what about the avalanche of declined checks


After the peak of rejections in April, in May there was an improvement that continues in June but is still far from pre-pandemic values

After a spike in April, rejection of declined checks fell in May. However, it continues well above the records of a year ago and continues at all-time highs. The trend is verified both in the total number of rebounds (which includes unfunded funds and others that admit deferred payment) and in the documents that could not be paid.

According to the latest data published by the Central Bank (BCRA), the amount of rejected checks fell 55% in May respect to April, since they added 305,000 documents versus more than 672,000 in the fourth month of the year. Of that total, lThe checks not paid in May were 261,000 (86% of the total). That figure meant a 58% monthly decline compared to April’s 616,000 unpaid checks, at what was the all-time peak.

Regarding amounts, the dynamics are similar. He Total money rejected in checks fell 47% in May compared to April, while the amounts involved in the documents that effectively not paid decreased 52% in the month.

Banks consulted by iProfessional they ratified this trend and added that June seems to show even better numbers than the previous two months.

Despite the slight recovery in May, the year-on-year figures clearly show the effect that the crisis had on the payment chain. A first point is that rejected and unpaid checks represented in May of last year 40% of the total rejections. In the same month of 2020, said proportion increased from 86%.

Another eloquent fact is that heThe number of documents bounced and unpaid increased 78% annually. While the amount rejected increased 135% in the last 12 months.

Is the worst left behind?

Consulted entities affirm that the peak of rejections was seen in April when compulsory social isolation affected the entire country. However, and even when it improves month by month, they assure that are far from pre-pandemic levels.

“So far this month June sees 50% reduction in unfunded rejections, since this month represent 4.4% with respect to the total deposits in the bank. In May, this number was 8.5%. However, the situation is better than the one that occurred in April, when we were at a level of rejection close to 15%“, they told Banco Galicia.

Regarding the ratios prior to the pandemic, in the same entity they indicated that rejections “represented 2% of total deposits” and checks “without funds they were 1%“This is behavior in normal contexts,” they stressed.

In another private entity, they expressed themselves along the same lines: “After the April and May peak, the volume of rejections decreased, but still well above pre-quarantine levels

“Historically, the level of rejections was 1.5%. When the pandemic started, it went to the 7% or 8% zone and reached 12%. Today, it is around 9%. It is still a lot, “they opened up in another private entity.

The number of bounced checks soared in April and hit a record high

The number of bounced checks soared in April and hit a record high

“After an increase during the first stage of isolation, check rejection began a path of improvement in recent months and sand located again in single-digit values ​​as of May“, they contributed in another financial institution.

In a bank they stated that today they already have “everything almost normalized” although they admitted that “if you compare the number of rejections with the same period last year, it is higher” but theyor attributed “to context”.

One factor that contributed to lower rejections is that there is a fewer checks in circulation. Total checks cleared in the financial system r21% monthly in May and 46% in year-on-year terms.

“The level of checks deposited decreased 30% with respect to pre-pandemic levels. Today the amount of rejections is around 4% and, although it is still high, it improved a lot with respect to the principle of isolation, “they explained in Banco Ciudad when asked about it.

Central measurements

In the first days of isolation, the BCRA was widely criticized for interrupting check clearing. Especially from the SME sector, they warned of an eventual breakdown of the payment chain. Finally, on March 26, that operation returned.

But that was not the only measure by the monetary authority on checks. He April 1 ordered 3 other measures that will follow valid until December 31. They are:

  • Expand in 30 additional days the deadline for submission common or deferred payment checks.
  • Admit one Second Submission for Checks Rejected Causal “No Funds enough available on account. “This provision does not apply to checks generated electronically or Echeq.
  • Determine that financial institutions they will not be able to apply commissions to his clients related to check rejection.

In one entity they referred to the effect of said decisions: “At the beginning of the quarantine, especially in April, the number of rejected checks grew because the regulations prohibited fines. In May they fell a little. There are quite a few companies that use the possibility of re-deposit rejected checks as a means of financing. As for sectors, except agriculture, all increased their level of rejection. “

Beyond these specific measures, the BCRA also promoted lines of cheap credit for the salary coverage and check discount of mipymes. Today, the BCRA announced a second part of this program that was expanded to companies of any size.

So far, official figures indicate that some $ 265,000 million were disbursed in those credits. However, A study by the Confederation of Medium-sized Enterprises (CAME) pointed out that these loans only reached 18% of SMEs.

A sector in emergency

Despite the circumstantial improvements, the SME payment chain is broken. Although some measures alleviated part of the situation, spokesmen for the sector affirm that they were not sufficient to mitigate the effect of a 3-month brake on economic activity.

“The index of rejected checks, which shows a drop, is a general figure. It would be necessary to see how many are from micro, small and medium-sized companies, section 1 or 2. At CAME we did a study that showed that 50% of SMEs had not been able to partially or fully cover their checks during April and May. This is concentrated in the smallest SMEs, “said Pedro Cascales, spokesperson for the entity.

And he added: “There are two things that helped lower the number of rejections. On the one hand, the opening in the rest of the country of almost all activities and partial opening at AMBA. That generated a little more activity. On the other hand, there are much fewer checks on the street because many SMEs no longer accept third-party or deferred checks but instead request payment on delivery

The Argentine Chamber of Commerce estimates that some 35,000 businesses have already closed due to the quarantine

The Argentine Chamber of Commerce estimates that some 35,000 businesses have already closed due to the quarantine

For his part, Mario Grinman, secretary of the Argentine Chamber of Commerce (CAC), agreed: “The latest survey shows a Quite high percentage of rejected checks and cut of payment chain. By BCRA regulations, banks do not report or penalize rejections. But there are ongoing discussions because checks cannot be covered. Negotiated one by one, based on trust and years of business relationship. ”

Regarding the possibility of making a double presentation of the bounced documents, Grinman sentenced: The problem is that on the second opportunity the money was not collected to pay

The CAC representative said that the return to activity in some areas of the country is also not generating a rapid recovery. “Those who reopened are billing between 50% and 60% less than before the pandemic. We calculate that about 35,000 shops have already closed and up to 100,000 can be lost if this continues and there is no government help, “he concluded.

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