Financial Stability Report

This semi-annual report presents recent developments and prospects for financial stability in Argentina.

Institutional vision

Argentina has a solid and liquid financial system, with great opportunities to grow and be more inclusive. The objective of the new monetary and financial policy agenda is to lay the foundations for the financial system to reach its potential, expanding its levels of banking penetration and maintaining its strength. The lack of protection for depositors, resulting from episodes of financial repression, high inflation and economic crises, has biased them to invest in foreign assets and other instruments outside the financial system1. As a result, this sector is concentrated in transactional activity, being practically absent from medium- and long-term financing. Thus, deposits and loans in the local financial system are equivalent to only 15% and 12% of the Gross Domestic Product (GDP), respectively, well below the same coefficients for the countries of the region and other emerging countries. In addition, large segments of the population and the productive sector do not have access to credit, so the system does not effectively promote equal opportunities either. To boost the growth of the financial system, the BCRA aims for low and stable inflation2 with positive real interest rates. Monetary policy has focused on this objective in recent months. The deepening of the financial system will be the consequence of monetary stability, along with other measures that have been taken to promote an environment of transparency, freedom and greater competition. To strengthen the growth of savings in domestic currency and long-term credit (in particular, mortgage loans), the BCRA has implemented instruments denominated in Housing Units (UVIs)3. In order to promote wider access to financial services under better price and quality conditions, the BCRA is implementing an agenda focused on full banking penetration (savings banks and free transfers)4, the effective dissemination of the prices of all services, innovation and greater competition in electronic means of payment5 and the expansion of infrastructure, especially in the most backward areas (flexibility in the opening of branches, new modalities). In the context of the new macroeconomic stance, the current situation of the financial system provides a favourable outlook for its development. The map of risks assumed is limited and there are ample liquidity, forecasting, profitability and capital coverages to face possible adverse scenarios. The financial system is regulated and supervised under a regulatory framework in line with international best practices, while remaining subject to professional and independent monitoring6. Going forward, the context presents significant challenges for the sector in terms of exposure growth, disinflation, and more competition. In order to preserve financial stability, the BCRA will maintain continuous monitoring of the different risk factors, adequately managing micro and macroprudential policy in a timely manner.