The Financial Stability Board (FSB) has published its peer review of Argentina.
The peer review examined two topics relevant for financial stability in Argentina: the macroprudential policy framework, and the framework for crisis management and resolution. The review focused on the steps taken by the Argentine authorities to implement reforms in these areas, including by following up on relevant International Monetary Fund (IMF)-World Bank Financial Sector Assessment Program (FSAP) recommendations and FSB initiatives.
The peer review finds that some progress has been made in recent years on both topics. In particular, the Central Bank of the Republic of Argentina (BCRA) established in 2016 a department within the Regulation Division for macroprudential monitoring. Data used in risk analysis have been improved and efforts are ongoing to enhance the granularity of corporate sector data as well as to improve systemic risk analysis and enhance stress testing models. Commendable improvements recently in the quality of macroeconomic data have provided a solid platform for this analysis. The authorities have a broad range of banking sector tools at their disposal for macroprudential purposes, including certain innovative tools introduced in response to the lessons from previous crises (e.g. restrictions on banks’ lending in foreign currency). The authorities have also submitted to Congress a new Capital Markets Law that provides an explicit financial stability mandate to the National Securities Commission and a more robust framework for financial market infrastructures.
Some, albeit limited, progress has been made in developing the crisis management and resolution framework to address the FSAP recommendations and incorporate elements of the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions. Recovery planning is underway for most domestic systemically important banks (D-SIBs) and the resolution regime benefits from a well-funded deposit insurance fund. The draft Capital Markets Law includes a proposal to introduce powers to temporarily stay early termination rights.
Notwithstanding this progress, the review concludes that there is additional work to be done:
- On the macroprudential policy framework:
- strengthening the institutional set-up for financial stability within the BCRA in terms of mandate, internal structures and resources;
- establishing a coordination forum for authorities to discuss regulatory issues, share information and analysis on systemic risks and related macroprudential policies, and develop crisis preparedness protocols;
- developing a framework for the identification and collection of data for systemic risk analysis; and
- refining stress tests as well as publishing more information on them.
- On crisis management and resolution:
- incorporating additional elements of the Key Attributes in the resolution regime;
- strengthening the operational independence of the resolution function within the BCRA and establishing mechanisms for cooperation and information sharing with domestic and foreign authorities on resolution;
- enhancing resolution funding arrangements; and
- further developing recovery and resolution planning for all D-SIBs.
The peer review report includes recommendations to the Argentine authorities in order to address these issues. These recommendations are meant to address future challenges as macroeconomic stability is restored and the financial system develops further.