Brazil's Caixa Econômica Federal needs about 6.00 billion Brazilian reais this year to meet stricter capital requirements and to fall within the guidelines of sound financial institutions, Folha de S.Paulo reported.
While Caixa should be able to resolve its financial and management issues through its own efforts, this year, it faces the challenge of aligning the bank's structure to comply with Basel III requirements. The bank, however, will not require external financial assistance to reach those goals, the publication said, noting it could consider a more rigid distribution policy of dividends to shareholders in addition to its other plans.
Last month, the bank's board approved a capital contingency plan to come up with alternate sources of funds to ensure it is in compliance with Basel III regulatory and capital requirements for 2018 and 2019. The plan includes the recapitalization of Caixa dividends owed to the National Treasury; the issuance of perpetual debt instruments, considered level I capital, in the international market; and the securitization and sale of credit portfolios without risk retention.
The bank had likewise considered using the workers' fund FGTS for its capitalization, but decided to forego that plan after the the measure was met with opposition from a number of groups, including Brazil's workers' fund institute.
Moody's, on Jan. 29, said the new measures that will revitalize the capitalization of the state-run bank are credit positive and support future growth despite a deterioration in its risk-weighted assets over the past two years.
As of Feb. 2, US$1 was equivalent to 3.22 Brazilian reais.
