The National Monetary Council (CMN) approved today (16), in an extraordinary meeting, two measures to help the Brazilian economy face the adverse effects of the Covid-19 epidemic. The decision allows banks to facilitate the renegotiation of debts of individuals and legal entities and increase the capacity to use their capital.
The first measure facilitates the renegotiation of credit operations by companies and families that have good financial capacity and maintain regular and active operations, allowing adjustments to their cash flows. The measure exempts banks from increasing provisioning (reserve of value) in the event of renegotiation of credit operations that are carried out in the next six months.
According to the note published by the Central Bank (BC), it is estimated that approximately R$ 3.2 trillion of credits could benefit from this measure, “whose renegotiation will naturally depend on the interest and convenience of the parties involved.”
The second measure expands the banks' ability to use capital so that they have better conditions to carry out eventual renegotiations and maintain the flow of credit concession. In practice, this measure increases the capital slack (difference between effective capital and minimum required capital), giving banks more space and security to maintain their credit concession plans or even expand them in the coming months.
According to the CMN, considering that capital buffers must be used during adverse moments, this measure reduces the Additional Principal Capital Conservation (ACCPeration) from 2.5% to 1.25% for a period of one year, increasing the capital slack. of the National Financial System (SFN) by R$ 56 billion, which would increase the credit concession capacity by around R$ 637 billion.
“After this one-year period, the ACPConservação will be gradually restored by March 31, 2022 to the level of 2.5%,” he said.
solid system
These measures are in addition to the recent decision by the BC to reduce by R$ 135 billion the resources that banks are required to leave on deposit at the institution, called compulsory deposits. For the CMN, the practical and joint effect of these measures is an improvement in the liquidity conditions of the SFN around R$ 135 billion, “which will contribute, at this moment, to soften the effects of Covid-19 on the Brazilian economy”.
According to the note, the BC continuously monitors the financial system, which “currently holds one of the most robust solidities in its history” and “is prepared to face severe scenarios”. “After going through the strong international financial crisis of 2008 and the biggest recession in Brazilian history in 2015 and 2016, all banks, without exception, currently meet capital and liquidity requirements, and are ready to support the economy,” says the statement. note.
The CMN also highlights that the BC has a wide arsenal of instruments that can be used, if necessary, not only to ensure financial stability, but particularly at this time, to support the economy. “This arsenal includes several instruments, such as regulatory measures and reserve requirements, currently around R$ 400 billion. The US$ 360 billion in international reserves is also a cushion that serves to ensure liquidity in foreign currency and the smooth functioning of the foreign exchange market”.
Banks
The Brazilian Federation of Banks (Febraban) reported that the five largest banks in the country – Banco do Brasil, Bradesco, Caixa, Itaú Unibanco and Santander – are open and committed to responding to requests for an extension, for 60 days, of debt maturities individuals and micro and small companies for contracts in force and limited to the amounts already used.
According to the entity, its member banks are “sensitive to the moment of concern of Brazilians with the disease caused by the new coronavirus”, “have been discussing proposals to mitigate the negative effects of this pandemic on employment and income” and “they understand that this is a profound shock, but of an essentially transitory nature.
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