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Moody's: Brazil's new rule for foreign investment in banks is credit positive

A decree that grants Brazil's central bank the authority to allow entry of foreign capital into financial institutions is credit positive due to the efficiency gains it entails, according to an Oct. 2 Moody's report.

The new rule simplifies the process of authorizing foreign investment in banks and the formation of foreign banks' branches in the country, the rating agency said.

The old procedure required foreign ventures in the banking sphere to be approved by the president and could take as long as two years to complete. With the new rule, however, Banco Central do Brasil has the autonomy and power to approve the requests, simplifying the procedure and aligning Brazil with international standards.

The decree complements a separate rule signed in October 2018 allowing foreign investments in credit-offering financial technology firms without the president's approval. Both measures are included in the central bank's framework of boosting competition in the banking sector through the entry of foreign investors.