The BCRA increases minimum reserve requirements on balances in money market fund’s interest-bearing sight accounts by 5 p.p., from 10% to 15%, for liquidity management.
Likewise, financial institutions may comply with minimum reserve requirement up to 15% out of their securities-backed transactions with a maximum residual term of 29 days. This measure seeks to eliminate distortions among similar instruments.
Both the reduction in the monetary policy rate and the normalization of reserve requirements are aimed at absorbing the liquidity surplus resulting from the monetary financing of fiscal deficit of the past few years. The correction of these imbalances is central to eliminate controls in the financial system. Both measures reduce endogenous issuance through the remuneration of BCRA’s liabilities while generating incentives to seek higher returns in the capital market.
