July 12, 2017 / 4:36 PM / a year ago

UPDATE 1-Brazil's BNDES chief walks back criticism of new benchmark

(Adds background on criticism, government policy)

BRASILIA, July 12 (Reuters) - Brazil’s state development bank BNDES is fully committed to a government plan to update the bank’s benchmark rate, BNDES President Paulo Rabello de Castro told journalists on Wednesday, after having publicly criticized the idea.

“I am totally committed to this measure,” Rabello said after an event at the presidential palace, adding that he would not suggest changes to the plan. “The only one who should have a proposal is President Michel Temer and his team.”

Rabello de Castro said last week the new benchmark, aimed at reducing the scale of costly subsidies, would be less predictable for borrowers.

Two senior BNDES vice presidents quit after his remarks and Planning Minister Dyogo Oliveira told Reuters that the government was not discussing any changes to the new rate.

The decision to replace the TJLP benchmark was a key step by Temer’s administration to reverse decades of subsidized loans that have cost taxpayers trillions of reais without a significant effect on long-term growth.

BNDES, the main provider of long-term corporate loans in Brazil, has offered subsidized loans for decades to boost economic growth and create jobs.

However, rising public debt and increased scrutiny of the bank’s lending policies after recent corruption scandals have led policymakers to propose changes, such as the new market-based benchmark, to boost transparency. (Reporting by Silvio Cascione and Marcela Ayres; Editing by Richard Chang)

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