Bankers see mini-run on dollar deposits slowing down

Monday, November 21, 2011

Bankers in Argentina see a recent mini-run on dollar deposits slowing down after a couple of weeks of heavy deposit withdrawals that raised fears over the stability of the country's financial system.

The withdrawals came after the government late last month decided that all foreign currency purchases must obtain a special approval from the country's tax agency. The measure is seen as aimed at reducing demand for the dollar and also a way to combat tax evasion.

A total of US$1.7bn was withdrawn from banks between October 28 and November 11, local daily La Nación reported, noting that this amount is equivalent to 56% of the US$3bn in new deposits (both local and foreign currency) that banks have received so far during 2011, and 11.4% of the total stock of deposits in the banking sector.

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Banking association ABA'spresident Claudio Cesario called signs that the pace of withdrawals was slowing down "very positive" information and he also praised the teamwork between banks and authorities to ensure that all those who wished to withdraw their deposits could do so without any inconvenience. The banking sector and the central bank have worked hard to meet the demand for the withdrawal of dollar deposits to avoid rumors of problems in the financial system.

The local authorities have come out and said that the withdrawals of recent weeks do not put the financial system at risk since the amount of dollar deposits in the system is still high.