Brazilian monetary authorities eased rules on reserve requirements that banks must keep at the Central Bank in a push to inject liquidity and preserve Brazil from the impacts of the United States financial crisis.
The Central Bank delayed the introduction of higher rates for mandatory deposits from leasing companies by two months and raised the threshold on exemptions for cash, time and savings deposits, according to a Wednesday e-mailed statement.
The measures will add 13.2 billion reais (US$ 7.16 billion) to the financial system, the Central Bank said. The measures are geared to "preserve the financial system from the effects of liquidity restriction which has been observed in the international financial system," said the bank's release.
The measure reverses part of the Central bank's efforts to slow lending growth that's fueling domestic demand and stoking inflation. Policy makers began phasing in reserve requirements on cash deposits from lease underwriters for the first time in May, a move that would remove as much as 40 billion reais from credit markets. In Brazil, leases are commonly used as consumer loans.
Under the rules announced Wednesday, a reserve requirement of 20% of cash deposits from lease underwriters will take effect January 16, two months after the original schedule. The reserve requirement will increase to 25% in March, according to the Central bank.
Banks will only have to keep part of their cash, time and savings deposits at the Central bank if the reserve requirement exceeds 300 million reais, the Central bank said. Previously, this threshold was 100 million reais.
"This is positive for the banks because they will have more money available to lend in a moment when there's credit restrictions abroad," said Aloisio Lemos, an analyst at Agora Corretora in Rio de Janeiro. The higher thresholds will mainly benefit small and medium-sized banks, Lemos said.
Bank lending climbed 33% in the 12 months ended in July after a 27% expansion in 2007, the fastest in more than a decade. The Central bank is scheduled to release August figures on September 29.
This is not the first reaction to the US financial crisis. Last week the Brazilian government decided to "fortify" the country's Economic and Social Development, BNDES bank with the purpose of supporting Brazilian corporations that have loans from international banks and could not be able to renew them because of the current credit drought.
The first transfer of funds to BNDES totaled US$ 2.8 billion but the option remains open if Brazilian corporations "need to renew credits."
"Brazilian corporations are having problems to renew their credits with international financial institutions because of the crisis", admitted Mário Cypriano, CEO from Bradesco, the country's largest private bank.