Financial Crime World

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Argentina’s Financial System Remains Limited and Short-Term

Argentina’s financial system still faces significant limitations and a lack of depth, particularly in its capital market and insurance sectors.

Capital Market Limitations

According to a recent report, Argentina’s total market capitalization stood at just 17.5% of GDP in the first quarter of 2011, significantly lower than similar economies such as Brazil, Chile, Colombia, and Peru.

Insurance Sector Challenges

Insurance premiums accounted for only 2.7% of GDP in 2010, indicating a lack of development in this sector.

Investment and Housing Finance Constraints

The financial system is also characterized by a scarcity of investment and housing finance products, with banks struggling to extend long-term loans due to uncertainty surrounding inflation levels.

Recommendations for Improvement

  • The government needs to take steps to review regulatory controls on foreign exchange, prices, and trade to improve banks’ intermediation capacity.
  • Prioritize building depositor and investor confidence in the domestic financial sector by maintaining stable macroeconomic conditions and strengthening regulatory frameworks.

Argentina’s Public Infrastructure Supports Financial Sector Growth

Despite challenges, Argentina’s public infrastructure has played a crucial role in supporting financial sector growth, according to a recent report.

Key Features of Public Infrastructure

  • Adequate credit registry managed by the Central Bank of Argentina (BCRA)
  • Effective collateral and pledge registration system
  • Rapidly improving corporate accounting and auditing regulations
  • Flexible and well-tested safety nets
  • Efficient national payment system

Areas for Continued Improvement

  • Oversight of payment systems
  • Corporate and financial institutions’ accounting, financial disclosure, and governance

Argentina Strengthens Auditing and Accounting Framework

Argentina’s auditing and accounting framework has undergone significant strengthening in recent years.

Progress Toward International Standards

  • Adoption of International Financial Reporting Standards (IFRS) for listed companies and banks
  • Proposal to require the use of IFRS standards for banks’ financial statements as of 2014

Strengthening Auditing Function

  • Securities supervisor, Comision Nacional de Valores (CNV), has submitted a new structure to the Ministry of Finance that includes a specific department and additional resources to oversee accountants and auditors.
  • CNV is working with the accounting profession on the adoption of International Auditing Standards (IAS) within the next two years.

Supervision of Non-Bank Financial Markets Needs Improvement

While Argentina’s supervision of non-bank financial markets is strong overall, there are areas for improvement in insurance and capital market supervision, as well as monitoring of non-bank financial institutions (NBFIs).

Insurance Sector Vulnerabilities

  • Lack of regulation and oversight could lead to instability.

Recommendations for Improvement

  • Regulators need to strengthen their supervision and monitoring capabilities to ensure the stability and integrity of Argentina’s financial system.