RIO DE JANEIRO, July 25 (Reuters) - Brazil's central bank on Friday announced measures to boost credit in the country's ailing economy, one week after keeping its benchmark interest rate at its highest level in over two years to fight inflation.
The bank said in a statement it was freeing up an estimated 30 billion reais ($13.5 billion) in the financial system through changes to banks' reserve requirements.
The move "aims at improving the distribution of liquidity in the economy" given a recent slowdown in credit and relatively low levels of bad loans, the bank said.
After years of slow growth, the Brazilian economy is now flirting with a recession as manufacturing shrinks and industry workers lose their jobs.
Inflation, however, remains at the ceiling of a government target, leaving policymakers in a difficult position.
Among the changes announced on Friday, banks will be allowed to use 50 percent of the amount they set aside as reserve requirements on term deposits to provide more credit or to purchase loan portfolios from eligible financial institutions.
The central bank also increased to 134 from 58 the number of financial institutions that are eligible to sell their loan portfolios under that option.
In a separate statement, the central bank said it was adjusting minimal capital requirements for retail credit operations.
The decision aims at reviewing macroprudential measures that were implemented as of 2010, when policymakers sought to slow down the pace of credit growth in Brazil, according to the statement.
Macroprudential policies are meant to care for the health of the financial system by increasing or reducing reserve and capital requirements as well as, in the case of Brazil, taxing financial operations.
Initially used to ease the flow of U.S. dollars into the economy and limit a rapid credit expansion, Brazil started to remove some macroprudential measures as the economy weakened in 2012.
yahoo.com
The bank said in a statement it was freeing up an estimated 30 billion reais ($13.5 billion) in the financial system through changes to banks' reserve requirements.
The move "aims at improving the distribution of liquidity in the economy" given a recent slowdown in credit and relatively low levels of bad loans, the bank said.
After years of slow growth, the Brazilian economy is now flirting with a recession as manufacturing shrinks and industry workers lose their jobs.
Inflation, however, remains at the ceiling of a government target, leaving policymakers in a difficult position.
Among the changes announced on Friday, banks will be allowed to use 50 percent of the amount they set aside as reserve requirements on term deposits to provide more credit or to purchase loan portfolios from eligible financial institutions.
The central bank also increased to 134 from 58 the number of financial institutions that are eligible to sell their loan portfolios under that option.
In a separate statement, the central bank said it was adjusting minimal capital requirements for retail credit operations.
The decision aims at reviewing macroprudential measures that were implemented as of 2010, when policymakers sought to slow down the pace of credit growth in Brazil, according to the statement.
Macroprudential policies are meant to care for the health of the financial system by increasing or reducing reserve and capital requirements as well as, in the case of Brazil, taxing financial operations.
Initially used to ease the flow of U.S. dollars into the economy and limit a rapid credit expansion, Brazil started to remove some macroprudential measures as the economy weakened in 2012.
yahoo.com
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