Argentine Banks Stable, but Face Obstacles to Future Growth

 
In early November, the US Department of Commerce (DOC) published an analysis of the Argentine banking system. In it, author and commercial attaché Jim Sullivan attempts to explain the system's strength despite two major recessions within the past four years. He points to a continuous wave of mergers and acquisitions, which have not only reduced the number of financial institutions, but also merged financial resources, including client and credit information, a top asset in the business. He goes on to provide a brief overview of the system's structure, with special attention to the central role of the two leading banks, Banco de la Nación Argentina and Banco de la Provincia de Buenos Aires (BICE).

According to Sullivan, the Argentine government's economic reforms during the past decade, including reinforcement of bank liquidity requirements and strict supervision of the financial system to guarantee solvency, have actively contributed to the current stability of the banking system. He points out that the United States owns a 50% share of foreign banks in Argentina and therefore plays a major influence in the financial market. Argentina is already among the world's leaders in innovative banking techniques, such as the Electronic Forms of Payment, which was introduced in 1997, allowing transactions to be made in real time.

Despite these positive developments and opportunities for foreign investors, the country's banking system faces some challenges. Political opposition to further bank privatizations could pose a major obstacle to free capital flow. Other problems include poor security systems, inaccurate and incomplete client information and neglect of the development of small to mid-sized domestic banks. If Argentina is capable of dealing with these problems effectively, its financial market has the potential to become more attractive to foreign investors than ever before, the article concludes.

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