Banco Hipotecario
Encyclopedia
Banco Hipotecario is an important commercial bank
in Argentina
and the nation's premier mortgage lender.
lending on extended, low-interest terms in Argentina, and thus contributed to consolidating a modern Argentine economy (a policy centerpiece of the Generation of '80
, as Roca and his allies were known).
The bank continued to grow and, during the administration of President Hipólito Yrigoyen
(1916-22), its share of the nation's mortgages doubled to 37%. The headquarters relocated in 1940 from its original, Baroque
headquarters in the financial district
(transferred to the Central Bank of Argentina) to a larger, Rationalist office building facing Plaza de Mayo
. The bank again grew significantly during President Juan Perón
's populist administration, boosting its loan portfolio from 100,000 mortgages in 1946 to 500,000 a decade later.
During the Perón years, the bank began advancing home ownership by promoting direct lending to builders, and by allowing an accelerated amortization
of its loans, whereby borrowers' 4% mortgages were mitigated further by inflation
, which averaged 26% from 1944 to 1974; as two-thirds of the institution's loans at the time were on a 15- or 20-year basis, this became an important subsidy for local borrowers, extending home ownership to a majority of households.
The bank's core business was adversely affected by policy changes during the dictatorship
installed in 1976. Central Bank Circular 1050, enacted in April 1980 at the behest of conservative Economy Minister José Alfredo Martínez de Hoz
, bankrupted thousands of homeowners by indexing
mortgages to the value of the US dollar
locally, which rose around fifteenfold by July 1982, when Central Bank President Domingo Cavallo
rescinded the policy.
During the resulting stagflation
of the 1980s, the Mortgage Bank increasingly became the prime source of not only mortgages, but of construction financing, as well, and directly funded the completion of over 15,000 homes a year (roughly half the average annual rate of private sector housing starts during that difficult decade). This practice, however, required growing subsidies from the Central Bank (over US$400 million annually), and during the era of financial liberalization advanced by President Carlos Menem
from 1989 onwards, this support was reduced. The National Mortgage Bank became a secondary player in the small, domestic mortgage market. Ultimately, the bank, which remained smaller, commercial and profitable up to that date, was privatized in 1997.
The IPO failed to attract the expected investor interest, and the state retained around 40% of the entity. Its leading private shareholder, real estate development firm IRSA
, would control 25-30%, and though its interest in increasing its stake grew with the recovery in the Argentine economy after 2002, President Néstor Kirchner
maintained the bank's significant government ownership. The headquarters was subsequently relocated to Clorindo Testa
's Banco de Londres y América del Sur building, one of the country's best-known works of Brutalist architecture
.
Though no longer the main source of mortgage lending in Argentina, the bank continues to account for around a fourth of the total. Among all banks in Argentina, its assets were the ninth largest, and its lending portfolio (around US$1.1 billion) the twelfth largest. It maintains 46 branches, and employs over 1,500 staff.
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
in Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
and the nation's premier mortgage lender.
Overview
The institution was chartered on September 24, 1886, as the Banco Hipotecario Nacional (National Mortgage Bank) by a bill (Law 1804) signed by President Julio Roca. The bank pioneered mortgageMortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
lending on extended, low-interest terms in Argentina, and thus contributed to consolidating a modern Argentine economy (a policy centerpiece of the Generation of '80
Generation of '80
The Generation of '80 was the governing elite in Argentina from 1880 to 1916. Members of the oligarchy of the provinces and the country's capital, they first joined the League of Governors , and then the National Autonomist Party...
, as Roca and his allies were known).
The bank continued to grow and, during the administration of President Hipólito Yrigoyen
Hipólito Yrigoyen
Juan Hipólito del Sagrado Corazón de Jesús Irigoyen Alem was twice President of Argentina . His activism became the prime impetus behind the obtainment of universal suffrage in Argentina in 1912...
(1916-22), its share of the nation's mortgages doubled to 37%. The headquarters relocated in 1940 from its original, Baroque
Baroque architecture
Baroque architecture is a term used to describe the building style of the Baroque era, begun in late sixteenth century Italy, that took the Roman vocabulary of Renaissance architecture and used it in a new rhetorical and theatrical fashion, often to express the triumph of the Catholic Church and...
headquarters in the financial district
San Nicolás, Buenos Aires
San Nicolás is one of the neighbourhoods of the city of Buenos Aires, Argentina, sharing most of the city and national government structure with neighboring Montserrat and home to much of Buenos Aires' financial sector...
(transferred to the Central Bank of Argentina) to a larger, Rationalist office building facing Plaza de Mayo
Plaza de Mayo
The Plaza de Mayo is the main square in downtown Buenos Aires, Argentina. It is flanked by Hipólito Yrigoyen, Balcarce, Rivadavia and Bolívar streets....
. The bank again grew significantly during President Juan Perón
Juan Perón
Juan Domingo Perón was an Argentine military officer, and politician. Perón was three times elected as President of Argentina though he only managed to serve one full term, after serving in several government positions, including the Secretary of Labor and the Vice Presidency...
's populist administration, boosting its loan portfolio from 100,000 mortgages in 1946 to 500,000 a decade later.
During the Perón years, the bank began advancing home ownership by promoting direct lending to builders, and by allowing an accelerated amortization
Amortization
Amortization is the process of decreasing, or accounting for, an amount over a period. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death.When used...
of its loans, whereby borrowers' 4% mortgages were mitigated further by inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
, which averaged 26% from 1944 to 1974; as two-thirds of the institution's loans at the time were on a 15- or 20-year basis, this became an important subsidy for local borrowers, extending home ownership to a majority of households.
The bank's core business was adversely affected by policy changes during the dictatorship
National Reorganization Process
The National Reorganization Process was the name used by its leaders for the military government that ruled Argentina from 1976 to 1983. In Argentina it is often known simply as la última junta militar or la última dictadura , because several of them existed throughout its history.The Argentine...
installed in 1976. Central Bank Circular 1050, enacted in April 1980 at the behest of conservative Economy Minister José Alfredo Martínez de Hoz
José Alfredo Martínez de Hoz
José Alfredo Martínez de Hoz was an Argentine executive and policy maker. He served as Minister of the Economy under de facto President Jorge Rafael Videla between 1976 and 1981, and shaped economic policy during the self-styled National Reorganization Process military dictatorship.-Early...
, bankrupted thousands of homeowners by indexing
Indexation
Indexation is a technique to adjust income payments by means of a price index, in order to maintain the purchasing power of the public after inflation....
mortgages to the value of the US dollar
Historical exchange rates of Argentine currency
The following table contains the monthly historical exchange rate of the different currencies of Argentina, expressed in Argentine currency units per United States dollar...
locally, which rose around fifteenfold by July 1982, when Central Bank President Domingo Cavallo
Domingo Cavallo
Domingo Felipe "Mingo" Cavallo is an Argentine economist and politician. He has a long history of public service and is known for implementing the Convertibilidad plan, which fixed the dollar-peso exchange rate at 1:1 between 1991 and 2001, which brought the Argentine inflation rate down from over...
rescinded the policy.
During the resulting stagflation
Stagflation
In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...
of the 1980s, the Mortgage Bank increasingly became the prime source of not only mortgages, but of construction financing, as well, and directly funded the completion of over 15,000 homes a year (roughly half the average annual rate of private sector housing starts during that difficult decade). This practice, however, required growing subsidies from the Central Bank (over US$400 million annually), and during the era of financial liberalization advanced by President Carlos Menem
Carlos Menem
Carlos Saúl Menem is an Argentine politician who was President of Argentina from 1989 to 1999. He is currently an Argentine National Senator for La Rioja Province.-Early life:...
from 1989 onwards, this support was reduced. The National Mortgage Bank became a secondary player in the small, domestic mortgage market. Ultimately, the bank, which remained smaller, commercial and profitable up to that date, was privatized in 1997.
The IPO failed to attract the expected investor interest, and the state retained around 40% of the entity. Its leading private shareholder, real estate development firm IRSA
Inversiones y Representaciones Sociedad Anónima (IRSA)
Inversiones y Representaciones Sociedad Anónima is the leading real estate development firm in Argentina.-Overview:IRSA was founded as a realty by Isaac Elsztain, an Argentine Jewish immigrant, in 1943. The small independent realty, based in Buenos Aires, grew slowly and, as late as 1991, had a...
, would control 25-30%, and though its interest in increasing its stake grew with the recovery in the Argentine economy after 2002, President Néstor Kirchner
Néstor Kirchner
Néstor Carlos Kirchner was an Argentine politician who served as the 54th President of Argentina from 25 May 2003 until 10 December 2007. Previously, he was Governor of Santa Cruz Province since 10 December 1991. He briefly served as Secretary General of the Union of South American Nations ...
maintained the bank's significant government ownership. The headquarters was subsequently relocated to Clorindo Testa
Clorindo Testa
Clorindo Manuel José Testa is an Italian-Argentine architect and artist. He graduated from the School of Architecture at the Universidad de Buenos Aires in 1948....
's Banco de Londres y América del Sur building, one of the country's best-known works of Brutalist architecture
Brutalist architecture
Brutalist architecture is a style of architecture which flourished from the 1950s to the mid 1970s, spawned from the modernist architectural movement.-The term "brutalism":...
.
Though no longer the main source of mortgage lending in Argentina, the bank continues to account for around a fourth of the total. Among all banks in Argentina, its assets were the ninth largest, and its lending portfolio (around US$1.1 billion) the twelfth largest. It maintains 46 branches, and employs over 1,500 staff.