Central Bank of Argentina quadruples cap on bank deposit insurance to better reflect falling peso

Argentina has raised its deposit insurance cap as the central bank continues to introduce measures to adjust to the effects of rising inflation in the country.

The Wall Street Journal, a financial newspaper, on Tuesday reported that the Central Bank of Argentina had quadrupled the guaranteed insurance on bank deposits in the country to Ps120,000 ($30,000) from Ps30,000, placing the new limit closer to regional neighbours Uruguay, which imposes a $29,040 cap, and Brazil, where the cap is $35,531. The central bank was not available for comment on the measure.

The move comes as rising inflation in Argentina continues to impact the value of the peso. Inflation in Argentina rose by 11% from November 2009 to November 2010. During the same period, the peso lost 4.3% against the dollar, and has fallen by a total of 22.6% since the onset of the financial crisis and the collapse of Lehman Brothers on 15 September, 2008. The greenback traded at Ps3.9755 at 4pm in London.

The central bank has linked the high inflation to an "evolution of commodities prices". Argentina's deposit insurance system was created in 1995 and charges banks a fee of between 0.015% and 0.06% on the average daily value of their peso and foreign currency-denominated deposits.

This is the second such measure the central bank has taken in a matter of days to reflect high inflation in the country. A shortage of high-denomination banknotes led to long queues appearing at ATM machines across the country prompting Argentina's central bank to set up a special operation to distribute Ps5 billion worth of 100 peso bills.


Source: http://www.centralbanking.com/central-banking/news/1937124/argentina-raises-deposit-insurance-ceiling-reports

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