The Central Bank of Brazil (“BCB”) announced measures to fight the effects of COVID-19 given the fast pace of dissemination of the virus. The purpose of the BCE in moments of large-scale is to keep the financial markets in operation. In this sense, the BCB implemented new measures as follows:
(i) New Term Deposit with Special Guarantees – NDPGE. BCB authorizes the raising of funds by means of Term Deposit with Special Guarantee without providing fiduciary lien in favor of the Credit Guarantee Fund (“FGC”). All financial institutions may increase the ability of obtaining funds with guarantee of FGC in 1x the net assets. (Res CMN 4785/20 – effective 01/01/22);
(ii) Compulsory + Short Term Liquidity Ratio – LCR. BCB reduced the rate of compulsory deposit of time deposits from 25% to 17%, thus enabling the financial institutions to have more funding for loans and credit, as such measure represents an additional release of funds into the market release of BRL 68B in compulsory deposits. (Circular BCB nº 3993/20 – effective 11/27/20);
(iii) Loans with coverage in debentures. BCB is authorized to grant loans by means of a temporary special line of credit. Debentures/bonds acquired in the secondary market may be used as guarantees once the requirements listed in the regulation are met. (Res CMN nº 4786/20 – effective 04/30/20);
(iv) Flexibility in the regulation of Agribusiness Credit Note – LCA. It promotes adjustments in the base of calculation for directing funds raised by means of an issuance of LCAs, resulting in easier credit to the Agribusiness and strengthening the liquidity of local banks. (Res CMN 4787/20 – effective 05/31/21);
(v) Increase in limit to repurchase self-issued Financial Notes. The banks will have ability to increase the level of repurchase of Financial Notes of its own issuance, from 5% to 20%. As a result, the financial institutions may meet the demands for liquidity of their own notes in the market. (Res 4788/20 – effective 04/30/20).
Costa Tavares Paes Advogados is available to provide any further information regarding the rules above mentioned.