3/15/2022 - Economy and Finance

Credit subject

By Horacio Gustavo Ammaturo

Credit subject

One of the main functions that banks fulfill in the economy is to link the funds deposited by their traders and investors with the requirements of those who consume, invest and produce.In order to preserve deposit security there are rules and information that banks must comply with and provide. The central banks are those that set these rules to give reliability and predictability to the financial system.In this sense, it is essential to define clear and verifiable guidelines for determining those who may be debtors of the financial system, i.e. those who may receive money borrowed by the banks, something which is usually called as the “credit subject”.In large strokes, credit subject is any natural or legal person satisfying the requirements that the creditor or the borrower defines.When analyzing the banking system as a credit organization, we observe three main aspects that are taken into account:

  1. Credit Background, i.e. all the history that a potential debtor has on loans in the past and its compliance with payments. There are companies that offer all kinds of information to assess how debtors were behaved in relation to any other past obligation.
  2. Repeatability, which determines the projection of future and verifiable revenue with which the debtor will face the payment of the loan, both of the interest and of the capital taken.
  3. Guarantees, represented by any right which the debtor, or a third party warrants, shall be immobilized for the purpose of dealing with the obligations incurred by the credit in the event of a breach.
Obviously, the rigurosity and magnitude of the analysis of these variables will be due to the characteristics of the loan, amount, time, rate, type etc.Both the rules and procedures established, partly described in the preceding paragraphs, are insufficient in some cases. For example, hundreds of debtors per credit card balances are subpoenaed by entities and legal studies to cancel their accounts. Many of these cases respond to operations carried out by individuals who have no guarantees and that their circumstances for repayment of debts have become “unfavorable”.Psychologically and emotionally occur, in appearance, turns in the positions of the parties, changing the power of the creditor to the weakness of those who can lose their money and the distressing situation of a debtor decompressing that of a resigned and heard in the “I can’t afford more”, assuming that this constitutes a truth that reveals and gives strength.In many of these cases, creditors accept, before a period of discussions, more formal than in the background, proposals for withdrawal of interest, resignation in charging punitory charges or even reductions in the due capital, extensions of time and periods of grace.However, what in appearance is a good negotiation for debtors turns out to be a substantial change in their condition against the rest of the system, as without a doubt their quality of credit subject will be affected. In these cases Debts consume their future indebtedness capacity in exchange for fulfilling their commitments.The successive economic crises in our country, in addition to the terrible impact that pandemic had on the solvency and projection of local business revenues, took from the category of credit to individuals and companies.Using traditional banking rules to grant credit lines in a molten country deprives those who most need these funds and reward those who have surpluses, as they can take them to take advantage of the incentives that the promotional lines offer.Exactly the same happens with countries.After the default of 2001, Argentina once again raped with its creditors, gives the same as internal or external, because the quality of debtor does not recognize jurisdiction, but rather review behavior, the rest are excuses or mechanisms that pay even more the reality of default.Having spent 15 years since that time, the voluntary credit system, that is, creditors who are willing to lend fresh money, but that was not cheap, not much less convenient.The interest rates that Argentina validated for its new debt emissions doubled and even tripled those that honored other countries in the region. Even presenting much better solvency, liquidity and indebtedness indicators, the market intended better yields to lend to our country. Credit backgrounds condition the investor profile, leaving only the most speculators and codiciosos, those who expect high incomes taking big risks.Like any neighbor in the neighborhood, when the antecedents, the incomes or guarantees do not give, only the usury or the commitment to a need remains.The debt negotiations and renegotiations we have concluded are similar to that of the credit card debtor who said “I can’t afford any more”. Our creditors took this, something that caused the following consequences:
  1. A stain more to the tiger of default, leaving the Argentina as this country that does not fulfil its contracts, whose politicians take the balls from one side to the other, as if they were different countries. With security, our country will again suffer the lack of external credibility in the future, with dubious consequences for both the public and the private sector.
  2. Lack of trust In all the agreements, the feitious proof of this is the quotization of the post-fault debt, that is, the renegotiated that presents typical values of those who will not comply, even though they are without deadlines fulfilled, even and with all their postponed deadlines.
Argentina is not a credit subject and this is a real failure, something that surpasses the current government and reaches all local power groups. The best demonstration of this is that there are no deadlines during the management of President Fernandez and, still, the public debt is not worth, i.e. screen investors in any of the efforts that might come.Investors do not believe in Argentina.Let's take over.

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horacio gustavo ammaturo

Horacio Gustavo Ammaturo

I am Gustavo Ammaturo. I have a degree in Economics. CEO and Director of infrastructure, energy and telecommunications companies. Founder and mentor of Fintech, DeFi and software development companies. Blockchain Product Designer.

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