(Updates with information on foreign banks' subsidiaries in paragraph six.)
By Taos Turner
BUENOS AIRES--Argentina's government will announce a plan Thursday to
force the country's biggest private-sector banks to boost lending.
The plan, outlined vaguely by Argentine President Cristina Kirchner in
a speech late Wednesday, aims to sustain investment levels at a time
when economists are rapidly lowering their forecasts for economic
growth.
Ms. Kirchner said private-sector banks have made a lot of money in
Argentina and that it's time for them to do more to spur growth.
She said private banks need to catch up with Banco de la Nacion
Argentina, a federal bank, which she said accounts for 22% of all
loans.
"We're not going to ask any single bank to lend that amount, but yes,
we're going to ask that 20 banks do in one year what one bank did in 4
1/2 years," she said. "We're going to ask them to help us sustain
investment, which last year was almost 25% of gross domestic product."
The new lending rules will affect the Argentine subsidiaries of
several large foreign banks, including Spain's Banco Santander SA
(SAN, SAN.MC) and Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC),
HSBC Holdings PLC (HBC, HSBA.LN, 0005.HK), and Citigroup Inc (C).
An official at Argentina's central bank said the bank's board of
directors will meet Thursday to determine how much each bank must lend
under the new program.
The bigger the bank, the higher the percentage of its deposits it will
be forced to lend, the official said.
For now, the idea is to require all banks holding more than 1% of
total national deposits to boost lending for business investment.
"This is a credit line for investment," the official said. "We're
talking about around 25 or 30 banks that will be obligated to do
this."
The interest rate on the loans will be set at Badlar plus four
percentage points. Badlar is the average interest rate on fixed-term
deposits above one million pesos ($221,238). Based on data from June,
that would put the annual rate for the new loans at around 15%.
That's far below the annual rate of inflation, which most economists
say likely totals around 25%. In recent years, banks have been
reluctant to lend below this level because of its inherent risk, and
expectations for future inflation that have long been around 25% or
30%.
Ms. Kirchner said Wednesday that banks appeared to distrust businesses
and haven't been lending to them because of this.
Whatever the case, the move to boost lending is the government's
latest attempt to use the power of the state to spur economic growth.
Most economists say the economy is slowing largely because of
unpredictable and cumbersome government policies, such as severe
restrictions on the purchase of foreign currency.
But Ms. Kirchner has sought to shift the blame abroad, blaming
problems in the U.S. and Europe for Argentina's own troubles.
Ms. Kirchner recently said the government would provide around ARS20
billion in lost-cost mortgages over the next four years as part of a
plan to build 400,000 homes over that period. The program aims to
stimulate demand in the construction industry, a key source of growth.
In May, total investment in Argentina was $7.4 billion, down almost
13% from the same month a year ago, according to an analysis by
consulting firm Orlando J Ferreres & Asociados, or OJF. That put the
investment-to-GDP ratio at 20.6%, according to OJF. Investment during
the first five months of 2012 was down 8.5% on the year.
In its report, OJF warned the decline in investment boded poorly for
economic growth, which "shows clear signs of deceleration."
Earlier this week, a key survey of leading economic indicators put the
odds of a recession within the next six months at 99%.
A spokesman for one of Argentina's bank associations couldn't be
reached for comment, while a spokesman for Ms. Kirchner didn't respond
to a request for comment.
Write to Taos Turner at taos.turner@dowjones.com
(END) Dow Jones Newswires
July 04, 2012 20:45 ET (00:45 GMT)
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