RIO DE JANEIRO, BRAZIL – Since the onset of the crisis triggered by the Covid-19 pandemic, legislators have submitted at least 336 bills (among complete laws and amendments to other texts) targeting the financial sector.
While temporary in nature, this “boost agenda” – as the banks refer to the initiatives – covers everything from interest rates for overdrafts and credit cards to tax increases for the sector.
The proposals of senators and deputies emerge amid criticism from various sectors over credit access issues to sustain their operations. In this sense, virtually half of the measures (161) address this issue. More specifically, they place restrictions on loans already taken out. The main target is consigned credit, with instalments discounted from salary payments.
Another highlight is the tax issue, with more than 30 proposed bills. There are also measures limiting the collection of fees by banks, as well as those that incorporate changes in companies’ judicial reorganization procedures.
One of the most controversial bills is the one establishing a ceiling on the collection of interest on overdrafts and cards, authored by Senator Alvaro Dias. It also prevents banks from changing their clients’ credit limits during the crisis. The issue was to be voted on last Friday, but it was removed from the agenda amid pressure from banks.
Effects
The bill may cause a “severe reduction” in the loans offered by financial institutions during a crisis. The president of Itaú Unibanco, Candido Bracher, said that the bills in progress are well-intentioned from the borrowers’ standpoint, but that there is a risk of “undermining” the financial system.
“These measures, to grant credit below the appropriate compensation for the risk, may entail two consequences: one is that credit may disappear and the other is the weakening of banks and the banking system’s balance,” he said. “We have a health crisis, an economic and political one. We certainly do not need a crisis in the financial system”.
Banks say they have already disbursed more than R$540 billion (US$100 billion) in new credit, according to data from the Brazilian Federation of Banks (FEBRABAN). The amount includes loan contracts, renewals, and suspension of installments. “The release of funds that the banking industry has provided over the past 45 days had not been seen in Brazil in recent years,” said Leandro Diniz, Bradesco’s credit director.
The risk of these agendas being enacted has brought the banks closer to Congress. The former Central Bank official and president of FEBRABAN, Isaac Sidney, is in charge of the talks. In office since January, he has been meeting with senators and legislators to discuss the potential impact of the proposed credit laws.
The banks’ task force has been reflected in the bills’ development. The bill limiting interest rates, for instance, has not only been removed from the agenda but has also been amended. According to a new proposal by the rapporteur, Senator Lasier Costa Martins, the interest ceiling was raised from 20 to 30 percent per year.
In the case of fintechs, the limit would go up to 35 percent. “If such a measure is passed, the small entrants will be destroyed. The sector does not only consist of five large banks,” says Bruno Balduccinio, a partner in the law firm Pinheiro Neto Attorneys.
On the tax front, banks are trying to negotiate a temporary increase in the CSLL (Social Contribution on Net Income). There are a total of ten bills on the subject in Congress. One of them is from Senate Vice President Weverton Rocha, who advocates increasing the tax rate from 20 to 50 percent as a means to draw resources from banks.
To prevent the issue from gaining ground, the institutions are negotiating to raise the CSLL to 25 percent as a temporary measure during the Covid-19 crisis.
Source: Estadão Conteúdo