The Board of Directors of the Central Bank of the Argentine Republic (BCRA) decided today on a set of rules aimed at mitigating the impact of the economic crisis generated in the productive sector as a result of the Coronavirus COVID-19 pandemic. These measures aim to ensure that the financial system can provide more support to both companies and individuals and that the payment chain does not suffer in the coming months.
According to the BCRA, all financial institutions in the system will be able to offer a special line of credit to micro, small and medium-sized enterprises (MSMEs) at a maximum annual interest rate of 24%. To increase their lending capacity, the BCRA established that entities must divest a part of their position in LELIQ.
In addition, in the case of entities that activate this special line of credit, the BCRA will reduce the amount of their reserve requirements, further increasing the availability of resources for financing. These loans are especially aimed at financing the working capital of companies in the current situation, such as payment of salaries and coverage of deferred checks.
The measure as a whole, adding the reduction of LELIQ’s holdings in the hands of the entities and the release of reserve requirements, generates a volume of credit to support this sector of more than 50% of current bank financing.
In addition, the release of reserve requirements was increased within the framework of the financing of the Ahora 12 Program, to encourage family consumption.
On the other hand, the BCRA ordered the temporary relaxation of the parameters with which bank debtors are classified. The current classification system takes into account, among other variables, the number of days of arrears of each debtor. From today until September 2020, a period of 60 days will be added to the classification of each debtor for each category, allowing the difficulties caused by the crisis in various branches of economic activity to be considered.
To sustain lending capacity, the possibility of the distribution of results by financial institutions was suspended until 06/30.
These measures approved by the BCRA board of directors are in addition to others adopted by the Executive Branch in the same sense to try to alleviate the effects of the coronavirus pandemic on the economy. The BCRA continues to monitor the evolution of the situation in order to evaluate alternatives to the extent that it deems it necessary.
