The head of ADEBA, Javier Bolzico, assured that the need for minimum cash is at its highest in the region, compared to Brazil and Uruguay.
ADEBA (Association of Argentine Banks) warned that the need for minimum cash (reserves) for demand deposits is at the highest in the region. A report prepared by the entity made a comparison in which Argentina is seen in first place with the 45% requirement while in Brazil, Uruguay and El Salvador it is 21%, 15% and 11%, respectively.
“The minimum cash requirements for demand deposits stand at 45% of total deposits, a level that is three times higher than that registered in December 2015 and almost double compared to June 2018. These values exceed normal prudential standards, limiting loanable capacity and making credit more expensive”, they wrote from ADEBA.
Meanwhile, they added that the minimum cash requirements operate as a “tax on financial intermediation.”
What are laces
The Bank reserves are a part of the deposits that banks or other financial entities must leave frozen in the BCRA. That is, it is a part of the money of its clients or depositors that cannot lend or invest in other financial instruments. It is about a tool that is used within the banking system to try to guarantee a minimum of liquidityin case savers want to withdraw their deposits.
But The management of reserve requirements also has an effect on money and the return on investments.: to the leave part of that capital immobilized in the BCRAfinancial institutions do not have the opportunity to lend or invest it to obtain higher returns, and then remunerate their clients.
Source: Ambito
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