The devaluation in December and the resulting inflationary surge influenced the situation payment capacity of businesses and families and the bank insolvency rate roseto a level not seen since 2010, when this variable began to be measured.
According to the latest report on banks drawn up by the Central Bank, even if from the end to the end of 2023 bank defaults increased by only 0.5 percentage points to close the year at 3.7%, the monthly variation recorded in December, with an increase of over 37%, appears as one of the indicators of the worsening of the crisis.
The most affected segment was that of companies, where Default reached 4.4% of loans granted. Meanwhile, the level of household arrears remained below 3%, standing at 2.8% of the loan portfolio, according to official data.
Within the corporate sector, it was industry that saw the largest increase in arrears with banks. The dollar’s 118% jump on December 13 hit those who owed debt in that currency. “The increase of the month is explained by the business financing segment, mainly due to the effect of the revaluation of the debt previously existing in foreign currency in an irregular situation”, explained the organization chaired by Santiago Bausili.
“The major contributor to this variation is corporate delinquency, which may be another indicator that adds to the recessionary scenario of the real economy,” they indicated in Aurum Valores.
The increase in insolvencies occurs in a context of a large decline in bank credit. According to the Central report, “in December the balance of peso financing to the private sector decreased in real terms, with reductions across groups of financial institutions and credit assistance. In year-on-year comparison, the balance of peso credit to the private sector contracted by 23.7% in real terms.
The decline in credit can be explained in two ways: on the one hand the banks limited the supply until December because financing to the Central Bank through Leliq was less risky and more profitable, on the other Even businesses and families do not ask for credit.even in a context of decline in the purchasing power of wages and reduction in company margins.
So far, despite the jump in prices in the economy and increased exchange rate pressure from the second half of 2023, insolvencies had remained more or less stable. The December data lights up with a yellow light consistent with those recently provided by INDEC in the Monthly Estimate of Economic Activity, which recorded a collapse of the economy by 4.5% in the last month of the year.
“At the same time, private sector deposits in pesos also saw an improvement a reduction of 22.8% at constant prices. “Loans to total deposits presented a monthly decrease of 10 percentage points due to a 19 trillion peso increase in deposits between November and December 2023. This once again placed the ratio in the downward trend observed since 2020” , they underlined in the consultancy firm Delphos.
The central report highlights that changes in monetary policy have been introduced since December. “It was established that the monetary policy rate would be the repo rate for the BCRA, setting it at a level of 100% (TNA). In turn LELIQ races were suspended, repo operations become the main tool for absorbing monetary surpluses,” the agency reminded.
“Stopping issuing LELIQ is an important step Entities have incentives to act as financial intermediaries that accept deposits to provide credit“, the BCRA highlighted in its report.
Source: Clarin
