The BCRA has decided to change the structure of minimum cash requirements. Since October 1, there has been an incentive to raise time deposits. Now, the goal is to make the minimum cash structure simpler and promote the extension of terms for time deposits, with no impact on the monetary base.
Against the backdrop of rising time deposits, at the end of September, the BCRA established that minimum cash requirements could be fully met with liquidity bills (LELIQs). This measure proved to be useful to promote the raising of time deposits in pesos and to reduce the spread between the benchmark rate (LELIQs) and the rate on these deposits. Private sector time deposits in pesos grew at a pace exceeding 10% monthly in October and November, and the spread between the benchmark rate and the average rate on private sector time deposits was reduced by over 900 basis points between September and December.
Given that time deposits grew at different rates across the financial system during this period, the current share of minimum cash requirements to be met in pesos is different among institutions even when the temporary structure of their time deposits is exactly the same. Cash requirements in pesos became equal for all banks pertaining to the same group under the current regulation. This change was made in such a way that would neutralize the impact on the monetary base and stimulate the term extension of deposits in pesos in the financial system.
In the case of institutions belonging to Group “A” or those related to global systemically important banks (G-SIBs), compliance with minimum cash requirements for time deposits will be 30% in pesos, 5% in BOTEs 2020, and 10% in LELIQs. For time deposits with a residual term of up to 29 days, they are set at 17%, 5% and 13%, respectively. These requirements are reduced as the term of deposits increases, showing lower implicit risks for longer term deposits. For deposits with a residual term between 30 and 59 days, requirements are 10% in cash, 5% in BOTES 2020, and 10% in LELIQs. For deposits with a residual term of 60 to 89 days, they are set at 5%, 2% and 0%, respectively. There will be no minimum cash requirement for deposits with a residual term of more than 90 days.
For financial institutions in Group “B” not included in the regulation aforementioned, the BCRA decided to extend the minimum cash requirements in force until June 21, 2018. On June 21, 2018, the BCRA increased the minimum cash requirements in pesos for financial institutions in Groups ”A” and “B.” This criterion differed from that adopted through the amendments implemented on August 16, 2018; August 30, 2018; September 14, 2018; and September 28, 2018. Through these amendments, the BCRA decided to exclude the rest of the financial institutions in group “B,” given the difference between their business model and the business model of group “A” financial institutions. With a view to making these changes sound, these institutions must comply with the following minimum cash requirements in pesos: for sight deposits, 20%; for time deposits with a residual term of up to 29 days, 14%; for time deposits with a residual term between 30 and 59 days, 10%; for time deposits with a residual term between 60 and 89 days, 5%; and for time deposits over 90 days, 0%.
This change to the minimum cash regime does neither affect the total requirements nor the monetary base; however, it does imply changes to the requirements at institution level. The greatest difference between the current minimum cash requirements and the new ones is observed in institutions belonging to Group “A” or G-SIBs. In order to allow for an orderly transition, the new regime will apply to these institutions as from February 1, 2019. For institutions belonging to Group “B” not included in the previous category, the new regime will be effective as from January 1, 2019.
