CB after longer-term deposits

After 2001 crisis and with rather unattractive rates, it is obvious that no long-term deposits from public or companies will be found. At present, up to 9 per cent annual for money in six months is paid, a figure below expected inflation, though above an stable ARG$ 3.10 dollar. From now onwards, Central Bank will authorize placements from savers at variable rate, but with an insured minimum interest. Yields have a rising path ahead. That's Argentine reality and in fact, the entire world's as well. Therefore, long-term deposits at variable monthly rate offer the possibility of making better use of international context. This new mode announced by the monetary authority is useful as hedge in case of an unexpected rate decline.

Central Bank authorized a new mode enabling banks to attract more medium- and long-term deposits. The intention is to offer investors a variable rate placement, but with an insured yield floor.

The Board of Directors of this entity provided on Thursday a 180-day minimum term for this type of mixed rate deposits. Another piece of news is that, among instruments approved to be offered to the public, BADLAR rate (yield paid averagely by institutions to great investors placing more than ARG$ 1 million) was added.

"Our goal is to broaden the option menu offered by banks to their clients, with the aim of extending average placement term," an official from the Argentine Central Bank explained to this newspaper.

Banks were already authorized to offer time deposits at variable rates, for example, CER (Baseline Stabilization Coefficient, retail inflation index), whose minimum term is one year.

However, now it is possible to guarantee some yield level, which would be convenient in case the chosen variable shows a poor performance.

Addressees

Although this type of products may be appealing to small and medium savers, they may not feel attracted in the first place because we are talking about complex products. For that reason, banks may offer them first to institutional investors who aim at Argentine pesos placement segment.

The entity managed by Martin Redrado had approved last year the possibility of offering Variable Interest Deposits (DIVA, its Spanish acronym) which fluctuated depending on Merval index or raw material price, with guaranteed capital. However, and although we are talking about a model taken from other markets like the Spanish one, it has not been accepted in Argentina yet.