Report on Banks

About the use of inclusive language in this publication

The use of language that does not discriminate and that makes all gender identities visible is an institutional commitment of the Central Bank of the Argentine Republic. This publication recognizes the influence of language on ideas, feelings, ways of thinking and evaluation schemes.

This document has sought to avoid sexist and binary language. However, for ease of reading, resources such as “@” or “x” are not included.

Executive summary

• In September, the aggregate financial system continued to show liquidity and solvency margins above current regulatory requirements, in line with internationally recommended standards. This occurred in a scenario in which intermediation with companies and households in pesos expanded throughout the third quarter, mainly driven by the measures taken by the BCRA to encourage credit and strengthen savings in national currency.

• The balance of credit in pesos to the private sector in real terms registered a slight monthly reduction of 1% in September (+1.8% nominal), allowing it to close the quarter with a positive real variation of 1.6% and a year-on-year (y.a.) of 11.5%, the latter being the highest in the last two years. This year-on-year increase was mainly explained by the performance of documents and cards, and occurred within the framework of the measures promoted by the BCRA and the National Executive Branch, which helped to mitigate the procyclical behavior of credit. The special line for MSMEs and Health Care Providers at 24% TNA accumulated disbursements of $538,381 million until the beginning of November, distributed among almost 328,000 companies. Through the MSME Plus line of credit – aimed at companies without access to the financial system – $2,683 million were disbursed. Assistance to single-tax and self-employed people generated 560,930 loans with disbursements of $66,373 million (Zero-Rate Credits) at the end of November.

• In order to focus credit assistance efforts, adapting them to the normalization of the level of activity that is gradually registered in various regions and sectors, in mid-October the BCRA approved a new scheme with 3 lines of financing for MSMEs: (i) MSME line for companies that are within the Emergency Assistance Program for Work and Production (with subsidized interest rates); (ii) MSME line for Capital Investment (30% maximum TNA and an average term equal to or greater than 24 months); and (iii) line intended to finance the working capital of MSME companies (35% maximum TNA). Through these programs, $65,026 million have been disbursed among 21,123 companies until the end of November.

• In September, the real balance of time deposits in pesos in the private sector increased by 2.6%, representing the sixth month of positive variation and accumulating growth of 11.9% in the quarter. Private sector peso demand deposits declined during the month, leaving the real balance of the sector’s total peso deposits unchanged. In order to continue encouraging savings in national currency, since November the minimum interest rate on fixed-term deposits in pesos has been increased: 37% TNA for deposits of up to $1 million for individuals (44% TEA) and 34% TNA for the rest (39.8% TEA).

• Within the framework of the measures adopted by the BCRA to deal with the effects of the pandemic, which include the modification of the parameters for classifying debtors and financial relief mechanisms, in September the credit irregularity ratio stood at 4.5%, reducing 0.3 p.p. compared to the previous month. The accounting forecasts attributable to loans in an irregular situation represented 104.8% of the loan portfolio in this situation.

• The BCRA has been adopting measures to promote digital technologies in the financial system, promoting greater inclusion. On the one hand, with a gradual implementation schedule until March 2021, credit fintechs will have to comply with the rules that provide protection to financial users, including transparency and dissemination of information (for example, in terms of interest rates). On the other hand, since the beginning of December, the 3.0 transfer program has been operational, through which the scope of immediate transfers is expanded. Its main characteristics are: (i) availability to interoperate with all accounts (bank and virtual wallets); (ii) online and irrevocable accreditation; (iii) reduction of cash handling expenses for businesses; (iv) commission limitation; (v) versatility in the use of card instruments, QR codes, ID cards, payment requests and biometric data (e.g. fingerprint).

• With respect to solvency margins, the capital integration (RPC) of the group of entities totaled 23.7% of risk-weighted assets (RWA) in the month, 0.4 p.p. more than in August. The aggregate capital position (RPC net of minimum capital requirement) increased by 5.8 p.p. from the regulatory requirement in September, to 179%. Ample liquidity remained at around 66% of deposits in the month (61.6% for items in pesos and 84.3% for foreign currency).

• In the first 9 months of the year, the system accrued total comprehensive results in homogeneous currency equivalent to 2.5% annualized (a) of assets (ROA) and 16.8% y. of equity (ROE). In the third quarter, ROA reached 1.9%y, lower than in the previous two quarters.

I. Financial intermediation activity

As part of the normalization of the level of economic activity that is gradually beginning to be observed in part of the country’s sectors and regions, the balance of credit and deposits in pesos of the private sector continued to increase in the third quarter of the year.

Considering the estimated cash flow for the financial system on items in national currency¹, in the third quarter the increase in public sector deposits, the increase in net worth (mainly driven by positive results in homogeneous currency) and the expansion of private sector deposits were the most relevant sources of funds². These funds were mainly channelled to increase financing to the public and private sectors, as well as to increase the liquidity of all financial institutions in the broad sense.

With regard to the month of September, the balance of credit to the private sector in pesos fell slightly by 1% in real terms (+1.8% nominal), closing the quarter with a real growth of 1.6%^{relevant 3}. Among credit lines in pesos, there was a heterogeneous behavior in the third quarter (see Graph 1), with decreases mainly in advances and mortgages, and increases in pledges, documents and cards. Loans in pesos with maximum or subsidized interest rates would be partially displacing the rest of the credit options, in line with the most convenient financial conditions for debtors adapted to the shock of the pandemic. In the third quarter, credit to the private sector in pesos increased in all groups of financial institutions, with the exception of foreign private institutions⁴.

Within the framework of the various credit assistance programs for the private sector implemented by the BCRA since March, the special line for MSMEs and Health Service Providers at a nominal rate of 24%⁵ accumulated disbursements for a total of $538,381 million until the beginning of November (10.2% has a guarantee from FoGar), distributed among almost 328,000 companies. For its part, through the MSME Plus⁶ credit line – aimed at assisting companies that do not have access to credit from the financial system – $2,683 million were disbursed until November (46.1% with a guarantee from FoGar).

It should be noted that, in order to gradually focus credit assistance efforts by adapting them to the needs of the new stage of the pandemic scenario, in mid-October the BCRA approved a new scheme called the financing line for the productive investment of MSMEs. It is intended both for companies affected by the consequences of the pandemic, and for the rest of the MSMEs that wish to expand their production processes⁷. It consists of 3 lines of financing for MSMEs: (i) MSME line for companies that are within the Emergency Assistance Program for Work and Production (with subsidized interest rates); (ii) MSME line for the financing of investment projects aimed at the acquisition of capital goods and/or the construction of facilities necessary for the production of goods and/or services and their marketing (30% maximum TNA and an average term equal to or greater than 24 months); and (iii) line intended to finance the working capital of MSME companies, discount of deferred payment checks and Electronic Credit Invoices MSMEs (35% maximum APR). Thus, through this new scheme, from October 16 to November 20, loans for $65,026 million were disbursed, channeled to 21,123 companies⁸.

For its part, through the line of financing at subsidized interest rates for companies registered in the “Emergency Assistance Program for Work and Production” (ATP)⁹ , nearly 8,500 loans were granted for a total accumulated amount of $5,096 million until the end of November, which were distributed among 244,363 workers. It should be noted that the ATP Program was originally implemented as a non-refundable subsidy to companies in crisis situations in the face of the shock generated by the pandemic, and thus lasted almost all of 2020. As certain sectors of economic activity showed some normalization, it was provided for those companies affected by the shock but already with positive nominal growth in turnover, the granting of loans at subsidized rates – below market rates – and with the support of National State Guarantee Funds.

At the same time, within the framework of credit assistance aimed at single-tax and self-employed people in the context of the pandemic, through the Zero Rate Credit Line¹⁰ , about $66,373 million has been granted until the end of November (98% already disbursed) through some 560,930 loans. The implementation of this credit assistance facilitated the issuance of 248,756 new credit cards and the opening of 771 demand accounts. In addition, through the Cultura¹¹ Zero-Rate Credit Line, 2,556 loans were granted for a total amount equivalent to $271 million (79% already credited).

In September, the year-on-year growth rate of the real balance of credit in pesos to the private sector continued to increase, reaching 11.5% (the highest variation in the last two years) (see Chart 2). This increase was mainly explained by the dynamism of documents and card financing, in a context in which private financial institutions showed relatively higher credit growth rates. The credit promotion measures of the BCRA and the PEN helped to mitigate the procyclical nature of credit, with positive year-on-year rates of change for the segment in national currency recorded for the system as a whole since May 2020.

Meanwhile, in September the balance of credit in foreign currency fell 3.3% – in the currency of origin. Thus, total financing to the private sector (in domestic and foreign currency) decreased 1.4% in real terms in the month and 8.9% YoY in real terms.

It should be considered that the BCRA continues to adopt measures to promote digital advances in the financial system, promoting greater financial inclusion. It was recently established that, with a gradual implementation schedule until March 2021, credit fintechs must be subject to the rules that provide protection to financial users, including transparency and dissemination of information (for example, on interest rates)¹².

On the funding side of the financial institutions as a whole, the real balance of deposits in national currency of the private sector remained unchanged in magnitude during the month (+0.1% real and +2.9% nominal). Time deposits in pesos increased 2.6% in real terms (+5.5% nominal) compared to August, observing a real increase for the sixth consecutive month (see Chart 3). Demand deposits fell by 1.7% in real terms (+1.1% nominal) in the month.

Foreign currency deposits of the private sector decreased 5.8% compared to August – in source currency. It should be considered that the financial system was able to adequately supply the reduction of these deposits, maintaining a wide coverage with liquid assets in foreign currency (see Liquidity and Solvency Section). As a result, the real balance of total deposits (in domestic and foreign currency) of the private sector fell 1.2% compared to August (+17.2% real YoY).

In this context, it should be considered that the BCRA recently readjusted the design of its monetary policy to the prevailing economic conditions¹³. In other aspects, it was decided to progressively harmonize the reference rates of monetary policy instruments, minimizing the impact on the cost of sterilization. Thus, throughout October and November, the interest rate on overnight passes for the BCRA (or active passes from the point of view of financial institutions) was increased to reach 32% nominal per annum (see Chart 4). In addition, seven-day passes recently began to be offered at a nominal annual rate of 36.5% and the interest rate of LELIQ was increased to 38% nominal annual rate. At the same time, since mid-November, the minimum guaranteed interest rate on fixed-term deposits in pesos has been raised (37% nominal annual for deposits of up to $1 million constituted by individuals and 34% nominal annual for the rest)¹⁴.

In September, the balance of public sector deposits in national currency increased by 9.1% in real terms compared to the previous month (12.2% nominal)^.15 When considering deposits in pesos from both the public and private sectors, they increased 1.6% in real terms in the month (4.5% nominal).

In year-on-year terms, the balance of deposits in pesos of the private sector accumulated an increase of 38.8% real y.o.y. (89.7% nominal y.o.y.) in the period. Deposits in national currency of the public sector grew in a similar way. Thus, in September the balance of total deposits in pesos increased by 37% YoY in real terms (87.1% YoY in nominal terms).

II. Aggregate composition of the balance sheet

The total assets of financial institutions as a whole grew slightly in September (+0.2% real or 3% nominal), accumulating an increase of 14.3% in real terms so far in 2020, with a similar performance in all groups of institutions (see Chart 5).

So far this year, the increase in assets was mainly explained by the greater holding of BCRA instruments and by the increase in credit in national currency. This Institution has played an active role in financing, through monetary issuance, the various assistance programs promoted by the National Government that sought to mitigate the negative consequences of the pandemic. Part of that monetary issuance was sterilized via LELIQ and^{passes 16}. As a result, the share of these instruments in the total assets of the entities increased.

In terms of the composition of the system’s aggregate balance sheet, as of September, the balance of credit to the private sector in national currency and of the BCRA’s instruments remained the assets with the highest relative weight (28.2% and 25.5% of the total, respectively, see Chart 6). Compared to August, the balance of current accounts in pesos at the BCRA and credit to the public sector increased their share of assets, while the balance of BCRA instruments in the portfolio and loans to the private sector in national currency slightly reduced their weighting in assets in the month. The main assets in foreign currency decreased their share of total assets on a monthly basis.

Regarding the composition of the total funding (liabilities plus net worth) of the financial system, private sector demand and time deposits in national currency remain the items with the highest participation in September (covering 24.9% and 22.3% of the total, respectively, see Chart 7). The monthly performance of deposits in national currency resulted in certain changes in their weighting of total funding: while public sector deposits and those made on time deposits by the private sector increased their participation, private sector demand accounts reduced their relative weight in the month. For their part, during September, private sector deposits in foreign currency continued to lose weight within the total liabilities of the financial system.

In relation to the recent performance of items in foreign currency, and within the framework of current prudential regulation, the participation of items in this denomination in the balance sheet of the financial system maintains a downward path. Assets in foreign currency accounted for 19.1% of the sector’s total assets (-0.7 p.p. monthly or -9.9 p.p. y.o.y.) and liabilities in this denomination totaled 17.9% of total funding (-0.7 p.p. monthly or -9.8 p.p. y.o.y.). When including forward purchase and sale of foreign currency – classified off-balance sheet – the spread between assets and liabilities in this denomination of the aggregate financial system totaled 10.2% of regulatory capital in September, unchanged from last month and 3.3 p.p. below the record of a year ago (see Chart 8).

III. Portfolio quality

Financing in pesos in terms of assets stood at 28.2% in September, slightly below the value of August and the same month of 2019. Meanwhile, credit in foreign currency continued to lose weight in assets in the last year, totaling 4.9% (equivalent to a third of a year ago) (see Chart 9). Thus, in September the total credit balance to the private sector represented 33.1% of the total assets of all financial institutions, slightly below the level of August.

Within the framework of the actions adopted by the BCRA to face the effects of the pandemic scenario, which include the modification of the parameters for classifying debtors and financial relief measures for companies and families (effective until the end of 2020)¹⁷, the irregularity ratio of credit to the private sector stood at 4.5% in September. reducing compared to the previous month (-0.3 p.p.) (see Graph 10). This trend was widespread among groups of financial institutions, with a greater relative intensity in non-bank financial institutions.

Reflecting the effects of the measures taken by the BCRA mentioned above, the irregularity of loans to companies decreased by 0.2 p.p. in the month, to 6.2%. Most of the lines of credit to this sector reduced their non-performing loans in the period (see Graph 11). Meanwhile, the NPL ratio for financing to households stood at 2.7% in September, 0.3 p.p. below the value of August. This performance was mainly explained by personal loans and pledges.

The balance of total accounting forecasts represented 126.9% of the balance of credit to the private sector in an irregular situation in September, increasing 8.2 p.p. compared to last month (see Chart 12). For its part, the estimated balance of regulatory forecasts attributable to the irregular portfolio¹⁸ totaled 104.8% of said portfolio.

IV. Liquidity and solvency

At the end of the third quarter, the financial system continued to operate with liquidity and solvency margins that comfortably exceed the internationally recommended regulatory standards.

In relation to the sector’s liquidity indicators, in September the Liquidity Coverage Ratio (LCR) stood at 2.2 for the entities covered (group A)¹⁹. On the other hand, the Stable Net Funding Ratio (NSFR) totalled 1.8 in obligated entities (group A) in June (latest available information)²⁰. In line with international recommendations, the minimum required at the local level for both indicators is 1.

Liquidity in the broad sense²¹ as a percentage of total deposits did not show significant changes between peak of the month, totaling 66% at the end of September (-0.1 p.p. in the month to 61.6% for items in pesos and +1.4 p.p. monthly to 84.3% for the foreign currency segment, see Chart 13). Within the segment in local currency, in the month the relevance of the current accounts that the entities have in the BCRA and of the net passes against this Institution increased, while the participation of LELIQ holdings decreased. ^{Acts 22}, ²³. In the last year, ample liquidity increased by 8.4 p.p. of deposits, a performance mainly explained by the foreign currency segment.

Regarding the sector’s solvency indicators, in September the aggregate regulatory capital ratios increased (see Chart 14). Capital integration (PRC) of all entities represented 23.7% of risk-weighted assets (RWA) (25.9% for private entities and 19.7% for public entities), 0.4 p.p. above the level observed in August. The capital position (difference between RPC and regulatory requirement) of the aggregate of entities increased by 5.8 p.p. of the regulatory requirement in the month, to 179% (216% for private entities and 116% for public entities). For its part, the^{leverage ratio of 24} totaled 11.8% at the systemic level in September, comfortably exceeding the minimum threshold of 3% that is in line with international recommendations. In addition, the banks as a whole continued to verify additional capital margins on an aggregate basis (2.5% of RWAs for all banks and an additional 1% for systemically important banks).

The maintenance of these solvency levels partly reflects the effect of the different microprudential and macroprudential policies that this Institution has been implementing since the beginning of the health emergency, in line with what has also been adopted in other Central Banks. In particular, financial institutions have suspended the possibility of distributing dividends in 2020²⁵.

With regard to the endogenous generation of the sector’s solvency, it should be noted that in the first 9 months of 2020 the financial system accrued total comprehensive results in homogeneous currency equivalent to 2.5% annualized (a) of assets (ROA) and 16.8% yra. of net worth (ROE). In particular, during the third quarter, the ROA of the financial system reached 1.9%y, reducing 1.4 p.p. and 0.3 p.p. with respect to the second quarter and the first quarter, respectively

The cumulative financial margin in the year to September stood at 11.3% of assets. Among the main positive items of the financial margin, so far this year interest income (8.7% y/y of assets) and results from securities (8.3% y/y. of assets) stood ^out,26 while interest expenses (8.6% y/y of assets) were the main financial expenditures of the system in the same period. Among non-financial items, results from services (1.9% y/y of assets) stood out as the most relevant source of income, while administrative expenses (6.6% y/y of assets) and bad debt charges (1.6% y/y of assets) were the main non-financial expenditures²⁷.

The monitoring of implicit interest rates in national currency (active and passive) and their differential makes it possible to monitor the evolution of some of the main sources of income and expenditure for each peso used in financial intermediation²⁸, ²⁹. Thus, on September³⁰ of this year compared to the same month in 2019, the nominal implicit lending interest rate in national currency and the nominal funding cost for deposits in the same denomination fell by 24.3 p.p. and 12.5 p.p., respectively. As a result, the differential between the two concepts decreased by 11.8 p.p. in the period (see Graph 15). In this context, it should be considered that the income and expenditures that feed the calculation of the implied rates were generated in different inflationary contexts. When estimating real implied interest rates, it was observed that the differential between the lending rate and the funding cost narrowed by 3.7 p.p. in a year-on-year comparison in September 2020.

V. Payment system

The operations of the payment system continued to develop in September in a scenario marked by the health emergency and the different measures that were adopted to reduce its impact on the population. The BCRA has been actively working to minimize the adverse economic and financial effects that this situation brings on users of financial services, mainly through the encouragement of the use of digital payment channels, thus seeking to reduce the use of cash.

During October (latest available information), the use of instant electronic transfers continued to deepen. Compared to September, immediate transfers in pesos increased, both in amounts (3.3%) and in real amounts (7.8%), thus maintaining values that exceed the monthly average of 2020. Transfers increased in real amounts and amounts on a monthly basis in all channels, with the exception of ATM transaction amounts. In year-on-year terms, total immediate transfers increased in amounts (103.5%) and in real amounts (32%), with all channels verifying a positive performance, particularly highlighting the dynamism of mobile banking (+230.8% YoY in amounts and 122% YoY in real amounts). Thus, from still low levels, in the last year the relative share of immediate transfers through mobile banking increased significantly (+8.6 p.p. to 22.5% in amounts and +3.5 p.p. to 8.6% in real amounts) (see Graph 16).

Moreover, taking advantage of the technological base offered by immediate transfers of funds, since the beginning of December the BCRA enabled the Transfers 3.0 program, a tool aimed at promoting digital payments and promoting greater financial inclusion in the country³¹. The purpose is to expand the scope of immediate transfers, which will allow the construction of a digital ecosystem of open and universal payments that is in a position to replace cash with efficiency and security. The system is characterized, first of all, by its interoperability. The Standardized Payment Interface (IEP) is created with an open architecture that will allow all accounts (bank and virtual wallets) to interoperate. Second, it is an immediate system. Businesses will receive accreditation automatically and irrevocably. Third, it is an economic system that does not present the expenses associated with cash handling for businesses (transportation, storage, and security). Fourth, it is a system that stimulates competition for the provision of the service to retail businesses³². Finally, it is a flexible system that will allow the operation of cards, QR, DNI, payment requests, biometrics (for example, fingerprint).

In September (latest available information), debit card transactions remained without significant changes in terms of amounts (-0.1% compared to August) and decreased in real amounts (-2%). However, debit card transactions carried out during September exceeded the monthly average so far in 2020. In the month, debit card transactions increased in its electronic channel (+4.4% and +1.1% in real amounts and values, respectively) and decreased in its face-to-face format (-1.5% and -3.3% in real amounts and amounts, respectively). In this context, transactions in electronic format increased their relative participation in the total of debit card operations, representing 28.5% in amounts and 30.4% in real amounts. Compared to the same month of the previous year, debit card transactions increased in amounts (19%) and in real amounts (32.2%, see Chart 17).

Regarding cash withdrawals through ATMs, during September no changes in magnitude were observed compared to the previous month. In a year-on-year comparison, ATM withdrawals decreased in amounts (-5.7%) and increased in real amounts (28.6%), thus increasing the average amount of each withdrawal, measured in constant currency (+$1,325, to almost $5,000 per withdrawal).

Regarding the operation of clearing checks, during October (latest available information) there was an increase in the amount issued (+0.7%) and in the amounts negotiated (0.4% in real terms). Monthly compensation was increased in its electronic version and decreased in its physical format (see Graph 18). Compared to September, the compensation of ECHEQs increased 16.5% in quantities and 9% in real amounts, thus increasing its relevance in the total compensation. For its part, the total clearing of checks decreased compared to the same month of the previous year (-37.2% in amounts and 30% in real amounts).

In October, the ratio of check rejections due to lack of funds over the total compensated decreased compared to last month (-0.07 p.p. to 0.66% in amounts and -0.14 p.p. to 0.5% in amounts). Compared to the same month of the previous year, this ratio also fell (-0.5 p.p. in quantities, -0.4 p.p. in amounts). In this way, this indicator is below the average for this year and 2019 (see Graph 19), both in quantities and amounts. On the other hand, considering exclusively the set of ECHEQs, during October the rejection ratio was also reduced out of the total compensated³³.

References

¹ Differences in balance sheet balances expressed in homogeneous currency.

² The increase in public sector deposits in the quarter was influenced, at least in part, by the payment of income tax and personal property tax due in August, and by transfers made by the BCRA to the National Treasury (transitory advances and profits).

³ Includes principal adjustments and accrued interest.

⁴ Throughout the Report, when reference is made to groups of private (national and/or foreign) and public financial institutions, it corresponds to banking entities. Non-bank entities will be referred to as “EFNBs”.

⁵ Communication “A” “6937” and amendments.

⁶ Communication “A” “7006” and amendments.

⁷ Communication “A” “7140” and “Press release” of 10/15/2020.

⁸Within the framework of this new line, recently through Communication “A” “7161” : a. the financing alternatives were expanded and b. an additional regulatory benefit was incorporated in terms of Minimum Cash for those financings intended for investment projects (with maximum interest rates of 30% TNA).

⁹ See Communication “A” “7082” and Communication “A” “7102”.

¹⁰ See Communication “A” “6993”.

¹¹ See Communication “A” “7082”.

¹² See Communication “A” “7146”.

¹³ See Guidelines for a “Monetary Policy in an Economy in Macroeconomic Transition” of October 2020 and “Press Release” of 12/11/2020.

¹⁴ See Communication “A” “7160”.

¹⁵ The monthly increase was partly explained by transfers made by the BCRA to the National Treasury.

¹⁶ For more details, see the latest edition of the “Monetary Policy Report (IPOM)”.

¹⁷ Communication “A” “6938”, Communication “A” “7107” and Point 2.1.1. of the Ordered Text “Financial Services in the Framework of the Health Emergency Provided for by Decree No. 260/2020 CORONAVIRUS (COVID-19)”.

¹⁸ Following the criteria of the BCRA’s minimum provisions for uncollectibility risk (Consolidated Text “Minimum Provisions for Uncollectibility Risk”).

¹⁹ The LCR considers the liquidity available to deal with a potential outflow of funds in the event of a possible stress scenario in the short term. See Ordered Text —TO— “Liquidity Coverage Ratio”.

²⁰ The NSFR takes into account the availability of stable funding of the entities, in line with the deadlines of the businesses to which it applies. See TO “Stable Net Funding Ratio”.

²¹ Considers availability, integration of minimum cash and BCRA instruments, in national and foreign currency.

²² It is worth mentioning that during September, certain regulatory changes came into force that had an impact on the composition of the liquidity of the financial system. Thus, financial institutions that capture fixed-term deposits at the minimum passive rate constituted by individuals for an amount of up to $1 million, were given the possibility of increasing their net surplus position of LELIQ by 13% of the monthly average of daily balances of the previous month of those deposits (see Communication “A” “7078”). On the other hand, in September, the classification of entities into groups A, B and C was ordered, according to the size of their assets, establishing new reserve rates on time deposits in pesos corresponding to the entities of group C (see Communication “A” “7108”).

²³ In relation to regulatory changes with a future impact on liquidity, the BCRA has provided in force since October—within the framework of the update of the Monetary Policy guidelines—that financial institutions must reduce their net excess position in LELIQ by 20 p.p. with respect to their position registered in September (see “Press Release” of October 1 and Communication “A” “7122”)). In addition, effective as of October, the deductible percentage of the minimum cash requirement in pesos for new financing granted by entities within the framework of the “Ahora 12” Program is increased to 50% (from the previous 35%).

²⁴ Recommended by the Basel Committee—defined as the ratio of the highest quality regulatory capital to a broad measure of exposures.

²⁵ Communications “A”, “6939” and “7035”.

²⁶ It is estimated that this value represented 10.3% of the assets when considering both the accumulated flows in the income statement and in other comprehensive income.

²⁷ With respect to income from services, at the beginning of November the BCRA authorized an update of the commissions received by banks for the provision of services to financial users, which may be effective in January and February 2021, with caps of 9% each month. It should be remembered that since February 19, the prohibition of applying new increases to these commissions has been in force. For more details, see “Press Release” of November 5.

²⁸ It should be recalled that since 2020, financial institutions have presented their balance sheets in homogeneous currencies (for more details, see Communication “A” “6651”), which means that the information from previous years is not directly comparable. From this arises the motivation to build alternative indicators that, although they are still partial, allow a certain comparability over time.

²⁹ These calculations do not consider concepts such as administrative expenses, tax expenditures, cost of capital or other components associated with risks assumed by the entities.

³⁰ Accumulated 2 months and annualized.

³¹ Communication “A” “7153” and “Press Release” of 10/29/2020.

³² Commissions to businesses will be capped at 8 per thousand.

³³ According to the information available, the rate of rejections of ECHEQs corresponds to the total number of reasons for rejection.