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

Summary

• In the third quarter of 2017, the growth of bank
credit granted to the private sector continued to consolidate. The balance of financing showed a relatively higher year-on-year growth than that of deposits in this sector. In this context, there was a further readjustment of
the high levels of liquidity accumulated by all financial institutions.

• In September, the total credit balance to the private sector increased by 4.2% (2.4% in real terms), with an
increase of 4.6% in the peso lines and a 2.9%1 increase in the foreign currency segment. In year-on-year terms
, total financing grew 49.4% (20.5% when adjusted for inflation), highlighting the performance of loans with real collateral (mortgages and pledges). Mortgage
lines to families continued to gain dynamism in recent months, verifying a real increase of
36.8% between the end of June and September, accumulating an increase of almost 90% in real terms when compared to
September 2016. In this context, between July and September it is estimated that more than 19,000 new mortgage debtors (in gross terms) joined the
financial system, accumulating a total of 34,000 so far this year.

• The non-performing loan ratio to the private sector decreased slightly in September,
to 1.8%. The fall in this indicator was mainly explained by the family segment, whose
non-performing loans reached 2.9% of their portfolio. Meanwhile, the NPL ratio of loans to companies remained
at 1%. The financial system’s accounting forecasts accounted for 140% of loans to
the private sector in an irregular situation in the period.

• In September, the total balance of deposits remained stable (a fall in real terms), reflecting the
effect of the increase in private sector placements offset by a decrease in those of the public sector
. Driven by demand accounts, deposits in pesos in the private sector grew 2.3% (0.4% adjusting for inflation), while those arranged in foreign
currency increased 1.8% in foreign currency. In year-on-year terms, total deposits increased 40.9% (or 13.6% adjusted for inflation), while private sector loans increased
37.2% YoY (10.6% YoY in real terms).

• The recent performance of financial intermediation led to a reduction in aggregate bank liquidity
from high levels. The broad liquidity ratio – considering LEBAC holdings
– totaled 42.6% of deposits in September, 1.8 p.p. and almost 10 p.p. less than in
August and March of this year, respectively. Excluding LEBAC holdings and passes, the
liquidity indicator reached 26.7% of deposits in the month, slightly below the August record.

• At the end of the third quarter, the financial system as a whole maintained comfortable levels of regulatory capitalization. Capital integration (Computable Patrimonial Liability-RPC) represented 16.2% of risk-weighted assets (RWA) in September. Tier 1
capital (the best quality in terms of capacity to absorb losses) accounted for 91% of the PRC. In the month, excess
capital integration totaled 88% of the regulatory requirement.

• In September, the banks as a whole obtained monthly profits equivalent to 3% of the assets. In the
nine-month cumulative of 2017, the results totaled 3.1% of assets, 0.9 p.p. less than in the same period last year.

• In order to better control the liquidity conditions of the system, the BCRA recently decided to stop computing the minimum cash requirements on a quarterly basis in the December-February period, and to measure them on a monthly basis, as is done in the rest of the
year. As of November, entities were allowed to decentralize or outsource technology services
regardless of their location. In line with the Basel recommendations, the eligibility criteria for ECAIs (“External Credit Assessment Institution”) were determined. For its part, the
BCRA established that the special accounts of the “Labor Cessation Fund for Workers in the Construction Industry
” are expressed in UVA. In November, the treatment of preferred credit guarantees was relaxed.