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Argentina streamlines banks' cash reserves to spur long-term deposits

Banco Central de la República Argentina said it simplified regulations on minimum cash requirements at banks in an effort to stimulate long-term deposits.

The changes, which modify rules set earlier in the year, were made "in order to neutralize the impact on the monetary base and stimulate longer terms for deposits in pesos in the financial system," the regulator said.

For the largest banks, which are classified as the regulatory Group A, the move will require reserves of 30% in Argentine pesos, 5% in treasury bonds and 10% in LELIQ central bank notes against all demand deposits. Those percentages generally decrease for deposits that carry short fixed terms of up to 90 days and disappear altogether for deposits with a duration of more than 90 days.

The central bank did not modify requirements for the smaller entities that are categorized in Group B.

According to the statement, the cash requirement changes will not affect total reserve requirements. As a result, the move does not alter Argentina's monetary base, a key part of BCRA's stricter monetary policy strategy that central bank chief Guido Sandleris launched in late September to tackle ongoing inflation troubles and the deterioration of the peso.

The BCRA has committed to containing the monetary base, which consists of all currency in circulation and commercial bank deposits held in the central bank's reserves, with a monthly average of zero growth between October 2018 and June 2019.

The International Monetary Fund, which rescued the country in 2018 with a $57.1 billion bailout package, praised the central bank for the move, El Cronista reported. "The changes proposed by the Argentine central bank are consistent with the current monetary policy framework and do not alter the monetary base objectives announced, while making the current system more transparent, simpler and more efficient."