Monthly Monetary Report

Monthly report on the evolution of the monetary base, international reserves and foreign exchange market.

Summary

• In June, the broadest monetary aggregate in pesos (M3) showed a growth of 2.5% and maintained its year-on-year variation stable at around 22%. Among its components, there was an increase in the working capital held by
the public (4%) and in private sector deposits (2.7%), while public sector placements maintained their stable balance.

• The liquidity of the local currency segment of financial institutions (sum of cash in banks, the current account of the entities in the Central Bank, the net passes with such entity and the holding of LEBAC and NOBAC) increased during June. In terms of total deposits in pesos, the broad liquidity ratio averaged 37.2%, 0.7 p.p. above May. The increase in the ratio was driven by the items that make up the excess liquidity, mainly due to the increase in the proportion of LEBAC and NOBAC holdings.

• Loans in pesos to the private sector showed a growth similar to that of the previous month, of 1.1% ($5,430 million), accumulating an increase of 25.1% in the last 12 months. Among the different lines of credit, financing granted through advances and personal loans led the growth of the month. In particular, personal loans increased 1.4% ($1,420 million), presenting an
increase of 21.1% in the last 12 months. In the coming months, the line would receive a boost due to the launch of Pro.Cre.Auto, a program aimed at underpinning the sale of domestically produced cars through a line of credit from the Banco de la Nación Argentina that finances the acquisition of new domestically manufactured cars at regulated interest rates and with a financing term of up to 60 months.

• Continuing with its policy of stimulating credit for productive activity, for the second half of 2014 the Central Bank established a new financing quota within the framework of
the Productive Investment Credit Line (LCIP). On this occasion, the financial institutions covered by the rule must agree to loans for at least 5.5% of their deposits in pesos from the private sector by the end of May 2014. Although the entire quota should be granted to MSMEs, with a minimum term of 36 months and a maximum fixed interest rate of 19.50%, in cases of application defect there are other permitted destinations; either to MSMEs, as in the case of the discount of deferred payment checks; or to customers who are not MSMEs. In the latter case, it could be mortgage loans for the purchase, construction or expansion of homes with a minimum term of 10 years and a maximum fixed interest rate of 17.50%, or investment projects with specific purposes or; financing in pesos to individuals (basically individuals and pledges to motor vehicles) granted as of June 11 that the financial institutions incorporate by assignment or through trusts, to the extent that the originator of the credits is a Group II financial institution

• Interest rates paid by financial institutions for their fixed-term deposits decreased throughout June. In the wholesale segment, the BADLAR of private banks averaged 23%, with a monthly
decrease of 1.6 p.p. On the other hand, in the retail segment, the monthly average of the interest rate paid by private entities for fixed-term deposits of up to $100,000 for up to 35 days stood at 20.1%, 1.1 p.p. below the May level.

• Most interest rates on peso loans to the private sector declined. Interest rates on financing through documents decreased, driven by the greater participation of loans granted within the framework of the LCIP, in a month where the fourth stage of this program ended. The monthly average interest rate corresponding to the discount of documents stood at 26.3%, falling 1.3 p.p. in the month; while the monthly average interest rate on single-signature documents decreased 2.9 p.p., to 26.6%. Among the longer-term lines, the 4 p.p. decrease in the monthly average interest rate on personal loans stood out, which stood at 40.5%. In this regard, it should be recalled that in mid-June Communication “A” 5590 came into force, through which maximum interest rates were introduced essentially for personal and pledge loans for motor vehicles to individuals. In this sense, the interest rate on title loans was also reduced (2.4 p.p.), averaging 23%.