These measures seek to balance the provinces’ need for financing with the mitigation of financial risks for the intervening entities.
He Central Bank through Communication “A” 8174/2025 published this Monday in the Official Gazette, authorized financial entities to acquire Public Titles issued by the Province of Buenos Aires for an amount of $300,000 million.
On the other hand, communication A” 8175/2025 gives the green light to financial entities to acquire Treasury Bills issued by the province of Chaco. The amount is for $140 billion.
The official text mentions that this authorization is carried out within the framework of the “2025 Letter Issuance Program” of the province of Chaco, as provided for in Provincial Laws 4,135-F and 1,092-A2. This gives legal support to the operation.
It also clarifies that the authorization is granted “without prejudice to the observance by the financial entities involved of the provisions regarding credit risk fractionation.” This means that entities must comply with the rules that regulate the diversification of their investments to avoid concentrating risk in a single issuer (in this case, the province of Chaco).
It also mentions that the BCRA does not object to financial entities acquiring these securities, despite the general restrictions on financing the non-financial public sector.
Fractionation of credit risk
The official text highlights that financial entities must comply with the rules on credit risk fractionation. This means that they cannot excessively concentrate their investment in these securities, but rather must diversify their portfolio to mitigate risk.
A very important point is that financial entities cannot use resources in foreign currency obtained from their liabilities through financial intermediation to subscribe to securities denominated in US dollars. This restriction is based on the ordered text on the BCRA’s Credit Policy.
In this way, the BCRA allows banks to invest a significant amount in debt of the province of Buenos Aires, but with certain conditions and limitations, especially with regard to the use of foreign currency. This communication seeks to regulate and control financing to the provincial public sector by financial entities.
Source: Ambito
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