Argentina to run troubled French banks

BUENOS AIRES, May 20 (Reuters) - Argentina's state-run Banco Nacion will take over operations at three French-controlled banks facing liquidity problems, the Central Bank said late on Sunday.

"Banco de la Nacion Argentina will take control of operations at the banks Bisel, Suquia and Banco de Entre Rios (BERSA),'' the Central Bank said in a statement. The three banks are controlled by France's Credit Agricole.

The banks' liquidity problems are not unique in Argentina. Some $50 million a day in deposits were estimated to have left the system before the government imposed a freeze on deposits in December.

The Central Bank, which spent Sunday negotiating a solution to the banks' problems, said BERSA will open normally on Monday while Bisel and Suquia will reopen on Wednesday. It did not provide further details.

The three banks have a total of 353 branches in Argentina and about 6,000 employees, according to the Argentine Bank Association.

President Eduardo Duhalde's economic team is struggling to find a way to gradually lift the deposit freeze, a move requested by the International Monetary Fund.

Argentina is hoping to meet a series of IMF demands, including reforms to controversial laws, in return for a possible aid package to jump-start the economy.

Latin America's No. 3 economy badly needs aid to avoid defaulting on loans from multilateral lenders, the country's only remaining source of financing, after the government defaulted on most of its $140 billion public debt load in January.

Attempts to halt peso's fall

The government must find a way to end the restrictions on bank withdrawals while avoiding a rise in the price of the dollar as account holders withdraw their pesos to buy the safe-haven U.S. currency.

Banco Bisel on Friday asked the Central Bank to consider putting into practice an unspecified law it said was designed to restructure Banco Bisel, to protect its loan portfolio and deposits.

Banco Bisel asked the Central Bank to apply the same law to Banco Suquia SA, which Banco Bisel controls. Bisel cited the continued withdrawal of deposits by the public, the lack of support from the Central Bank and the decision by its parent company not to shore up the bank's reserves with more funds.

The Central Bank on Friday said it would limit the amount of dollars banks and foreign exchange houses can buy and sell daily.

As of Monday, banks with 50 or more branches can sell $1 million a day, banks with fewer than 50 branches are limited to $500,000, while exchange houses are limited to $300,000.

The Central Bank extended for another 30 days its suspension of Scotiabank Quilmes bank due to liquidity problems, a Central Bank official said late on Friday.

The Central Bank first suspended Scotiabank, controlled by Canada's No.4 bank, Bank of Nova Scotia, on April 18 for 30 days.

Scotiabank Quilmes was the first foreign-controlled bank to be suspended from operating due to the massive deposit exodus that has threatened to topple the country's fragile banking system.

Since the April suspension, Scotiabank's parent bank has been studying various options to deal with the unit, including selling it.