Argentine banks are now allowed to issue US dollars loans to any company

On Thursday, Argentina’s government lifted a restriction dating back to the 2001-02 crisis, allowing banks to lend their dollar deposits to companies that do not generate foreign currency. Economy Minister Luis Caputo described the move as a “partial easing” of the restriction, while the Central Bank referred to it as loosening its prudential framework for foreign currency financing.

The updated rules will be formalized through a decree soon. Previously, banks could only lend dollars to companies that either produced foreign currency or received a guarantee from one that did. Now, the benefit is open to all companies.

Caputo explained that economic prudence was the reason individuals were excluded, and that legal precedents for contract validity were stronger between companies. The Central Bank clarified that the aggregate dollar loans could not exceed 15% of each bank’s foreign-currency deposits. The minimum capital requirement for these loans would be 125% of what is required for similar funding circumstances.

Additionally, banks must assess borrowers' repayment capacity under various exchange-rate scenarios to mitigate currency mismatches.

The measure aims to promote sustainable financial growth, safeguard solvency and liquidity of the financial system, and limit risks from borrowers' currency exposures. While no exchange-rate hedge will be attached to the loans, they will still require conversion in the official foreign exchange market. Caputo emphasized that the prudential requirements imposed by the Central Bank would be stricter than those for regular loans.

The timing of the change coincides with a new "fiscal innocence" bill in Congress, designed to bring dollars held outside the banking system into the financial system. The bill also lowers tax controls and increases the threshold for spending without justification. High peso borrowing costs, particularly for small companies, are expected to decrease as banks can now offer dollar loans, potentially reducing these rates.