Brazil may approve Caixa's capital plan by year-end - sources
SAO PAULO, July 22 (Reuters) - Brazil's central bank is likely to approve a request by state-run lender Caixa Econômica Federal to book 28 billion reais ($12.6 billion) in hybrid securities as common equity before year-end, sources said, a move that should help allay capital concerns at the nation's No. 1 mortgage lender.
The central bank has already agreed to allow Caixa to record the securities as capital under the implementation of Basel III capital requirements, but was still deciding where on its balance sheet to book them, said a first source, who declined to be named because the discussions were still underway.
Caixa's efforts come as peers in developed and emerging market countries struggle to phase in the Basel III rules, which were designed to stave off a repeat of the crisis that followed the collapse of U.S. investment bank Lehman Brothers Inc late in 2008.
Investors have voiced concerns that years of rapid growth in Caixa's loan book, fueled by the government's pressure to boost access to credit, have weighed down its capital position.
A second source said the central bank was gauging whether to allow Caixa to book the instruments as Tier 1 capital, which consists mainly of common stock, retained profits and, in some cases, non-redeemable, non-cumulative preferred stock.
A third source said executives at Caixa recently told investors the request could be approved soon.
One of the sources said that with the central bank's approval, Caixa's regulatory capital ratio - the amount of capital that regulators require a bank to hold - could jump by 1.15 percentage points. The ratio reached 13.7 percent at the end of the first quarter, well above the central bank's minimum 11 percent ratio.
Both Caixa and the central bank did not have an immediate comment.
On July 16, Caixa raised $500 million in 10-year Tier 2 bonds, the first of their kind to incorporate Basel III features in Brazil. Tier 2 bonds rank lower in repayment order than loans, creditor rights and other subordinated debt. Continuación...