BRASILIA (Reuters) – Brazil’s Credit Guarantee Fund (FGC) should hold accounting reserves equivalent to 1% of eligible deposits but is currently at 0.35%, the fund’s head Daniel Lima said on Thursday.
Discussions on necessary adjustments will take place in the coming months, Lima stressed.
Speaking at an event hosted by payment industry group Abipag, Lima also noted that the FGC’s liquidity indicator stands at around 2.3% of eligible deposits, compared to a target range of 2.3% to 2.7%.
The FGC is a private nonprofit entity created to manage protection mechanisms for clients of financial institutions in the event of bank resolution.
The fund has drawn renewed attention following the high-profile acquisition of lender Banco Master by BRB, a deal currently being analyzed by the central bank.
The transaction has sparked scrutiny as it involves two similarly sized banks, with Master having grown rapidly in recent years through an aggressive funding model based on high-yield debt distributed via investment platforms.
Lima noted that addressing potential contagion risks from mid-sized banks requires more timely access to information from each institution.
The central bank said earlier this year that it would carry out a scheduled review of the FGC next year as part of its regular four-year cycle on the matter.
Debt securities issued by banks are insured by the FGC up to a limit of 250,000 reais ($44,028) per financial institution.
(Reporting by Marcela Ayres; Editing by Gabriel Araujo)
