Financial Crime World

Argentina’s Compliance with Basel Banking Regulations

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The Basel Committee on Banking Supervision’s Regulatory Consistency Assessment Programme (RCAP) has assessed Argentina’s compliance with the Basel banking regulations. Here are some key points extracted from the report:

Compliance with Basel Banking Regulations

Adoption of Advanced Approaches

  • Argentina has not adopted the internal ratings-based (IRB) approaches for credit risk and the internal models approach (IMA) for market risk, as well as the advanced Credit Valuation Adjustment (CVA) capital charge.

Standardised Approaches

  • The standardised approaches for credit and market risk adopted by Argentina differ from those in the Basel standards mainly due to not referencing external credit ratings in its regulation.

Argentina’s Financial Sector

Structure of the Financial Sector

  • Argentina’s financial sector is bank-based, with a small role for capital markets.
  • The sector consists of 78 financial institutions, including state-owned banks (12) and private banks (50).

Key Players in the Financial Sector

  • Banco de la Nación Argentina is the principal institution among state-owned banks, accounting for almost 28% of total deposits and 17% of loans.
  • Private foreign banks originate 34% of total financial system credit, while private national banks originate 33%.

Funding and Assets

Funding Strategy

  • The banking sector has maintained a strategy based on deposit funding, with domestic currency deposits being the most important funding source.

Composition of Bank Assets

  • Credit to the private sector is the most significant component of total bank assets, at almost 45%, with nearly 95% denominated in domestic currency.

Cross-Border Activities

  • Banks’ cross-border activities remain limited, with exposure to foreign counterparties and markets representing only around 1.7% of total assets.

Assessment Dimensions

The assessment focused on two dimensions:

  • Completeness of the Argentinian domestic regulation: comparing domestic regulations with the capital standards under the Basel framework.
  • Consistency of the Argentinian regulation: assessing differences in substance between domestic regulations and capital standards.