By Ken Parks BUENOS AIRES--The New York-listed shares of Argentine banks opened sharply lower Thursday, after President Cristina Kirchner said she will force banks to make cheap loans to businesses as her government tries to revive a rapidly slowing economy. BBVA Banco Frances SA (BFR, FRAN.BA), a subsidiary of Spain's Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC)), was down 4.9% at $3.48 around 9:45 a.m. EDT. Banco Macro SA (BMA, BMA.BA) was trading 3.6% lower at $13.09, while Grupo Financiero Galicia SA (GGAL, GGAL.BA) was down 4.7% at $4.48. Both banks are controlled by Argentine investors, including federal pension agency Anses. The new lending rules will also affect the local subsidiaries of other large foreign banks, including Spain's Banco Santander SA (SAN, SAN.MC), HSBC Holdings PLC (HBC, HSBA.LN, 0005.HK), Citigroup Inc. (C), and China's Industrial and Commercial Bank of China Ltd. (IDCBY, 1398.HK, 601398.SH). Goldman Sachs economist Alberto Ramos said that requiring banks to lend at negative real interest rates will erode their capital base and poor lending decisions. "Furthermore, the forceful nature of the measure will contribute to erode even further business and investment sentiment," he said in a note. In a televised speech Wednesday night, Kirchner said private sector banks will be required to lend more to businesses to spur the economy. She said private lenders need to match the efforts of state-run commercial bank Banco de la Nacion, Argentina's largest bank by deposits and loans. "We're not going to ask any single bank to lend that amount, but yes, we're going to ask that 20 banks do in one year what one bank [Banco de la Nacion] did in 4.5 years," she said. "We're going to ask them to help us sustain investment, which last year was almost 25% of gross domestic product." The interest rate on the loans will be set at Badlar plus four percentage points. Badlar--the average interest rate on fixed-term deposits above 1 million pesos ($221,238)--stood at 13.25% on Tuesday, according to central bank data. That would imply lending rates well below the annual rate of inflation, which most economists say is between 20% and 25%. An official at Argentina's central bank said the bank's board of directors will meet Thursday to determine how much each bank must lend under the new program. The bigger the bank, the higher the percentage of its deposits it will be forced to lend, the central bank official said. Argentina's top five private sector banks by deposits are Banco Santander Rio, Banco Galicia, Banco BBVA Frances, Banco Macro and HSBC Bank. Kirchner is leaning on banks amid an abrupt slowdown in an economy that grew 8.9% last year and 9.2% in 2010. Argentina's economy faces headwinds from high inflation, soft demand for Argentine goods in Brazil and a sluggish global economy. Last week, Economy Minister Hernan Lorenzino affirmed the 5.1% growth forecast in the 2012 budget. But a number of private sector forecasters are much more bearish, with some even predicting the economy will stall or contract. There is a 99% chance the economy will enter a recession in the coming months, according to the closely followed monthly leading indicator published Tuesday by Torcuato Di Tella University. That was the second consecutive month that recession odds exceeded 95%. Historically, each time the indicator has exceeded that threshold, the economy has suffered a recession sometime in the following six months, the university said. -Write to Ken Parks at ken.parks@dowjones.com
