Argentina is to tighten controls on its banking system in a desperate at­tempt to shore up financial stability af­ter the announce­ment of a 29 per cent devaluation of the peso on Monday. The Argentine authorities an­nounced on Thursday that the cur­rency markets would reopen on Friday.
 
In the toughest action yet, dol­lar fixed term savings accounts are to be frozen for at least a year. "The banks don't have the mon­ey to meet a massive withdrawal of deposits," said Jorge Remes Lenicov, economy minister.

The controls will be very un­popular among middle class Argentines and will further com­plicate the political challenges fac­ing President Eduardo Duhalde, who took over earlier this month after popular protests toppled two previous governments within three weeks. Bank controls were initially im­posed in December as nervous savers withdrew money. Remes Lenicov said last year's decline in bank deposits of S20 billion was equal to half the country's nation­al budget.

The new measures convert cur­rent and savings accounts to fixed-term accounts but allow holders of current accounts of less than $10,000 to convert dollar savings to pesos at the official 1.40 pesos to the dollar rate, or withdraw $500 a month. Peso savings accounts will be frozen as well but only until the beginning of March, said Rem Lenicov.

He insisted there would be no "confiscation, trimming', or short-changing" and said the monthly limit on withdrawals was being increased from 1,000 pesos to 1,500 pesos for workers whose wages are paid into their accounts.

However, Argentina's prolonged bank holiday, which has left banks and exchange houses open for only limited operations all week means savers have no clear idea what the local currency is worth.

MORE ON ARGENTINA CRISIS

January 13, 2002.

[Source: The Business Standard, January 12, 2002.]

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