Argetina halts banking
By Joe Baker
By Joe Baker
Argentinas central bank has suspended indefinitely all banking activity in that troubled country. The bank said suspension of all deposit and foreign exchange operations were to begin following the close of business last Friday.
Financial Times reported that it is the first total freeze since Argentina plunged into crisis near the turn of the year after defaulting on its external debt and the suspension of International Monetary Fund crisis-lending.
Last Saturday finance ministers and central bank governors from the seven leading industrial nations of the world met in Washington. They declared the matter as a serious concern.
A spokesman for the Argentine bank said continued leakage of deposits from the banking system led to the shut down decision which was made jointly by the bank and the finance ministry.
The crisis was expected to dominate the IMFs shareholder governments meeting in Washington. Argentinas finance minister, Jorge Remes Lenicov was expected to present his countrys case for a rescue package to the ministerial policy committee of the IMF.
The move is the latest by the Argentine government that has infuriated foreign banks and forced conversion of dollar-denominated loans to Argentine pesos, leaving the foreign banks with large losses on their Argentine operations.
The government is between a rock and a hard place, said Lacy Gallagher, at Credit Suisse First Boston bank. Once you freeze the bank deposits its very hard to unfreeze them, she said.
She said the government of Argentina was caught in a dilemma between allowing the banking system to collapse, triggering hyperinflation, or facing mounting public anger if deposits remain frozen or forcibly converted to bonds.