Report on Banks

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

Summary

• In line with the objective of increasing banking penetration and financial inclusion, the BCRA continued to simplify the procedures for opening and closing accounts. To open a savings bank, only
the presentation of the ID card will be required, facilitating the operation for those who do not have a domicile or service
in their name. In addition, the opening and closing of savings banks was enabled through electronic means,
without the need to appear at a branch. The customer will also be allowed to associate an “alias” with each
of their Uniform Bank Keys (CBUs). Throughout the year, savings banks for individuals had already been made free, as well as the granting and replacement of debit cards. It had also been determined that transfers, regardless of their amount, do not have costs for
individuals either.
• In line with the measures adopted by the BCRA aimed at normalizing the functioning of the
foreign exchange market and expanding the use of banks’ lending capacity in foreign currency
without neglecting balance sheet mismatches, the Ministry of Commerce recently decided
to extend the maximum period for the settlement of export collections to five years. In
this way, Argentine companies will be able to expand the use of resources to finance their customers abroad, gaining competitiveness and allowing them to open up to new customers and markets.
• Fourteen financial institutions recently committed to offering financing within the
framework of PROCREAR, expanding the possibilities of offering mortgage loans to households. This
tool is complemented by the instruments launched by the BCRA at the beginning of April called in UVIs and which have been gradually gaining relevance in the local financial system.
• In July, the balance of credit in foreign currency to the private sector grew 8.9%. On the other hand, the balance
of credit in pesos to companies and households remained stable compared to June (23.7% nominal y.o.y. and –
14.2% in real terms1
).
• The irregularity of loans to the private sector remained at low levels (1.9% of the total portfolio
). The ratio of non-performing loans to companies as well as that of families remained in line with the values recorded last month and with the levels of a year ago: 1.3% and 2.7%
respectively. The level of forecasting remained high. The accounting forecasts are equivalent to 136.5% of the portfolio in an irregular situation of the private sector in the period.
• Private sector deposits in pesos grew slightly in the month, with an increase in term deposits and a reduction in demand accounts – linked to seasonal factors. Deposits in dollars increased 3.1% – in the currency of origin – in July, accumulating a year-on-year variation of 51%. Total deposits in the financial system grew 0.6% in the period,
accumulating a variation of 34.2% YoY (-6.9% YoY adjusted for inflation).
• High levels of liquidity were evident during the month. The ratio that considers balances in domestic and foreign currency
– and excludes holdings of LEBAC – stood at 30.7% of deposits. The monthly increase
in the balance in the current accounts that the entities have in the BCRA was practically offset by a reduction in the transfer operations with this Institution. On the other hand, as holdings
of monetary regulation instruments grew in July, the broad indicator – which incorporates such
instruments – increased slightly to total 47.5% of deposits.
• The banks as a whole continued to show high solvency indicators. In July, the excess integration of
regulatory capital for the financial system represented 90% of the regulatory requirement. In
the middle of the year, the Leverage Ratio – defined by the Basel Committee on
Banking Supervision as the ratio between the capital with the greatest capacity to absorb losses and a broad measure of exposure – reached 10.8% at the local level, far exceeding the initial
recommended minimum of 3% (applicable since 2018 and still under study).
• In July, the results accrued by the financial system in terms of its assets (ROA)
were slightly lower than those of the previous month, totaling 4.2%y. (32.9%y. in terms of equity). The monthly decrease was explained by private banks, an effect partially offset by public banks. The ROA for the accumulated in seven months of 2016 was 4.1% y. (32.7% y. in terms
of net worth).