However, foreign bank subsidiaries in
BBVA, Santander, HSBC, Banco Itau and Citibank, among other banks have footprints in
In Fitch's view, even with higher valuation volatility, the net exposure of global banks to
The intrinsic financial strengths of banking subs in
In times of increased economic pressures, however, even banks with adequate financial profiles can suffer contagion due to higher funding volatility. Fitch believes that the current liquidity position of the Argentine bank subsidiaries is strong, and we recognize that the central bank would be able to provide some local currency liquidity, should it be required.
While deposit runs are the most serious threat that any of the banking subsidiaries could face in the event of a significant deterioration of the operating environment, Fitch sees further write-downs of equity investment in the Argentine subs as being the more likely immediate threat following any possible sovereign default and/or a deterioration of the operating environment. The Argentine subsidiaries represent no more than 1% of BBVA's and Santander's total assets, thus any contagion impact on these banks' parents should be limited.
Fitch recognizes that parent company support from BBVA and Santander for their Argentine subsidiaries is not unlimited. Fitch's base case assumption is that if there was a need for support for bank-specific reasons, the support would be more likely to be provided than in a case for country-specific issues, including a deterioration of the operating/legal environment. The current ratings of Argentine bank subsidiaries are driven by the Viability Rating (VR) of each subsidiary and do not incorporate any benefit of institutional support, which is unique relative to Fitch's views with other subsidiaries of Spanish banks in
Data from the central bank of the
The overall system liquidity ratio (which include cash in hand, securities held with the central banks and other very short term securities) has strengthened since the beginning of 2014 to around 37% of total deposits at
Fitch currently maintains 'B-' ratings with a Rating Outlooks Negative on the Argentine subsidiaries of BBVA and Santander. Fitch also maintains VRs of 'b-' on the subsidiaries of BBVA and Santander. The
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
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