Report on Banks

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

Summary

• To encourage the use of electronic means of payment and the banking of economic transactions,
  since May the BCRA has ordered that all transfers of up to $100,000 per day be immediate, and can be made 24 hours a day. In addition, since April, the BCRA has defined the absolute free of charge transfers made by users of financial services. It should be considered that prior to this last measure, a third of the total amount of immediate transfers made by individuals were subject
  to charges and/or commissions and became mandatorily free, along with the rest of the operations
  in this segment. With the impetus of these regulatory changes, transfers with instant credit accumulated an increase of 71% year-on-year (y.a.) in values (18% adjusted for IPCBA1
  ) and 30% y.o.y. in amounts.
• Going forward, the BCRA seeks to give a greater boost to electronic transfers by encouraging their
  realization through mobile devices. To this end, it ordered the development of the Mobile Payment Platform (PPM),
  through which immediate payments can be made using a cell phone, tablet or laptop.
• In order to direct idle resources in foreign currency towards the productive system, the BCRA
  promoted regulatory changes. These include the expansion of the destinations of lending capacity in
  this denomination and the reduction of reserve requirements for dollar deposits, all within the framework of the normalization
  of the foreign exchange market. Based on these initiatives, in the last six months, credit to the private sector in foreign currency showed outstanding dynamism, accumulating an increase of 35.1% y.o.y. (96%
  since December 2015) in origin currency in May, being the largest increase in the last four years. For its part, since the end of 2015,
  private sector dollar deposits have significantly increased their share
  of total deposits. With the performance evidenced since November of last year, as of May, the private sector’s foreign currency deposits
  accumulated an expansion of 44% YoY – in foreign currency.
• In a context of growth in the volume of resources intermediated in foreign currency, the mismatch of the
  financial system in this denomination remains at low levels. This mismatch was slightly reduced in May, reaching 14.9% of Computable Patrimonial Liability (RPC). In this context, the BCRA
  recently raised the positive limit of the global net foreign currency position (PGNME) that entities
  must verify as of July, to 15% of the PRC – or liquid resources, the lowest – and additionally eliminated the limit on the
  positive net forward position of foreign currency.
• In May, the financial system maintained high levels of liquidity. The liquidity ratio (with items in domestic and foreign currency
  , excluding LEBAC) increased 2.8 p.p. of deposits to reach 27.7%. This performance was
  explained to a greater extent by pass operations with the BCRA. The liquidity indicator that covers LEBAC holdings stood at 46% of deposits, slightly higher than the level of April and 12 months ago.
   In mid-May, the BCRA extended the Financing Line for Production and Financial Inclusion (LFPIF) for the second half of 2016. The financial institutions included must maintain
  a balance of financing of at least 15.5% (in the previous stage it was 14%) of the private sector deposits in pesos in
  May 2016. The reference interest rate for MSMEs will continue at 22% nominal annual fixed for
  a total term of no less than three years. At this stage, the calculation of assistance to individuals and/or
  legal entities in emergency areas will be admitted, through financing for working capital and new financing or
  refinancing for the capital balances they owe.
• The non-performing loan ratio for loans to the private sector remained low, at around 1.9% in
  May. The non-performing loan ratio for financing to households increased slightly in the period to 2.6% of the
  portfolio, while the non-performing loan ratio for loans to companies remained at 1.3%. Accounting forecasts accounted for 140% of loans to the private sector in an irregular situation in the month.
• After almost 9 years, in May a private bank and an EFNB increased their capital from the initial public offering
  of shares (IPO) carried out by the financial group to which they belong. This was partly
  possible due to the modifications to the regulatory framework for the sector made in recent months. Together
  with the monthly return, the funds obtained by the IPO boosted the net worth of the financial system at
  the aggregate level. The total capital integration of the financial system represented 16.4% of risk-weighted
  assets (RWA) in the month (15.4% in the case of Tier 1 capital).
• In May, the gains of the financial system in terms of its assets (ROA) were 4.3% annualized, recomposing compared to April. In the first five months of 2016, the ROA of the