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

Summary

• In order to continue promoting the opening of new branches and access to financial services, at the beginning of July the BCRA ordered a simplification of the types of operating houses of the entities and a modernization of physical security measures. Likewise, to stimulate the use and development
of electronic means, it was established that term investments can be constituted through electronic channels and that the entities that debit the funds from the transfers made
through the different mechanisms provided by the Mobile Payment Platform (PPM) cannot
charge charges and/or commissions. In addition, the opening of special demand accounts exclusively for purchases in stores was regulated. For its part, in June the BCRA extended the “Financing Line for Production and Financial Inclusion” (LFPIF) for the second half of
the year.
• Effective as of August, new parameters were established that will govern the authorizations for banks to acquire debt from provinces and municipalities, in order to put
stricter limits on the exposure of the financial system to the public sector and align the
parameters of financial sustainability with the Fiscal Responsibility Law.
• In May, the total balance of financing to the private sector increased nominally
by 3.8%, equivalent to 2.1% when adjusted for inflation1 , accumulating 37.9% YoY or 10.7%
YoY in real terms. Loans in foreign currency increased 8% in foreign currency in the month – within the framework
of the seasonality of the second quarter – while loans in pesos increased by 2.2% (0.5%
in real terms). The year-on-year growth rate of loans to households (13.1% y.o.y. when adjusted
for inflation) continued to outpace that of financing to companies (7.1% y.o.y. in real terms), with greater
dynamism in collateral and mortgage loans. In particular, it is worth highlighting the
performance of mortgage loans in UVA with an amount traded close to $1,650 million in May, $2,600 million in June and $850 million in the first week of July.
• In more than 2 per cent, the non-performing loan ratio for credit to the private sector remained unchanged
at around 2 per cent. The non-performing loan ratio of loans to households increased slightly in
the month, reaching 3.1% of the portfolio, while the irregularity ratio of loans
to companies remained at 1.1%. The balance of accounting forecasts of all financial
institutions represented 131.5% of loans to the private sector in an irregular situation.
• Private sector domestic currency deposits increased slightly in May, with a relatively larger increase
in demand accounts. For its part, private sector deposits in foreign currency
were reduced in the period as a result of the withdrawal of funds from the accounts associated with
the Fiscal Sincerity Regime. Despite the monthly performance, bank deposits maintained significant year-on-year dynamism. Total placements by the private sector increased by 14.4% YoY in real terms. Private sector deposits in foreign currency almost doubled compared to May 2016, while those made in pesos grew 2.7% y.o.y. when adjusted
for inflation. Total deposits in the financial system increased by 12.7% YoY in real terms.
• From high levels, in May the most relevant liquidity indicators of the
financial system were reduced. Total liquid assets (including LEBACs and passes) totaled 48% of
total deposits, 1.6 p.p. less than in April (although it was almost 2 p.p. higher than the level of
May 2016). For its part, the liquidity ratio that excludes holdings of LEBACs and passes stood
at around 26.4% of deposits, reducing monthly by 3.5 p.p. in the month (in any case, it still
presents a level 1.1 p.p. higher than that evidenced a year ago).
• The integration of regulatory capital for the banks as a whole totaled 16.4% of risk-weighted assets
(RWA) as of May. Tier 1 capital reached 15% of aggregate RWA. On the other hand
, excess capital integration represented 91% of the regulatory requirement, exceeding the level of May 2016 by 16
p.p. All groups of financial institutions maintained their solvency indicators
at high levels.
• In terms of assets, the financial system’s monthly results in terms of assets (ROA)
totalled 3.8% annualised (y). Although the monthly ROA increased with respect to April, this ratio was
below the record for the same month in 2016. Taking into account the accumulated cash flow in twelve months,
the sector’s profits reached 3.3% of assets. Both ROA and profit or loss in terms of
net worth (ROE) for the cumulative