The central bank had to exit cold harsh criticism that the banks had done to him due to a move in interest rates hurting financial institutions in favor of mutual funds.
What the board of directors of the institution he presides decided this Thursday Miguel Fish is partial rollback rate improvement which he had given to the common purse. Lowered the subscription ratio from 95% to 85% of 1-day reverse repurchase agreements to which mutual investment funds may be exposed, a measure which aims to restore profitability and liquidity to banks and financial institutions.
The provision will come into force from tomorrow, Friday 27 January, and adds to the authorization for banks to carry out passive surety operations on the stock exchange in pesos.
The latter point implies that banks will be able to make short-term loans to individuals backed by securities listed on stock exchanges and markets authorized by the National Securities Commission, such as stocks or sovereign bonds.
“The decision improves the pass-through mechanism of the benchmark rate established by the BCRA’s board of directors to the short-term rates of the financial system,” the BCRA said in a statement.
The monetary authority’s decision comes after the banks challenged a decision adopted on Monday, which established the increase from 75% to 95% of the coefficient at which the FCI can subscribe to 1-day Passive Passes.
Last Monday the Central Bank had raised the repo rate for mutual funds to the equivalent of 95% of the repo rate for banks, currently 72% nominal per annum. Thus, the repo rate at which FCAs can place in the BCRA has increased by 14.4 percentage points to 68.4% per annum nominal, from 54% previously.
This guaranteed the funds the possibility of subscribing to a daily payment instrument with an annual nominal interest rate of 68.4%, so as to guarantee investors the willingness to stay in these instruments, and thus avoid the pesos that are invested today in the money market mutual funds (about $3.6 trillion, 53% of total pesos invested in mutual funds in Argentina) run against the dollar.
The so-called Money Market or Money Market funds are the shortest-term investment funds that pay lower interest than others, but which allow you to redeem money in less than 24 hours and not lose to asset price fluctuations.
However, the banks complained to Central as soon as the measure was published on Monday because they said it greatly affected their profit margins.
Currently, much of the money that is part of the Money Market portfolio is invested in interest-bearing current and wholesale term accounts of banks, which pay a nominal interest rate of 63.6% and 66.5% respectively.
The change decreed on Monday by the Central had put the banks “in the situation of having to choose between refusing deposits or accepting profit margins that had been reduced by about 75% compared to the pre-provision margin”, the sources explain.
In the last few hours, the negotiation between the BCRA, the banks and the mutual funds has brought the funds underwriting ratio to 85% instead of 95%, which will make the funds choose to stay instead of going directly to the overnight BCRA repo rate, as profitability does not justify massive portfolio turnover.
Source: Clarin
