Financial Stability Report

Executive summary

Over the last six months, the financial system continued to carry out its activity – both intermediation and the provision of payment services – in an orderly manner and without disruptions. In line with the gradual process of deepening financial intermediation with the private sector, compared to the previous IEF, financial institutions as a whole registered an increase in exposure and some materialization of credit risk. Faced with this scenario, the sector maintained a high degree of resilience, supported by large coverage margins through forecasts and capital.

After the October 2025 elections, there was a sharp decrease in uncertainty at the local level, which allowed further progress in the implementation of the stabilization program and the structural reform agenda. Since the beginning of 2026, phase 4 of the monetary program has been in force, with a focus on the re-monetization of the economy and the accumulation of international reserves. This was complemented by the progressive normalization of bank reserve requirements, after exceptional measures were introduced during the second half of 2025, in the context of the volatility linked to the election process. Other relevant factors in recent months were, for example, the enactment of laws (such as the Labor Modernization Law and the Fiscal Innocence Law), the continued elimination of regulatory obstacles, the signing of new international agreements and privatizations and calls for bids for concessions.

Lower volatility and the consequent improvement in financial conditions generate a positive outlook for the evolution of economic activity. After closing 2025 with an average growth of 4.4%, activity continued to grow in the first quarter, reaching the highest level in historical terms, maintaining the leadership of agriculture, oil and gas and the financial sector. In a context marked by the preservation of the fiscal surplus, the Treasury continued to refinance the debt in the local market, with the extension of terms (from the largest placement of CER debt and at a variable rate) and a cut in the cost of placement in pesos at a fixed rate. This was complemented by placements of public securities in dollars with local legislation. In the secondary markets, the sovereign curves in pesos moved downwards, while – after rating improvements by two rating agencies – the EMBIG spread for Argentina reached values not seen since the end of 2017 and the beginning of 2018. With respect to financing to companies through the capital market, the aggregate amount in instruments with local legislation shows a significant year-on-year increase in real terms in the January-May period, which was complemented by the dynamics of placement of negotiable obligations with foreign legislation. The reopening of international markets has also been
taken advantage of by sub-national governments.

This occurred in an international context that was conditioned by the shock in the price of oil derived from the conflict in the Middle East. While the impact on international financial markets was limited in time and intensity, the situation generated uncertainty regarding global growth and greater inflationary pressures, and a more restrictive monetary policy bias is now expected for the main developed economies. The focus then shifts to the negotiations to finish resolving this geo-political conflict after the signing of a preliminary agreement and on the prospects for the evolution of interest rates in large economies, in an international context still marked by various sources of risk and multiple vulnerabilities that have been increasing in recent years (including, for example, the existence of market segments with high valuations, the increase in global indebtedness and the growth of non-bank financial intermediation).

The possible erosion of the external context remains one of the main risks for the local financial system. On the other hand, although the outlook for the consolidation of the local macroeconomic stabilization process is positive, the context remains challenging and the possibility of transitory deviations from the expected favorable evolution and, eventually, new episodes of volatility cannot be ruled out. However, given the soundness of the local financial system, potential events of tension at both the international and local levels should be of an extreme nature in order to significantly affect financial stability.

The main source of vulnerability for the aggregate financial system continued to be equity exposure to credit risk. Since the previous IEF, the relevance of credit to the private sector in the total assets of all institutions continued to increase, although it remained below the local peaks recorded in 2018 and the average of the countries in the region. The indicators of credit risk materialization – such as the irregularity ratio and the estimated probability of default – are at levels higher than those verified in October 2025, although in the first months of 2026 certain changes in performance began to be observed – a slowdown in the rate of increase in the irregularity ratio and a decrease in the estimated probability of default. The estimated financial burden for household debt remained at high levels and increased slightly compared to the previous IEF. However, aggregate private sector indebtedness, while growing, remained at moderate levels at the beginning of the year, both in historical terms and in international comparison. In this context, all banks maintained high levels of coverage with provisions and capital in relation to the credit risk assumed. Sensitivity exercises on a possible additional materialization of credit risk – based on extreme assumptions and low probability of occurrence – continue to show a relatively high resilience of the financial system.

In terms of funding and liquidity in the financial system, deposits continued to be the main source of resources in the sector. Within the composition of private sector depositors, in the last six months the relative participation of FCIs increased, leading to a slight increase in indicators of exposure to systemic liquidity risk, given the potentially more volatile behavior of this type of client. However, the financial institutions as a whole maintained high aggregate liquidity coverage and continued to comply comfortably with local and international regulatory standards, thus preserving an important response capacity to face possible stress scenarios.

Since the previous IEF, intermediation with the private sector has shown a heterogeneous behavior, depending on the currency of denomination. In real terms, the balance of credit in pesos to the private sector fell in the last six months, while the balance of deposits in that currency registered a slight increase. In contrast, the balances of loans and deposits in foreign currency continued to expand at a sustained pace in the last six months. In this context, the depth of bank financing to the private sector in the economy continued to show a slight increase compared to October 2025, although it still remains at low levels both in historical perspective and in an international comparison. Since the previous IEF and in the accumulated 12 months, the financial system registered positive results, with profitability indicators gradually improving at the margin and presenting less volatility compared to what was verified in the environment of the 2025 elections. In this context, progress continued to be made with respect to the indicators of operational efficiency and production scale, although these are still below those recorded in other economies in the region.

Going forward, it is expected that all financial institutions will continue to develop their intermediation activity with the private sector, with ample room to continue gaining depth in the economy. It is expected that credit in pesos to the private sector will gradually be coupled with the dynamism of credit in foreign currency, favored by the improvement in financial conditions (moderation of interest rates in pesos and dismantling of extraordinary measures to avoid liquidity imbalances applied last year in the context of pre-election uncertainty). in conjunction with a stabilization/reduction of the non-performing loans of the loan portfolio, the consolidation of the fall in the inflation rate and the consolidation of the recovery of economic activity. In line with its objective of promoting financial stability, the BCRA will continue to implement a micro- and macroprudential supervision and regulation approach consistent with international best practices, strengthening the monitoring of exposures and hedging of risks in order to preserve the high levels of resilience of the financial system.