New Capital-Requirement Rules Push Argentine Stocks Lower

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BUENOS AIRES (Dow Jones)–Argentine stocks tumbled Friday after the Central Bank of Argentina said late Thursday it would force financial institutions to abide by higher minimum-capital requirements.

The Merval index fell 2.65% to 2,831.58 points in volume totaling ARS48.3 million ($11.2 million).

«The most significant thing today was the sharp decline in financial stocks because of the new capital requirements,» said Ruben Pascuali, a trader at Mayoral brokerage. «This partially restricts the payment of dividends. It is clearly bad news for the sector.»

Grupo Financiero Galicia SA (GGAL.BA, GGAL) led the declines, dropping 5.9% to ARS3.54; Banco Frances (FRAN.BA) fell 5.5% to ARS9.59; Banco Patagonia SA (BPAT.BA, BPATL) slid 3.2% to ARS3.61.

The only Merval company to rise was the steel producer Tenaris (TS, TEN.MI), which rose 0.16% to ARS91.90.

Under the new capital requirements, starting Feb. 1, local banks will have to start raising the amount of capital required to guard against unexpected losses to 75% of total capital before distributing dividends, the Central Bank said. The minimum-capital requirement will be equivalent to an average of 15% of gross income over the last three years.

The move will increase the total capitalization requirement for the banking system by about 1.2%, the central bank said. Banks must meet half of the new requirement by February, 75% of it by August and be in full compliance by December.

The Global X FTSE Argentina 20 ETF fell 1.08% to $11.95.

Bonds were mixed. The benchmark 2033 peso bond was unchanged at ARS137.50, yielding about 12%.

The peso was largely unchanged against the U.S. dollar at ARS4.3345 on the MAE local foreign-exchange wholesale market, compared with ARS4.336 in the previous session.

Last year, the peso weakened 7.6% against the dollar.

-By Taos Turner, Dow Jones Newswires; 5411-4103-6728; taos.turner@dowjones.com

Source: http://online.wsj.com

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