Financial Stability Report – July 2016

This edition of the Financial Stability Report (Informe de Estabilidad Financiera, IEF) was presented at a press conference on Monday, August 1. Click here to see the presentation. The next edition of the IEF will be published in November 2016. As from 2017, the IEF will be published in April and October each year.

Synthesis and institutional outlook for this edition:

Argentina has a solid and liquid financial system, with great opportunities to grow and be more inclusive. The objective of the new monetary and financial policy agenda is to lay the foundations for the financial system to reach its potential, expanding its banking access levels and maintaining its strength.

The lack of protection for depositors, attributed to episodes of financial repression, high inflation processes and economic crises, has pushed depositors to invest in foreign assets and other instruments outside the financial system. As a consequence, this sector is strong in transactional activity, with almost no medium- to long-term financing activity. Thus, deposits and credits in the local financial system account for only 15% and 12% of the Gross Domestic Product (GDP), respectively; well below the records evidenced by the same coefficients for the countries of the region and other emerging countries. In addition, large segments of the population and the productive sector do not have access to credit; this means that the system does not effectively promote equal opportunities.

To boost the growth of the financial system, the BCRA pillars are low and stable inflation with positive real interest rates. Monetary policy has been focusing on that target over the past few months. The deepening of the financial system will stem from monetary stability, along with other measures that have been taken to promote an environment of transparency, freedom and greater competition. In order to strengthen the growth of savings in local currency and long-term credit (in particular, mortgage loans), the BCRA has implemented the instruments denominated in Housing Units (Unidades de Vivienda, UVIs).

In order to promote broader access to financial services under better price and quality conditions, the BCRA is implementing an agenda focused on full banking access (savings accounts and free transfers), the effective disclosure of prices for all services, as well as innovation and greater competition in electronic means of payment and infrastructure expansion, particularly in those regions that are lagging behind (flexibility when opening branches, new methods).

Within the new macroeconomic context, the current state of the financial system fosters economic growth. The risk mapping assumed is limited and there are comprehensive liquidity, provisioning, profitability and capital hedges to deal with possible adverse scenarios. The financial system is regulated and supervised under a regulatory framework in line with international best practices, while remaining subject to professional and independent monitoring. Going forward, there are important challenges for the sector in terms of growth of exposures, disinflation and more competition. With the aim of preserving financial stability, the BCRA will continuously monitor the different risk factors, adequately managing micro and macroprudential policy in a timely manner.

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The next edition of the IEF will be published in November 2016. As from 2017, the IEF will be published in April and October each year.

August 1st, 2016