Argentina Orders Banking ‘Holiday’

The Argentine government ordered an indefinite halt to all foreign exchange and banking transactions Friday, saying it needed time to finalize a plan to bolster the troubled banking system.

The Central Bank announced the move as President Eduardo Duhalde works to slow a steady outflow of cash that Argentine officials say could spark a collapse of the country’s financial system.

Economy Ministry officials said the banking holiday would remain in effect until Duhalde and his economic team can complete a program to convert most savings accounts into bonds--a plan they say would brake a growing number of lawsuits against a four-month-old banking freeze.

Long lines of Argentines seeking to pull out cash from automated teller machines immediately began forming outside many Buenos Aires banks.

For weeks, Argentine officials have been searching for ways to slow thousands of court cases challenging the banking restrictions, first imposed Dec. 1 to prevent a run on the country’s banks.

But thousands of Argentines have successfully won court orders overturning the freeze, pulling out more than $100 million a day, banking analysts say. The withdrawals have left many banks short of cash since few fresh deposits are being made.

The restrictions limit cash withdrawals to $500 a month and have triggered protests outside many banks. The near daily demonstrations have forced many banks to install metal coverings on their facades.

The drain of deposits forced at least one bank to close temporarily.

On Thursday, the Central Bank suspended for 30 days all operations by Scotiabank Quilmes, an Argentine unit of Canada’s Bank of Nova Scotia, because of cash problems. Scotiabank Quilmes is Argentina’s 11th-largest bank.

Hundreds of the bank’s clientele crowded outside its branches on Friday, wondering how they could get their money. Bank officials said customers would be able to use bank-issued credit cards and withdraw money from some accounts, but most banking operations would be suspended.

Government spokesman Anibal Fernandez said Duhalde would soon send a bill to Congress that would further tighten depositors’ access to their savings.

The plan would replace frozen bank accounts with bonds--a plan last used in 1989 when triple-digit hyperinflation gripped South America’s second-largest economy and the government confiscated some $3.5 billion in bank deposits.

Argentina is the grips of a four-year recession and reeling from a steep devaluation of the peso and a $141-billion debt default.