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By Jamie McGeever and Marcela Ayres
BRASILIA, March 23 (Reuters) - Brazil’s banks have adequate liquidity and are well capitalized, central bank president Roberto Campos Neto said on Monday, adding that no institution needs bailing out and that the central bank has a range of tools at its disposal to face the current crisis.
Speaking at an online press conference from the bank’s headquarters in Brasilia, Campos Neto said the central bank is “completely calm” and that its has a wide range of intervention power in the foreign exchange market it will deploy if need be.
“The central bank is completely calm and the national financial system will work perfectly,” despite the growing economic and financial strains caused by the coronavirus pandemic, Campos Neto said.
He outlined the central bank’s three main priorities regarding the banking system in the current crisis: guaranteeing adequate liquidity; ensuring it is well capitalized so credit and lending continues smoothly; providing conditions so that banks can roll over customer loans.
Campos Neto said it was hard to say how long this crisis will last and did not want to be drawn on the increasingly gloomy recession forecasts that are now being made, saying the growth outlook will be addressed in the bank’s Quarterly Inflation Report on Thursday.
He recognized there has been a widening of credit spreads and increase in corporate and banks’ borrowing costs, but said the central bank injecting liquidity into the system by lowering banks’ reserve requirements and buying sovereign bonds held by banks.
He also said the central bank will increase loans backed by corporate bonds by some 200 billion reais ($40 billion) and is looking at a measure that could free up to 670 billion reais of liquidity through issuing loans backed by financial bills.
Regarding exchange rate policy, Campos Neto said the bank stands ready to use the wide range of tools at its disposal, and that ensuring the smooth functioning of the FX market in the current environment is vitally important.
He said the $60 billion FX swap line opened up with the U.S. Federal Reserve last week is a good insurance policy to have, but added that there is no need to use it in the short term and hopes it does not ever have to be tapped.
Reporting by Jamie McGeever and Marcela Ayres Editing by Chizu Nomiyama and Marguerita Choy