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BCRA mulls longer term for Leliq-notes to address mismatch

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BCRA mulls longer term for Leliq-notes to address mismatch

Banco Central de la República Argentina is currently evaluating an extension in the term of its Leliq notes to 30 days from 7 days in a bid to boost the interest paid on deposits and correct a mismatch with deposit rates, El Cronista reported.

Presumably, a longer term on their Leliq placements would diminish banks' risk and allow them to lend at higher rates.

The monetary authority seeks to address banks' "excuse that passive rates do not rise at the same rate as the Leliq rate ... due to fear of maturity mismatch," according to sources from the BCRA quoted by the newspaper.

In mid-February, the central bank reversed its downward course on its interest rate amid depreciation pressures on the Argentine peso, prompting an increase of roughly 20% in its monetary rate.

But while the Leliq rate closed March 15 at 63.61%, the Badlar rate, a benchmark for loan pricing which represents the interest banks pay on fixed-term deposits of over 1 million pesos, stood at 41.31%.

In a recent fourth-quarter earnings call, Banco Macro SA, CFO Jorge Scarinci had said "the spread (against time deposits) was extremely positive for the bank," in a period when the bank turned to Leliq income to compensate for weak loan growth.

As of March 15, US$1 was equivalent to 39.94 Argentine pesos.