Report on Banks

Thisreport analyzes the situation of the Argentine financial system on a monthly basis.

Summary

• In order to encourage a higher level of banking penetration and financial inclusion, in April the BCRA
  defined that savings banks and the use of debit cards are free. It was also
  determined that savings banks for payments of social assistance plans or programs can receive additional deposits to the accreditation of benefits, and that they can be used through internet banking
  and to pay taxes through electronic channels. More banking penetration in a framework of
  greater transparency should translate into less informality in the economy, greater competition between entities in
  the sector and more benefits for users of financial services.
• Immediate fund transfers have been showing a marked dynamism, in
  line with the objective pursued by this Institution to deepen electronic payment tools. Thus, since April the BCRA determined that all transfers made by users are free of charge (up to $250,000 in the case of legal entities) and, in addition, since May all
  transfers for up to $100,000 are immediate 24 hours a day. Mobile banking transfers
  showed the highest relative growth (174% YoY), although they still have a low weighting in the total. This dynamic is expected to be reinforced from the upcoming implementation of
  a new type of mobile banking application provided by the BCRA, which will allow the immediate transfer of funds between customers – replacing cash when carrying out commercial transactions
  – in an agile, efficient and secure way.
• At the beginning of June, the BCRA adopted a set of measures aimed at developing the operational infrastructure of the
  financial system. On the one hand, the mechanism for authorizing the opening of new branches was simplified, making it subject to the consideration of a set of objective factors related to the solvency and liquidity of banks, among others. Building requirements for the installation of branches in regions with lower population density were also reduced
  . In addition, all entities will be able to use mobile branches to extend their geographical reach.
• The financial system maintains relatively high levels of liquidity and solvency. Liquid assets
  – considering monetary regulation instruments – accounted for 45% of total deposits
  in April. Tier 1 capital – greater capacity to absorb losses – reached
  15% of total risk-weighted assets (RWA), while excess capital integration
  in terms of regulatory requirements was 87%. In the first four months of 2016, ROA
  reached 4%y, slightly lower than that recorded in the same period last year.
• In April, the balance of financing to the private sector grew 1.1%, accumulating a variation of
  32.8% YoY (fall of 5.5% YoY adjusting for inflation). In May, the BCRA ordered the extension of the
  Financing Line for Production and Financial Inclusion (LFPIF) for the second part
  of the year, extending it to 15.5% of non-financial private sector deposits in pesos (as of
  May 2016). Also with the aim of expanding financing to companies, in April the rules on “Credit Graduation” for Mutual Guarantee Societies and Public Guarantee Funds – registered in the corresponding BCRA Registry – were made more flexible, increasing the complementary financing margin from 200% to 300% of the debtor’s equity,
  provided that it does not exceed 5% of the entity’s computable equity liability (previously 2.5%).
• The non-performing loan indicator for loans to the private sector stood at 1.9% of total financing in April, remaining in a range of both historically and internationally
  low values. The irregularity of loans to households increased slightly in the month to 2.6% of the total
  portfolio, while that of loans to companies remained at 1.3%. The financial system’s accounting
  forecasts accounted for 142% of the portfolio in an irregular situation in the period.
• At the beginning of June, operations were already registered using the new modality of
  loans and time deposits denominated in Housing Units (UVIs). This new tool, on the one hand,
  expands the population’s access to their own home and, on the other, stimulates long-term savings.
• The nominal cost of funding for deposits in pesos did not show significant variations in
  April, a period in which the BCRA maintained the reference interest rate (the decline began in
  the third week of May). These yields were conducive to generating an increase in retail time deposits and a fall in demand accounts in pesos. This performance is in line with the
  increase in LEBAC holdings evidenced in the period by non-bank investors.