The Vice President of the Central Bank of the Argentine Republic (BCRA), Vladimir Werning, spoke this Thursday at the 47th Annual Convention of the Argentine Institute of Finance Executives (IAEF), held in Puerto Iguazú, Misiones. In his speech, he addressed the record level of household credit defaults and proposed that banks absorb the cost of refinancing debts, rather than passing it on to customers.
Defaults: A Private-Sector Problem
Werning was emphatic in stating that defaults are a "private-sector problem" and that the solution must come from agreements between banks and debtors. In this regard, he noted that refinancing should offer "much lower" interest rates and longer terms to give families a chance to pay. "The key is at what cost banks refinance," he stressed.
The official explained that high interest rates "induce defaults" because they become "unpayable in real terms" for many households. Therefore, he urged financial institutions to "recognize losses" and absorb them with their own capital, rather than compensating with higher rates for other customers.
Default and Credit Data
According to data presented by Werning, total defaults have stabilized at around 7.7% over the past three months, but household defaults are significantly higher: 12.8%. This figure reflects the difficult situation many households face in meeting their financial commitments.
Regarding interest rates, the BCRA Vice President detailed that, after the exchange rate shock of the 2025 elections, real rates for businesses fell to one-fifth of their peak during the uncertainty. However, rates for families fell only a quarter from the electoral peak and remain at three-quarters of that peak. This asymmetry partly explains the higher default rate in the consumer segment.
Credit to families has stopped contracting but is not yet growing, while bank credit to the private sector has accelerated since May, with greater momentum in dollar-denominated loans and the business segment. Werning defended the easing of dollar credit to channel banks' idle liquidity into productive activity.
Rejection of Populist Solutions
Werning rejected "populist" proposals to ease defaults, such as state assistance to banks, regulatory changes in debtor classification, or lowering reserve requirements. For the official, these measures would only shift the problem to society as a whole and would not address the root of the issue.
Instead, he highlighted that the drop in rates for businesses was due to the reduction of political risk, optimism about reforms, and prospects for remonetization and reserve accumulation. He also noted that business defaults are lower than during the last credit expansion cycle in the Macri era.
Economic Context and Reforms
The BCRA Vice President also referred to the tax burden on the average total financial cost, which reaches 25% (provincial taxes and municipal fees). In this context, he mentioned that the Government is preparing a capital market reform to boost guarantees and lower financial costs.
In a balance of the economic program, Werning highlighted five results: high levels of activity, reduced inflation, external surplus, recovery of private credit, and poverty reduction. He also recalled that the BCRA purchased foreign currency for around US$ 14 billion and expanded its available liquidity by about US$ 30 billion since December 2023.
Finally, the official estimated that the damage caused by 2023 inflation was US$ 550 billion, equivalent to 85% of GDP, a figure that underscores the challenge facing the Argentine economy.