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Analysis Of The Banking System In Argentina

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I. Composition of the Banking Sector The banking system in Argentina is highly concentrated. In 2015 the top three banks controlled more than 43% of all commercial banking assets. The top ten banks control more than 77% of banking assets. This reflects a long-term trend of consolidation beginning in the 1990s when banking reforms were introduced and continued following the 2001 crisis. Today only 78 banks remain in operation, compared to 200 in the mid-1990s. Market entry is made difficult by both evolving regulation and the concentrated power of large, established banks. Argentine banks have expanded their presences in recent years. In mid-2016 a total 4,507 branches were in operation across the nation. Still, this ranks below the other …show more content…

By far the largest bank in Argentina is state-owned Banco de la Nación Argentina, which controls 27.6% of banking assets. The two next largest domestic banks are the privately-owned Banco de Galicia y Buenos Aires, controlling 7.9%, and state-owned Banco de la Provincia de Buenos Aires, controlling 7.8%. Several large foreign banks also operate in Argentina. These include the Banco Santander Rio (controlling 8% of assets), BBVA Banco Francés (5.6% of assets), and HSBC (3.2%). Some foreign banks have reduced, or have indicated plans to reduce, their presences in Argentina. In 2016, Citibank agreed to sell off most of its assets to Banco Rio Santander, citing desires to cut costs. Despite such moves, Argentina may appear attractive to foreign banks seeking to expand in the Latin American market. The soundness and profitability of Argentine banks make them potential takeover targets for international banks, assuming a friendly regulatory climate.

II. State of the Banking Sector The banking sector has sound fundamentals. Banks are highly capitalized. As of July 2017, the BCRA reports that banks have a capital compliance rate (qualified capital/ risk-weighted assets) of 14.7%. This exceeds the requirements by 79%. Banks have been significantly over the capital requirements for the previous five years. Liquidity indicators are strong. The broad liquidity ratio in July was 45.4%, while the liquidity ratio excluding BCRA securities stood at 29.6%

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