What is the only bank deposit that beats inflation and why banks do not push it

What is the only bank deposit that beats inflation and why banks do not push it

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UVA fixed terms protect the value of savings against the advance of inflation

In a context of strongly negative real rates, traditional 30-day time deposits are a savings option of last resort for companies and individuals who prefer to place money in the short term so that it produces some kind of return that compensates for inflation although do not win or tie. In the system however, there is an alternative that guarantees to conserve the value of savings, but neither customers finish using them nor banks have incentives to promote them.

These are the fixed terms UVA (Purchasing Value Unit), the other side of the mortgage loans adjusted by that unit indexed for inflation that today are the focus of a controversy due to the acceleration of the rate of advance of prices.

These deposits consist of an investment that adjusts the capital constituted to the variation of the CER (Reference Stabilization Coefficient). The initial deposit is expressed in UVA at that time. Upon maturity, the amount of UVA is converted into pesos at the value of the corresponding index for that date.

Put another way, A deposit of $ 100,000 constituted on October 28, 2020, when a UVA was worth $ 60, was equivalent to 1,666.66 indexed units. Ninety days later, the minimum term to agree on a fixed term of this type, a UVA is worth $ 66.20 according to the daily data published by the Central Bank. Thus, the capital as of maturity transformed from UVA to pesos is $ 110,333.

In addition to the capital expressed in UVA, the rate offered by each bank is applied, which currently usually ranges from 0.5% to 1.5% among the largest entities.

These yields, which guarantee to outperform inflation even slightly, compare with 30-day fixed-term rates that yield 3% per month compared to a consumer price index that rose 4% in December.

However, even though the fixed term is a losing bet in advance, the UVA-adjusted alternative still has a marginal role in the local banking market.

If a bank is afraid of placing UVA loans and having it frozen, it will not look for UBA deposits either (Barbero)

As of January 20, the latest official data, all the value in pesos placed in fixed terms adjusted by UVA did not reach 2.6% of the stock of traditional fixed terms at a pre-agreed rate. There were $ 64,640 million placed that day in indexed deposits, compared to $ 2,342 billion in traditional time deposits.

At a local retail bank, an official who influences the entity’s funding strategy admitted that today it is not attractive for banks to take deposits that adjust for inflation on a massive scale. And the freezing of the UVA loan installments has to do with it.

“If I take UVA deposits, I have to turn around and place UVA loans. With freezes, constant rule changes and few people willing to get into debt, it doesn’t make sense to get funding that I’m going to have to pay back and that I can’t place, ”he said.

Although indexed loans are far from a boom, banks do have the option of placing indexed deposits in CER-adjusted bills and bonds. However, the main issuer of these papers is the national State and each bank treasury decides how much it is willing to expose itself to public bonds.

For Guillermo Barbero At First Corporate Finance, the unattractiveness these deposits generate among banks is combined with a saving public that has not been very enthusiastic about the tool.

“It is true that the banks do not promote it, because mortgage credit fell a lot last year, because the rest of the UVA credit lines -personal, pledged- do not grow that much either and, then, they have no need to obtain them,” he commented the specialist.

“In addition, this year with the freeze they could not adjust their loans according to UVA given the freezing of quotas. A bank will be afraid to place a UVA loan and then freeze it, “he added.

If I take UVA deposits, I have to turn around and place UVA loans. With freezes, constant rule changes, and few people willing to borrow, it doesn’t make sense

On the other side of the counter, or on the other side of home banking, customers don’t jump into making those deposits either.

“The minimum term of 90 days is very repellent to the traditional saver, who does not want to run out of savings for so long out of reach, and the tool also never finished being understood”, concluded Barbero.

Still, each spike in inflation drives some portfolio shifts between retailers and businesses. Since November, the stock of UVA fixed terms grew 34%, a variation that cannot be attributed only to the impact on capital of the variation in UVA: it rose just over 10% in the same period.

To face the lack of predisposition of savers to place three-month deposits, in the middle of last year the Central Bank created pre-cancelable UVA deposits. These are 3-month deposits that, as of the 30th, can be canceled. However, when doing so, the variation in UVA is not perceived, but rather a predetermined rate that tends to be even lower than that of a traditional fixed term. However, for now it does not find a great echo.


Ben Oakley
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