By Taos Turner
BUENOS AIRES--Argentine banks will offer at least 15 billion Argentine pesos ($3.3 billion) in investment-credit lines thanks to new government rules that force them to do so, the Central Bank of Argentina said Thursday.
The rules, which compel banks holding at least 1% of the country's total deposits to lend 5% of their own deposits at subsidized rates, aim to boost business investment at a time of weakening economic growth.
Central Bank President Mercedes Marco del Pont said the best way to create jobs and stimulate the economy is to set bank deposits aside for this type of lending.
The new 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).
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 is far below the annual rate of inflation, which most economists have said 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%.
At least half of the loans must go to small businesses.
"This is very important as a symbolic gesture," said Nicolas Dujovne, head of the consultancy Nicolas Dujovne y Asociados. "Until now it had been taboo to touch the banking sector because of concern about the consequences of doing so. This puts us in unchartered waters."
Mr. Dujovne, who spent more than a decade as the chief economist at Banco Galicia, one of the country's biggest banks, said the government may now be tempted to further tap the banking system.
"This won't cut that much into banks' earnings," he said. "The most important thing is that it sets us on a new path with banks and the potential expropriation of earnings and discretional use of bank capital."
Banco Galicia is part of Grupo Financiero Galicia SA (GGAL.BA, GGAL).
Argentine President Cristina Kirchner outlined the rules late Wednesday, saying private-sector banks have made a lot of money in Argentina and it is time for them to do more to spur growth.
"This will put some pressure on the banks' profitability," Moody's Investors Service analyst Valeria Azconegui said Thursday.
Ms. Azconegui said bank lending rose at a quick pace in 2010 and 2011 but the growth rate has been slowing this year.
Write to Taos Turner at email@example.com