He Central Bank of the Argentine Republic (BCRA) decided to increase the requirement of reserve from 15% to 20% for passive stock securities in pesos and deposits in pesos at sight that are part of money market mutual funds. This measure seeks to strengthen the financial system through prudent capital management, according to the official statement.
This decision was communicated through the “Communication A 8119.” Its entry into force will also immediately impact the rates offered by the digital wallets for keeping the money in these accounts.
From the Center for Political and Economic Studies (CEPEC) who directs Leo Anzalone explain that the BCRA’s decision “translates into a lower yield on sureties and paid accounts, which directly affects the performance of the funds.” Money Market. And it probably has some effect on the dollar“.
Anzalone explains in statements to Scope that there are several reasons why the BCRA could have made that decision, “all focused on lowering inflation“, he maintains. The economist analyzes that, first of all, the entity in charge of Santiago Bausilli seeks to counteract the upward pressure exerted by surety rates within the financial system. Well, according to what they say in the city: “They were shooting a lot lately and the system was not very well-oiled“.
Afterwards, Anzalone slips that increasing reserve requirements is seeking to reduce the liquidity of the system and as we have been listening, “dry the weight square” is to reduce inflationary pressures. “Now, it is to be expected that some savers who maintained their liquidity in remunerated accounts (money market) seek security by going to the dollar“, he says, so there may be pressure on exchange rates.
The detail of Communication A 8119
In the official communication, the BCRA authorizes banks to participate in the stock market guarantees, allowing them to place pesos in these operations, something that until now was prohibited. According to the regulatory body, this is done with the aim of diversifying the market.
And it is worth remembering that previously, banks could only take collateral due to the structural liquidity of the system, resulting from a constant issuance of money. This had led to a significant drop in surety rates. With the new approach, the active participation of banks on both sides of the equation is expected to improve efficiency in the fluidity of market liquidity.
Ariel Sbdar, CEO of Cocos Capital, explained on his X account what it is about and tweeted: “Red alert: interest rate drops.” For the strategist, the Central Bank’s measure “means that banks will now pay approximately 2% less per remus, which will cause remunerated accounts and money market mutual funds to lower their performance even further”, in line with what Anzalone pointed out.
The increase in the reserve requirement, which will come into effect on November 1, is a contractionary measure that is expected to reduce the rates currently offered by virtual wallets, which range between 35% and 44%.
This resolution occurs in a context of growing decrease in liquidity in the banking system, evidenced by the downward trend in fixed terms in pesos and the increase in demand for credit by the private sectorwhich records double-digit growth over the last five months.
Thus, the main objective of this new BCRA regulation is, probably, to promote activity in the capital market and improve the management of the risks associated with stock market guarantee operations. By allowing financial entities to have a more active role in this market, it is expected to increase liquidity and efficiency in the placement of guarantees.
On the other hand, the increase in minimum cash requirement rates seeks to guarantee that financial institutions have sufficient liquid resources to face possible deposit withdrawals and comply with their obligations.
News in development.-
Source: Ambito
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