Brazil's central bank plans to implement a long-term reduction in the level of reserve requirements under its so-called BC# reform agenda, Valor Econômico reported.
The level of compulsory deposits maintained by the financial system in the central bank declined to 420 billion reais from 500 billion reais in recent years, and still has room for further cuts, according to Banco Central do Brasil President Roberto Campos Neto.
The high volume of reserve requirements served as a cushion against tighter liquidity during the 2008 financial crisis, but structural changes in the financial system in recent years allowed for a coexistence with lower levels of compulsory deposits, Campos Neto said.
Liquidity stress tests carried out by the central bank showed that the level of deposit requirements are smaller than they have been in the past, Campos Neto noted. Reserve requirements will also have a smaller role in countering possible liquidity tightening given liquidity requirements under the Basel rule, the central bank said.
The central bank's reform agenda also includes operational improvements in the management of international reserves as well as a review of capital requirements for agricultural operations. Measures to be adopted under the agenda will be in accordance with the Basel III framework, Campos Neto said.
As of May 29, US$1 was equivalent to 4.00 Brazilian reais.