under the debt swap and the regulatory adaptation carried out by the Central Bank (BCRA) to attract banks to participate in this process, which the Government will launch this Thursday, the financial regulator ordered that, from this March 9, financial entities will be able to integrate the bonds of the exchange as part of the reserve requirements. The measure is viewed with concern by some market analysts. Because?
The first thing to note is that what Communication “A” 7717 of the Central resolved that the requirement of minimum cash in pesos -of the period and daily- can be carried out with national public securities in pesos acquired both by primary subscription and in the secondary market, including those adjusted by the CER and with yield in dual currency (DUAL BOND).
Meanwhile, those linked to the evolution of the US dollar (dollar linked) are excluded from this possibility. And it should also be clarified that the rule establishes that instruments with a residual term of more than 300 days and less than 730 calendar days at the time of subscription can be used for this purpose.
This measure, as the economist Christian Buteler warns Ámbito, is worrying because he considers that, “in some way, it makes the financial system as a whole more risky”. Why? As detailed, “a reserve requirement is the part of the deposits that the banks have to ‘keep’ as a guarantee and that money always has to go to the BCRA: one possibility is to put it in a Central instrument, such as a LELIQ, and another is to do so through a Treasury bond (as authorized to do in this case).
The problem, according to his vision, is that the latter are instruments that have greater risk than those of the BCRA and present greater price fluctuations. “That way, it can go down and, in that way, decrease the value of that part that is held as collateral,” says Buteler.
The economist Federico Glustein opines in the same sense when he warns that “this measure will give banks more flexibility in their liquidity management.” In other words, reserve requirements would become more illiquid and, therefore, there is already starting to be less money to replace it with bonds. This, according to his vision, implies that when there is a strong demand for pesos, there will be less support to deal with it.
In conclusion, it is a measure in favor of the banks that encourages them to enter the swap compulsively to earn money with the rest of the funds that they can mobilize while financing the Treasury.
This option is not the first time it has been used in Argentina. In fact, this government had already applied this mechanism some time ago, but economists warn that what is worrying is that, by increasing the percentage of reserve requirements that are in Treasury bonds, due to the very nature of these instruments (compared to those of the BCRA , above all) makes them less reliable and, in some ways, makes the financial system as a whole more risky.