RIO DE JANEIRO, BRAZIL – Financial institutions will be able to take out loans with the Central Bank. The estimate is for the release of R$650 (US$125) billion into the economy.
On Wednesday evening, in an extraordinary meeting, the National Monetary Council (CMN) authorized the Central Bank (BC) to grant loans to banks taking as collateral the credit portfolios of these institutions. The operations will have a minimum of 30 days and a maximum of 359 calendar days maturity.
According to the Central Bank, the Special Temporary Liquidity Line (LTEL) aims to provide the liquidity (available resources) “required for the National Financial System to remain stable in view of the increase in demand observed in the credit market, as a result of the spread of Covid-19”.
The Central Bank announced in a note, released yesterday, April 2nd, that the adoption of these special lines of liquidity by the main central banks in the world has been a “widely used” tool as one of the responses to the crisis.
“In order to provide greater security to the operation, the banks’ loans will be given as collateral in the scope of the financial asset registry and transferred to the Central Bank through the issuance of a Guaranteed Financial Bill, deposited in a central depository,” says the Central Bank.
According to the Central Bank, low-risk loans rated as AA, A and B, will be accepted, subject to the requirement of collateral in an amount greater than the loan, in proportion to the risk of the credit operations offered as collateral.
The Central Bank stated that it will establish the operating criteria and conditions.
Source: Agência Brasil