Jul
5
Argentina gives banks 6 months to grant new loans
Filed Under EN
* Central bank orders biggest banks to lend to companies
* Interest rates seen well below inflation
* Banks must grant new loans before Dec. 31
* Banco Macro, Galicia shares take a dive
BUENOS AIRES, July 5 (Reuters) – Argentine banks must offer
to lend companies 15 billion pesos ($3.3 billion) by the end of
the year at rates well below private inflation estimates, a
central bank statement said on Thursday.
The central bank’s statement comes after President Cristina
Fernandez announced on Wednesday that banks would have to lend
cheaply to businesses to help bolster a flagging economy.
Latin America’s No. 3 economy grew a sizzling 8.9 percent in
2011 but growth is slowing sharply due to sluggish global
conditions, slackening demand from top trade partner Brazil and
the impact of surging costs at home.
Economic activity screeched to a virtual halt in April while
industrial production sank 4.6 percent year-on-year in May.
The central bank said banks will have to put 5 percent of
their total private deposits, calculated as of June, into the
new credit lines.
The loans should finance capital goods purchases and new
construction or expansion projects aimed at increasing the
production of goods and services, the central bank said.
The loans must be disbursed by Dec. 31, although additional
credit could be granted for more complex projects through to
June 30, 2013, the central bank said.
“This measure … is part of government policies oriented
toward safeguarding production and Argentine jobs in light of
the current international context, which has shown an increase
in global risk and uncertainty,” the statement said.
The loans should carry a maximum interest rate of the Badlar
reference rate, which Fernandez said averaged 11.9
percent per year for private banks in June, plus 400 basis
points. The minimum loan period is three years.
Inflation is running at about 25 percent per year, according
to private estimates that more than double the government’s
discredited consumer price statistics.
The MerVal index of leading stocks closed down 1.87
percent on Thursday, dragged lower by banking shares.
Shares in Banco Macro ended 7.31 percent
lower at 8.24 pesos per share, while leading financial group
Grupo Financiero Galicia, which owns Banco Galicia
, shed 5.46 percent to end at 2.94 pesos per share.
Some market analysts were skeptical the new plan would
result in that many new loans as the economy cools quickly and
investments look less profitable.
Lending levels in Argentina are among the lowest in Latin
America. Many smaller companies do not qualify for
state-subsidized bank loans because of tough requirements, and
both deposits and loans tend to be short-term due to inflation
and the country’s volatile history.
Fernandez’s allies in Congress reformed the central bank’s
charter in March to allow the monetary authority to regulate and
steer credit flows to target long-term productive investment.
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