BBA Bombay CO

Argentina's biggest private and public sector banks have pledged to lower the interest rates they charge businesses and consumers after meeting with the head of the central bank.

President Cristina Kirchner is leaning on banks to keep affordable credit flowing to an economy that private sector forecasters and the government say will grow at a more subdued pace next year.

Executives from Banco Santander Rio SA (BRPBF, BRIO.BA), Banco de La Nacion, Banco Ciudad de Buenos Aires, Banco Galicia SA, Banco Macro SA (BMA, BMA.BA), BBVA Banco Frances SA (BFR, FRAN.BA), Credicoop and HSBC Argentina met with Central Bank of Argentina President Marco del Pont on Thursday to discuss interest rates, according to a statement posted on the presidency's website.

Bankers agreed to gradually lower rates on loans starting Friday.

"There is no justification for the current level of rates, especially for the productive sector, which means concrete actions are needed to reduce it," Marco del Pont was quoted as saying.

A central bank spokesman declined to comment about the statement and Thursday's meeting.

The central bank appears to be taking aim at what it sees as an excessive spread between the rates that banks charge on loans and what they pay on deposits.

While the rate banks paid on 30 day certificates of deposit for up to 100,000 Argentine pesos ($23,360) fell to 14.5% on Dec. 2 from 15.2% a month earlier, the rate banks charge businesses for one-week loans rose to 23.6% from 21.9% during the same period, according to central bank data.

"There is a risk that banks repeat the same behaviour they had during the 2008-09 crisis, when they increased spreads and profitability," Marco del Pont said in the statement.

Banks have profited handsomely from Kirchner's high-growth, high-inflation policies that have stoked demand for consumer credit.

The central bank's most recent data put the financial system's annualized return on equity, a measure of profitability, at a hefty 22.5% in September.

Argentina's booming economy is set to slow next year, with Marco del Pont last week forecasting 6% growth in 2012.

Demand for goods from Brazil, Argentina's top trade partner, is already showing signs of cooling, while galloping inflation at home is expected to weigh on an economy that will likely grow about 9% for a second straight year in 2011.

Further complicating the economic outlook, Kirchner has started to cut generous energy subsidies to consumers and is thought to be crafting an inflation-fighting plan that would seek to limit annual wage hikes at around 18% next year.

The government's heavily criticized statistics agency put annual inflation at nearly 10% at the end of October, while most private-sector estimates say it was between 20% and 25%.

Both measures, while necessary to stabilize the economy and public finances, could further depress growth through a reduction in consumers' disposable income.

-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740; ken.parks@dowjones.com

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