Understanding the Change in UVA Fixed Terms: Why Banks No Longer Offer 90-Day Options

2024-03-18 13:56:20
Since December, banks are no longer obliged to offer pre-cancellable UVA fixed terms within 90 days (Illustrative Image Infobae)

A confusion among savers and even among the banks themselves revolves these days around UVA fixed terms, term deposits that adjust the value of their capital in pesos according to the progress of inflation and that in the midst of record monthly data For more than 30 years they have been eagerly sought after by clients who want to tie the fate of their holdings to the record march of the general price level. But although banks are obliged to offer this type of placements with a term of at least 180 days, the publication of some regulatory changes for deposits in general led many users to search for placements with a term of 90 days without success.

The confusion arose with the publication of Communication A 7978 of the Central Bank which, last week, eliminated the rate floor that banks had to offer for other types of deposits, the traditional and popular 30-day fixed-term deposits. The change was important for the customs developed in the last four years, when the monetary authority forced entities to pay returns identical to, or even higher than, the reference rate. The regulation in question liberalized rates and today banks compete to obtain these deposits with the rate that is most comfortable for them, between 70% and 90% annual nominal.

But together with the publication of 7978, “ordered texts” of the “Term Deposits and Investments” regulations were published, which compile all the regulations accumulated over the years regarding the subject. And a mention in it of the placement terms adjusted by UVA establishes that this type of deposits cannot be taken with less than a 90-day term.

Among users the mention was read, in some cases as the return of the UVA fixed term to 3 months. The enthusiasm was no less. These types of placements ceased to exist on December 28, after the publication of another BCRA rule. And those who were able to place them in the hours before their end received, in recent days, sky-high returns above 70% in dollar terms (because inflation flew but the dollar was flat).

According to user reports, even a private bank fell victim to the error and allowed its savers to place UVA fixed terms for a few hours. Soon, that option disappeared and the deposits that were agreed upon were returned without further explanation.

The UVA fixed terms placed until December 28, the day they abandoned the menu offered by banks, have earned more than 70% in dollars so far. The last ones expire in less than 10 days (Reuters)

It was a big misunderstanding. Central Bank regulations never prohibited banks from offering UVA three-month fixed terms. Banks have complete freedom to do so. And they choose the freedom of not offering, whether drunk or asleep, a deposit that pays 70% in dollars when they do not have the possibility of investing in any loan or asset that helps pay for those returns.

What was in effect until December 28 was the obligation to offer these deposits. Communication A 7929 published that day established the obligation to offer pre-cancellable fixed terms adjusted by UVA of 180 days. Until the previous day, the obligation to offer them within 90 days was in force. The only reason why users found that option in their hombanking was regulations. Banks are usually not interested in intentionally losing money.

“The issue is that the banks did not have and still do not have a way to hedge the UVA, they could only buy securities with CER but at a high price, so they lose compared to what they pay for the fixed terms, so one way is discourage them by increasing the deadline,” a specialist told this medium.

So, do 90-day UVA fixed terms exist?

It is clear that the regulations allow them. But it is up to each bank whether they want to offer them or not. Communication A 7929 forces banks to take 180-day UVA fixed terms from natural persons. A period that is too long for the local palate, which has almost no followers.

But without the obligation to take money adjusted by UVA for three months, the banks preferred not to offer them. At the time of publishing this note, no banking entity offers UVA pre-cancellable fixed terms of 90 days. They can do it, yes, but they choose to avoid it.

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