São Paulo – The new measures approved yesterday (26) by the National Monetary Council (CMN) should result in reduction of bank interest rates and, thus, guarantee the injection of 40 billion Brazilian reals (US$ 17.9 billion) in credit in the Brazilian economy. The forecast is by Finance minister, Guido Mantega. The governor of the Central Bank of Brazil (BC), Henrique Meirelles, believes that there is potential to reach 170 billion reals (US$ 76 billion).
"If all banks comply – small, medium and large ones -, the total should reach 170 billion reals. What is expected from banks is, in fact, that they participate in the program and issue them [the certificates of banking deposits, with special guarantees]. With this, there should be between 40 billion reals and 50 billion reals," said Meirelles.
Minister Guido Mantega recalled that, no matter what value, the initial estimate is already considered decent by the government, as it should irrigate small and medium companies with funds. "This is what we hope happens," he said. He explained that the training rates tend to drop with greater offer of credit, a fact that may benefit small and medium banks that currently borrow at higher rates. With lower rates, the banks may reduce the rate of loans they make.
"There are no precise figures. We are going to wait for the market reaction. I believe that it is a mechanism that should be used and should be very useful for small and medium companies," said Mantega.
The CMN increased the value of investment with special guarantees, like Banking Deposit Certificates (CDBs). Investment for the value of up to 20 million reals per natural person or business, in each institution, should be guaranteed. Currently, the guarantee is for investment of up to 60,000 reals (US$ 26,800). The limit of emissions per financial institution should be up to 5 billion reals (US$ 2.2 billion).
According to Central Bank governor Henrique Meirelles, the objective is to allow banks to return to "aggressive" market competition, collaboration for reduction of spread (the difference between interest paid by banks when borrowing money – collection – and how much they charge from clients at the time of the loan). The reduction of spread is a condition for the cheapening of credit to end borrowers.
Meirelles also recalled that these institutions may start supplying specific markets, as well as small and medium companies, the concession of consigned credit for natural people and the financing of second-hand vehicles, which stopped being supplied by large banks due to the crisis. The new rules will include cash in the Credit Guarantee Fund (FGC).
The institutions that decide to issue CDBs with special guarantees can only do so with a maturities ranging from six months to five years. The CDBs with daily adjustment will no longer be permitted. According to Meirelles, participation in the program is voluntary and it does not exclude the large banks, although the limit of 5 billion reals is not attractive to such institutions. Banks currently have 25 billion reals invested in the FGC.
*Translated by Mark Ament
