 3918, beginnning in April 2003, tax revenues shared by the national government and the provinces ceased to be considered "Preferred Guarantees."

As of December 31, 2003, and since 2002, loans to the nonfinancial public sector have represented the Bank's most important loan portfolio.

As of December 31, 2003, the portfolio of loans to the nonfinancial public sector, valued pursuant to Argentine Central Bank Communique "A" 3911, amounted to Ps. 7,751.4 million (principal amount, adjustment and interests) valued at their present value calculated by applying a 3.0% discount rate in accordance with Argentine Central Bank Communique "A" 3911. Of this total amount:

(i) Ps. 4,277.7 million were secured loans created by Decree No. 1387/01, which the Bank received in exchange for its eligible portfolio of debt instruments of the national government, including bonds and loans to the national government, the terms and conditions of which were later modified by the government, including their pesification.

(ii) Ps. 3,473.7 million were secured loans created by Decree No. 1579/02, which the Bank received in exchange for its portfolio of loans to the provincial governments and for the loans made to such governments through the FFAEFyS. This amount included Ps. 22.0 million of a loan for which the exchange had not been completed as of December 31, 2003. The Bank tendered in the exchange under Decree No. 1579/02 all of its portfolio of loans to provincial governments and opted to exchange all of the BOGAR to be received in the exchange for promissory notes. As of December 31, 2003, the Bank had received BOGAR for the provincial debt for which the exchange had been completed and after the close of the fiscal year it received BOGAR for the remaining portion of provincial debt. As of the date of this annual report, the Bank has not yet received the promissory notes but expects to receive them in the future.

The application in 2003 of Communique "A" 3911 reduced by Ps. 198.1 million the book value of the Bank's secured loan portfolio. For a description of the valuation methodology introduced by Communique

"A"3911, see "--Argentine Banking System and Regulation--Argentine Banking Regulation--Valuation of Public-Sector Assets" and Item 5. "Operating and Financial Review and Prospects--Item 5A. Operating Results--Results of Operations of Grupo Galicia for the Fiscal Years Ending December 31, 2003, December 31, 2002 and December 31, 2001."

As of the date of this annual report, all of the secured loans are current.

As of December 31, 2003, loans to the financial public sector amounted to Ps. 194.7 million and the remaining Ps. 4,166.0 million corresponded to gross loans (plus adjustments and accrued interest) to the nonfinancial private sector. Net loans to the private sector amounted to Ps. 2,988.7 million.

The nominal and relative decrease of the portfolio of loans to the private sector in 2002 and 2003, as compared to pre-crisis periods, is related to their pesification at the Ps. 1.0 per U.S. dollar parity and to the exceptions provided for by the regulations in connection with the applicability of the adjustment by the CER and their adjustment mostly by the CVS, beginning in September 2003 only. This decrease also reflects payments and prepayments made by private-sector debtors (in part, in 2002, by using their restructured deposits held at the Bank to pay off such loans), while certain secured loans begin to amortize in 2005 only. In addition this decrease reflects the fact that most loans to the private sector were not adjusted by an index (until 2003) while the previous periods figures where restated by using the WPI variation. Similarly, the decrease in the private sector portfolio was also the consequence of the securitization or sale of part of the Bank's loan portfolio in the first half of 2002 in order to restore the Bank's liquidity within the framework of the Galicia capitalization and liquidity plan.

During 2003, the only type of loan to the private sector that showed an increase was credit-card lending, which increase was mainly the result of an increase in the loan portfolio of the regional credit card companies.

The decrease in the amount of secured loans during 2002 was mainly due to: (i) the sale of secured loans to the "Secured Loans Trust" in exchange for cash as part of the Galicia capitalization and liquidity plan (see Item 5. "Operating and Financial Review and Prospects--Item 5A. Operating Results--Securitization of Assets"); (ii) to the use of secured loans to acquire the government securities that were delivered to depositors with the Bank that participated in the exchange of restructured deposits for government securities ("Canje I") established by Decree No. 905/02, which was settled in December 2003 (see "--Main Regulatory Changes in 2002 and 2003--Deposits"); and (iii) to the recording of the secured loans granted as collateral of the loan from FFAEFyS as "Miscellaneous Receivables (see Item 5. "Operating and Financial Review and Prospects--Item 5A. Operating Results--Consolidated Assets").

In 2001, through Decree No. 1387/03, the government offered to swap voluntarily debt instruments (bonds and loans) held by local investors representing an exposure to the national and provincial governments for secured loans. The Bank decided to swap all of its eligible portfolio of government securities and loans made to the national and provincial public sectors in exchange for secured loans. The swap of debt instruments originally representing an exposure to the national public sector was completed on November 6, 2001. The swap of eligible debt instruments originally representing an exposure to the provinces was not completed until late 2003. As of December 31, 2001, the Bank had recorded the provincial loans in accordance with the applicable terms and conditions of the new secured loans to be received.

Once the Argentine currency devaluation was effective in January 2002, Decree No. 471/02 enacted on March 13, 2002, established that obligations denominated in U.S. dollars of the national, provincial and municipal public sectors outstanding as of February 3, 2002 would be converted into pesos at the exchange rate of Ps. 1.40 per U.S. dollar and would be adjusted by the CER. Moreover, said Decree established that public sector's obligations would bear a fixed annual interest rate ranging from 3.0% to 5.5% depending on their average life.

Decree No. 1579, dated August 28, 2002, established a new restructuring of provincial government debt. The restructuring consisted of a voluntary exchange of provincial government debt for bonds ("BOGAR") or loans (promissory notes), issued by the FFAEFyS and secured by the federal government's tax receipts shared with the provinces, with a 16-year term, a 2% fixed annual interest rate and amortization in 156 monthly and consecutive installments beginning on March 4, 2005. This Decree included as eligible for tender in the exchange the financial assistance provided to provincial governments through loans the FFAEFyS, a portfolio that was not eligible under

the provisions of Decree No. 1387/01. The Bank tendered in the exchange under Decree No. 579/02 all of its portfolio of loans to provincial governments and pursuant to the option provided by section 3, subsection k of the Decree, opted to exchange all of the BOGAR to be received in the exchange for promissory notes.

                                                                                   AS OF DECEMBER 31,
                                                  ----------------------------------------------------------------------------------
                                                             2003                         2002                       2001
                                                  ----------------------------------------------------------------------------------
                                                     AMOUNT      % OF TOTAL       AMOUNT       % OF TOTAL    AMOUNT       % OF TOTAL
                                                  ----------------------------------------------------------------------------------
                                                  (in millions of pesos)      (in millions of February 28, 2003, constant pesos)
  Corporate................................       Ps.  1,820.4       15.03%    Ps.  2,130.8       17.31%   Ps.  2,728.6       12.95%
  Middle-Market Companies .................              850.3        7.02            890.1        7.23         3,129.8       14.85
Commercial Loans...........................            2,670.7       22.05          3,020.9       24.54         5,858.4       27.80
Individuals................................            1,324.7       10.94          1,297.7       10.54         4,466.0       21.20
Financial Sector (1).......................              357.4        2.95            172.0        1.40           658.6        3.13
Non Financial Public Sector................            7,751.4       64.00          7,634.7       62.03         8,669.7       41.15
Other Loans................................                7.9        0.06            183.4        1.49         1,417.0        6.72
                                                  ---------------------------------------------------------------------------------
TOTAL (2)..................................       Ps. 12,112.1      100.00%    Ps. 12,308.7      100.00%   Ps. 21,069.7      100.00%
                                                  ---------------------------------------------------------------------------------

(1) Includes local and international financial sector. Financial Sector loans are primarily composed by interbank loans(call money loans), overnight deposit at international money center banks and loans to provincial banks.

(2) Before the allowance for loan losses.

                                                              AS OF DECEMBER 31,
                                      ---------------------------------------------------------------
                                              2003                 2002                  2001
                                      ---------------------------------------------------------------
                                                      % OF               % OF                % OF
                                           AMOUNT    TOTAL    AMOUNT    TOTAL     AMOUNT     TOTAL
                                      ---------------------------------------------------------------
                                        (in millions of
                                         pesos, except      (in millions of February 28, 2003,
                                          percentages)      constant pesos, except percentages)
Financial Sector...................   Ps.   357.4     2.95% Ps.   172.0    1.40% Ps.   658.6     3.13%
Services
  Nonfinancial Government Sector...       7,751.4    64.00      7,634.7   62.03      8,669.7    41.15
  Comunic., Transportation Health
  and Others                                320.2     2.64        334.1    2.71        594.5     2.82
  Electricity, Gas, Water
  Supply and Sewage Services.......         239.0     1.97        235.8    1.92        344.4     1.63
  Other Financial Services.........         362.2     2.99        548.5    4.45        399.3     1.90
                                      -----------   ------  ----------- -------  -----------  -------
    Total..........................       8,672.8    71.60      8,753.1   71.11     10,007.9    47.50
Primary Products
  Agriculture and Livestock........         389.6     3.22        464.5    3.77       1370.2     6.50
  Fishing, Forestry and Mining.....          93.0     0.77         91.1    0.74         94.7     0.45
                                      -----------   ------  ----------- -------  -----------  -------
   Total...........................         482.6     3.99        555.6    4.51      1,464.9     6.95
Consumer...........................       1,258.5    10.39      1,106.4    8.99      4,466.0    21.20
Retail Trade.......................         278.5     2.30        276.4    2.25        633.3     3.01
Wholesale Trade....................          67.7     0.56         67.6    0.55        247.0     1.17
Construction.......................         404.2     3.34        513.0    4.17        915.3     4.34
Manufacturing
  Foodstuffs.......................         166.7     1.38        205.0    1.66        484.8     2.30
  Transportation Materials.........          18.6     0.15         27.9    0.23         92.3     0.44
  Chemicals and Oil................         109.5     0.90        110.6    0.90        286.2     1.36
  Manufacturing Industries.........         235.0     1.94        391.9    3.18        797.5     3.78
                                      -----------   ------  ----------- -------  -----------  -------
   Total...........................         529.8     4.37        735.4    5.97      1,660.8     7.88
Other Loans (1)....................          60.6     0.50        129.2    1.05      1,015.9     4.82
                                      -----------   ------  ----------- -------  -----------  -------
  TOTAL (2)........................   Ps.12,112.1   100.00% Ps.12,308.7  100.00% Ps.21,069.7   100.00%
                                      -----------   ------  ----------- -------  -----------  -------

(1) "Other loans" is an Argentine Central Bank classification that primarily includes loans in judicial proceedings.

(2) Before the allowance for loan losses.

In the table above, the loans that are identified as consumer loans are classified as consumer loans for purposes of the Argentine Central Bank classification and provisioning system. All of the other loans represent commercial loans for the purpose of the Argentine Central Bank's classification and provisioning system. See " -- Argentine Central Bank's Loan Classification and Loan Loss Provisions."

                                                            AFTER 6
                                                 AFTER 1    MONTHS         AFTER 1     AFTER 3
                                                MONTH BUT     BUT         YEAR BUT    YEARS BUT                 TOTAL AT
                                     WITHIN 1    WITHIN 6  WITHIN 12      WITHIN 3    WITHIN 5      AFTER 5     DECEMBER
                                      MONTH      MONTHS     MONTHS          YEARS       YEARS        YEARS      31, 2003
                                   ----------   ---------  ---------      ---------   ---------   -----------  -----------
                                                               (in millions of pesos)
Nonfinancial Public Sector (1)....          -           -  Ps.   0.6      Ps. 335.9   Ps. 424.6   Ps. 6,990.3  Ps. 7,751.4
Financial Sector (1).............. Ps.  144.1   Ps.   6.2        7.4           29.6         7.4             -        194.7
Private Sector and Residents
Abroad............................    2,630.4       334.4      213.7          412.0       254.4         321.1      4,166.0
   - Advances.....................      183.7        34.1        0.4            0.9           -             -        219.1
   - Promissory Notes.............      674.7       230.5      132.3          183.7       102.1          64.5      1,387.8
   - Mortgages Loans..............       41.5        41.5       56.4          195.7       150.3         234.2        719.6
   - Pledge Loans.................       16.7         8.4        9.8           17.7         1.8           0.2         54.6
   - Personal Loans...............        7.3        19.3       14.7           13.9           -             -         55.2
   - Credit-Cards Loans...........      818.8           -          -              -           -             -        818.8
   - Other Loans..................      367.7         0.6        0.1            0.1         0.2          22.2        390.9
   - Accrued Interest and
      Quotation Differences
      Receivable (1)..............      523.1           -          -              -           -             -        523.1
   - (Documented Interest)........       (2.5)          -          -              -           -             -         (2.5)
   - (Unallocated Collections)....       (0.6)          -          -              -           -             -         (0.6)
Allowance for Loan Losses (2).....   (1,177.3)          -          -              -           -             -     (1,177.3)
                                   ----------   ---------  ---------      ---------   ---------   -----------  -----------
TOTAL LOANS, NET.................. Ps.1,597.2   Ps. 340.6  Ps. 221.7      Ps. 777.5   Ps. 686.4   Ps. 7,311.4  Ps.10,934.8
                                   ==========   =========  =========      =========   =========   ===========  ===========

(1) Interests and CER adjustment were assigned to the first month.

(2) The allowances were assigned to the first month like past due loans and loans in judicial proceedings.

In the table above, consumer loans as classified by the Argentine Central Bank consist of personal loans, credit card loans, as well as certain portions of advances, mortgage loans and pledge loans.

                                                                        (in millions of pesos)             AS A % OF TOTAL LOANS
                                                                        ------------------------           ---------------------
Variable Rate (1)(2)
       Pesos......................................................         Ps.  7,511.8                            81.31%
       Dollars....................................................                289.4                             3.13
                                                                           ------------                            -----
    TOTAL.........................................................         Ps.  7,801.2                            84.44%
Fixed Rate (2)(3)
       Pesos......................................................         Ps.    831.1                             9.00%
       Dollars....................................................                606.0                             6.56
                                                                           ------------                            -----
    TOTAL.........................................................         Ps.  1,437.1                            15.56%
Past Due Loans
       Pesos......................................................         Ps.  1,291.0                            13.97%
       Dollars....................................................                 11.9                             0.13
                                                                           ------------                            -----
    TOTAL.........................................................         Ps.  1,302.9                            14.10
                                                                           ============                            =====

(1) Includes overdraft loans.

(2) Includes past due loans and excludes interest receivable, differences in quotations and the CER adjustment.

(3) Includes short-term and long-term loans whose rates are determined at the beginning of the loans' life.

CREDIT REVIEW PROCESS

Credit risk is the potential for financial loss resulting from the failure of a borrower to honor its financial contractual obligations. Credit risk at Grupo Galicia arises mainly from Banco Galicia's lending activities and from the fact that, in the normal course of its business, the Bank is a party to certain financial transactions with off-balance sheet risk, mainly commitments to extend credit and guarantees granted. See also Item 5. "Operating and Financial Review and Prospects -- Item 5A. Operating Results -- Off-Balance Sheet Arrangements."

The Bank's credit approval and credit risk analysis is a centralized process based on the concept of "opposition of interests." This is achieved through the existing division between the credit and the origination functions thus enabling the Bank to achieve an ongoing and efficient control of asset quality, a proactive management of problem loans, aggressive write-offs of uncollectible loans, and an adequate loan loss provisioning. The process also includes credit-quality monitoring of the borrower, as well as monitoring of problem loans and related losses. The process facilitates early detection of situations that could entail some degree of portfolio impairment and provides appropriate protection of the Bank's assets.

The Bank's credit division is responsible for the Bank's credit risk management policies and procedures, which have to be approved by the board of directors, both for the retail and the corporate banking businesses. The Bank's credit division monitors credit risk management performance, provides ongoing assessment of the loan portfolio risk and establishes the measurement methods to be applied to the different risk products. The credit division is responsible for loan approval and classification of the loan portfolio. The corporate recovery department reporting to the wholesale banking division is responsible for commercial loan portfolio collection. Reporting to the retail banking division, the retail credit department carries out most individual loan portfolio approval and classification under the supervision of the credit division. It also is responsible for collection of loans to individuals.

Individual Portfolio

In the case of loans to individuals, the Bank assesses applications for different types of loans including credit-card loans, current account loans and personal loans with or without guarantees. Origination of mortgage loans was discontinued during 2002, due to the prevailing economic situation. New mortgage loans were launched in late 2003 but origination has been limited.

Applications for these types of loans are assessed through computerized credit-scoring systems that take into account different variables to determine the customer's profile and repayment capacity. Analysis of the information required from applicants and the credit approval or refusal decision is made in a centralized manner. The retail credit department approves loans of up to Ps. 250,000. Above such amount and up to Ps. 1.0 million, the approval of the credit division is required. Loans to individuals of more than Ps. 1 million are approved by the credit committee of the board of directors.

Applicants previous credit performance, both at Banco Galicia or in the financial system as a whole, is verified through internal information and information supplied by Organizacion Veraz S.A., a company that provides credit information services.

The retail credit department classifies the loan portfolio, in accordance with the Argentine Central Bank's applicable rules and the Bank's own internal policy. It also coordinates the relation with the Bank's internal auditor which supervises the portfolio classification, and with the independent auditor. As described under " -- Argentine Central Bank's Loan Classification and Loan Loss Provisions," classification of the retail loan portfolio is based on the borrower's payment performance, pursuant to the rules set forth by the Argentine Central Bank.

With respect to the recovery of past-due loans, the Department manages the consumer loan portfolio from the early stages until the portfolio returns to a normal status or the recovery procedures are abandoned for loans deemed uncollectible. When a consumer loan is more than three days past due, recovery procedures are undertaken through the Collection Center (a specialized area of the Bank's Customer Contact Center) or through letters or visits to the borrower's residence. A follow-up system that performs automated telephone calls is also used for loans in early stages of delinquency. For a better coverage of distant locations, the Department also coordinates actions with

the branch network staff. When these early procedures are exhausted, collection is turned to collection agencies hired by the Bank to handle recovery through litigation or out of court procedures, and the retail credit department supervises the process.

Banco Galicia does not classify, nor does it provide for recovery procedures of certain small balance loans, including credit card balances from membership fees and other administrative costs charged to customers on unsolicited credit cards, small residual balances from lending operations where the cost of recovery and legal costs are prohibitive. These small balance loans are charged-off directly to the income statement.

Commercial Portfolio

Prior to the approval of a loan, Banco Galicia's analysis involves the evaluation and assessment of the corporate borrower and its financial status. For credits to customers with revenues above certain amounts, Banco Galicia makes a standard analysis of each credit line and corporate borrower. For credits to customers with revenues below certain amounts, Banco Galicia uses automated systems of risk evaluation that provide financial and nonfinancial information on the corporate borrower.

Banco Galicia bases the risk assessment on the following factors:

Qualitative analysis..........  assessment of the quality of the corporate
                                borrower by the line officer to which the
                                account is assigned on the basis of personal
                                knowledge.

Economic and financial risk...  quantitative results obtained from analysis of
                                the corporate borrower's financial statements.

Economic sector risk..........  measure of the general risk of the sector in
                                which the corporate borrower operates (based on
                                statistical information gathered from internal
                                and external sources).

The corporate credit department is in charge of the management of the commercial loan portfolio risk and reports to the credit division. As of December 31, 2003, this department reported to the wholesale banking division. The credit division monitors the credit risk of the commercial loan portfolio on a borrower-by-borrower basis and carries out the related procedures. It also classifies the commercial loan portfolio and defines loan-loss provisioning.

The internal audit division is in charge of overseeing the classification of the loan portfolio, in accordance with regulations established by the Argentine Central Bank.

The corporate and middle market banking departments are responsible for the relationship with corporate customers, for both the planning and management of the various lines of business, for credit origination. The corporate restructuring unit was created in 2002 within the corporate banking department in order to carry on the process of restructuring the loans granted to certain large corporate customers. It is expected that in 2004, upon completion of the restructuring of the commercial portfolio under this unit's management, that it will be incorporated into the corporate banking department.

All extensions of credit must be approved by an officer from the credit division. Commercial credit approval is structured depending on the credit limit assigned to each customer, as follows:

- Under Ps. 1.0 million: credit extensions proposed by the business officers must be signed by officers of the corporate credit department, in accordance with pre-established credit authority levels.

- More than Ps. 1.0 million and up to Ps. 3.5 million: credit extensions must be approved by the senior credit committee, composed of at least (i) the Chief Credit Officer (the manager of the credit division) or, alternatively, the manager of the corporate credit department; and (ii) one of the managers of the following departments

pertaining to the wholesale banking division: corporate banking, middle market banking or corporate recovery.

- Above Ps. 3.5 million: credit extensions must be approved by the credit committee of the Bank's board of directors, with the participation of at least one director, the chief credit officer or, alternatively, the manager of the corporate credit department and the manager in charge of the department proposing the extension of credit.

The primary responsibility of the corporate credit department is to approve loans to corporate customers with a credit limit not exceeding Ps. 3.5 million, ensuring the overall objective of maintaining high credit-quality standards and complying with the Bank's policies and procedures. Prior to presentations to the credit committees of corporate borrowers whose credit limit exceeds Ps. 3.5 million, the department prepares analyses and reports that assess the credit risk involved. This department classifies the performing and nonperforming commercial portfolios, in accordance with the regulations set by the Argentine Central Bank and with the Bank's own internal policies. It also coordinates relations with the Argentine Central Bank, the independent auditors, and the rating agencies in connection with credit risk information. Moreover, it reviews all those businesses whose total credit exceeds Ps. 1.0 million, in accordance with a review schedule determined by the level of credit risk.

The corporate recovery department, reporting to the wholesale banking division, is responsible for monitoring and controlling past-due commercial portfolios and for recovery of the entire commercial portfolio. It acts proactively and designs action plans on a case-by-case basis to recover any amounts that exceed the credit limits that are assigned to the different corporate customers. This unit also oversees recovery of problem loans in the corporate portfolio (different from those addressed by the corporate restructuring unit), managing them efficiently and working to regularize the status of those customers that are most attractive to the Bank. Furthermore, this unit manages problem loans for which recovery is being settled through litigation or out of court agreements. This unit also manages and oversees lawsuits carried out in various jurisdictions by outside law firms hired to handle these matters.

The Bank's information systems provide both financial and nonfinancial data about customers. They can also perform automated risk evaluations and financial-statements projections, and have the capacity to generate automatic warnings about situations that may indicate an increase in risk.

As a result of the Argentine economic situation and the measures taken by the government in 2002 (mentioned in other sections of this annual report), during 2003 and 2002, substantially all of the Bank's commercial loan portfolio underwent a restructuring process. This process has not yet been completed.

                              APPROVAL AUTHORITY           NUMBER OF        TOTAL CREDIT(1)        % OF
                           LEVEL IN MILLIONS OF PESOS       ACCOUNTS     IN MILLIONS OF PESOS  TOTAL CREDIT
                           --------------------------      ---------     --------------------  -------------
Credit Committee of the
Board of Directors              Over Ps. 3.5                      127            10,512.2          80.8%
                                More than Ps.
                                1.0 and Up to
Senior Credit Committee         Ps. 3.5                           192               335.2           2.6%

Credit Officers                 Up to Ps. 1.0               1,354,439             2,153.4          16.6%
                                -------------               ---------          ----------         -----
                                        TOTAL               1,354,758            13,000.8         100.0%
                                                            =========          ==========         =====

(1) In accordance with Argentine Central Bank's methodology for preparation of the Statement of Debtor's Status, total credit is defined as the sum of loans, certain accounts representing credit transactions under the balance sheet heading "Other Receivables from Financial Brokerage," assets under financial leases, and the off-balance sheet accounts "Guarantees Granted" and "Unused Balances of Loans Granted."

Policy for Requiring Collateral

The credit review process of Banco Galicia is unaffected by the collateral underlying the loan. The Bank's credit review process and the Argentine Central Bank's loan classification system is based on a borrower's capacity to repay or on the past due status of the loan rather than on the structure of the loan. However, once a loan is

classified, the level of the reserve that should be made against the loan is determined by whether the loan is secured or unsecured.

Although the procedures for assessing a borrower's credit worthiness are unaffected by the collateral of the loan, Banco Galicia performs additional procedures to review the existence and valuation of the collateral on all major loans on an annual basis. For nonperforming commercial loans, this review is performed every six months. Banco Galicia reviews the existence and valuation of collateral on consumer loans on a sample basis.

ARGENTINE CENTRAL BANK'S LOAN CLASSIFICATION AND LOAN LOSS PROVISIONS

General

The Argentine Central Bank's loan classification system is a bifurcated system, that applies certain criteria to classify loans in a bank's consumer portfolio, and another set of criteria to classify loans in its commercial portfolio. The classification system is independent of the currency in which the loan was denominated, since the dual currency system was part of Argentine federal law. Subsequent to December 31, 2001, the economic policy measures taken by the government provided for the "pesification" of most loans denominated in foreign currency outstanding as of December 31, 2001. For a description of the pesification process and some of the measures adopted by the Argentine government to mandatorily restructure private sector loans, see " -- Main Regulatory Changes in 2002 and 2003 -- Loans to the Private Sector and Asymmetric Indexation."

The loan classification criteria applied to loans in the consumer portfolio are based mainly on delinquency aging. For the purposes of the Argentine Central Bank, consumer loans are defined as residential mortgage loans, personal loans, pledge loans, credit-card loans and other types of installment credits to individuals. All other loans are considered as commercial loans. In addition, as permitted by the Argentine Central Bank, the Bank classifies as consumer loans all commercial loans that are for an amount less than Ps. 200,000 for purposes of applying the Argentine Central Bank's provisioning requirements. As a result, the Bank classifies such loans based on the delinquency aging system rather than on the borrower's ability to repay.

The principal criterion of classification of loans in the commercial portfolio is each borrower's ability to pay, as measured principally by such borrower's future cash flow. In this loan classification system, all customers in an economic group (all corporate and financial entities, both domestic and foreign, which are controlled, directly or indirectly, by a customer) are considered as one borrower. For example, if one or more loans in a group of loans to an economic group becomes classified, all loans to that group are reclassified in the most severe classification. Banks may opt to apply the consumer loan classification criteria to commercial loans of up to Ps. 200,000. If a customer has both commercial and consumer loans, consumer loans will be added to commercial loans to determine eligibility for classification in the consumer portfolio.

Interbank transactions of less than 30 days in maturity, as well as loans to provincial governments or to financial institutions majority-owned by the Argentine national, provincial or city governments with governmental guarantees, are excluded from this procedure.

In applying the Argentine Central Bank's classifications to commercial loans, a bank must assess the following factors:

- management and operating history of the borrower;

- present and projected financial situation of the borrower with a review of the borrower's financial statements;

- borrower's payment history and ability to service debt;

- capability of the borrower's internal information and control systems to provide accurate and timely financial information; and

- general risk of the sector in which the borrower operates and its relative position within that sector.

Argentine Central Bank rules establish that periodic evaluations of the commercial portfolio must be performed by an evaluation team independent from the officers that originate the loans. Alternatively, if such officers carry out these evaluations, they must be subject to independent supervision. The retail credit department of the retail banking division and the corporate credit department of the wholesale banking division are responsible for these evaluations, being independent from the business units that originate loans.

The frequency of the evaluation of each borrower depends on the Bank's exposure to such borrower. The Argentine Central Bank requires that the larger the exposure, the more frequent the review. A review is conducted every calendar quarter when credit exposure to that borrower is equal to or in excess of 5.0% of the Bank's Regulatory Capital on the last day of the month prior to the review. Alternatively, a review is conducted every six months when exposure amounts to the lesser of Ps. 1,000,000 or 1.0% of the Bank's Regulatory Capital on the last day of the month prior to review. In any case, at least 50.0% of the commercial portfolio must be reviewed by the end of each six months, and all other borrowers in the commercial portfolio must be reviewed during the fiscal year, so that the entire commercial portfolio is reviewed every fiscal year.

Reviews must be reevaluated and documented in a borrower's file upon a negative change in objective criteria such as an increase in days past due, filing for bankruptcy or protection from creditors, or a judicial proceeding initiated against a borrower. In addition, a reevaluation is triggered when, based on information made available by the Argentine Central Bank, any other financial institution holding at least 10.0% of a borrower's total outstanding credit downgrades its classification of that borrower, or when an independent rating agency downgrades the rating it grants to a borrower's debt securities.

The Argentine Central Bank allows only one level of discrepancy between the classification that the Bank assigns and the lowest classification assigned by at least two other banks whose combined credit to the borrower represents 40.0% or more of the total credit of the borrower within the financial system, considering all banks. Information on each bank's classification of its borrowers is released by the Argentine Central Bank to all banks on a monthly basis. If a bank's classification differs by more than one level from the lowest classification, it must immediately downgrade its classification of the borrower to the same classification, or within one classification level.

Argentine Central Bank Communique "A" 3418 issued on January 3, 2002, allowed for increased flexibility of the rules for classification of borrowers for December 2001 and January 2002, by temporarily extending the late-payment period admitted for borrowers in categories 1 and 2 by 31 additional days, both for the commercial and consumer portfolios. On February 7, 2002, through its Communique "A" 3463, the Argentine Central Bank further extended the late-payment periods established by Communique "A" 3418 by 31 additional days. Subsequently, no additional extension was provided.

Through Communique "A" 3918, issued on April 4, 2003, the Argentine Central Bank also established that beginning on March 31, 2003, customers with debt in the whole financial system of up to Ps. 5.0 million were to be classified in the same manner as consumer loans, that is, they would be automatically classified according to the number of days the debt is past due. In addition, the obligatory reclassification of debtors with different ratings in the financial system was suspended until December 31, 2003. In accordance with such Communique, between December 1, 2001 and March 31, 2003, the number of days such loans had been past due was computed taking one day for every three days past due in the period from December 1, 2001 to March 31, 2003. This treatment was also provided to the portfolio of commercial loans of up to Ps. 200.000, which under the previous rules were already automatically classified according to their delinquency aging.

              Loan Classification                                                      Description
              -------------------                                                      -----------
                                                                              (a)      COMMERCIAL PORTFOLIO

1.  Normal.....................................        Borrower can easily service all financial obligations; shows strong cash
                                                       flow, liquid current financial situation, adequate financial structure,
                                                       punctual payment record, capable management, timely and precise available
                                                       information and satisfactory internal controls. Borrower is determined to be
                                                       in the top 50.0% of an industry that is performing well and has a good
                                                       outlook.

2.  With Special Follow-Up.....................        Cash flow analysis indicates debt can be serviced, with the possibility that
                                                       if not closely observed, future payment capacity could be impaired.

                                                        This category is divided into two subcategories:

                                                        (2.a). Under observation;

                                                        (2.b). Under negotiation or under agreements to refinance.

3.  With Problems..............................        Cash flow analysis evidences problems in normal servicing of existing debt,
                                                       such that if the problems are not solved, they may result in some loss.

4.  High Risk of Insolvency....................        Cash flow analysis demonstrates that full repayment of the borrower's
                                                       obligations is highly improbable.

5.  Uncollectible..............................        Debts in this category are considered total losses. Although these assets
                                                       could have a possibility of recovery under certain future circumstances, lack
                                                       of collectibility is evident as of the date of analysis.  Includes loans to
                                                       insolvent or bankrupt borrowers.

6.  Uncollectible due to Technical Reasons.....        Loans to borrowers indicated by the Argentine Central Bank to be in arrears
                                                       to any liquidated or bankrupt financial entity.  Also includes loans to
                                                       foreign banks and other financial institutions which are not:

                                                       (i)    classified as "normal,"

                                                       (ii)   subject to the supervision of the Argentine Central Bank or other
                                                              similar authority of the country of origin, and

                                                       (iii)  classified as "investment grade"by any of the
                                                              rating agencies admitted to the Argentine Central
                                                              Bank pursuant to Communique "A" 2729.

                                                              (b)      CONSUMER PORTFOLIO

1.  Normal Performance.........................        Current Loans and Loans that are up to 31 days past due on
                                                       principal and/or interest, including loans that are
                                                       current.

2.  Inadequate Performance.....................        Debt payment is occasionally delinquent, with arrears from
                                                       32 to 90 days.

3.  Deficient Performance......................        Debt is in arrears at least 91 days and up to 180 days.

4.  Difficult Collection.......................        Judicial proceedings demanding payment have been initiated against
                                                       the borrower, or the borrower is delinquent with arrears greater than
                                                       180 days and up to one year past due.

5.  Uncollectible..............................        Loans to insolvent or bankrupt borrowers, or borrowers
                                                       subject to judicial proceedings, with little or no
                                                       possibility of collection, or in arrears in excess of one
                                                       year.

6.  Uncollectible due to Technical Reasons.....        Loans to borrowers who fall within the conditions
                                                       described above under Commercial Portfolio --
                                                       Uncollectible due to Technical Reasons.

                                                                        WITH
                                                                        SELF-             WITH            WITHOUT
                                                                     LIQUIDATING         OTHER          PREFERRED
                                                                      PREFERRED         PREFERRED       GUARANTEES
                      LOAN CLASSIFICATION                             GUARANTEES       GUARANTEES       OR SECURITY
                      -------------------                             ----------       ----------       -----------
"With Special Follow Up" and "Inadequate Performance"
"Inadequate Performance - Under Observation"...................            1.0%             3.0%             5.0%
"Inadequate Performance - Under Negotiation or Agreement to                1.0              6.0             12.0
Refinance".....................................................
"With Problems" and "Deficient Performance"....................            1.0             12.0             25.0
"High Risk of Insolvency" and "Difficult Collection"...........            1.0             25.0             50.0
"Uncollectible"................................................            1.0             50.0            100.0
"Uncollectible Due to Technical Reasons".......................          100.0%           100.0%           100.0%

Banks are required to cease the accrual of interest or to establish provisions of 100.0% of the interest accrued on loans to borrowers classified as "with problems," "deficient performance" or under higher risk categories.

Pursuant to Argentine Central Bank regulation, these minimum provisions are not required for interbank financial transactions of less than thirty days, or loans to provincial governments or to financial institutions majority-owned by the Argentine national, provincial or city governments with governmental guarantees.

General Provisions

In addition to the specific loan loss allowances described above, the Argentine Central Bank established in November 1992 a mandatory general allowance requirement of 1.0% for all loans in its "normal" and "normal performance" categories which was fully implemented on January 1, 1996. This general allowance is not required for interbank financial transactions of less than thirty days, or loans to provincial governments or to financial institutions majority-owned by the Argentine national, provincial or city governments with governmental guarantees. This general allowance is determined based on the Bank's judgment of the entire loan portfolio risk at each reporting period.

As of December 31, 2003, the Bank maintained a general loan loss allowance of Ps. 313.6 million, which exceeded by Ps. 293.0 million the 1.0% general allowance minimum requirement for the "normal" and "normal performance" loan portfolio established by the Argentine Central Bank's rules. The excess over the minimum requirement, which represents only 38% of that reported as of December 31, 2002, was maintained in connection with commercial loans under a restructuring process, which restructuring had not been completed.

As of December 31, 2002, Banco Galicia maintained a general loan loss allowance of Ps. 822.3 million, which exceeded by Ps. 787.0 million the 1.0% general allowance minimum requirement for the "normal" and "normal performance" loan portfolio established by the Argentine Central Bank's rules. As explained above, this general allowance is determined based on the Bank's judgment of the entire loan portfolio risk at each reporting period. Therefore, the excess over the minimum requirement reflected the judgment that the consequences of the Argentine economic and political crisis of late 2001 and 2002 on the loan portfolio had not unfolded completely as of the balance sheet date and that the risk that loans that were impaired had not been identified as impaired as of the balance sheet date was still high. In addition, as the restructuring process in the Bank's commercial portfolio began only in the second half of the 2002, uncertainty about the outcome of the process was still high.

As of December 31, 2001, Banco Galicia maintained a general loan loss allowance of Ps. 440.9 million, which exceeded by Ps. 331.6 million the 1.0% general allowance minimum requirement for the "normal" and "normal performance" loan portfolio established by the Argentine Central Bank's rules. The excess over the minimum requirement reflected the fact that the Argentine economic and political crisis of late 2001 had just begun to unfold as of December 31, 2001, the balance sheet date. Therefore, given that the crisis had reached unprecedented levels and in the unprecedented context of uncertainty prevailing at the time, the risk that loans that were impaired had not been identified as impaired as of the balance sheet date was much higher than in previous years.

CLASSIFICATION OF THE LOAN PORTFOLIO BASED ON ARGENTINE CENTRAL BANK REGULATIONS

The following tables set forth the amounts of Banco Galicia's loans past due and the amounts not yet due of the loan portfolio, applying the Argentine Central Bank's loan classification criteria in effect at the dates indicated below.

Nonaccrual loans correspond to those loans classified under the last four categories of the classification.

For December 31, 2001, the Bank applied the 30-day flexibility for the classification of borrowers in categories 1 and 2 which was allowed by Argentine Central Bank Communique "A" 3418, only to the classification of the Bank's portfolio that is automatically classified according to the delinquency aging system (consumer loans and all commercial loans that are for an amount of less than Ps. 200,000). Commercial loans continued to be classified according to the borrower's ability to repay. As a consequence, the classification of consumer loans in the categories 1, 2, and 3 of the classification of the loan portfolio as of December 31, 2001 followed a different criterion than in previous periods. On December 31, 2002, the prior criterion was again applicable.

Loans classified as category "2.b" pursuant to the Argentine Central Bank's classification, which correspond to loans under a restructuring process but that do not constitute nonperforming portfolios, amounted to Ps. 212.6 million as of December 31, 2003, 54.3% lower than the Ps. 464.8 million recorded at the close of fiscal year 2002. In the case of the Bank, this portfolio consisted of commercial loans only.

                                                                             AS OF DECEMBER 31, 2003
                                                       ---------------------------------------------------------------------
                                                       AMOUNTS NOT YET DUE(1)   AMOUNTS PAST DUE          TOTAL LOANS
                                                       ---------------------  -------------------  -------------------------
                                                                    (in millions of pesos, except percentages)
LOAN PORTFOLIO CLASSIFICATION
Normal and Normal Performance.......................   Ps.10,004.9     90.13%          -        -   Ps.  10,004.9      82.60%
With Special Follow-up and Inadequate Performance...         807.9      7.28           -        -           807.9       6.67
With Problems and Deficient Performance.............         237.9      2.14  Ps.  426.5    42.19%          664.4       5.49
High Risk of Insolvency and Difficult Collection....          50.4      0.45       245.4    24.27           295.8       2.44
Uncollectible.......................................             -         -       324.9    32.14           324.9       2.68
Uncollectible Due to Technical Reasons..............             -         -        14.2     1.40            14.2       0.12
                                                       -----------    ------  ----------  -------   -------------     ------
TOTAL...............................................   Ps.11,101.1    100.00% Ps.1,011.0   100.00%  Ps.  12,112.1     100.00%
                                                       -----------    ------  ----------  -------   -------------     ------

                                                                             AS OF DECEMBER 31, 2002
                                                       --------------------------------------------------------------------
                                                       AMOUNTS NOT YET DUE(1)   AMOUNTS PAST DUE          TOTAL LOANS
                                                       ---------------------  -------------------  ------------------------
                                                                   (In millions of  February 28, 2003, constant
                                                                               pesos, except  percentages)
LOAN PORTFOLIO CLASSIFICATION
Normal and Normal Performance.......................   Ps. 9,758.0     88.02%          -        -  Ps.   9,758.0      79.28%
With Special Follow-up and Inadequate Performance...         940.5      8.48           -        -          940.5       7.64
With Problems and Deficient Performance.............         321.5      2.90  Ps.  556.3    45.50%         877.8       7.13
High Risk of Insolvency and Difficult Collection....          66.1      0.60       453.4    37.09          519.5       4.22
Uncollectible.......................................             -         -       198.2    16.21          198.2       1.61
Uncollectible Due to Technical Reasons..............             -         -        14.7     1.20           14.7       0.12
                                                       -----------    ------  ----------   ------  -------------     ------
TOTAL...............................................   Ps.11,086.1    100.00% Ps.1,222.6   100.00% Ps.  12,308.7     100.00%
                                                       -----------    ------  ----------   ------  -------------     ------

                                                                          AS OF DECEMBER 31, 2001
                                                      --------------------------------------------------------------------
                                                       AMOUNTS NOT YET DUE(1)   AMOUNTS PAST DUE          TOTAL LOANS
                                                       ---------------------  -------------------  ------------------------
                                                              (in millions of February 28, 2003, constant pesos,
                                                                              except percentages)
LOAN PORTFOLIO CLASSIFICATION
Normal and Normal Performance.......................   Ps.19,287.1     96.32%          -        -  Ps.  19,287.1      91.54%
With Special Follow-up and Inadequate Performance...         362.0      1.81           -        -          362.0       1.72
With Problems and Deficient Performance.............         198.9      0.99  Ps.  157.4    15.05%         356.3       1.69
High Risk of Insolvency and Difficult Collection....         175.8      0.88       624.7    59.73          800.5       3.80
Uncollectible.......................................             -        -        217.5    20.79          217.5       1.03
Uncollectible Due to Technical Reasons..............             -        -         46.3     4.43           46.3       0.22
                                                       -----------    ------  ----------   ------  -------------     ------
TOTAL...............................................   Ps.20,023.8    100.00% Ps.1,045.9   100.00% Ps.  21,069.7     100.00%
                                                       -----------    ------  ----------   ------  -------------     ------

                                                                         AS OF DECEMBER 31, 2000
                                                      --------------------------------------------------------------------
                                                       AMOUNTS NOT YET DUE(1)   AMOUNTS PAST DUE          TOTAL LOANS
                                                       ---------------------  -------------------  ------------------------
                                                               (in millions of February 28, 2003,constant pesos,
                                                                           except percentages)
LOAN PORTFOLIO CLASSIFICATION
Normal and Normal Performance.......................   Ps.19,776.5     97.74%          -        -  Ps.  19,776.5      94.36%
With Special Follow-up and Inadequate Performance...         335.8      1.66           -        -          335.8       1.60
With Problems and Deficient Performance.............          64.8      0.32  Ps.  104.5    14.41%         169.3       0.81
High Risk of Insolvency and Difficult Collection....          56.6      0.28       400.4    55.19          457.0       2.18
Uncollectible.......................................             -         -       216.8    29.88          216.8       1.03
Uncollectible Due to Technical Reasons..............             -         -         3.7     0.52            3.7       0.02
                                                       -----------    ------  ----------   ------  -------------     ------
TOTAL...............................................   Ps.20,233.7    100.00% Ps.  725.4   100.00% Ps.  20,959.1     100.00%
                                                       -----------    ------  ----------   ------  -------------     ------

                                                                               AS OF JUNE 30, 2000
                                                       --------------------------------------------------------------------
                                                       AMOUNTS NOT YET DUE(1)   AMOUNTS PAST DUE          TOTAL LOANS
                                                       ---------------------  -------------------  ------------------------
                                                           (in millions of February 28, 2003, constant pesos, except
                                                                               percentages)
LOAN PORTFOLIO CLASSIFICATION
Normal and Normal Performance.......................   Ps.19,938.1     97.69%          -        -  Ps.  19,938.1      94.37%
With Special Follow-up and Inadequate Performance...         354.8      1.74           -        -          354.8       1.68
With Problems and Deficient Performance.............          70.1      0.34  Ps.   89.0    12.38%         159.1       0.75
High Risk of Insolvency and Difficult Collection....          46.1      0.23       399.3    55.54          445.4       2.11
Uncollectible.......................................             -         -       229.6    31.93          229.6       1.09
Uncollectible Due to Technical Reasons..............             -         -         1.1     0.15            1.1       0.00
                                                       -----------    ------  ----------   ------  -------------     ------
TOTAL...............................................   Ps.20,409.1    100.00% Ps.  719.0   100.00% Ps.  21,128.1     100.00%
                                                       -----------    ------  ----------   ------  -------------     ------

                                                                               AS OF JUNE 30, 1999
                                                       --------------------------------------------------------------------
                                                       AMOUNTS NOT YET DUE(1)   AMOUNTS PAST DUE          TOTAL LOANS
                                                       ---------------------  -------------------  ------------------------
                                                          (in millions of February 28, 2003, constant pesos, except
                                                                               percentages)
LOAN PORTFOLIO CLASSIFICATION
Normal and Normal Performance.......................   Ps.17,969.2     97.14%          -        -  Ps.  17,969.2      93.58%
With Special Follow-up and Inadequate Performance...         366.9      1.98           -        -          366.9       1.92
With Problems and Deficient Performance.............         104.5      0.57  Ps.  107.4    15.23%         211.9       1.10
High Risk of Insolvency and Difficult Collection....          57.5      0.31       388.9    55.21          446.4       2.32
Uncollectible.......................................             -        -        206.0    29.24          206.0       1.07
Uncollectible Due to Technical Reasons..............             -        -          2.2     0.32            2.2       0.01
                                                       -----------    ------  ----------  -------  -------------     ------
TOTAL...............................................   Ps.18,498.1    100.00% Ps.  704.5  100.00%  Ps.  19,202.6     100.00%
                                                       -----------    ------  ----------  -------  -------------     ------

(1) Amounts not yet due represent the portion of a loan that has not yet become due, such as the future installments of a consumer loan.

ANALYSIS OF AMOUNTS PAST DUE AND NONACCRUAL LOANS

The table on the following page analyzes amounts past due 90 days or more in Banco Galicia's loan portfolio, by type of loan and by type of guarantee at the dates indicated, as well as the Bank's nonaccrual loan portfolio, by type of guarantee, the Bank's allowance for loan losses and its main asset quality ratios at the dates indicated.

                                                                  AS OF DECEMBER 31,                          AS OF JUNE 30,
                                                ------------------------------------------------------  -------------------------
                                                  2003           2002            2001            2000         2000       1999
                                                ---------------------------------------------------------------------------------
                                                (in millions
                                                of pesos,
                                                  except
                                                  ratios)       (in millions of February 28, 2003, constant pesos, except ratios)
TOTAL LOANS (1)..............................   Ps.12,112.1  Ps .12,308.7    Ps.21,069.7  Ps. 20,959.1  Ps. 21,128.1  Ps.19,202.6
NONACCRUAL LOANS (2)
  With Preferred Guarantees..................         496.5         610.8          578.4         366.9         383.8        355.6
  With Other Guarantees......................         275.8         282.9          198.5          35.5          65.9         82.1
  Without Guarantees.........................         527.0         716.5          643.7         444.4         385.5        428.8
                                                -----------  ------------    -----------  ------------  ------------  -----------
TOTAL NONACCRUAL LOANS (2)...................   Ps. 1,299.3  Ps.  1,610.2    Ps. 1,420.6  Ps.    846.8  Ps.    835.2  Ps.   866.5
PAST DUE LOAN PORTFOLIO
 Nonfinancial Public Sector..................             -             -              -             -             -            -
 Local Financial Sector......................             -             -              -             -             -            -
 Nonfinancial Private Sector and Residents
  Abroad
  Advances...................................   Ps.    93.9  Ps.     64.9    Ps.    79.8  Ps.     59.9  Ps.     73.6  Ps.    54.9
  Notes......................................         528.2         741.0          307.6         112.4         137.7        120.3
  Mortgage Loans.............................         211.7         217.2          313.6         202.8         189.7        194.3
  Pledge Loans...............................          28.3          35.7           74.0          78.5          90.3         67.4
  Personal Loans.............................         110.2          58.6           94.5          82.6          76.2         53.3
  Credit-Card Loans..........................          30.6         100.4          174.5         171.4         150.3        208.0
  Placements with Correspondent Banks........             -             -              -             -             -            -
  Other Loans................................           8.1           4.8            1.9          17.8           1.2          6.3
                                                -----------  ------------    -----------  ------------  ------------  -----------
TOTAL PAST DUE LOANS.........................   Ps. 1,011.0  Ps.  1,222.6    Ps. 1,045.9  Ps.    725.4  Ps.    719.0  Ps.   704.5
 Past Due Loans
  With Preferred Guarantees..................   Ps.   415.7  Ps.    449.3    Ps.   388.3  Ps.    288.2  Ps.    308.7  Ps.   256.9
  With Other Guarantees......................         235.6         172.5           76.1          32.8          63.3         79.8
  Without Guarantees.........................         359.7         600.8          581.5         404.4         347.0        367.8
                                                -----------  ------------    -----------  ------------  ------------  -----------
TOTAL PAST DUE LOANS.........................   Ps. 1,011.0  Ps.  1,222.6    Ps. 1,045.9  Ps.    725.4  Ps.    719.0  Ps.   704.5
ALLOWANCE FOR LOAN LOSSES....................   Ps. 1,177.3  Ps.  1,681.8    Ps. 1,050.3  Ps.    596.0  Ps.    576.9  Ps.   591.2
RATIOS (%)
 As a % of Total Loans:
 - Total Past Due Loans .....................          8.35%         9.93%          4.96%         3.46%         3.40%        3.67%
 - Past Due Loans with Preferred Guarantees..          3.43          3.65           1.84          1.38          1.46         1.34
 - Past Due Loans with Other Guarantees......          1.95          1.40           0.36          0.16          0.30         0.42
 - Past Due Unsecured Amounts................          2.97          4.88           2.76          1.92          1.64         1.91
 - Nonaccrual Loans (2)......................         10.73         13.08           6.74          4.04          3.95         4.51
 - Nonaccrual Loans (2) (Excluding
  Interbank Loans)...........................         10.88         13.25           6.87          4.33          4.23         4.97
 Allowance for Loan Losses as a % of :
 - Total Loans...............................          9.72         13.66           4.98          2.84          2.73         3.08
 - Total Loans Excluding Interbank Loans.....          9.86         13.84           5.08          3.04          2.92         3.39
 - Total Nonaccrual Loans (2)................         90.61        104.45          73.93         70.38         69.07        68.23
 Nonaccrual Loans with Guarantees as a
   Percentage of Nonaccrual Loans (2)........         59.44         55.50          54.69         47.52         53.84        50.52
 Nonaccrual Loans as a Percentage of Total
   Past Due Loans............................        128.52        131.70         135.83        116.74        116.16       123.00
                                                ===========  ============    ===========  ============  ============  ===========

(1) Before the allowance for loan losses.

(2) Nonaccrual loans are defined as those loans in the categories of: (a) consumer portfolio: defective fulfillment, difficulty in recovery, uncollectible and uncollectible due to technical reasons; (b) commercial portfolio: with problems, high risk of insolvency, uncollectible and uncollectible due to technical reasons.

As a result of the Argentine economic situation in 2002 and of the measures taken by the government that modified the terms and conditions of the Bank's private-sector loan portfolio, substantially all of the Bank's loan portfolio underwent a restructuring process. This process had not been completed as of December 31, 2003, and continues as of the date of this annual report. See " -- Main Regulatory Changes in 2002 and 2003 -- Loans to the Private Sector and Asymmetric Indexation."

The amount of loan restructurings included in the nonaccrual loan balance as of December 31, 2001 was Ps. 47.6 million. The amounts were: Ps. 49.5 million as of December 31, 2000; Ps. 50.6 million as of June 30, 2000; and Ps. 65.5 million as of June 30, 1999, respectively.

Under Argentine Central Bank rules, banks are required to cease the accrual of interest or to establish provisions of 100.0% of the interest accrued on all loans pertaining to the nonaccrual loan portfolio, that is, all loans to borrowers in the categories of:

- in the consumer portfolio: defective fulfillment, difficulty in recovery, uncollectible and uncollectible due to technical reasons.

- in the commercial portfolio: with problems, high risk of insolvency, uncollectible and uncollectible due to technical reasons.

During 2003, interest income that would have been recorded on those nonaccrual loans on which the accrual of interest was discontinued amounted to Ps. 39.9 million. Recoveries of interest on loans classified as nonaccrual on which the accrual of interest had been discontinued amounted to approximately Ps. 2.0 million (recorded under "Miscellaneous Income") during the same period.

During the years ended December 31, 2002, 2001 and the six-month period ended December 31, 2000, interest income that would have been recorded on those nonaccrual loans on which the accrual of interest was discontinued amounted to Ps. 40.4 million, Ps. 119.6 million and Ps. 24.4 million, respectively. Recoveries of interest on loans classified as nonaccrual on which the accrual of interest had been discontinued amounted to approximately Ps. 2.0 million, Ps. 6.0 million and Ps. 1.3 million (recorded under "Miscellaneous Income") during the same periods, respectively.

The nonaccrual to total loans ratio deteriorated in 2001 as a result of the deterioration of Argentina's overall economic situation during he year, that worsened throughout 2001 and deepened into an unprecedented political and economic crisis which disrupted Argentina's financial system and real economy. It should be noted that this ratio had already increased in the last six months of 2000 as a result of the long recession that Argentina was undergoing at the time and that had begun in the second half of 1998. In 2002 the severe economic crisis had as a direct consequence an additional significant deterioration of the Bank's loan portfolio quality as compared to that of prior fiscal years. In 2003, the improvement in the overall Argentine economy and the advances made by the Bank in the restructuring of its commercial portfolio generated an improvement in the quality of the its loan portfolio. Despite this improvement, the high level nonaccrual loans in 2003 continues to reflect the deterioration of Argentina's economic situation and the measures adopted by the government aimed at restructuring private-sector debts, mainly in 2002. As of December 31, 2003, the nonaccrual portfolio as a percentage of total loans was 10.73%, compared to 13.08% at the close of fiscal year 2002. Considering the private-sector loan portfolio only, at the close of fiscal year 2003, the nonaccrual loan portfolio represented 31.19% of the total portfolio of loans to the private sector, compared to 35.47% a year before.

In 2002, the Bank made a substantial effort to increase its allowances for loan losses and the coverage of the nonaccrual loan portfolio with allowances for loan losses. Due to the significant allowances set up in the previous fiscal year, coverage of nonaccrual loan portfolio with allowances reached 90.61% at the end of fiscal year 2003 and allowances as a percentage of total loans amounted to 9.72%. At that same date, the nonaccrual portfolio with guarantees amounted to 59.44%. Coverage with allowances for loan losses of the nonaccrual portfolio plus loans classified as category "2.b" pursuant to the Argentine Central Bank's classification (amounting to Ps. 212.6 million as of December 31, 2003) was 77.87% at the end of fiscal year 2003.

In the year ended June 30, 2000, the improvement in the nonaccrual to total loans ratio was due to an increase in charge-offs, rather than to an improvement in the credit quality of the Bank's portfolio.

                                                                                       SIX MONTHS
                                                       FISCAL YEAR ENDED                  ENDED               FISCAL YEAR ENDED
                                                --------------------------------------------------------  ------------------------
                                                                      DECEMBER 31,                                JUNE 30,
                                                --------------------------------------------------------  ------------------------
                                                      2003         2002            2001         2000          2000         1999
                                                --------------- ------------    ----------  ------------  ------------  ----------
                                                (in millions of
                                                 pesos, except
                                                    ratios)     (in millions of February 28, 2003, constant pesos, except ratios)
TOTAL LOANS, AVERAGE (1).......................  Ps. 11,556.7   Ps. 15,262.4  Ps. 20,002.3  Ps. 19,676.5  Ps. 18,252.7  Ps.16,565.9
ALLOWANCE FOR LOAN LOSSES AT BEGINNING
 OF PERIOD.....................................       1,681.8        1,050.3         596.0         576.9         591.2        545.1
Changes in the Allowance for Loan Losses
  during the Period
Provisions Charged to Income...................         217.1        1,599.5         922.0         253.8         530.6        450.6
Prior Allowances Reversed......................        (402.1)             -          (2.0)         (2.9)         (3.5)        (0.2)
Charge-Offs (A)................................        (267.3)        (305.7)       (465.7)       (231.8)       (541.4)      (404.3)
Inflation Effect...............................         (52.2)        (662.3)            -             -             -            -
                                                 ------------   ------------  ------------  ------------  ------------  -----------
ALLOWANCE FOR LOAN LOSSES AT END OF PERIOD.....  Ps.  1,177.3   Ps.  1,681.8  Ps.  1,050.3  Ps.    596.0  Ps.    576.9  Ps.   591.2
Charge to the Income Statement during the
 Period Provisions Charged to Income...........         217.1        1,599.5         922.0         253.8         530.6        450.6
 Direct Charge-Offs, Net of Recoveries (B).....         (38.6)         (17.2)        (25.8)        (15.6)        (29.6)         0.7
 Recoveries of Provisions......................        (402.1)             -          (2.0)         (2.9)         (3.5)        (0.2)
                                                 ------------   ------------  ------------  ------------  ------------  -----------
NET CHARGE (BENEFIT) TO THE INCOME STATEMENT     Ps.   (223.6)  Ps.  1,582.3  Ps.    894.2  Ps.    235.3  Ps.    497.5  Ps.   451.1
RATIOS (%)
 Charge-Offs (A+B) to Average Loans (2)........          1.98%          1.89%         2.20%         2.20%         2.80%        2.44%
 Net Charge to the Income Statement to Average
 Loans (3).....................................         (1.93)         10.37          4.47          2.39          2.73         2.72

(1) Before the allowance for loan losses.

(2) Charge-offs plus direct charge-offs minus bad debts recovered.

(3) Income statement charges consist of net provisions plus net direct charge-offs (direct charge-offs minus bad debts recovered).

As of December 31, 2003, the loan loss allowance was Ps. 1,177.3 million. This amount represented a coverage of the nonaccrual loan portfolio of 90.61%, which was lower than the 104.45% level as of December 31, 2002, but higher than the levels reached in prior fiscal years.

The lower loan loss allowance reported at the close of fiscal year 2003, as compared to the prior fiscal year, reflects the reduced overall risk faced by the Bank's loan portfolio after completion of several debt restructurings. See " -- Argentine Central Bank's Loan Classification and Loan Loss Provisions -- Loan Loss Provision Requirements -- General Provisions" above.

The increase in the allowance for loan losses as of December 31, 2002, when compared to December 31, 2001 and the increases in the year ended December 31, 2001, the six-month period ended December 31, 2000 and in the year ended June 30, 2000 when compared to the previous fiscal year are part of a continuing trend that reflects the continuous worsening of the economic conditions in Argentina between late 1998 and 2002. This is reflected in a general deterioration of credit quality, higher levels of nonperforming loans and higher charge-offs across the entire loan portfolio.

The increase in the years ended December 31, 2002 and 2001 can also be attributed to the increase in the unallocated reserve as of each year end. For an explanation of the increase in the Bank's general unallocated allowance, see " -- Argentine Central Bank's Loan Classification and Loan Loss Provisions -- Loan Loss Provision Requirements -- General Provisions" above.

In 2003, the net effect on the income statement was a benefit of Ps. 223.6 million, representing 1.93% of the average loan balance for the fiscal year. This gain was the consequence of the improvement in the quality of the loan portfolio which resulted in the recovery of loan loss provisions. The net charge to the income statement as a percentage of average loans was 10.37% in fiscal year 2002, 4.47% during fiscal year 2001 and 2.39% during the six months ended December 31, 2000. This reflects the fact that the Bank assigned an increased portion of its income, both to nonaccrual portfolio charge offs and to provide for a higher coverage of such portfolio with allowances, given that the quality of such portfolio deteriorated significantly during 2001, especially in the last quarter of the year, and in 2002.

                                                                       AS OF DECEMBER 31,
                                  ---------------------------------------------------------------------------------------------
                                               2003                           2002                            2001
                                  ------------------------------  ----------------------------   ------------------------------
                                                % OF      LOAN                  % OF      LOAN               % OF       LOAN
                                      AMOUNT   LOANS   CATEGORY %    AMOUNT     LOANS CATEGORY %    AMOUNT  LOANS    CATEGORY %
                                  ------------------------------  ------------------------------ ------------------------------
                                  (in millions of pesos,  (in millions of February 28, 2003, constant pesos, except percentages)
                                    except percentages)
Nonfinancial Public Sector......            -       -      64.00%          -       -     62.03%           -       -      41.15%
Local Financial Sector..........            -       -       1.61           -       -      1.09            -       -       0.91
Nonfinancial Private Sector and
 Residents Abroad
  Advances......................  Ps.    78.8    0.65%      1.81  Ps.   40.1    0.33%     1.84   Ps.   46.1    0.22%      3.85
  Notes.........................        441.9    3.65      11.46       569.0    4.62     12.55        219.2    1.04      18.46
  Mortgage Loans................        142.6    1.18       5.94       122.1    0.99      7.02        154.5    0.73      15.65
  Pledge Loans..................         22.7    0.19       0.45        24.3    0.20      1.56         33.5    0.16       4.00
  Personal Loans................        157.6    1.30       0.46        48.4    0.39      0.97         64.8    0.31       2.77
  Credit-Card Loans.............         14.5    0.12       6.76        55.6    0.45      4.75         83.7    0.40       8.90
  Placements in Correspondent
   Banks........................            -       -       1.42           -       -      1.29            -       -       1.79
  Other ........................          5.6    0.05       6.09         0.0    0.00      6.90          3.7    0.02       2.52
Unallocated (1).................        313.6    2.58          -       822.3    6.68         -        444.8    2.10          -
                                  -----------  ------  ---------  ---------- -------    ------   ---------- -------  ---------
TOTAL...........................  Ps. 1,177.3    9.72%    100.00% Ps.1,681.8   13.66%   100.00%  Ps.1,050.3    4.98%    100.00%
                                  ===========  ======  =========  ========== =======    ======   ========== =======  =========

                                           AS OF DECEMBER 31,                           AS OF JUNE 30,
                                      ------------------------------------------------------------------------------------------
                                                    2000                           2000                         1999
                                      ------------------------------------------------------------------------------------------
                                                    % OF      LOAN                % OF      LOAN               % OF    LOAN
                                        AMOUNT     LOANS    CATEGORY %  AMOUNT    LOANS   CATEGORY %  AMOUNT  LOANS  CATEGORY %
                                      ------------------------------------------------------------------------------------------
                                               (in millions of February 28, 2003, constant pesos, except percentages)
Nonfinancial Public Sector...........          -        -    27.49%            -       -     26.11%        -     -    22.12%
Local Financial Sector...............          -        -     5.35             -       -      3.77         -     -     4.90
Nonfinancial Private Sector and
Residents Abroad
 Advances............................  Ps.  35.9     0.17%    4.62      Ps. 40.1    0.19%     8.25   Ps.31.1  0.16%    7.84
 Notes...............................       76.7     0.37    23.61          82.9    0.39     25.60      71.6  0.37    24.82
 Mortgage Loans......................      100.3     0.48    16.72          89.9    0.43     14.16      97.8  0.51    14.48
 Pledge Loans........................       37.2     0.18     4.18          39.0    0.19      4.06      30.0  0.16     4.71
 Personal Loans......................       58.0     0.28     3.87          51.6    0.24      3.45      46.1  0.24     3.51
 Credit-Card Loans...................       84.8     0.40     7.95          86.8    0.41      6.84     134.2  0.70     6.41
 Placements in Correspondent Banks...          -        -     3.68             -       -      5.82         -     -     8.75
 Other...............................       10.7     0.05     2.53          11.2    0.05      1.94      12.1  0.06     2.46
Unallocated (1)......................      192.4     0.91        -         175.4    0.83         -     168.3  0.88        -
                                       ---------   ------   ------      --------  ------  --------  --------  ----   ------
TOTAL................................  Ps. 596.0     2.84%  100.00%     Ps.576.9    2.73%   100.00% Ps.591.2  3.08%  100.00%
                                       =========   ======   ======      ========  ======  ========  ========  ====   ======

(1) The unallocated reserve consists of the allowances established on the portfolio classified in the "normal" and "normal performance" categories and includes additional reserves in excess of Argentine Central Bank minimum requirements.

                                                                            FISCAL YEAR ENDED
                                                --------------------------------------------------------------------------
                                                                                DECEMBER 31,
                                                --------------------------------------------------------------------------
                                                       2003                       2002                     2001
                                                --------------------------------------------------------------------------
                                                (in millions of pesos)   (in millions of February 28, 2003, constant pesos)
CHARGE-OFFS BY TYPE

  Advances.....................................       Ps. 31.3                  Ps. 48.6                Ps. 59.0
  Notes
     Promissory Notes .........................           65.0                      14.9                    20.1
     Discounted and Purchased Bills............              -                         -                    20.7
     Documentary Credits.......................              -                         -                       -
  Mortgage Loans...............................           34.4                      18.5                    16.5
  Pledge Loans.................................           18.8                      19.1                    41.0
  Personal Loans...............................           36.9                      33.7                   108.8
  Credit-Card Loans
     Banco Galicia.............................           27.9                      22.1                    50.2
     Regional Credit-Card Companies............           52.9                      89.3                   147.9
  Other Loans .................................            0.1                       5.7                     1.5
  Adjustment and Restatement...................              -                      31.5                       -
  Other........................................              -                         -                       -
                                                      --------                  --------                --------
  TOTAL........................................       Ps.267.3                  Ps.283.4(*)             Ps.465.7
                                                      ========                  ========                ========

(*) Does not include Ps. 22.3 million corresponding to Banco Galicia Uruguay S.A.

During fiscal year 2003 the overall level of charge-offs decreased from the level reported in the prior fiscal year, mainly as a result of the significant decrease in charge-offs related to loans granted by the regional credit card companies, which mainly comprises loans to the client segment that was first affected by the crisis, and therefore this portfolio had experienced significant charge offs in the prior years. This was partially offset by higher charge offs on mortgage loans and promissory notes.

The overall level of charge offs for the year ended December 31, 2002, reflects the effects on the Bank's loan portfolio quality of the outbreak of the crisis in late 2001 and of the crisis environment prevailing during 2002. It also reflects the effects of the Argentine government measures aimed at restructuring private-sector loan portfolios. When comparing the 2002 figures in the table above with the previous periods' figures, it should be taken into account that previous year's data was restated in constant currency of February 28, 2003, by using the variation of the WPI, that is using a coefficient of
2.2035. The decrease in the overall level of charge offs in real terms is mainly due to this restatement. When compared in nominal terms, the overall level of charge offs in 2002 was 33.0% higher than in 2001. By type of loan, and when compared in nominal terms, increases can be observed in charge offs of promissory notes, mortgages and the regional credit-card companies portfolios. The increases in promissory notes and mortgage portfolios mainly reflect the fact that the economic crisis of 2002 significantly affected businesses, including several large businesses. The increase in the charge offs in the regional credit-card portfolio continued to show the more than proportional effect of the crisis (increase in unemployment and decrease in the purchasing power of income) on the lower-income segment of the population.

The overall level of charge offs for the year ended December 31, 2001, reflects the deepening during year 2001 of the recession that began in the second half of 1998. The overall level of charge-offs remained mostly unchanged when compared to the annualized level of charge-offs made during the six-month period ended December 30, 2000. However, charge-offs by type of loan for the year ended December 31, 2001, showed certain variations when compared to the annualized amounts of the six-month period ended December 30, 2000, mostly due

to the dynamics of the long and deep economic recession. Higher charge offs of advances and discounted and purchased bills reflect the fact that, during 2001, the adverse effects of the persistent economic recession extended into the medium and large corporate sector more intensely than in previous periods, with businesses being the main recipients of this type of unsecured loans. Charge-offs on notes and mortgage and pledge loans decreased indicating a slower deterioration of the credit quality of this type of loans. Charge offs on personal loans and credit-card loans related to credit cards managed by the Bank itself remained unchanged. Charge-offs on credit-card loans granted by the regional credit-card companies increased significantly reflecting the fact that the customer segment of these companies, the lower end of the consumer segment of the interior of Argentina, was one of the most affected by the deepening of the recession in 2001.

FOREIGN OUTSTANDINGS

Cross-border or foreign outstandings for a particular country are defined as the sum of all claims on third parties domiciled in that country and comprise loans (including accrued interest), acceptances, interest-bearing deposits with other banks, other interest-bearing investments and any other monetary assets that are denominated in dollars or other nonlocal currency. At the end of fiscal year 2003, we did not have any foreign outstandings that represented 0.75% or more of our total assets.

At the end of fiscal year 2002, we had foreign outstandings amounting to Ps. 206.3 million with United States banks and other financial institutions, representing 0.86% of our total assets. There were no other foreign outstanding representing more than 0.75% of our total assets.

At the end of fiscal year 2001, we had foreign outstandings with United States banks and other financial institutions of Ps. 698.2 million and with United Kingdom banks and financial institutions for Ps. 1,113.2 million, representing 2.50% and 3.99% of our total assets, respectively. There were no other foreign outstandings representing more than 0.75% of our total assets.

                                                                      GRUPO GALICIA
                                                     --------------------------------------------
                                                                    AS OF DECEMBER 31,
                                                     --------------------------------------------
                                                         2003             2002            2001
                                                     --------------------------------------------
                                                      (in millions     (in millions of February 28,
                                                        of pesos)         2003, constant pesos)
Current Accounts and Other Demand Deposits.........  Ps. 1,178.8       Ps.  730.3     Ps.  1,907.9
Savings Accounts...................................        818.9            563.9          3,240.6
Time Deposits......................................      2,838.4          2,423.1          6,936.7
Restructured Deposits (1) .........................        381.9            948.4                -
Other Deposits.....................................        168.7            166.3          1,285.8
Plus:  Interest Payable and Differences in
Quotations (2).....................................        197.3            377.3            131.9
                                                     -----------       ----------     ------------
TOTAL DEPOSITS.....................................  Ps. 5,584.0       Ps.5,209.3     Ps. 13,502.9
                                                     -----------       ----------     ------------

(1) CEDROS, plus restructured deposits exchanged for government bonds in the Canje II, which have not been delivered to customers yet, plus restructured deposits under judicial proceedings.

(2) Includes the CER adjustment of CEDROs.

In 2003, the Group's consolidated deposits increased 7.2% as a result of the increase of voluntary deposits (deposits in current accounts, savings accounts and time deposits) raised by the Bank in Argentina. The increase in voluntary deposits was to a large extent due to the government measures aimed at "freeing" restructured deposits and exchanging them for government bonds. See " -- Main Regulatory Changes in 2002 and 2003 -- Deposits." Substantially all of the increase in time deposits was in short-term peso-denominated time deposits.

The increase in consolidated time deposits was partially offset by the payment by Galicia Uruguay of the first installment of the restructuring schedule agreed with the depositors in December 31, 2003. In addition, the

following factors contributed to offset the increase in the Bank's total deposits: (i) the decrease of the exchange rate during 2003 from Ps. 3,363 per U.S. dollar as of December 31, 2002 to Ps. 2,933 as of December 2003; and (ii) restructured deposits continued to decrease as a result of their amortization in accordance with the schedule established by the government, the payments made by the Bank as a consequence of the judicial orders received by the Bank mandating the reimbursement of deposits, and to the above mentioned measures to eliminate the restructured deposits.

Restructured deposits in Argentina as of December 31, 2003 amounted to Ps. 381.9 million (principal only), with a 59.7% decrease from Ps. 948.4 million (principal only) as of December 31, 2002. Consequently, these deposits represented 6.8% of total deposits as of December 31, 2003, compared to 18.2% as of December 31, 2002.

During 2002, the Group's consolidated deposits decreased 61.4% due to:

(i) the continuity of the run on the Argentine financial system's deposits during the first months of 2002;

(ii) the run on its deposits experienced by Galicia Uruguay until the suspension of its activities in February 13, 2002;

(iii) the restructuring, completed during the last quarter of 2002, of Galicia Uruguay's deposits, which, in accordance with the restructuring proposal and depositor preferences, were partially replaced by negotiable obligations;

(iv) the decrease in the Bank's deposits in Argentina as a consequence of the judicial orders received by the Bank mandating the reimbursement of deposits; and

(v) the completion by late December 2002 of the Canje I. See " -- Main Regulatory Changes in 2002 and 2003 -- Deposits."

It should be noted that, in the table above, prior years' figures were restated in constant currency of February 28, 2003, by using the variation of the WPI between January 1, 2002 and February 28, 2003, that is by using a coefficient of 2.2035. Therefore, the decrease in 2002 is to a large extent explained by said restatement of the December 31, 2001, figures. In nominal terms, the fall in the Group's consolidated deposits was 15.7%.

The decrease of the Bank's total deposits in 2002 was mitigated by the fact that: (i) total deposits as of December 31, 2002, included US$554.9 million of deposits at the Bank's foreign branches and subsidiaries, that were dollar denominated and valued at the market exchange rate, and (ii) the exchange rate during 2002 increased from Ps. 1.00 per U.S. dollar as of December 31, 2001 to Ps. 3.363 as of December 2002.

The decrease in savings accounts during 2002 is attributable to the fact that most savings accounts in the Bank operating in Argentina were dollar denominated as of December 31, 2001 and these deposits were restructured, with the balances of these restructured deposits (net of decreases and amortizations) shown under "Restructured Deposits" in the table above. This line included as of December 31, 2002, Ps. 948.4 million of restructured deposits (principal only). No restructured deposits were outstanding as of the close of fiscal year 2001. The decrease in time deposits is due, in part, to the restructuring of a large portion of Galicia Uruguay deposits as negotiable obligations. Galicia Uruguay had consolidated deposits for US$1,355.7 million as of December 2001 which were mostly time deposits. As of December 31, 2002 this subsidiary's consolidated deposits amounted to US$550.0 million.

The table above shows the significant loss in deposits experienced by the Bank in 2001 as a consequence of the massive runs suffered by the Bank in Argentina throughout 2001 and by its subsidiary, Galicia Uruguay, in December 2001. Consolidated deposits fell 31.2% during 2001.

For more information on deposits, see Item 5. "Operating and Financial Review and Prospects -- Item 5A. Operating Results -- Funding."

The following table provides a breakdown of the Group's consolidated deposits as of December 31, 2003, by contractual maturity date and currency of denomination. As already mentioned in this annual report, the contractual maturity of CEDROs was set by the Argentine government's regulations.

                                                        PESO-DENOMINATED        DOLLAR-DENOMINATED         TOTAL
                                                      ----------------------------------------------------------------
                                                                     % OF                  % OF                  % OF
                                                       AMOUNT       TOTAL       AMOUNT     TOTAL      AMOUNT    TOTAL
                                                      ----------------------------------------------------------------
                                                                            (in millions of pesos)
Current Accounts and Demand Deposits................  Ps.1,130.1     30.2%    Ps.   48.7      3.0%  Ps.1,178.8   21.9%
Savings Accounts....................................       641.6     17.2          177.3     10.8        818.9   15.2
Time Deposits.......................................     1,507.6     40.3        1,330.8     80.9      2,838.4   52.7
     Maturing within 30 Days........................       349.0      9.3           65.3      4.0        414.3    7.7
     Maturing after 31 Days but within 59 Days......       402.8     10.8           44.4      2.7        447.2    8.3
     Maturing after 60 Days but within 89 Days......       449.0     12.0           28.3      1.7        477.3    8.9
     Maturing after 90 Days but within 179 Days.....       263.3      7.0           24.6      1.5        287.9    5.3
     Maturing after 180 Days but within 365 Days....        42.5      1.2            6.5      0.4         49.0    0.9
     Maturing after 365 Days........................         1.0        -        1,161.7     70.6      1,162.7   21.6
Restructured Deposits (1)...........................       381.9     10.2              -        -        381.9    7.1
Other Deposits......................................        79.8      2.1           88.9      5.3        168.7    3.1
     Maturing within 30 Days........................        79.3      2.1           82.5      5.0        161.8    3.0
     Maturing after 31 Days but within 59 Days......           -        -              -        -            -      -
     Maturing after 60 Days but within 89 Days......           -        -              -        -            -      -
     Maturing after 90 Days but within 179 Days.....           -        -              -        -            -      -
     Maturing after 180 Days but within 365 Days....           -        -              -        -            -      -
     Maturing after 365 Days........................         0.5        -            6.4      0.3          6.9    0.1
                                                      ----------    -----     ----------   ------   ----------  -----
TOTAL DEPOSITS (2)..................................  Ps.3,741.0    100.0%    Ps.1,645.7    100.0%  Ps.5,386.7  100.0%
                                                      ----------    -----     ----------   ------   ----------  -----

(1) CEDROs, plus restructured deposits exchanged for government bonds in the Canje II, which have not been delivered to customers yet, plus restructured deposits under judicial proceedings. Only principal. Excludes the CER adjustment.

(2) Only principal.

The preceding table shows that the highest concentration of time deposits is in the "Within 30 Days," "After 31 Days but Within 59 Days" and "After 60 Days but Within 89 Days" categories, amounting to 24.9% of the total.

With respect to time deposits raised in Argentina, it is worth pointing out that, even though the Argentine Central Bank had authorized the raising of time deposits of less than 30 days (up to 7- and 14-day terms) as from March 2002, depending on the characteristics of the funds raised, through Communique "A" 4032 effective as of November 1, 2003, such entity reestablished the minimum term to raise deposits in 30 days. The average maturity of our voluntary time deposits in Argentina both peso- and dollar-denominated was approximately 60 days as of December 31, 2003, having increased during 2003 from approximately 40 days as of December 31, 2002.

Dollar-denominated time deposits in the table above with a maturity of more than 365 days corresponded primarily to Galicia Uruguay's consolidated restructured deposits.

The schedule established by the government for the reimbursement of CEDROS began in March 2002 and January 2003, for those originally denominated in pesos and in U.S. dollars, respectively, and expires in November 2004 and August 2005, respectively.

As of December 31, 2003, dollar-denominated deposits, for Ps. 1,645.7 million, represented 30.6% of total deposits, Ps. 1,270.8 million of which corresponded to Galicia Uruguay consolidated, representing mostly time deposits, and Ps. 0.8 million to the Bank's Cayman Branch.

The following table provides information about the maturity of the Group's outstanding time deposits exceeding Ps. 100,000, according to whether they were opened at domestic or foreign branches as of December 31, 2003.

                                                                                 ISSUED BY            ISSUED BY
                                                                              DOMESTIC OFFICES     FOREIGN OFFICES
                                                                              ----------------     ---------------
                                                                                    (in millions of pesos)
Time Deposits
    Within 29 Days...........................................................    Ps. 151.1                   -
    After 30 Days but within 59 Days.........................................        180.0                   -
    After 60 Days but within 89 Days.........................................        146.9                   -
    After 90 Days but within 179 Days........................................        128.4                   -
    After 180 Days but within 365 Days.......................................         29.7                   -
    After 365 Days...........................................................          1.3             1,060.5
                                                                                 ---------         -----------
TOTAL TIME DEPOSITS..........................................................    Ps. 637.4         Ps. 1,060.5
RESTRUCTURED DEPOSITS........................................................    Ps. 108.8                   -
Other Deposits
    Within 29 Days...........................................................            -                   -
    After 30 Days but within 59 Days.........................................            -                   -
    After 60 Days but within 89 Days.........................................            -                   -
    After 90 Days but within 179 Days........................................            -                   -
    After 180 Days but within 365 Days.......................................            -                   -
    After 365 Days...........................................................            -         Ps.     6.4
                                                                                 ---------         -----------
TOTAL OTHER DEPOSITS.........................................................            -         Ps.     6.4
                                                                                 ---------         -----------
TOTAL DEPOSITS (2) ..........................................................    Ps. 746.2         Ps. 1,066.9
                                                                                 =========         ===========

(1) CEDROS, plus restructured deposits exchanged for government bonds in the Canje II, which have not been delivered to customers yet, plus restructured deposits under judicial proceedings. Only principal. Excludes the CER adjustment.

(2) Only principal.

                                                                                             GRUPO GALICIA
                                                                          ---------------------------------------------
                                                                                           FISCAL YEAR ENDED
                                                                          ---------------------------------------------
                                                                                              DECEMBER 31,
                                                                          ---------------------------------------------
                                                                                2003            2002            2001
                                                                          ---------------------------------------------
                                                                          (in millions of   (in millions of February 28,
                                                                           pesos, except    2003, constant pesos, except
                                                                           percentages)           percentages)
Net Income After the Loss Absorption..................................    Ps.  (217.1)     Ps. (1,471.5)    Ps.   264.6
Net Income Before the Loss Absorption.................................         (217.1)         (2,841.5)          264.6
Average Total Assets..................................................       22,530.3          29,500.9        31,967.4
Average Shareholders' Equity..........................................        1,529.4           2,431.9         3,053.4
Shareholders' Equity at End of the Period.............................        1,462.3           1,638.7         3,103.5
Return on Assets (1)..................................................          (0.92)%           (5.90)%          0.90%
Return on Shareholders' Equity (2)....................................         (14.19)           (60.51)           8.67
Declared Cash Dividends...............................................              -                 -               -
Dividend Payout Ratio.................................................              -                 -               -
Average Shareholders' Equity as a Percentage of Average Total Assets..           6.79%             8.24%           9.55%
Shareholders' Equity at the End of the Period as a Percentage of
 Average Total Assets.................................................           6.49              5.55            9.71
                                                                          ===========      ============     ===========

(1) Before the absorption allowed by Argentine Central Bank Communique "A" 3800, for fiscal year 2002 this ratio was (10.55) %.

(2) Before the absorption allowed by Argentine Central Bank Communique "A" 3800, for fiscal year 2002 this ratio was (116.84) %.

                                                                                  AS OF DECEMBER 31,
                                                                 ---------------------------------------------------
                                                                   2003                 2002                2001
                                                                 ---------------------------------------------------
                                                                                         (in millions of February 28,
                                                                 (in millions of pesos)     2003, constant pesos)
SHORT-TERM BORROWINGS
Argentine Central Bank......................................     Ps.    0.8          Ps. 4,831.2         Ps. 2,719.8
Other Banks and International Entities (1)
    Lines of Credit from Domestic Banks.....................           25.1                 48.0                42.8
    Lines of Credit from Foreign Banks......................        1,231.8              1,548.8               567.4
Repos with Domestic Banks (1)...............................              -                    -               954.8
Repos with Foreign Banks (1)................................              -                    -                88.1
Debt Securities (1) ........................................            9.5                129.2               962.7
                                                                 ----------          -----------         -----------
TOTAL.......................................................     Ps.1,267.2          Ps. 6,557.2         Ps. 5,335.6
                                                                 ==========          ===========         ===========

(1) For 2003 and 2002, included short term borrowings under restructuring.

Banco Galicia's short-term borrowings totaled Ps. 1,267.2 million as of December 31, 2003, compared to Ps. 6,557.1 million as of December 31, 2002 and Ps. 5,335.6 million as of December 31, 2001.

The decrease in the Bank's short term borrowings in 2003 is mainly due to the fact that, as of December 31, 2003, the financial assistance for liquidity support owed to the Argentine Central Bank was recorded as a long term liability, while as of December 31, 2002, such liabilities were recorded as a 30-day revolving facility. On November 27, 2003, through its Resolution No. 1, the Financial System's Restructuring Unit authorized the Argentine Central Bank to restructure such financial assistance in accordance with: (i) the provisions of Decree No. 739/03 and Decree No. 1262/03 and (ii) the repayment schedule presented by the Bank to the Argentine Central Bank. On February 3, 2003, the Argentine Central Bank approved such schedule, which contemplates the repayment of the financial assistance for liquidity support owed to the Argentine Central Bank in 92 monthly installments beginning in March 2004, inclusively. As of December 31, 2002, Ps. 4,831.2 million corresponding to such assistance were included as short term borrowings. See Item 5. "Operating and Financial Review and Prospects -- Item 5A. Operating Results -- Funding."

In addition short term borrowings decreased in 2003 due to: (i) the decrease of the balance of lines with foreign banks, mainly as a result of the appreciation of the peso, and (ii) the decrease of the balance of negotiable obligations as a result of the progress made by the regional credit card companies in the restructuring of its short-term negotiable obligations, past due as of December 31, 2002, into long term liabilities.

The increase in the Bank's short term borrowings in 2002 as compared with 2001 was attributable to: (i) additional financial assistance for liquidity support granted by the Argentine Central Bank to the Bank, in the first months of 2002 and before the implementation of the Galicia capitalization and liquidity plan. It should be noted that the balance of "Repos with Domestic Banks" as of December 31, 2001, mainly represents Repos with the Argentine Central Bank, given that as a result of the crisis, in late 2001, the only source of funding available to banks in the local market became the Argentine Central Bank, in its capacity as lender of last resort. At maturity such Repos were cancelled by means of advances from the Argentine Central Bank.

The increase in the balance of lines from foreign banks in 2002 mainly reflects the reallocation of an US commercial paper recorded as negotiable obligations as debt with foreign banks, for US$250 million.

The following table shows for the significant short-term borrowings of Grupo Galicia for the fiscal years ended December 31, 2003, 2002 and 2001:

- the weighted-average interest rate at year end,

- the maximum balance recorded at the monthly closing dates of the periods,

- the average balances for each period, and

- the weighted-average interest rate for the periods.

                                                                            GRUPO GALICIA, AS OF DECEMBER 31,
                                                                    -----------------------------------------------------
                                                                         2003               2002               2001
                                                                    -----------------------------------------------------
                                                                    (in millions of     (in millions of February 28, 2003,
                                                                       pesos )                  constant pesos)
ARGENTINE CENTRAL BANK
    Weighted-average interest rate at end of period........                9.00%               4.38%               9.00%
    Maximum balance recorded at the monthly closing dates..         Ps.     0.8         Ps. 4,831.2             3,414.0
    Average balances for each period.......................                 0.3             4,297.8               294.4
    Weighted-average interest rate for the period..........                9.00%              29.09%               9.00%
LINES OF CREDIT FROM DOMESTIC BANKS
    Weighted-average interest rate at end of period........                6.88%               6.48%              20.35%
    Maximum balance recorded at the monthly closing dates..         Ps.    43.4         Ps.   144.3         Ps.   172.3
    Average balances for each period.......................                35.4                73.1               182.7
    Weighted-average interest rate for the period .........                6.82%               9.86%              37.03%
LINES OF CREDIT FROM FOREIGN BANKS
    Weighted average interest rate at end of period .......                7.10%               6.20%               6.51%
    Maximum balance recorded at the monthly closing dates..         Ps. 1,344.4         Ps. 1,877.6         Ps.   916.9
    Average balances for each period ......................             1,239.0             1,443.2               715.7
    Weighted average interest rate for the period .........                7.10%               6.12%               6.19%
REPOS WITH DOMESTIC BANKS
    Weighted-average interest rate at end of period .......                   -                   -                9.00%
    Maximum balance recorded at the monthly closing dates..                   -         Ps. 1,056.8         Ps. 1,259.1
    Average balances for each period ......................                   -               330.9                91.9
    Weighted-average interest rate for the period .........                   -               33.42%               9.13%
REPOS WITH FOREIGN BANKS
    Weighted-average interest rate at end of period .......                   -                   -                3.50%
    Maximum balance recorded at the monthly closing dates..                   -                   -         Ps.   461.8
    Average balances for each period ......................                   -                   -               365.8
    Weighted-average interest rate for the period .........                   -                   -               3.91%
NEGOTIABLE OBLIGATIONS
    Weighted-average interest rate at end of period .......               16.05%              16.18%               9.44%
    Maximum balance recorded at the monthly closing dates..         Ps.   128.0         Ps.   238.7         Ps. 1,377.4
    Average balances for each period ......................                50.9               182.7             1,235.5
    Weighted-average interest rate for the period..........               16.05%              16.19%               8.86%
                                                                    -----------         -----------         -----------

REGULATORY CAPITAL

The capital adequacy of Grupo Galicia is not under the supervision of the Argentine Central Bank. Grupo Galicia has a minimum capital requirement established by the Commercial Companies' Law (Ley de Sociedades Comerciales) of Ps. 0.012 million.

Due to the significant changes suffered during 2002 by the financial system's operations, which significantly affected the variables to determine the minimum capital requirements, through its Communiques "A" 3599 and "A" 3604 dated May 3 and 9, 2002, respectively, the Argentine Central Bank suspended the submission of capital adequacy information by financial institutions. On June 2, 2003 and July 25, 2003, through its Communiques "A" 3959 and "A" 3986, respectively, the Argentine Central Bank established new capital adequacy rules and that compliance with such rules by financial institutions would be required beginning on January 1, 2004.

The Bank was in compliance with the Argentine Central Bank's new capital adequacy requirements during 2004, both before and after the increase in its regulatory capital resulting from the restructuring of the foreign debt of its head office in Argentina and of its Cayman Branch. For more information on this restructuring see " -- Business Overview -- Banco Galicia -- Restructuring of the Foreign Debt of the Bank's Head Office in Argentina and its Cayman Branch."

The current and the previous capital adequacy rules established by the Argentine Central Bank are based on the methodology of the Basel Committee on Banking Supervision of the Bank for International Settlements. Banks have to comply with capital requirements both on an unconsolidated basis and on a consolidated basis with its significant subsidiaries. Banco Galicia's significant subsidiaries are Galicia Uruguay and the regional credit-card companies that Banco Galicia indirectly controls.

For more information on Argentine Central Bank's minimum capital requirement rules, see " -- Argentine Banking System and Regulation -- Argentine Banking Regulation -- Capital Adequacy Requirements."

The table below presents Banco Galicia's capital requirement and computable capital for the dates indicated. The information is consolidated with significant subsidiaries, with the regional credit card companies incorporated in June 1999.

                                                                                  AS OF DECEMBER 31,
                                                         -------------------------------------------------------------------
                                                              2003(*)                2002(*)                        2001
                                                         -------------------------------------------------------------------
                                                         (in millions of pesos,  (in millions of February 28, 2003, constant
                                                         except  percentages)             pesos, except percentages)
SHAREHOLDERS' EQUITY................................        Ps. 1,352.8            Ps. 1,551.7                  Ps. 3,090.3
ARGENTINE CENTRAL BANK MINIMUM CAPITAL
  REQUIREMENTS
  Allocated to Financial Assets ....................                  -                      -                      1,465.3
  Allocated to Fixed Assets ........................                  -                      -                        202.3
  Allocated to Market Risk..........................                  -                      -                          0.2
  Allocated to Interest-Rate Risk...................                  -                      -                         64.1
  Lending to the Nonfinancial Public Sector.........                  -                      -                         55.7
  Government Securities in Investment
  Accounts..........................................                  -                      -                         92.3
                                                            -----------            -----------                  -----------
MINIMUM CAPITAL REQUIRED BY THE ARGENTINE
  CENTRAL  BANK (A)                                                   -                      -                  Ps. 1,879.9
CAPITAL CALCULATED UNDER ARGENTINE BANKING
  GAAP
 Core Capital.......................................                  -                      -                      3,103.1
 Supplemental Capital...............................                  -                      -                        158.6
 Deductions
  Investments in Financial Entities.................                  -                      -                         (2.2)
  Organization Expenses.............................                  -                      -                       (208.4)
  Goodwill Recorded from June 30, 1997..............                  -                      -                       (258.2)
  Real Estate Properties for Banco
     Galicia's Own Use and Miscellaneous,
     for which no title deed has been made..........                                                                  (61.7)
  Other.............................................                  -                      -                        (58.0)
                                                            -----------            -----------                  -----------
 Total..............................................                  -                      -                       (588.5)
 Additional Capital - Market Variation..............                  -                      -                          2.2
                                                            -----------            -----------                  -----------
CAPITAL CALCULATED UNDER ARGENTINE BANKING
  GAAP..............................................                  -                      -                  Ps. 2,675.4
EXCESS CAPITAL
  Excess over required Capital (B)-(A)..............                  -                      -                  Ps.   795.5
  Excess over Required Capital as a % of
  Required Capital .................................                  -                      -                        42.32%
Total Capital Ratio.................................                  -                      -                        17.18

(*) Through its Communiques "A" 3599 and "A" 3604 dated May 3 and 9, 2002, respectively, the Argentine Central Bank suspended the submission of this information.

As of December 31, 2001, the Bank's computable capital exceeded the minimum capital requirement of Ps. 1,879.9 million by Ps. 795.5 million, representing an excess of 42.3%. This represented a Ps. 245.7 million

increase in excess computable capital from the December 31, 2000 level, primarily due to a Ps. 102.3 million decrease in the minimum capital requirement and a Ps. 143.4 million increase in the regulatory capital calculated under the Argentine Central Bank rules. The lower minimum capital requirement can be explained by the reduction in the risk-weighted value of financial assets, mainly due to the decrease in the average loan balance during 2001, while the higher computable capital was mainly a consequence of the increase in retained earnings.

For more information regarding Banco Galicia's capital, see Item 5. "Operating and Financial Review and Prospects -- Item 5B. Liquidity and Capital Resources -- Capital."

GOVERNMENT REGULATION

As a financial services holding company, Grupo Galicia does not have a specific institution controlling its activities as a holding entity. Nevertheless, its subsidiaries have different regulatory entities regulating their activities.

In the case of Banco Galicia, the Argentine Central Bank is the regulatory entity. For a description of Argentine banking regulations and the main regulatory changes introduced by the government affecting financial institutions' activities, see " -- Main Regulatory Changes in 2002 and 2003" and " -- Argentine Banking System and Regulation -- Argentine Banking Regulation" below.

With respect to the insurance business, Sudamericana Holding S.A.'s insurance subsidiaries are regulated by the National Insurance Superintendency and Laws No. 17,418, No. 20,091 and No. 22,400. The insurance companies held by Sudamericana Holding S.A. are Galicia Vida Compania de Seguros S.A., Galicia Retiro Compania de Seguros S.A., Galicia Patrimoniales S.A. and Instituto de Salta Compania de Seguros de Vida S.A. Sudamericana Holding S.A. also holds Medigap Salud S.A. and Sudamericana Asesores de Seguros S.A., both of which are regulated by the Commercial Companies' Law. Sudamericana Asesores de Seguros S.A. is also regulated by the National Insurance Superintendency through Law No. 22,400.

Net Investment S.A., our Internet incubator, and its controlled companies are regulated by the Commercial Companies' Law and do not have a specific regulating agency.

Galicia Warrants is regulated by National Law No. 9,643.

MINIMUM CAPITAL REQUIREMENTS OF NONBANKING COMPANIES

We and the companies we control are regulated by the Law Governing Commercial Companies. In section No. 186, the law establishes that the capital of a corporation (sociedad anonima) cannot be less than Ps. 12,000 (twelve thousand pesos). In addition to this law, the Bank must also comply with the regulations set forth by the Argentine Central Bank.

The insurance companies controlled by Sudamericana Holding S.A. must meet the minimum capital requirements set by General Resolution No. 25,804 of Argentina's Superintendency of Insurance. The abovementioned resolution requires insurance companies to maintain a minimum capital level equivalent to the highest of the amounts calculated as follows:

a) By line of insurance: This method establishes a fixed amount by line of insurance. For life insurance companies, it is Ps. 750,000, rising to Ps. 3 million for companies that offer pension-linked life insurance. For annuity providers that do not offer life annuities or annuities covering disability and other work-related risks, the requirement is Ps. 2 million. For property insurance companies, the requirement is Ps. 5 million, excluding the automotive line of business.

b) By premiums and additional fees: To use this method, the company must calculate the sum of the premiums written and additional fees earned in the last 12 months. Of the total, the company must calculate 18% of any result up to Ps. 5 million, and 16% of any result over Ps. 5 million. Finally, it must add the resulting figures and adjust the total by the ratio of net paid claims to gross paid claims for the last 36 months. This ratio must be at least 50%.

c) By claims: To use this method, the company must calculate the sum of gross claims paid during the 36 months prior to the end of the period under analysis. To that amount, it must add the difference between the balance of unpaid claims as of the end of the period under analysis and the balance of unpaid claims as of the 36th month prior to the end of the period under analysis. The resulting figure must be divided by three. Then the company must calculate 26% of any result up to Ps. 3.5 million, and 23% of any result over Ps. 3.5 million. The resulting figure must be adjusted by the ratio of net paid claims to gross paid claims for the last 36 months. This ratio must be at least 50%.

d) For life insurance companies that offer policies with an investment component, the figures obtained in b) and c) must be increased by an amount equal to 4% of the technical reserves. The latter total must be adjusted by the ratio of net claims reserves to gross claims reserves (at least 85%), plus 0.03% of at-risk capital adjusted by the ratio of net claims reserves to gross claims reserves (at least 50%).

The minimum required capital must then be compared to computable capital, defined as shareholder's equity less noncomputable assets. Noncomputable assets consist mainly of deferred charges, pending capital contributions, and excess investments in authorized instruments. As of December 31, 2003, the computable capital of the companies held by Sudamericana Holding S.A. exceeded the minimum requirement of Ps. 11.7 million by Ps. 19.6 million, representing an excess of approximately 167%.

MAIN REGULATORY CHANGES IN 2002 AND 2003

GENERAL

In order to deal with the 2001 and 2002 crisis, on January 7, 2002, Congress enacted the Public Emergency Law. The main measures taken by the government through the enactment of such Law and a series of decrees, include the following:

- ratifying the suspension of payments of Argentina's sovereign debt except for debt with the multilateral credit agencies;

- repealing of the articles of the Convertibility Law that had established in 1991 the one-to-one peso-dollar parity, devaluing the peso and subsequently allowing the peso to float, which resulted in an increase in such parity of approximately 240.0% during 2002;

- tightening of foreign-exchange controls and restrictions to transfers abroad, which began to be loosened at the end of 2002;

- ratifying and tightening the restrictions to cash withdrawals from bank deposits established in December 2001 (the "corralito"), restrictions that were lifted in December 2002;

- establishing a compulsory "asymmetric" conversion of certain dollar-denominated assets and liabilities into peso-denominated assets and liabilities at different exchange rates ("asymmetric pesification"), as follows:

- private sector debt (individual and corporate dollar-denominated debt) with financial institutions, and other creditors, was converted into peso-denominated debt at a one-to-one exchange rate;

- dollar-denominated public sector debt instruments in financial institutions' portfolios, both national and provincial, were converted into peso-denominated instruments at an exchange rate of Ps. 1.40 per US$1.00; and

- dollar-denominated bank deposits were converted into peso-denominated bank deposits at an exchange rate of Ps. 1.40 per US$1.00, while public-sector debt, bank and corporate debt governed by foreign law remained dollar-denominated;.

- modifying the yields of assets and the cost of liabilities pesified at the Ps. 1.40 per US$1.00 exchange rate, establishing fixed maximum and minimum interest rates, respectively, and establishing the indexation of the capital of those assets and liabilities to the variation of prices or salaries;

- restructuring bank peso-denominated time deposits and dollar-denominated deposits, above certain amounts, and establishing a repayment schedule ending in 2003 and 2005 depending on whether the deposit was originally peso or dollar-denominated (this restructuring was known as the "corralon");

- establishing a series of voluntary swaps of deposits in the "corralito" or of restructured deposits for government bonds, as a response to the inability of the financial system to return deposits in accordance with their original terms and conditions. Through Decree No. 739/03 of April 1, 2003, the lifting of the "corralon" was established;

- amending the charter of the Argentine Central Bank; and

- allocating government bonds to financial institutions in compensation for the losses that would otherwise arise from the "asymmetric pesification." As of the date of this annual report, the government and the Argentine Central Bank have provided a series of rules to determine the amount of compensation in connection with the "asymmetric pesification" to which each financial institution is entitled. However, certain situations remain that have not been contemplated by such rules, such as the provision of compensation for the effects of the "asymmetric pesification" on nonbanking subsidiaries with complementary activities.

On October 29, 2003, the Congress approved the provision to financial institutions of compensation for the imposition by the government of different inflation adjustment coefficients on pesified bank assets. However, as of the date of this annual report, the provision of compensation to financial institutions for the negative effect on their financial condition resulting from the reimbursement of dollar-denominated deposits, pursuant to depositors' judicial actions ("amparo claims"), at exchange rates greater than Ps. 1.40 per US$1.00, is pending.

Some of these measures are described in more detail below and under " -- Argentine Banking System and Regulation -- Argentine Banking Regulation."

FOREIGN EXCHANGE MARKET

In late 2001 and early 2002 restrictions were imposed on access to the Argentine foreign exchange market and on capital movements, which were tightened by mid 2002. The Public Emergency Law put an end to the Convertibility Law regime and thereby abandoned over ten years of fixed 1-to-1 U.S. dollar-peso parity, and granted the Executive Branch the power to set the exchange rate between the peso and foreign currencies and to regulate the foreign exchange market.

In order to prevent the appreciation of the peso that took place principally during the fourth quarter of 2002, and mainly through its Communiques "A" 3826, "A" 3843, "A" 3845, "A" 3866, "A" 3944, "A" 4087, and A" 4079, the Argentine Central Bank began to ease some of these restrictions.

Effective January 1, 2003, the Argentine Central Bank authorized the anticipated payment of imports and extended the maximum period for exporters of capital goods to liquidate foreign exchange. Likewise, it subsequently lifted restrictions on: (i) transfers of foreign exchange abroad to effect payments of principal in connection with nonfinancial private sector debts of a financial nature that had been restructured and in connection with debts that had become past due for amounts not to exceed US$150,000 per month; and (ii) the transfer of funds to pay interest on financial debts, profits and dividends. In addition:
(i) access of individuals and legal entities to the foreign exchange market was enhanced by increasing the monthly purchase amounts authorized from US$100,000 to US$150,000; (ii) authorized holdings of foreign exchange by financial institutions were also increased; and (iii) the limit over which exporters had to liquidate foreign exchange with the Argentine Central Bank was increased from US$200,000 to US$1.0 million.

In May 2003, the foreign exchange market regulations were further relaxed. Mainly through Communique "A" 3944, effective May 6, 2003, the Argentine Central Bank provided for an additional easing of restrictions, which included, among others, the following:

- the period for exporters of goods and services to liquidate foreign exchange was extended from 30 to 90 working days;

- except for certain export transactions, the obligation for exporters to liquidate foreign exchange through the Argentine Central Bank was eliminated;

- anticipated payment of foreign debt arising from import transactions was authorized independently from the contractual maturity;

- the requirement to obtain prior authorization of the Argentine Central Bank was eliminated for transfers of funds abroad for payment of principal of debts of a financial nature by financial and nonfinancial legal entities and local governments. The need for Argentine Central Bank prior authorization was not lifted in the case of financial institutions with outstanding financial assistance for liquidity support from the Argentine Central Bank. See " -- Argentine Banking System and Regulation -- Argentine Banking Regulation -- Financial Assistance from the Argentine Central Bank -- Financial Assistance for Liquidity Support Granted Before April 1, 2003." The requirement to obtain prior authorization from the Argentine Central Bank is not applicable to the payments in connection with the Bank's foreign debt restructured on May 18, 2004, as such restructuring was approved by the Argentine Central Bank. See " -- Business Overview -- Banco Galicia -- Restructuring of the Foreign Debt of the Bank's Head Office in Argentina and its Cayman Branch." On February 3, 2004, financial institutions with no outstanding financial assistance from the Argentine Central Bank were authorized to prepay debts with foreign creditors, with certain exceptions.

- the limit to purchase foreign exchange without the prior authorization of the Argentine Central Bank, applicable to all Argentine residents, was increased from to US$500,000 per month. On January 20, 2004, Communique "A" 4079 increased such limit to US$1 million, and Communique "A" 4128, dated April, 16, 2004, increased it again to US$2 million.

On June 30, 2003, Decree No. 285/03, regulated by Argentine Central Bank Communique "A" 3972, established effective July 1, 2003, a system for the registration of funds entering into Argentina and a 180-day restriction on the remittance of such registered funds abroad. This restriction does not apply to foreign trade transactions or to foreign direct investment.

During 2003, the Argentine Central Bank issued a series of rules further enhancing access to the foreign exchange market. Effective as of February 3, 2004, through Communique "A" 4086, access by mutual funds to the foreign exchange market was authorized.

LOANS TO THE PRIVATE SECTOR AND ASYMMETRIC INDEXATION

Pursuant to Decree No. 214/02 dated February 3, 2002, as amended, loans to the private sector were pesified at the Ps. 1 per dollar parity. These loans' principal was to be adjusted by a coefficient whose variation is tied to the changes in the consumer price index. The adjustment coefficient was known as the Stabilization Coefficient of Reference ("Coeficiente de Estabilizacion de Referencia") or CER (as per its initials in Spanish), with a maximum interest rate was to be applied. The adjustment by the CER coefficient would be retroactively applied beginning 180 days as from February 4, 2002. Subsequently, most of the loans to individuals were excluded from this adjustment, which was replaced by another coefficient that is linked to the changes in the general level of salaries. This coefficient was called the Variation Coefficient of Salaries ("Coeficiente de Variacion de Salarios") or CVS (as per its initials in Spanish). Decrees No. 762/2002 and No. 1242/2002, dated May 7, 2002 and July 15, 2002, respectively, Law No. 25,713 dated November 28, 2002, as ruled by Decree No. 44/03 dated January 26, 2003, and Law No. 25,796, published in the Official Gazette on November 17, 2003 and passed by Congress on November 14, 2003 provided for the following measures, among others:

- the following loans originally agreed in U.S. dollars and then pesified were excluded from the application of the CER: (i) loans secured by residential mortgages on property representing the borrower's sole family residence agreed upon for up to US$250,000; ii) personal loans originally agreed up to Ps. 12,000 or US$12,000 or the equivalent amount in foreign currency; and iii) personal loans secured by a pledge originally agreed up to Ps. 30,000 or US$30,000 or the equivalent amount in foreign currency.

- the application of the adjustment by the CVS as from October 1, 2002 (until such date, loan conditions to be applied would be those in force as of February 2, 2002) and the elimination of such adjustment

beginning on April 1, 2004. This rule was regulated through Decree No. 117/04 published in the Official Gazette on January 6, 2004 and through Communique "A" 4103 issued by the Argentine Central Bank. The Bank began to apply the adjustment by the CVS to the principal of eligible loans on November 2003.

- loans to be adjusted by the CER shall bear an interest rate ranging from 3.5% to 8%, depending on the type of debtor, the existence of guarantees and the type of loan.

- loans to be adjusted by the CVS shall bear an interest rate that would be the lowest between the loan's contractual rate and the following maximum interest rates: 12.38% for mortgage loans, 16.41% for loans secured by a pledge and 25.48% for personal loans.

- those debtors with obligations not included in the above-mentioned exceptions and with a total indebtedness in the financial system, as of February 3, 2002, of up to Ps. 400,000, would be able to capitalize the CER adjustment accrued up to September 30, 2002. Once the debt's new amount was recalculated in such way, the loan had to be restructured so that the first installment at the moment of the restructuring did not exceed the last installment paid in accordance with the previous conditions. If the loan was not an installment loan, the CER adjustment accrued and accumulated up to September 30, 2002, must be paid in installments throughout a period of not less than 120 days. Decree No. 117/2004 set forth that the restructuring of these loans and the offer of alternatives to debtors by creditors to pay off the accumulated CER amounts had to be made before March 1, 2004.

On July 25, 2003, the Argentine Central Bank authorized, through its Communique "A" 3987, financial institutions to grant loans to be adjusted by the CER, with the purposes of increasing peso-denominated loan origination, both medium- and long-term.

DURING MOST OF 2002, SEVERAL REGULATIONS WERE IN FORCE THAT RESTRICTED CREDITORS' ABILITY TO EXERCISE THEIR RIGHTS, INCLUDING FORECLOSURE PROCEEDINGS ON MORTGAGES AND PLEDGES, ALL PRELIMINARY MEASURES, SUCH AS ATTACHMENTS AND PRELIMINARY INJUNCTIONS ON THOSE GOODS AND/OR FACILITIES OWNED BY DEBTORS. THE SUSPENSION OF FORECLOSURE PROCEEDINGS WAS EXTENDED SEVERAL TIMES THROUGH REGULATIONS OR BY MEANS OF BANKS' VOLUNTARY COMMITMENT TO NOT BRING FORECLOSURE ACTIONS AGAINST DEBTORS UNTIL THE NATIONAL CONGRESS HAD THE OPPORTUNITY TO CONSIDER A NEW PROJECT OF LAW IN SUCH RESPECT.

On February 4, 2003, Decree No. 204/03 created the Legal Emergency Units to act as mediators between borrowers and creditors during a 90-day period beginning on February 6, 2003, the date of publication of the Decree in the Official Gazette. This mechanism did not involve the suspension or interruption of judicial proceedings' terms or of judicial or extrajudicial foreclosures, as regulated by the applicable rules.

On May 8, 2003, Congress enacted Act No. 25,737 whereby foreclosure proceedings on real property constituting the home of debtors were suspended for 90-day working days from the date said regulation was published, that is June 3, 2003. On June 26, 2003, through Decree No. 247/03 the government created the Foreclosure Proceedings Registry (Registro de Procedimientos de Ejecucion), with the purposes of identifying borrowers affected by foreclosure proceedings on their sole home, assess the situation and offer a solution not affecting creditors' rights or the Government's financial condition.

Through Law No. 25,798 enacted on November 6, 2003, the Mortgage Refinancing Regime (Sistema de Refinanciacion Hipotecaria) was created in order to refinance nonperforming loans secured by real property constituting the debtor's sole family residence. The Bank decided not to participate in this mortgage refinancing regime.

DEPOSITS

On December 3, 2001, Decree No. 1570/01 established the restrictions to depositors' ability to make cash withdrawals from bank accounts known as the "corralito." The "corralito" did not prevent transfers of deposits among banks. A banking holiday was imposed between December 21, 2001 until January 10, 2002.

On January 10, 2002, Resolution No. 6/02 of the Ministry of Economy established the first restructuring of time deposits in pesos and of most deposits originally denominated in U.S. dollars, above certain amounts. Certain nonrestructured amounts in dollar-denominated deposit accounts were allowed to be transferred to peso-denominated demand accounts at the Ps. 1.40 exchange rate and depositors were allowed to make monthly withdrawals of up to US$500. This limit was modified several times. Resolution No. 6/02, as amended, established a restructured deposits' monthly reimbursement schedule beginning in March 2002 and ending in November 2004, in the case of deposits originally constituted in pesos, and beginning in January 2003 and ending in August 2005, for deposits originally constituted in dollars. Restructured deposits were known as deposits in the "corralon" and were not allowed to be transferred among banks. After Resolution No. 6/02, the "corralito" referred to the restrictions applicable to transactional deposits only.

On February 3, 2002, Decree No. 214/02 established the mandatory conversion of all deposits in U.S. dollars or other foreign currencies in the Argentine financial system into pesos at the exchange rate of Ps. 1.40 per US$1.00. Decree No. 214/02 also allowed for the entire withdrawal of salaries and pensions in cash and other exceptions.

The "corralito" and the "corralon" were meant to shield banks from massive withdrawal of deposits. However, the financial system's deposit levels continued to diminish. One of the reasons for this was the increased access to funds in demand accounts that was permitted by Decree No. 214/02 and the subsequent withdrawal of all such funds by depositors in the context of the prevailing lack of confidence in the financial system. The other factor that became increasingly important beginning March 2002, was the increase in the number of successful amparo claims obtained by depositors requiring banks to release deposits.

During March and April 2002, due to the fact that outflows from the financial system were used to purchase foreign currency, the exchange rate began to increase and, as a result, the inflation accelerated too. The government declared, on April 19, 2002, a new banking and foreign-exchange market holiday that lasted until April 29, 2002. During such period, the Minister of Economy resigned and Mr. Roberto Lavagna, was appointed to replace him. In order to restrict fund outflows from the financial system, Law No. 25,587 was passed on April 25, 2002, that required banks to release deposits only when amparo claims had been issued pursuant to final non-appealable judicial decisions. Enforcement of this Law limited bank losses of deposits due to amparo claims, but did not eliminate them.

In an attempt to solve the problem that the "corralito" and "the corralon" represented, Minister Lavagna proposed a voluntary exchange of deposits for government bonds, known as "Canje I." Decree No. 905/02 established a mechanism pursuant to which any holder of restructured deposits and demand deposits, as well as depositors having participated in a prior voluntary exchange established by Decree No. 494/02, were given the option to exchange their deposits for new Argentine government bonds. These were a peso-denominated bond maturing in 2007 (BODEN 2007) and two dollar-denominated bonds, one maturing in 2005 and the other in 2012 (BODEN 2005 and BODEN 2012). The period to exercise the options expired in mid July 2002.

Decree No. 905/02 established that financial institutions would acquire the government bonds to be offered to depositors in cash, obtained by means of advances to be granted to them by the Argentine Central Bank. These advances had to be fully secured by public- and private-sector debt instruments held by financial institutions, in accordance with the provisions of article 15 of Decree No. 905/02 (which established assets included and their order of preference), except in the case of BODEN 2012, which had to be acquired in the first place by delivering 9.0% National Government Bonds maturing 2002 ("Bonos Encaje"). Such advances would have the same terms as the bonds to be subscribed with the funds provided by them.

In addition, Decree No. 905/02 established that non-exchanged restructured deposits would remain under the repayment schedule defined by Resolution No. 6/02 as amended, but would be registered with Caja de Valores S.A. and constitute publicly negotiable certificates known as "CEDROs," listed in self-regulated exchanges of the country. CEDROs could be used for subscription of primary issues of equity and debt securities authorized to be publicly offered by the CNV and authorized to be listed by an exchange and to repay loans granted by the same financial institution where the deposits were held.

Through Decree No. 1836/02 dated September 16, 2002, the government announced a new exchange (known as "Canje II") of deposits for government bonds and the possibility for holders of restructured deposits outstanding as of May 31, 2002 of up to Ps. 7,000 (excluding the CER adjustment), to exchange them for cash. Financial institutions were allowed to extend this possibility to holders of restructured deposits of up to Ps. 10,000 (excluding the CER adjustment). The period to receive cash began in September 23, 2002, and expired on November 21, 2002. This new exchange contemplated different options for holders of CEDROs or depositors that might have participated in the previous exchange implemented by the government. The period to exercise these options, began in September 23, 2002 and expired on May 23, 2003.

Decree No. 1836/02 opened the possibility for financial institutions to acquire the government bonds to be delivered to depositors, in exchange for secured loans and other public sector debt instruments held by financial institutions included in art.15 of Decree No. 905/02, with the preference there established. In addition, Decree No. 1836/02 allowed financial institutions to offer dollar-denominated government bonds maturing in 2006 to depositors having initiated judicial actions pending resolution, to recover their deposits. Acceptance of such bonds is voluntary.

Given the favorable trend shown during the second half of 2002 by the financial system's deposit base, through its Resolution No. 668/02 and effective December 2, 2002, the Ministry of Economy eliminated the restrictions still in force on the amounts that depositors were allowed to withdraw in cash from transactional deposit accounts. These measures meant the lifting of the "corralito."

On March 5, 2003, the Argentine Supreme Court (the "Supreme Court") ruled on the lawsuit of the Province of San Luis against the Argentine government, concerning the claim for the reimbursement, in dollars or in pesos for an amount equivalent to the dollar amount at the free exchange rate, of a pesified dollar-denominated deposit that the Province of San Luis holds at Banco Nacion. In its ruling, the Supreme Court declared art. 2 of Decree No. 214/02 unconstitutional (the article that had pesified the dollar-denominated deposits outstanding in the Argentine financial system) and ordered Banco Nacion to reimburse the Province of San Luis' deposit in dollars or in pesos for an amount equivalent to the dollar amount at the free exchange rate. In its ruling, the Supreme Court established a 60-day term for the parties to convene or determine the manner and the terms of the reimbursement of the deposit. The parties did not reach an agreement within the established period. Resolution of this issue by the Supreme Court is pending as of the date of this annual report.

Continuing with the progressive release of restructured deposits, through Decree No. 739/03 of April 1, 2003, regulated by Argentine Central Bank Communique "A" 3919, the Argentine government allowed holders of such deposits to request from financial institutions and the Argentine government, the reimbursement of their deposits, on conditions that varied depending on the amount of the deposit and its original currency of denomination. In all cases the difference between the nominal amount of the deposit's principal adjusted by the CER (which was reimbursed in cash plus interest by banks) and the equivalent in pesos of the original dollar amount of the deposit at the exchange rate informed by the Argentine Central Bank as of April 1, 2003 (Ps. 2.979 per US$1.00), will be repaid by the Argentine government through the delivery of "National Government Bonds in Dollars Maturing 2013" ("BODEN 2013"). The period to exercise the options contemplated began on April 8 and ended on May 23, 2003. The process to eliminate the "corralon" was completed in August 2003.

COMPENSATION TO FINANCIAL INSTITUTIONS

For Asymmetric Pesification and its Consequences

Mainly through Decrees No. 214/02, No. 320/02, No. 410/02, No. 471/02, No. 704/02, No. 905/02 and No. 992/02 and complementary ones, as amended, and Argentine Central Bank Communiques "A" 3467, 3507, 3561 and 3648 and complementary ones, as amended, a significant portion of financial institutions' assets and liabilities denominated in foreign currency, which formed part of their net asset position in foreign currency were converted into pesos at different exchange rates.

Decree No. 214/02 provided for the compensation, through the issuance by the government of a bond to be delivered to financial institutions, of the losses that financial institutions would otherwise suffer as a result of the conversion of bank assets and liabilities into pesos at different exchange rates and the short foreign currency

positions that would result from such conversion. Decree No. 494/02 provided a methodology for the calculation of the amount of compensation and established that the government objective in providing such compensation was to cause financial institutions' net worth to return to the levels prior to the pesification, by compensating them for:

- the losses caused by the conversion into pesos of a significant portion of their liabilities at the Ps. 1.40 per US$1.00 exchange rate, greater than the Ps. 1.00 per US$1.00 exchange rate established for the conversion into pesos of a significant portion of its dollar-denominated assets. This would be achieved through the issuance and delivery of a peso-denominated compensatory bond maturing in 2007 ("BODEN 2007").

- the currency mismatch generated by the compulsory pesification of certain portions of financial institutions' assets and liabilities. This would be achieved through the conversion of the compensatory bond originally peso-denominated into a dollar-denominated compensatory bond and, if necessary, through the subscription of a dollar-denominated hedge bond. For this, the government established the issuance of a dollar-denominated bond bearing LIBOR and maturing in 2012 ("BODEN 2012").

Among other measures, Decree No. 905/02, replaced the provisions of Decree No. 494/02 in connection with the methodology for calculating the compensation to be received by financial institutions. Decree No. 905/02 established that (i) the compensation to which a financial institution was entitled would be calculated by taking into account the imbalances generated by the government's pesification measures in the balance sheet of such financial institution's head office and branches located in Argentina as of December 31, 2001, only; and (ii) provision of compensation on account of imbalances generated in the balance sheets of such institution's foreign branches and subsidiaries would be limited exclusively to the effects of the pesification of such foreign branches' and subsidiaries' investments in secured loans. Compensation for the pesification of other assets of a bank's foreign branches and subsidiaries and of the assets of local subsidiaries with complementary activities subject to Argentine Law was not contemplated. On October 28, 2002, Decree No. 2167/02 incorporated into the compensation scope those assets and liabilities subject to Argentine Law and recorded in foreign branches and subsidiaries that were pesified by Decree No. 214/02 and complementary ones. The assets of subsidiaries with complementary activity remained excluded.

Argentine Central Bank Communiques "A" 3805 and "A" 3825 regulated Decree No. 2167/02 and established that no later than December 23, 2002, financial institutions had to inform the Argentine Central Bank of the amounts of compensation to which they were entitled under the new rules. The Argentine Central Bank has to confirm the amounts after its review. In the Bank's case, such review by the Argentine Central Bank has not been completed as of the date hereof.

The Bank has the option to purchase the hedge bond using secured loans pursuant to the provisions of Decree No. 2167/02. If the hedge bond is purchased through borrowings from the Argentine Central Bank, pursuant to article 15 of Decree No. 905/02 such borrowings have to be collateralized by the following assets in the following priority: (i) secured loans representing in origin an exposure to the Argentine government, beginning with those with the shorter average life; (ii) secured loans representing in origin an exposure to the provinces, beginning with those with the shorter average life; and (iii) other assets with the public sector at the criteria of the Ministry of Economy and the Argentine Central Bank. If a bank does not have the required assets, it must give as collateral loans to the private sector classified in the first two categories of the Argentine Central Bank loan classification, beginning with mortgage loans, or if necessary such bank's shareholders shall pledge their shares in such bank. The value of the collateral required must be equal to 100.0% of the amount of the borrowings. No assets have been given as collateral by the Bank as of the date of this annual report because the compensation bonds have not been received in full by the Bank yet. In addition, article 17 of Decree No. 905/02 established that such borrowings from the Argentine Central Bank to purchase the hedge bond may be repaid with the assets pledged as collateral thereto at any time following (i) a default by the Argentine government on the new debt issued pursuant to Decree No. 1387/01 (secured loans), and (ii) the date on which the government shall have completed the restructuring of its foreign debt.

Subsequently, Resolution No. 6/04 of the Ministry of Economy, as regulated by Argentine Central Bank Communiques "A" 4122 and "A" 4130, issued on March 26 and April 26, 2004, respectively, established certain changes to the methodology for the calculation of the compensation for asymmetric pesification:
(i) certain transactions such as debts with a bank's foreign head office as of December 31, 2001 and a bank's borrowings

which FX risk had been hedged by the bank's head office were excluded from the compensation calculation; (ii) the methodology for the compensation corresponding to holdings of foreign-currency-denominated certificates of participation and debt securities issued by financial trusts was established; and (iii) compensation in the case of nonpesified loans for which payments were received between January 15 and March 3, 2002, at exchange rates higher than Ps. 1.4 per U.S. dollar, was reduced.

As of the date of this annual report, the resolution from the Argentine Central Bank regarding the final amount of this compensation to the Bank is pending. See Item 5. "Operating and Financial Review and Prospects -- Item 5A. Operating Results -- Consolidated Assets."

For Asymmetric Indexation and for Differences Related to Amparo Claims

Financial institutions have requested to the government that they be compensated for the losses generated to them by other economic policy measures or facts such as: (i) the reimbursement of deposits pursuant to amparo claims at the free market exchange rate, which was greater than that established by the government for the conversion into pesos of financial institutions' assets and liabilities; and (ii) the adjustment for inflation of included assets and liabilities by using different coefficients, the CER or the CVS ("asymmetric indexation").

Law No. 25,796, published in the Official Gazette on November 17, 2003, set forth the compensation to financial institutions by the Argentine Government for the negative effects generated on financial institutions' financial condition by asymmetric indexation. To that end, this law allowed the National Government to issue "National Government Bonds Denominated in Pesos at a Variable Rate Maturing in 2013" for up to Ps. 2,800 million. These bonds shall bear the financial system's average interest rate on deposits not subject to any principal adjustment. Law No. 25,796 was regulated by Decree No. 117/2004, published in the Official Gazette on January 26, 2004, which provided for: (i) the compensation's mechanism; (ii) the optional participation in the compensation regime by financial institutions; and (iii) the possibility for financial institutions to opt for a total or partial participation.

As of December 31, 2003, based on the provisions set forth by Law No. 25,796, which did not provide for a partial option, the Bank had recorded, on the basis of a total option, Ps. 102.7 million under "Other Receivables from Financial Brokerage" on account of the estimated compensation amount.

Subsequently, through the issuance of different rules, the Ministry and the Argentine Central Bank further regulated Law No. 25,796, in a way that, in the Bank's opinion, is contrary to the provisions of Law No. 25,796. On May 6, 2004, the Bank presented a letter to the Executive Branch, the Ministry of Economy and the Argentine Central Bank maintaining the claim for compensation that it had made on December 30, 2003. On May 18, 2004, the date of expiration of the period established by such rules for financial institutions to opt for their participation in the compensation regime laid down by such rules, the Bank did not request to participate in such compensation regime and made a new presentation before the Ministry of Economy and the Argentine Central Bank, restating its right to be compensated for the negative effects of asymmetric indexation and formally challenging the new rules. Based on the provisions of Law No. 25,709, as of December 31, 2003, the Bank had recorded Ps. 102.7 million under "Other Receivables Resulting from Financial Intermediation" on account of its right to receive compensation from the government for asymmetric indexation.

With respect to the differences generated by the payments made by the Bank pursuant to amparo claims, the Bank recorded an intangible asset, the amount of which as of December 31, 2003, was Ps. 487.0 million, net of the amortization mandated by the Argentine Central Bank. on account of its right to receive compensation for having had to make payments pursuant to judicial orders for amounts higher than those provided for by the pesification decrees. See " -- Argentine Banking System and Regulation -- Argentine Banking Regulation -- Treatment of Losses in Connection with Amparo Claims." As of the date of this annual report, rules for the provision of compensation to financial institutions on account of the differences arising from the reimbursement of dollar-denominated deposits pursuant to amparo claims for amounts higher than those provided for by the pesification decrees are pending, and the government has expressed that it was contrary to the provision of such compensation.

INFLATION ACCOUNTING

The Banks' financial statements have been restated for inflation for periods ended in 2002 and up to February 28, 2003. For a description of the applicable regulations, see "Presentation of Financial Information" at the beginning of this annual report.

ARGENTINE BANKING SYSTEM AND REGULATION

ARGENTINE BANKING SYSTEM

As of December 31, 2003, the Argentine financial system consisted of 96 financial institutions, of which 75 were banks and 21 were financial nonbank institutions (including finance companies, credit unions, savings and loan associations). Of the 75 banks, 15 were Argentine government-owned or related banks. As of December 31, 2003, out of the 60 private-sector banks:

- 31 were private-sector domestically-owned banks (i.e., sociedades anonimas);

- 27 were foreign-owned banks (i.e., local branches or subsidiaries of foreign banks); and

- 2 were cooperative banks (bancos cooperativos limitados), also domestically-owned.

As of that date, the largest private-sector banks, in terms of total deposits, were: BBVA Banco Frances, Banco Rio Santander, Banco Galicia, Citibank, BankBoston and HSBC Bank. Except for the Bank, these were all foreign-owned banks. According to information published by the Argentine Central Bank as of December 31, 2003, private-sector banks accounted for 51.5% of total deposits and approximately 68.2% of total net loans in the Argentine financial system. Argentine financial industry regulations do not raise any entry or exit barriers, nor do they make any differentiation between locally or foreign-owned institutions. Cooperative banks are active principally in consumer banking, with a special emphasis on the lower end of the market. As of December 31, 2003, financial entities (other than banks) accounted for approximately 0.2% of deposits and 0.8% of net loans in the Argentine financial system.

As of December 31, 2003, the largest Argentine government-owned or related banks, in terms of total deposits, were Banco Nacion and Banco de la Provincia de Buenos Aires. Under the provisions of the Financial Institutions' Law, public banks have comparable rights and obligations as private banks, except that public banks handle public revenues and promote regional development and certain public banks have preferential tax treatment. The bylaws of some Argentine government-owned banks provide that the governments that own them (national and provincial) guarantee their commitments. Under current law, Banco de la Provincia de Buenos Aires is not subject to taxes, levies or contributions that the Argentine government may impose. According to information published by the Argentine Central Bank, as of December 31, 2003, government-owned banks and banks in which the Argentine government (national, provincial and municipal) had an ownership interest accounted for 48.2% of deposits and 30.9% of loans in the Argentine financial system.

Consolidation has been a dominant theme in the banking sector since the Convertibility Law was implemented in 1991, with the total number of financial institutions declining from 214 in 1991 to 96 at December 31, 2003, with the ten largest private banks holding 41.9% of the system's deposits as of December 31, 2003. We expect consolidation in the Argentine financial system to continue.

During the decade of the 1990s, foreign banks significantly increased their presence in the Argentine financial system. Since the last quarter of 1996, control of many of the largest Argentine private-sector domestically-owned commercial banks has been transferred to foreign banks, which ended up controlling the largest private sector financial institutions except the Bank. This foreign presence grew both in the universal bank sector and among financial institutions specializing in specific products or markets. Currently, this situation has not changed despite the fact that the number of foreign banks decreased by twelve through December 2003 as compared with the number at the end of 2001. In this period, most foreign banks operating in Argentina have experienced losses in their Argentine operations. It is still unclear at the moment which foreign institutions will remain in the country.

ARGENTINE BANKING REGULATION

The following is a summary of certain matters relating to the Argentine banking system, including provisions of Argentine law and regulations applicable to financial institutions in Argentina. This summary is not intended to constitute a complete analysis of all laws and regulations applicable to financial institutions in Argentina.

General

Since 1977, banking activities in Argentina have been regulated under the Financial Institutions' Law which places the supervision and control of the Argentine banking system in the hands of the Argentine Central Bank, which is an autonomous institution. The Argentine Central Bank has vested the Superintendencia de Entidades Financieras y Cambiarias (Superintendency of Financial and Exchange Institutions, the "Financial Superintendency") with most of the Argentine Central Bank's supervisory powers. In this section, unless the context otherwise requires, references to the Argentine Central Bank shall be understood as references to the Argentine Central Bank acting through the Financial Superintendency. The Financial Institutions' Law provides the Argentine Central Bank with broad access to the accounting systems, books, correspondence, and other documents of banking institutions. The Argentine Central Bank regulates the supply of credit and monitors the liquidity of, and generally supervises the operation of, the Argentine banking system. The Argentine Central Bank enforces the Financial Institutions' Law and grants authorization for banks to operate in Argentina. The Financial Institutions' Law confers numerous powers to the Argentine Central Bank, including the ability to grant and revoke bank licenses, to authorize the establishment of branches outside Argentina, to approve bank mergers, capital increases and certain transfers of stock, to fix minimum capital, liquidity and solvency requirements and lending limits, to grant certain credit facilities to financial institutions in cases of temporary liquidity problems and to promulgate other regulations that further the intent of the Financial Institutions' Law.

Current regulations place the operation of local and foreign owned banks on equal regulatory terms.

The Public Emergency Law sanctioned on February 6, 2002 introduced substantial amendments to the Argentine Central Bank's charter which, among others, released certain restrictions on its ability to act as a lender of last resort, allowed the Argentine Central Bank to make advances to the Argentine government for up to 10.0% of the cash funds obtained during the preceding 12 months (which before could only be effected by purchasing at market prices negotiable securities issued by the National Treasury) and released the restriction whereby up to one third of the freely available international reserves could be composed of government securities considered at market values.

The Financial Institutions Law and the Argentine Central Bank charter were recently amended by Law No. 25, 780, published in the Official Gazette on September 8, 2003. The main provisions established by such law are the following: (1) authorization was given to the Argentine Central Bank to make temporary loans to the Argentine government for up to 12.0% of the monetary base, and to make loans for an amount of up to 10.0% of the total annual amount raised by the Argentine government in cash during the last 12 months, both of which shall be reimbursed within 12 months from the relevant date of disbursement. Such temporary loans cannot not exceed 12.0% of the monetary base, except those destined exclusively to the payment of outstanding obligations to multilateral agencies; (2) indemnity for Argentine Central Bank officers was provided for, by stating that the "opportunity, merits or convenience" of certain of their decisions (mostly related to the liquidation and restructuring of financial institutions) must be reviewed by the courts only when such decisions have been clearly made in an unreasonable and arbitrary manner; (3) authorization was given to the Argentine Central Bank to exclude assets and liabilities of financial institutions with liquidity and solvency problems and establish the rules for their valuation, and assign the transfer of excluded assets and liabilities to other financial entities, or transfer assets to financial trusts (see " -- Financial Institutions with Economic Difficulties");
(4) amendment in the degree of payment preferences in favor of creditors (see " -- Priority Rights of Depositors"); and (5) authorization was given to the Argentine Central Bank to disburse rediscounts to financial institutions with liquidity or solvency problems, during the term of the Public Emergency Law.

Supervision

As supervisor of the Argentine financial system, the Argentine Central Bank requires financial institutions to submit information on a daily, monthly, quarterly, semiannual and annual basis. These reports that include balance sheets and income statements, information relating to reserve funds, use of deposits, portfolio quality (including details on debtors and any loan-loss provision established) and other pertinent information, allow the Argentine Central Bank to monitor financial institutions' financial condition and business practices.

The Argentine Central Bank carries out formal inspections from time to time of all banking institutions for purposes of monitoring compliance by banks with legal and regulatory requirements. If the Argentine Central Bank rules are breached, it may impose various sanctions depending on the gravity of the violation. These sanctions range from calling attention to the infraction to the imposition of fines or even the revocation of the financial institution's operating license. Moreover, noncompliance with certain rules may result in the obligatory presentation to the Argentine Central Bank of specific adequacy or regularization plans. The Argentine Central Bank must approve these plans in order for the financial institution to remain in business.

Financial institutions have been subject to the supervision of the Argentine Central Bank on a consolidated basis since 1994. The Argentine Central Bank requires financial entities (i) to consolidate their quarterly and annual financial statements with all corporate and financial entities in its economic group; and (ii) to prepare consolidated semiannual financial statements for its economic group, unless the company or financial entity controlling the economic group is required to prepare audited consolidated financial statements in the country in which it is incorporated. Information set out in " -- Limitations on Types of Business," " -- Capital Adequacy Requirements," " -- Lending Limits," and " -- Loan Classification System and Loan Loss Provisions" below, relating to a bank's loan portfolio, are calculated on a consolidated basis. However, regulations relating to a bank's deposits are not based on consolidated information, but on such bank's deposits in Argentina (for example, liquidity requirements and contributions to the deposit insurance system).

Due to the significant impact of the crisis that unfolded in Argentina since December 2001, in 2002 the Argentine Central Bank suspended the requirement of submission of certain information or changed or postponed the filing dates prescribed by the information regime to which financial institutions were subject. In particular, see the " -- Capital Adequacy Requirements" section below.

Financial System's Restructuring Unit ("Unidad de Reestructuracion del Sistema Financiero" or "URSF")

Decree No. 1262/03 of April 1, 2003, created the Financial System's Restructuring Unit, comprised of three members appointed by the Ministry of Economy and three members appointed by the Argentine Central Bank to decide on the strategy to be followed and the measures to be taken in order to restructure the Argentine financial system, including the conditions under which financial institutions will repay the financial assistance granted by the Argentine Central Bank. See " -- Financial Assistance from the Argentine Central Bank -- Financial Assistance for Liquidity Support Granted Before April 1, 2003."

Examination by the Argentine Central Bank

The Argentine Central Bank established the "CAMEL" quality rating system which is based on weighting the creditworthiness, compliance with the Financial Institutions' Law, administrative order and general operating solvency of a financial institution. Each letter of the CAMEL system corresponds to the following areas of the operations of each bank being rated: "C" represents capital, "A" represents assets, "M" represents management, "E" represents earnings, and "L" represents liquidity. Each factor is evaluated and rated on a scale from 1 to 5, 1 being the highest rating an entity can receive. By combining the individual factors that are under evaluation, a combined index can be obtained that represents the final rating for the financial institution.

The Argentine Central Bank begun to rate each Argentine financial institution based on the results of a periodic examination conducted by the Financial Superintendency, in accordance with the CAMEL system, in October 1994. The last examination of Banco Galicia was based on information as of September 30, 2000 and the rating obtained, informed to the Bank on October 15, 2001 was the highest among financial institutions, as had occurred in the previous years.

On October 6, 2003, the Argentine Central Bank issued Communique "A" 4027 requiring financial institutions to provide information regarding their business plan and their projections. This information had to be filed with the Argentine Central Bank on or prior to October 31, 2003, and the Argentine Central Bank has required updates.

BASIC System

The Argentine Central Bank established a control system ("BASIC") which requires all financial entities to comply with a set of procedures concerning the operations of such financial entities with the purpose of allowing the public access to a greater level of information and safety with respect to their holdings in the Argentine financial system. Each letter of the BASIC system corresponds to one of the following procedures:

- B ("Bonos" or Bonds). On an annual basis, all financial institutions in Argentina were required to engage in certain debt issuing transactions in order to expose them to scrutiny and analysis by third parties with high standards. The Bank was always in compliance with this requirement, which was repealed through Argentine Central Bank Communique "A" 3498, effective March 1, 2002.

- A ("Auditoria" or Audit). The Argentine Central Bank requires a set of audit procedures that include: (a) the creation of a registry of auditors; (b) the implementation of strict accounting procedures to be complied with by auditors; (c) the payment of a performance guarantee by those auditors to induce their compliance with the procedures, and
(d) the creation of a department within the Argentine Central Bank liable for verifying that the procedures are followed. The purpose of this requirement is to assure accurate disclosures by the financial institutions to both the Financial Superintendency and the public.

- S ("Supervision" or Supervision). The Argentine Central Bank has the right to inspect financial institutions from time to time.

- I ("Informacion" or Information). Financial institutions are required to file on a monthly basis certain daily, weekly, monthly and quarterly statistical information.

- C ("Calificacion" or Rating). The Argentine Central Bank established a system requiring periodic credit evaluation by internationally recognized rating agencies, which was suspended by Communique "A" 3601 in May 2002.

Legal Reserve

The Argentine Central Bank requires that each year banks allocate to a legal reserve a percentage of net income set by the Argentine Central Bank, which is currently 20.0%. Such reserve can only be used during periods in which a bank has incurred losses and has exhausted all allowances and other provisions. Dividends may not be paid if the legal reserve has been impaired.

Limitations on Types of Business

As provided by the Financial Institutions' Law, commercial banks are authorized to conduct all activities and operations that are not specifically prohibited by law or by regulations of the Argentine Central Bank. Some of the activities which are permitted include the ability to make and receive loans; to receive deposits from the public in both local and foreign currency; to guarantee customers' debts; to acquire, place or negotiate stock or debt securities in the Argentine OTC Market, subject to the approval of the CNV; to conduct transactions in foreign currency; to act as fiduciary; and to issue credit cards.

Banks are not permitted to own commercial, industrial, agricultural and other types of businesses, except with prior authorization from the Argentine Central Bank. Under Argentine Central Bank regulations, the aggregate amount of equity investments of a commercial bank (including participations in domestic mutual funds called fondos comunes de inversion) may not exceed 50.0% of such bank's Adjusted Shareholders' Equity or Computable Regulatory Capital (as defined below). In addition, investments in:

- unlisted equity shares excluding (a) stock of companies which provide services complementary to the services offered by the bank, and (b) certain stock participations which are necessary in order to obtain the rendering of public services, if any,

- listed stock and participations in mutual funds which are not included in order to determine the capital requirements related to market risk; and

- listed stock that does not have a "largely publicly available" market price (when daily quotes of relevant transactions are available, which quotes would not be significantly affected by the disposition of the bank's holdings of such stock)

may not exceed, in the aggregate, 15.0% of a bank's Adjusted Shareholders' Equity.

"Adjusted Shareholders' Equity" or "Computable Regulatory Capital" is defined under the Argentine Central Bank's regulations as the so-called (a) "basic" shareholders' equity or "core capital," which includes capital stock, capital adjustments, reserves, uncapitalized irrevocable capital contributions, audited retained earnings and, pursuant to the consolidated supervision regime, third party holdings; plus (b) the so-called "complementary" shareholders' equity which includes certain subordinated debt securities, a portion of the allowances required by the Argentine Central Bank in respect of loans classified Normal and Normal Performance (as such terms are defined in " -- Selected Statistical Information -- Argentine Central Bank's Loan Classification and Loan Loss Provisions") plus certain unaudited net income and less certain items such as permanent investments in other financial institutions, capital assigned to offshore branches, certain intangible assets and nonpaid capital.

Nevertheless, for purposes of calculating the limits described both above and in " -- Lending Limits," it is not necessary to deduct the capital assigned to offshore branches from a bank's shareholders' equity.

Under Argentine Central Bank regulations, financial institutions are typically precluded from engaging directly in insurance activities and from holding an equity interest in excess of 12.5% of the outstanding capital of a company that does not provide services complementary to those provided by financial institutions or which exceeds specified percentages of the respective financial institution's Adjusted Shareholders' Equity as described above. The Argentine Central Bank determines which services are complementary to the services provided by financial institutions.

Through Communique "A" 3918 the Argentine Central Bank established that beginning on April 1, 2003 and until December 31, 2003, financial institutions will be allowed to receive in payment of credits granted shares or equity participations in the capital of a company that engages in activities other than complementary activities, not exceeding 20.0% of the capital stock or of voting rights, subject to certain conditions.

Treatment of Losses in Connection with Amparo Claims

Through Communique "A" 3916 dated April 3, 2003, the Argentine Central Bank provided for the recording of an intangible asset on account of the difference between the amount paid by financial institutions pursuant to legal actions and the amount resulting from the conversion into pesos of the balance of the U.S. dollar deposits reimbursed, at the exchange rate of Ps. 1.40 per US$1 (adjusted by the CER plus interests accrued up to the payment date). In addition, it established that the corresponding amount shall be amortized in 60 monthly equal and consecutive installments as from April 2003. As of December 31, 2003, the Bank had recorded an intangible asset of Ps. 487.0 million and amortizations amounted to Ps. 77.9 million during 2003.

The Bank has reserved its right to file any legal actions, at suitable times, in view of the negative effect caused on its financial condition by the reimbursement of originally dollar-denominated deposits, pursuant to legal orders or final judgments, either in dollars or in pesos for the equivalent amount at the market exchange rate, since compensation of this effect was not included into the calculation of the compensation to financial institutions. The method of recording a deferred loss set forth by the Argentine Central Bank in the above-mentioned Communique does not affect the legitimacy of such rights.

Legal Reserve Requirements

After the crisis of early 1995 (known as the "Tequila crisis") a system of "minimum liquidity requirements" was created in substitution of the prior minimum cash reserve requirements' system. In order to meet the minimum liquidity requirements, a percentage of a bank's liabilities, depending on the type of account, and on the remaining maturity of the liability had to be invested in certain specific instruments, so that financial institutions

could obtain a return on the reserves. Compliance with the minimum liquidity requirements was determined in average for monthly periods. However, the Argentine Central Bank modifies from time to time this practice depending on monetary policy considerations.

Effective June 1, 2001, Argentine Central Bank Communique "A" 3274 changed the regulations for bank reserve requirements: (i) minimum liquidity requirements remained in effect only for liabilities with a fixed maturity, for which banks continued, as previously required, to apply a sliding scale of minimum percentage liquidity requirements that decreased as the remaining maturity of the liability increased. These percentages were set at 22.0% for remaining maturities of up to 89 days, 15.0% for up to 179 days, 10.0% for up to 364 days, and 0.0% for more than one year; and (ii) "minimum cash requirements" were established for demand deposits (savings accounts, current accounts, and other demand-deposit accounts) at 15.5%. The assets eligible for compliance with this requirement were cash held in bank vaults and balances held at the Argentine Central Bank. Through its Communique "A" 3311, the Argentine Central Bank reduced the minimum liquidity requirements for the July-August 2001 period, and allowed the inclusion of cash being transported and cash held in custody with armored-car companies as eligible for compliance with minimum cash requirements.

Beginning June 1, 2001, bank accounts at the Argentine Central Bank began to be remunerated. Reverse repurchase agreements with the Argentine Central Bank ceased to be eligible to comply with the minimum liquidity requirements. The minimum liquidity requirements and the minimum cash requirements and banks' compliance with the level required continued to be determined in average for monthly periods.

Due to the systemic liquidity shortage resulting from deposit outflows, which accelerated during the last quarter of 2001, in December of that year, the Argentine Central Bank established temporary emergency reserve requirements.

Effective March 1, 2002, Communique "A" 3498, of the Argentine Central Bank eliminated the minimum liquidity requirements and modified the regulations addressing minimum cash requirements. Compliance with the minimum cash requirements must be accomplished, in the same currency as the liability that originates the requirement, with cash in bank vaults, the balances of banks' current accounts at the Argentine Central Bank and the balances of the special escrow accounts held by banks at the Argentine Central Bank in favor of clearing houses.

Communique "A" 3598 created the "minimum placement requirements," effective May 1, 2002, applicable only to peso demand deposits (deposits in savings accounts and current accounts). Communique "A" 3732 of September 13, 2002, extended this requirement to time deposits in pesos constituted with funds from the "corralito."

The minimum cash requirements outstanding as of December 31, 2002, were 14.0% for time deposits and 22.0% for demand deposits. Regulations allowed the "Special Funds former Almafuerte and Mendoza Banks" to be considered as a lower requirement in accordance with Argentine Central Bank Resolution No. 36/03. See Item 5. "Operating and Financial Review and Prospects -- Item 5A. Operating Results -- Consolidated Assets." The assets computable for compliance with this requirement are the technical cash, which comprises notes and currencies in banks' vaults and the balances of the peso- and dollar-denominated accounts and of the escrow accounts in favor of the clearing houses held by banks at the Argentine Central Bank.

As of December 31, 2002, the minimum fund placement requirements were 12.0% for time deposits in pesos and 18.0% for demand deposits in pesos. Certain assets were eligible to comply with this requirement: (i) credits acquired from or debt securities or participation certificates issued by financial trusts or other sums of money applied to those ends obtained in transactions formalized or to be formalized as from November 26, 1998, related to the restructuring of financial institutions under the framework of article 35bis of the Financial Institutions Law, including possible unpaid balances of participation certificates or debt securities of such trusts, subscribed before January 31, 2001, (ii) Lebac in pesos adjustable by the CER and (iii) holdings of "National Government Bonds at 9.0% Maturing in 2002." On this respect, the Argentine Central Bank established a schedule that exhausted the amounts computable in July 2003. In case a bank did not have the necessary assets, the "minimum fund placement requirements" turned into greater "minimum cash requirements."

On March 21, 2003, Communique "A" 3905 distinguished the minimum cash requirements applicable to time deposits by their remaining maturity and incorporated restructured deposits to the calculation base, applying to

such deposits the same scale of requirements, based on remaining maturity, than to time deposits. The percentage requirements established ranged from 12.0% for time deposits maturing in up to 29 days, to 4.0% for deposits maturing in up to 365 days, and 0.0% for deposits maturing after 365 days.

During 2003, in several occasions, the Argentine Central Bank reduced the minimum cash requirements and minimum fund placement requirements applicable.

Through Communique "A" 4032, dated October 10, 2003, the Argentine Central Bank increased the percentages of minimum cash requirements effective November 1, 2003. In addition, through such Communique, it discontinued, effective November 1, 2003, the minimum fund placement requirements.

Through its Communique "A" 4051, dated November 27, 2003, as amended by Communique "A" 4140, dated May 14, 2004, the Argentine Central Bank reduced the percentages of minimum cash requirements applicable to demand-deposit accounts (mainly current accounts and savings accounts ), from 23% to 20%.

On May 28, 2004, Communique "A" 4147 established several changes, as follows:

- Effective June 1, 2004, the percentage of minimum cash requirements applicable to peso-denominated current accounts and saving accounts, other peso-denominated demand-deposit accounts was reduced from 20% to 18%. The percentage applicable to dollar-denominated current accounts was reduced to 18% and for dollar-denominated saving accounts and other dollar-denominated demand-deposits it was reduced to 20%;

- Effective August 1, 2004: the percentages applicable to dollar-denominated saving accounts and other dollar-denominated demand-deposits, except current accounts, will increase from 20% to 30%; and those applicable to minimum demand-deposits by mutual funds required by regulatory requirements, will increase from 80% to 100%;

- Effective on the same date, the percentages applicable to dollar-denominated time deposits, restructured deposits, acceptances, swaps, negotiable obligations (issued after January 1, 2002) and other liabilities with a fixed maturity, will be based on their remaining maturity, as follows:

Less than 29 Days:            from 18.0% to 35%

From 30 Days to 59 Days:      from 14.0% to 28%

From 60 Days to 89 Days:      from 10.0% to 20%

From 90 Days to 179 Days:     from 5.0% to 10.0%

From 180 Days to 365 Days:    from 3.0% to 6.0%

Beginning on August 1, 2004, the applicable requirement for any type of deposit by mutual funds, excluding those demand-deposits mentioned in (ii), will be 25% for peso-denominated deposits and 40% for dollar-denominated deposits.

The Bank was in compliance with the legal reserve requirements as of December 31, 2003.

Capital Adequacy Requirements

Due to the deep changes made during 2002 to the financial system's operations, which significantly affected the variables to determine the minimum capital requirements, through its Communiques "A" 3599 and "A" 3604 dated May 3 and 9, 2002, respectively, the Argentine Central Bank suspended the submission of this information by financial institutions.

Until December 31, 2001, Argentine banks had to comply with the minimum capital requirements established by the Argentine Central Bank, which were based on the methodology of the Basel Committee on Banking Supervision of the Bank for International Settlements. Banks had to comply with capital requirements both on an unconsolidated basis and on a consolidated basis with its significant subsidiaries. Until December 31, 2001,

the Bank had complied in excess with the minimum capital requirements. See " -- Selected Statistical Information -- Regulatory Capital."

Through its Communique "A" 3959 dated June 2, 2003, the Argentine Central Bank established a new minimum capital requirements regime for financial institutions.

The new regime's main features are:

- an 8.0% requirement on risk-weighted assets, consistent with the international standard set forth by the Basel Committee;

- equal percentage requirements for financial institutions' exposures to private and public sectors' assets;

- the requirement of increasing capital as a function of loans' interest rates was discontinued;

- an additional requirement was established to cover the risk inherent to mismatches between the rate of inflation and market interest rates;

- the determination of the capital requirements to cover market and interest-rate risks, shall incorporate the dollar as well as the adjustments by the CER and the CVS;

- the increase or decrease of the capital requirement depending on the rating granted to each institution by the Superintendency of Financial and Foreign Exchange Institutions was discontinued;

- risk weightings will be adjusted to take into account, among others, the changes introduced in late March 2003 regarding the treatment of public-sector assets.

Through Communique "A" 3959, the Argentine Central Bank required minimum capital information to be presented on a monthly basis for periods after May 1, 2003, but did not specify a date of effectiveness for the minimum capital requirement. On July 25, 2003, Argentine Central Bank Communique "A" 3986 made certain modifications and clarifications to the new rule on minimum capital requirements introduced by Communique "A" 3959, established that the new minimum capital requirements will become effective in January 2004, and maintained the obligation for financial institutions to comply with the associated information regime.

Communique "A" 3986 established that, beginning in January 2004, two coefficients known as "Alfa 1" and "Alfa 2" will be applied, in order to temporarily reduce the minimum capital requirement to cover credit risk and the minimum capital requirement to cover interest-rate risk, respectively.

"Alfa 1" will be applied exclusively to government securities held in investment accounts; loans granted to the nonfinancial public sector until May 31, 2003; government securities received by financial institutions as compensation for the effects of the "asymmetric pesification" (articles 28 and 29 of Decree No. 905/02); and debt instruments issued by the Fiduciary Fund for Provincial Development (Decree No. 1579/02). For the year 2004, the first period for applying this coefficient, "Alfa 1" was established in 0.05 and its value will increase progressively to reach 1 on January 2009.

The initial value of "Alfa 2" will be 0.20 for the year 2004. The value of this coefficient will increase progressively to reach 1 in January 2007.

Lending Limits

The aggregate amount of equity participation and credit, including guarantees granted, a bank can grant to any credit customer at any time is based on the bank's Adjusted Shareholders' Equity on the last day of the immediately preceding month and on the customer's net worth.

According to Argentine Central Bank rules, a commercial bank may not lend or otherwise extend credit to (referred to herein as "financial assistance") or participate in the capital stock of a single unrelated customer (together with its affiliates) in amounts in excess of 15.0% of the bank's Adjusted Shareholders' Equity or 100.0% of such customer's net worth. However, a bank may grant additional financial assistance to such customer up to an amount equal to 10.0% of the bank's Adjusted Shareholders' Equity if such additional financial assistance is secured with certain liquid assets, including public or private debt securities.

Under Argentine Central Bank regulations, the aggregate amount of investments of a commercial bank in the stock of third parties, including participation in certain mutual funds authorized pursuant to Argentine Central Bank regulations, may not exceed 50.0% of such bank's Adjusted Shareholders' Equity, with the aggregate amount of such investments on the assets described below being limited to 15.0% of such Adjusted Shareholders' Equity. Such assets are:

- unlisted stock, excluding (a) stock of companies which provide services complementary to the services offered by the bank and
(b) any stock participation which is necessary in order to obtain the rendering of public services;

- listed stock and participations in mutual funds which are not taken into account in order to determine the market risk related capital requirements referred to below; and

- listed stock which does not have a "largely publicly available" Market price. Under the regulations, a stock's market price is considered to be "largely publicly available" when daily quotes of relevant transactions are available, which quotes would not be significantly affected by the disposition of the bank's holdings of such stock.

In addition, an equity investment of a commercial bank in another company that does not provide services complementary to the services provided by the commercial bank may not exceed 12.5% of such company's net worth.

Total financial assistance that a commercial bank may grant to any particular borrower and its affiliates are also limited based on the borrower's net worth. Total financial assistance to any one borrower and its affiliates may not exceed, in general, 100.0% of such borrower's net worth, but such limit may be increased to 300.0% of the borrower's net worth if such amount does not exceed 2.5% of the bank's Adjusted Shareholders' Equity. Communique "A" 4060, dated December 22, 2003, allowed financial institutions to grant new loans exceeding 300% of the borrower's net worth, but not exceeding 2.5% of the bank's Adjusted Shareholders' Equity, considering each client debt, and 15% considering total debt of clients in the same situation. This authorization will expire on June 30, 2005.

The Argentine Central Bank regulates loans to a bank's "related parties," defined as a bank's affiliates and related individuals. For purposes of these lending limits, "affiliate" means any entity over which a bank, directly or indirectly, has control, is controlled by, or is under common control with, or any entity over which a bank has, directly or indirectly, significant influence with respect to such entity's corporate decisions. "Related individuals" means a bank's directors, senior management, syndics and such persons' direct relatives.

The Argentine Central Bank limits the amount banks can lend to their related parties depending on the rating granted to each bank by the Financial Superintendency. Banks rated 4 or 5 are forbidden to lend to their related parties. Banks ranked between 1 and 3 cannot extend financial assistance to their related parties in an amount which exceeds, together with any equity participation held by the bank in its affiliates, 5.0% of such bank's Adjusted Shareholders' Equity. However, a bank may grant additional financial assistance to such related parties up to an amount equal to 10.0% of such bank's Adjusted Shareholders' Equity: (i) if the affiliate provides complementary services (defined as services in connection with stock brokerage, issuance of credit or debit or similar cards, financial intermediation in leasing and factoring transactions) (ii) in the case of temporary acquisition of shareholdings in companies to facilitate their development in order to sell such holdings afterwards, (iii) if the affiliate is a local financial institution rated other than 1 or 2 by the Argentine Central Bank, or (iv) if such additional financial assistance is secured with certain liquid assets, including public or private debt securities. If the affiliate is a financial institution rated 1, the amount of financial assistance can reach 100.0% of a bank's Adjusted Shareholders' Equity. If the receiving affiliate financial institution is rated 2, the amount of financial assistance can

reach 10.0% without limitations and an additional 90.0% should the term for the loans and other credit facilities not exceed 180 days.

In addition, the aggregate amount of a bank's equity participation in, and nonexempt financial assistance to, its related parties may not exceed 20.0% of such bank's Adjusted Shareholders' Equity.

In addition, with respect to related persons who are individuals, the total amount of loans to those related persons cannot exceed Ps. 50,000, which must be used exclusively for personal or family purposes. Failure to properly observe these requirements can result in an increase of the minimum capital requirements for credit risk in an amount equal to 100.0% of the daily excess amounts over the requirements beginning on the month when the excess amounts appear and continuing while the excess amounts remain.

Notwithstanding the limitations described above, the aggregate amount of nonexempt financial assistance (including equity participations) independently of whether customers qualify as related parties or not of a bank as to which such assistance and participation exceeds 10.0% of such bank's Adjusted Shareholders' Equity, may not exceed three times the bank's Adjusted Shareholders' Equity excluding financial assistance to domestic financial institutions, or five times the bank's Adjusted Shareholders' Equity including financial assistance to domestic financial institutions.

The Bank has complied with such rules. On February 11, 2002, through its Resolution No. 81/02, the board of directors of the Argentine Central Bank prohibited the Bank from granting any further financing to related parties.

Communique "A" 3911 issued on March 28, 2003, established limits to a financial institution's new exposure to the Argentine public sector applicable granted after April 1, 2003. These limits exclude the stock exposure outstanding as of March 31, 2003, and government securities received as compensation in accordance with Decree No. 905/02 or those to be received pursuant to other regulations. Beginning April 1, 2003, new financial assistance to the Argentine public sector must be within the limits established as follows: (i) aggregate exposure to national public sector debt instruments (including financial assistance to other public sector jurisdictions secured by the federal tax collection shared with such jurisdictions) cannot exceed 50.0% of a bank's regulatory capital or Adjusted Shareholders' Equity, (ii) aggregate exposure to each provincial jurisdiction and the City of Buenos Aires (including financial assistance to municipal jurisdictions secured by the federal tax collection shared with such jurisdictions but excluding those included in the previous item) may not exceed 10.0% of a bank's Adjusted Shareholders' Equity and shall be secured by local tax collection revenues or by a pledge or be instrumented as a leasing transaction, and (iii) aggregate exposure to each municipal jurisdiction may not exceed 3.0% of a bank's Adjusted Shareholders' Equity and must be secured in the same manner. Total exposure to municipal jurisdictions shall not exceed 15.0% of a bank's Adjusted Shareholders' Equity and the total exposure to the public sector, described in items (i), (ii) and (iii), above, must not exceed 75.0%. In addition, beginning January 1, 2006, the average financial assistance to all the public sector must not exceed 40.0% of a bank's total assets as of the end of the previous month. Any excess over this limit will determine an equal increase in the minimum capital requirement.

Loan Classification System and Loan Loss Provisions

In 1994, the Argentine Central Bank introduced the current loan classification system and corresponding minimum loan loss provision requirements applicable to loans and other types of credit (together, referred to as "loans" in this section) of private sector borrowers.

The current loan classification system is a bifurcated system, applying certain criteria to classify loans in a bank's "consumer" portfolio, and another set of criteria to classify loans in its "commercial" portfolio. The loan classification criteria applied to loans in the consumer portfolio are based on delinquency aging, while the principal criterion of classification of loans in the commercial portfolio is each borrower's ability to pay, as measured mainly by such borrower's future cash flow. In the loan classification system, all customers in an economic group are considered as one borrower. If a customer has both commercial and consumer loans, consumer loans will be added to commercial loans to determine eligibility for classification in the consumer portfolio. Loans backed with preferred guarantees will be considered at 50.0% of their face value.

Until December 31, 2002, banks could opt to apply the consumer loan classification criteria to commercial loans of up to Ps. 200,000. Through Communique "A" 3918, issued on April 4, 2003, the Argentine Central Bank established that between March 31, 2003 and December 31, 2003, customers with debt in the whole financial system of up to Ps. 5.0 million will be classified in the same manner as consumer loans, that is, they will be automatically classified according to the number of days the debt is past due. For the classification, one day past due will be computed for each 3 days elapsed in the period from December 1, 2001 to March 31, 2003. This treatment will also be provided to the portfolio of commercial loans of up to Ps. 200,000, which under the previous rules were already automatically classified. The aggregate amount of net reversal of allowances outstanding as of February 28, 2003, if corresponding, must be reflected in a specific liability account the balance of which shall be used for the establishment of new allowances beginning in April 2004.

For a description of the Argentine Central Bank's loan classification system and the Argentine Central Bank's minimum loan provision requirements, see " -- Selected Statistical Information -- Argentine Central Bank's Loan Classification and Loan Loss Provisions."

Valuation of Public Sector Assets

For a description of the rules governing the valuation of government securities, see " -- Selected Statistical Information -- Government and Corporate Securities."

In November 2001, the government offered a swap of public-sector debt instruments for secured loans to the Argentine government (Decree No. 1387/01). As of December 2001, only the swap of Argentine government debt instruments was completed. Beginning in November 2001, the Bank recorded the secured loans to the national government and those loans to the provinces tendered in the swap in accordance with the terms and conditions of the new secured loans. This swap reduced the yields of public-sector debt instruments and extended their maturity but did not modify their currency of denomination.

The rules issued in 2002 compulsorily pesified the Argentine government secured loans and modified their other terms and conditions (maturity, interest rate and principal adjustment). Decree No. 471/02 established that all secured loans outstanding as of February 3, 2002 had to be pesified at the Ps. 1.40 per US$1.00 exchange rate, with their principal adjusted by the CER and fixed annual interest rates ranging from 3.0% to 5.5% depending on their term. For secured loans representing in origin an exposure to the provinces, Decree No. 1579/02 dated August 28, 2002, introduced an additional restructuring through the offering of a new swap for secured notes (BOGAR) or loans issued by the FFDP maturing in 16 years, principal adjusted by the CER and a fixed 2.0% annual interest rate. The new swap included loans to the FFDP, excluded from the first swap, and recognized the loans to the provinces originally tendered in the first swap. The swap was completed in early 2004. The Bank records provincial secured loans in accordance with the terms and conditions established by Decree No. 1579/02 since November 2002.

Through its Communique "A" 3911, the Argentine Central Bank established a new method for the valuation of secured loans, government securities not subject to capital requirements to cover market risk, promissory notes issued by the FFDP and other loans to the nonfinancial public sector, excluding among others, government securities recorded in investment accounts, compensatory and hedge bonds and Lebac, short-term Argentine Central Bank notes.

Beginning with the financial statements for March 2003, included assets began to be valued at the lower between their face and present values. To determine present values, the Argentine Central Bank established a discount rate that increases gradually over time. Its initial value was 3.0% per annum, applicable during 2003 and until December 2003, inclusively. Thereafter the discount rate increases by 0.25% semiannually until 2005. In 2006 it will be 5.0% and in 2007 the discount rate will be 5% plus a function of the market yield of national-government securities. Beginning in 2008 the applicable discount rate will be the average market yield of national-government securities. The face value is the balance of each instrument adjusted according to its contractual terms. The difference between the lower of present and face values, and the book value has to be reflected in an asset regularizing account, for a positive difference, or be charged to income, for a negative one.

Subsequently, Argentine Central Bank Communique "A" 4084, dated January 30, 2004, modified the public-sector assets valuation rules established by Communique "A" 3911, as follows:

- Public-sector assets granted as collateral of advances from the Argentine Central Bank to purchase BODEN (both for clients and held by banks) contemplated by articles 10, 11 and 12 of Decree No. 905/02 were excluded from the valuation rules for public-sector assets established by Communique "A" 3911 (valuation at present value resulting from a discount rate established by this Communique). Those assets can be recorded at the value determined by the Argentine Central Bank for their use as collateral.

- Cash flow of provincial secured loans created by Decree No. 1579/02 (BOGAR) must be used to calculate the present value of past-due and unpaid public-sector assets.

Finally, this Communique provided for the reversal of the interest accrued on past-due government assets after December 31, 2001, if corresponding.

Financial Assistance from the Argentine Central Bank

Financial Assistance Granted for Liquidity Support Beginning March 10, 2003

Communique "A" 3901, issued on March 19, 2003, established an automatic mechanism to regulate the provision by the Argentine Central Bank to financial institutions of assistance for liquidity support. This mechanism does not apply to the financial assistance granted for such reasons during the 2001/2002 crisis.

Financial Assistance for Liquidity Support Granted Before April 1, 2003

Through Decree No. 739/03, the Argentine government established a voluntary procedure for the restructuring of the financial assistance granted by the Argentine Central Bank to financial institutions during the crisis that affected the financial system since 2001. The basic purpose was to harmonize the cash flows of those financial institutions that are simultaneously debtors (for having received financial assistance from the Argentine Central Bank) and creditors (for their holdings of debt instruments) of the public sector.

Art. 9 of this Decree established that balances due must be amortized in pesos, in the same number of installments as those of the assets granted as guarantees of the financial assistance received, without exceeding 70 monthly installments. Argentine Central Bank Communique "A" 3941 established a minimum cumulative amortization schedule and a monthly repayment of not less than 0.90% of the adjusted balance. Mandatory accelerated repayment is contemplated when the interest rate earned by the assets granted as guarantees exceeds 3.5% per annum. In addition, voluntary prepayment is available.

Decree No. 739/03 also established that financial assistance subject to this repayment system shall be guaranteed by the Argentine government secured loans issued under Decree No. 1646/01 and, in the absence of the latter, Secured Notes issued under the provisions of Decree No. 1579/02 or bonds issued under the provisions of Decree Nos. 905/02, 1836/02 and 739/03. Pursuant to Argentine Central Bank Communique "A" 3941, all instruments to be delivered as security must be adjustable by the variation of the CER. These securities are to be maintained with no decrease until restructuring of the government's foreign debt is concluded under Decree No. 1387/01 or December 31, 2004, whichever occurs first (except for prepayments, in which case the securities are to be returned on a pro rata basis in the inverse order of their granting).

Argentine Central Bank Communique "A" 3941 established that all amortization installments and interest payments shall be automatically withdrawn from the accounts the financial institution holds with the Argentine Central Bank.

In accordance with Argentine Central Bank Communique "A" 3940, for a bank to be eligible to restructure the financial assistance for liquidity reasons provided to it by the Argentine Central Bank, under the terms established by Decrees No. 739/03 and No. 1262/03, such bank was required to have received the approval of the Argentine Central Bank to the terms and conditions for the restructuring of their foreign debt before December 5, 2003.

Decree No. 1262/03 provided that the Argentine Central Bank shall modify the above mentioned repayment conditions, when the URSF establishes so, subject to the following conditions: (i) the average life of the assets

granted as guarantees of the financial assistance received exceeds 70 months and
(ii) the financial institution falls under the provisions of articles 34 and 35bis of the Financial Institutions Law and has adopted a reorganization plan approved by the URSF. In this case, repayment will occur in the same number of installments as that of the assets granted as guarantees of the financial assistance received with a maximum number of 120 monthly installments and a monthly amortization of not less than 0.4%. Also, upon the occurrence of an event of default, the URSF has the right to accelerate the maturity of such financial assistance.

On November 28, 2003, the URSF informed the Bank that through Resolution No. 1 dated November 27, 2003, it had authorized the Argentine Central Bank to extend the maturity of the Banks' debt for liquidity support with said entity, within the regime established by Decree No. 739/03, pursuant to the repayment schedule submitted by the Bank to the Argentine Central Bank and under the terms provided for by Decree No. 1262/03.

By means of a note dated February 3, 2004, the Argentine Central Bank informed the Bank that it had approved the Bank's request to adhere to the regime of repayment of the debt owed to said entity for liquidity support established by Decree No. 739/03 and extended through Decree No. 1262/03. Through the same note the Argentine Central Bank informed the Bank that it had also authorized such debt's amortization schedule submitted by the Bank, which is the result of the minimum amortization defined by the applicable regulations and of the cash flows of the assets eligible as collateral pursuant to such regulations. Consequently, this schedule comprises the debt repayment in 92 monthly installments as from March 2004, inclusively.

Foreign Currency Position

Through Communique "A" 3889, the Argentine Central Bank limited financial institutions' foreign currency exposure based on such institution's "Global Foreign Currency Net Position" (assets and liabilities from financial brokerage and securities denominated in foreign currencies). Beginning May 1, 2003, the absolute value of the "Global Foreign Currency Net Position" must not exceed 30.0% of a bank's computable capital or Adjusted Shareholders' Equity as of the end of the previous month. In the case of short positions, the limit was set at the lower of 30.0% of computable capital or liquid shareholders' equity. For those financial institutions that expected not to be able to comply with such limits, a period for the presentation of a compliance plan was provided that expired May 15, 2003. On that date, the Bank notified the Argentine Central Bank of an excess in its global foreign currency position and proposed a compliance plan, a response with respect to which is pending.

Through Communique "A" 4135, issued on May 5, 2004, the Argentine Central Bank established an additional limit to be observed by financial institutions. Beginning on July 1, 2004, balances of demand accounts, assets and liabilities included in this regime which are usually traded in institutional markets with a significant volume of transactions or which become due within 180 days, will not be able to exceed a percentage to be determined. In order to calculate this position, they should be considered only those securities recorded at their market value, but not excluding those payments that become due within 180 days.

Deposit Insurance System

Argentine Law No. 24,485 and Decree No. 540, as amended by Decree No. 1292/96 and Decree No. 1127/98, created a deposit insurance system for bank deposits and delegated to the Argentine Central Bank the organization and start-up of the deposit insurance system. The deposit insurance system has been implemented through the creation of a fund named Fondo de Garantia de los Depositos ("FGD") which is administered by Sedesa. The shareholders of Sedesa are the Argentine government through the Argentine Central Bank, which holds at least one share, and a trust constituted by the financial institutions authorized by the Argentine Central Bank which wish to participate in the fund. The Argentine Central Bank establishes the extent of participation by each institution proportionally to the resources contributed by each such institution to the FGD (Communique "A" 2337).

The deposit insurance system that became effective covered all peso and foreign currency deposits held in demand deposit accounts, savings accounts and time deposits with a maturity of less than 90 days are insured for an amount up to Ps. 10,000 and all time deposits with a maturity of 90 days or longer are insured for up to Ps. 20,000. In November 1998, the amount of insurance for such deposits was raised to Ps. 30,000 for all deposits and made uniform without distinction of maturity dates. Deposits made after July 1, 1995 with an interest rate 200 basis points

above the interest rate quoted by Banco de la Nacion Argentina for deposits with equivalent maturities are not covered by this system. This guarantee shall be made effective within 30 days from the revocation of the license of a financial institution, subject to the outcome of the exercise by depositors of their priority rights described under " -- Priority Rights of Depositors" below.

The Argentine Central Bank may modify, at any time, and with general scope, the sum of the mandatory deposit guarantee insurance according to the consolidation of the financial system and any other elements that it may deem appropriate.

Decree No. 1292/96, enhanced Sedesa's functions to allow it to provide equity capital or make loans to Argentine financial entities experiencing difficulties and to institutions which buy such Argentine financial entities or buy the deposits of such Argentine financial entities. As a result of such decree, Sedesa has the flexibility to intervene in the restructuring of a financial entity experiencing difficulties prior to bankruptcy.

Priority Rights of Depositors

According to section 49 e) of the Financial Institutions Law, as amended by Law No. 25,780 dated September 8, 2003, in case of judicial liquidation or bankruptcy of a financial entity, the holders of deposits in pesos and foreign currency benefit from a general priority right to obtain repayment of their deposits up to the amount set forth below, with priority rank over all other creditors, with the exception of the following: (i) credits secured by mortgage or pledge, (ii) credits from rediscounts and overdrafts granted to financial entities by the Argentine Central Bank, according to section 17 subsections b), c) and f) of the Argentine Central Bank Charter,
(iii) credits granted by the Banking Liquidity Fund created by Decree No. 32 of December 26, 2001, secured by mortgage and pledge and (iv) certain labor credits, including accrued interests until its total cancellation. Pursuant to section 16 of Law No. 25,780 during the term of emergency set forth under the Public Emergency Law No. 25,561 the Argentine Central Bank can grant rediscounts and overdrafts to financial entities with liquidity and solvency problems, included those entities under a restructuring process as contemplated in section 35bis of the Financial Institutions Law.

The holders of the following deposits are entitled to the general preferential right established by the Financial Institutions Law (following this order of preference),

- deposits of individuals or legal entities up to Ps. 50,000 or the equivalent thereof in foreign currency, enjoying this preference only one person per deposit. For the determination of this preference, all deposits of the same person registered by the entity shall be computed;

- deposits in excess of Ps. 50,000 or the equivalent thereof in foreign currency, referred to above;

- liabilities originated on commercial credit lines granted to the financial entity, which are directly in connection with international trade.

According to the Financial Institutions Law, the preferences set forth in previous paragraphs (i) and (ii) above, are not applicable to deposits held by persons who are affiliates of the financial entity, either directly or indirectly as determined by procedures that the Argentine Central Bank will establish in the future.

In addition, under section 53 of the Financial Institutions Law, the Argentine Central Bank has an absolute priority over all other creditors of the entity except as provided by the Financial Institutions Law.

Financial Institutions with Economic Difficulties

The Financial Institutions Law establishes that financial institutions, including commercial banks such as the Bank, which evidence a cash reserve deficiency, have not abided by certain technical standards, have not maintained minimum net worth standards, or which solvency or liquidity is deemed to be impaired by the Argentine Central Bank must submit a restructuring plan (a "Restructuring Plan") to the Argentine Central Bank. Such Restructuring Plan must be presented to the Argentine Central Bank on the date specified by the Argentine Central Bank, which should not be later than 30 calendar days from the date on which the request is made by the Argentine

Central Bank. In order to facilitate the implementation of a Restructuring Plan, the Argentine Central Bank is authorized to provide a temporary exemption from compliance with technical regulations and/or the payment of charges and fines which arise from such noncompliance.

The Argentine Central Bank may also, in relation to a Restructuring Plan presented by a financial institution, require such financial institution to provide guarantees or limit the distribution of profits, and appoint a supervisor, to oversee such financial institutions' management, with the power to veto decisions taken by the financial institution's corporate authorities.

In addition, the Argentine Central Bank's charter authorizes the Financial Superintendency within the Argentine Central Bank, subject only to the prior approval of the president of the Argentine Central Bank, to suspend for up to 30 days, in whole or in part, the operations of a financial entity if its liquidity or solvency has been adversely affected. Notice of this decision must be given to the board of directors of the Argentine Central Bank. In case at the end of such suspension period the Financial Superintendency considers it is necessary to renew it, it can only be authorized by the board of directors of the Argentine Central Bank, for an additional period not to exceed 90 days. During the suspension: (i) there is an automatic stay of claims, enforcement actions and precautionary measures; (ii) any commitment increasing the financial institution's liabilities is void, and (iii) acceleration of indebtedness and interest accrual is suspended.

If, in the judgment of the Argentine Central Bank, a financial institution is in a situation which, under the Financial Institutions' Law, would authorize the Argentine Central Bank to revoke the financial institution's license to operate as such, the Argentine Central Bank may, prior to considering such revocation, order a variety of measures, including (1) taking steps to reduce, increase or sell the financial institution's capital; (2) revoking the approval granted to the shareholders of the financial institution to own an interest therein, giving a term for the transfer of such shares; (3) exclusion and transfer of assets and liabilities; (4) constituting trusts with part or all the financial institution's assets (5) granting of temporary exemptions to comply with technical regulations and/or pay charges and fines arising from such defective compliance; or (6) appointing a bankruptcy trustee and removing statutory authorities.

Furthermore, it is provided that, those acts which are authorized, commissioned or decided by the Argentine Central Bank under section 35bis of the Financial Institutions' Law, involving the transfer of assets and liabilities, or which complement it, or are necessary to execute the restructuring of a financial institution, as well as those related to the reduction, increase and sale of equity, are not subject to any court authorization and cannot be deemed inefficient in respect of the creditors of the financial institution which was the owner of the excluded assets, even though its insolvency preceded such exclusion.

Dissolution and Liquidation of Financial Institutions

The Argentine Central Bank must be notified of any decision to dissolve a financial institution pursuant to the Financial Institutions' Law. The Argentine Central Bank, in turn, must then notify a court of competent jurisdiction which will determine who will liquidate the entity: the corporate authorities or an appointed, independent liquidator. This determination is based on whether or not sufficient assurances exist which indicate that such corporate authorities are able to carry out liquidation properly.

Pursuant to the Financial Institutions' Law, the Argentine Central Bank no longer acts as liquidator of financial institutions. However, when:

- a restructuring plan has failed or is not considered viable;

- local and regulatory violations exist; or

- substantial changes have occurred in the entity's condition since the original authorization was granted,

the Argentine Central Bank may decide to revoke a bank's license to operate as a financial institution. In this case, the law allows judicial or extrajudicial liquidation as in the case of voluntary liquidation described in the preceding paragraph.

Bankruptcy of a financial institution cannot be adjudicated until the license is revoked by the Argentine Central Bank. No creditor, with the exception of the Argentine Central Bank, may request the bankruptcy of the former entity until 60 days have elapsed since the revocation of the license.