The Central Bank, better known as Bacen, this week announced the reduction of compulsory deposits for companies, and also announced a line of loans with special rates for financial institutions this morning.
Why did the bank take this measure? Because Bacen directors informed that the decision is part of the set of actions adopted by the BC to minimize the effects of the coronavirus (Covid-19) on the Brazilian economy.
The BC reduced the reserve requirement rate
The reduction was on term resources from 25% to 17%. According to the BC, the measure is temporary.
“The measure aims to increase the liquidity of the National Financial System”.
The Bank also clarified that the reduction of reserve requirements, resources that banks are obliged to leave deposited with the Central Bank, could lead to the injection of up to R$ 68 billion into the economy, from the 30th of this month.
But everything predicts: On December 14, if the economy has gone through the Covid-19 pandemic, the compulsory rate on term resources will be restored to the previous level of 25%”, declared Bacen to the press.
Loans for companies and institutions.
The Central Bank also announced that the National Monetary Council (CMN) authorized it to grant loans to financial institutions guaranteed by debentures acquired between March 23 and April 30, 2020.
But according to information from the Central Bank, it is a Special Temporary Liquidity Line (LTEL). See what the bank said:
“The objective of the line is to provide liquidity to the secondary corporate debt market, strongly affected by the recent turmoil in international and national financial markets, as a result of the spread of the Coronavirus (COVID-19)”.
Furthermore, Bacen will maintain, as an additional guarantee, the bank's compulsory payments in the same amount as the operation.
“With this measure, the BC hopes to increase liquidity in the secondary private debt market, minimizing the effects of the crisis on the capital market”, he highlighted.
What does fundraising look like after this measure?
It was also made clear that “the uncertainties caused by the global health crisis on the economy have increased risk aversion and may negatively interfere with fundraising by financial institutions”.
Finally, the bank reported that:
“To reinforce the capacity to respond to the regular functioning of the National Financial System (SFN), the National Monetary Council (CMN) approved today Resolution No. 4,785, which authorizes the capture of Term Deposits with a Special Guarantee from the Credit Guarantee Fund (FGC )”.
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Source: G1.
