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 to financial institutions this morning.
Why did the bank take this measure? Because Bacen directors reported that the decision is part of a set of actions adopted by the BC to minimize the effects of the coronavirus (Covid-19) on the Brazilian economy.
The BC reduced the compulsory reserve 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 compulsory reserves, resources that banks are required to leave deposited at the BC, could lead to the injection of up to R$68 billion into the economy, starting on the 30th of this month.
But everything predicts: On December 14, if the economy has overcome the Covid-19 pandemic, the compulsory rate on term funds 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, which has been strongly affected by the recent turbulence seen in the international and national financial markets, as a result of the effects of the spread of the Coronavirus (COVID-19)”.
Furthermore, Bacen will maintain, as an additional guarantee, the bank's compulsory collections 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 happens to fundraising 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 impact the raising of funds by financial institutions”.
Finally, the bank reported that:
“To reinforce the response capacity to the regular functioning of the National Financial System (SFN), the National Monetary Council (CMN) today approved Resolution No. 4,785, which authorizes the collection of Term Deposits with Special Guarantee from the Credit Guarantee Fund (FGC)”.
So, did you like it? To stay up to date with what is happening related to the coronavirus and the Brazilian economy, click here to read more exclusive content.
Source: G1.