RIO DE JANEIRO, BRAZIL – The use of Treasury resources to rescue banks has been banned since 2000 when the Fiscal Accountability Law (LRF) was promulgated. Now, Bolsonaro’s plan is that, once all the steps to rebalance these institutions’ accounts have been exhausted, the federal government will take part in their rescue.
Article 45 of Bolsonaro’s government proposal provides that, in case of risk of systematic crisis or a threat to the solidity of the National Financial System, of the Brazilian Payments System or the National System of Insurance, Capitalization, Reinsurance and Open Complementary Welfare, the National Monetary Council (CMN) may, by a resolution – by the Central Bank, for instance – “approve the execution of loans from the federal government to the fund in which the legal entity is involved”.
Thus, the CMN would be in charge of approving a federal loan to a fund in which the financial institution in question is involved. According to Estadão, a fund, the possibility of which is also provided for in the project, will be responsible for granting loans to institutions subject to the stabilization system.
In short, the government advocates the capitalization, by the federal government, of the fund.
Before the text, legislators recall the Program to Stimulate Restructuring and Supply the National Financial System (PROER), developed by Fernando Henrique Cardoso’s government in the 1990s to bail out distressed banks.
Source: Conversa Afiada