To ensure that banks come into operation of debt swapthe Central Bank has decided to extend the terms of a regulation that had already generated controversy: the one that allows institutions integrate Treasury debt securities into its reserves. In this particular case, it also authorized the banks to include the bonds resulting from the exchange.
While the tender for which Sergio Massa intends to cancel debts for the equivalent of over 7,000 million US dollars, the board of directors of the Central Bank has issued a communication in which it establishes that the banks will be able to calculate these public securities in the context of IL minimum cash requirements that the Central asks them to have.
Bank reserve requirements are, according to the Central Bank’s own definition, the percentage of deposits and other liabilities, in local or foreign currency, that financial institutions must always be available. “The BCRA can set the minimum cash in accordance with the provisions of its Organic Charter, taking into account the implemented monetary regulatory policy,” explains the agency on its website.
In other words, it is the percentage of money that banks cannot lend or place to guarantee liquidity and respond to their customers in case of problems.
This Thursday, through the communication A 7717, The body chaired by Miguel Pesce resolved “that financial institutions may supplement the requirement of minimum cash in pesos – for the period and daily – which, in compliance with the provisions of the “Minimum Cash” legislation, is allowed to be carried out at national public securities in pesos –including those adjustable by the CER and with services in double currency (DOUBLE BONUS) and excluding those linked to the evolution of the US dollar”.
As explained by the monetary authority, there was already a law that allowed banks to include public debt securities in their reserves. And from now on, the agency has only decided to extend the maximum terms in which these holdings can be maintained: they have gone from 630 days to 730 days.
At the headquarters they insisted on the fact that the regulation dated this Thursday 9 March “has no news”. In the Municipality they have warned that the measure only accentuates a growing trend in the banks: the greater exposure to the “risk” of the State.
Inveq’s economist, Juan Pablo Albornoz, underlined that this afternoon’s measure is a sign of desperation: “These “fit” coupons were a fundamental element for the Treasury to roll up the debt, especially last year and, in lesser extent, in the first two months of this year. The difference is that they were allowed to do it with badlar bonds maturing in 2027,” he said.
“It is yet another measure that threatens the risk of the financial system”, said Albornoz, adding “It is also bittersweet news in terms of signal for the market: you are arming a stock exchange where half of the securities are held by public bodies (BCRA, FGS, public banks and others) and you have to go out and change the regulations so that banks can use them to supplement reserve requirements and generate demand where perhaps there was none.”
Source: Clarin
