Argentina eyes pension fund for long-term mortgage lending

Argentina's Economy Minister Luis Caputo is exploring a novel approach to revive the nation's sluggish mortgage market. The government is studying the possibility of channeling resources from the FGS, a significant pension reserve fund, to provide long-term financing for banks.

Caputo clarified that the FGS would not directly purchase mortgages from financial institutions, a mechanism previously proposed by the sector. Instead, the focus is on more effective methods. One such method under consideration involves the FGS making long-term fixed deposits with banks, potentially for two to five years. Banks would then compete in tenders to secure these funds by offering various interest rates.

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The FGS cannot be buying mortgages from human beings because that is not its job. What we are looking at are forms that we believe are more effective.

This strategy aims to resolve a core challenge for banks: they offer long-term mortgages but primarily rely on short-term deposits. By securing longer-term funding through the FGS, banks could reduce the mismatch between their liabilities and assets. The ultimate goal is to increase the volume of available mortgage loans and improve their terms, thereby stimulating the real estate market.

The initiative comes after months of government analysis into how the FGS could support the mortgage market. While a previous proposal involving the FGS in financing mortgage portfolios was not included in official resolutions, this new approach shifts the focus to providing indirect, long-term funding to banks.

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Given that the FGS fund has a long-term objective, it could indeed make long-term fixed deposits.