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To: NOW who wrote (133767)	11/9/2001 7:19:15 PM
From: patron_anejo_por_favor	Respond to of 436258

Sayyyyy, this is a promising development: biz.yahoo.com Friday November 9, 7:13 pm Eastern Time Argentina to ask banks to repatriate reserves (UPDATE: Adds increase in bank contributions to deposit insuring body in paragraph 10) By Gilbert Le Gras BUENOS AIRES, Argentina, Nov 9 (Reuters) - Argentina's Central Bank will require banks to repatriate some funds held as reserve requirements abroad to have them closer at hand to underpin a vulnerable financial system, it said on Friday. ADVERTISEMENT Bankers said the aim is to shore up depositor and investor confidence in Argentina's financial system and the decade-old currency regime pegging the peso at par to the dollar, after total bank deposits fell 16.5 percent so far this year. ``This is an accounting maneuver designed to have a psychological impact on people and analysts who continue to make the mistake of not counting the reserves held in Deutsche Bank in New York,'' one banking industry source told Reuters. Argentine banking authorities impose stringent requirements on local institutions in terms of the amount of cash they must have to guarantee withdrawals -- higher than those set by the Bank of International Settlements (BIS). Argentina fixed its reserve requirement at about twice the minimum level recommended by the BIS after a much steeper fall in domestic bank deposits during the 1995 Mexican devaluation or ``Tequila'' crisis rocked Latin American financial systems. Local banks were allowed until now to hold 80 percent of reserve requirement abroad to get higher interest. An estimated $2.4 billion is currently held at Deutsche Bank in New York. ``The (Central Bank's) board's resolution is already prepared and it will be made public this evening,'' a Central Bank spokeswoman told Reuters, confirming what government and financial sector sources had earlier said. ``Now the banks are going to be authorized to have only up to 10 percent in Deutsche and all (the banks) will have to comply,'' another Central Bank official told Reuters. HIGHER RATES SEEN OFFERED The Central Bank would probably offer interest rates above those offered by Deutsche Bank's New York branch on the reserve requirement to entice the funds back, a banking official said. The Central Bank meanwhile on Friday gave the green light to an increase in bank contributions to the body that insures Argentine bank deposits, to enable it to increase guarantees on deposits from $30,000 to $50,000, giving savers more protection. Argentina has one of the most open banking systems to foreign institutions in Latin America. Economists say it could serve as a domestic safe-haven in contrast to the bank run in the Tequila crisis in 1995 when deposits fell 21 percent. But the Central Bank's foreign currency reserves have been eaten away by a steady conversion of deposits into dollars from pesos due to heightened fears Argentina could be headed for the biggest sovereign debt default in history and devaluation. The International Monetary Fund board transferred $5 billion into Argentina's Central Bank in early September to top up foreign reserves to help recover depositor confidence. But that amount has almost completely been wiped out by Monday. ``It really shows you they have burned through the $5 billion reserve line extended by the IMF and they are now drawing on whatever foreign assets the Argentine financial system has,'' said Christian Stracke, chief Latin American debt strategist at Commerzbank Securities. Total bank deposits slipped by nearly $3 billion, or around 4 percent, last week. They fell 3.2 percent in October and are down 16.5 percent since beginning of the year. International reserves, despite bailouts from the IMF, have fallen to about $20 billion, or by around 35 percent since Economy Minister Domingo Cavallo took the helm in March amid ongoing financial crisis. Wonder how much of those foreign held reserve assets are dollar-denominated?