Brazil to allow cooperative banks to issue local debt notes

lunes 17 de noviembre de 2014 16:23 GYT
 

By Alonso Soto and Guillermo Parra-Bernal

FLORIANOPOLIS, Brazil Nov 17 (Reuters) - Brazil's main economic policy body will allow cooperative banks to sell local debt notes in a move to strengthen alternative financing in a country where borrowing costs are among the world's highest.

By selling so-called letras financeiras, or real-denominated debt notes that are currently sold by commercial banks, cooperative banks will have access to a stable funding for the long term, Anthero Meirelles, the central bank's director for supervision, said at an event in the southern city of Florianopolis.

The move comes in tandem with efforts by President Dilma Rousseff, who last month won re-election for a second, four-year term, to strengthen alternative financing mechanisms to bring down interest rates and simultaneously broaden access to credit in Latin America's largest economy. She spearheaded plans to force commercial banks to disburse more credit at lower costs two years ago, but the plan failed as it made lenders more wary of giving out loans.

Brazilian banks charge some of the world's highest borrowing costs due to heavy taxes, high default rates and banks' efforts to secure high margins on credit. Currently, individual borrowers in Brazil pay an average 33 percent in interest to take on a one-year, standard consumer loan, or three times the rate in Chile, or about twice the cost of borrowing in Mexico.

The decision by the National Monetary Council, a policymaking body that sets Brazil's annual inflation target, should also bolster the regulatory capital of cooperative banks, Meirelles said. As of June, Brazil had about 1,150 cooperative lenders with assets totaling 185.6 billion reais ($71 billion) catering to 6.5 million customers, central bank data showed.

"We have undertaken throughout the past decade an enormous effort to fine-tune financial inclusion in Brazil," Meirelles said. "We understand that at this point, the system is mature enough to take other important regulatory steps towards consolidation."

Cooperative banks currently use deposits from members and tap over-the-counter markets for funding, which could either be too expensive or insufficient, depending on how the economy is performing.

($1 = 2.6021 Brazilian reais) (Additional reporting by Michael O'Boyle in Mexico City; editing by Andrew Hay)