Brazil Changes Rules to Help Small, Mid-Sized Lenders

(Corrects to say new rule allows more banks to benefit from initiative in second paragraph.)

Brazil’s central bank changed the rules for sales of loan portfolios as it seeks to boost funding for small- and mid-sized banks.

Regulators raised to 3.5 billion reais ($1.72 billion) from 2.2 billion reais the maximum capital of banks allowed to benefit from an initiative to stimulate the purchase of loan books by rivals, according to a statement today. Under the program, banks can use some of the reserve requirements that they keep on deposit at the central bank to buy the portfolios.

The banks that sell portfolios must also have at least 20 percent of assets in lending operations to qualify for the program, the central bank said. The new rules also allow long- term local bonds, known as Letras Financeiras, to be sold under the initiative.

Brazil’s small- and mid-sized banks have been facing a squeeze on credit after regulators seized or bailed out seven banks since 2010. On Oct. 19, the central bank took control of Banco BVA SA on violations of industry standards one month after it decided to liquidate Banco Cruzeiro do Sul SA amid fraud investigations.

The central bank said the measure is effective as of today.

To contact the reporters on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net; Arnaldo Galvao in Brasilia Newsroom at agalvao1@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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