trending Market Intelligence /marketintelligence/en/news-insights/trending/cn1gzdiytwtmdq99-ur2ca2 content esgSubNav
In This List

Caixa says loans made to states and municipalities meet standards

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Caixa says loans made to states and municipalities meet standards

Caixa Econômica Federal said the loans it made to states and municipalities meet lending standards after facing inquiries on the legality of the credit operations, Diário Comércio Indústria e Serviços reported.

In a note, the board of the Brazilian state-owned bank said it performs a rigorous analysis of the allocation of capital in unsecured loans from the National Treasury to states and municipalities. These loans are guaranteed by tax receipts or funds received through the state participation fund, or FPE, and the municipal participation fund, or FPM, for the purpose of complying with Caixa's capital plan.

The board also noted that this credit portfolio is performing positively, with high compliance from the states and municipalities. Although there are questions in court regarding the execution of the guarantees, the board said the judicial decisions were favorable to financial institutions.

A report from news service Broadcast said that the Brazilian Constitution prohibits the granting of the loans with tax revenue guarantees, which prompted the board to temporarily suspend lending to public entities.

Meanwhile, National Treasury Secretary Ana Paula Vescovi said she is evaluating Caixa's credit operations to states and municipalities, Diário Comércio Indústria e Serviços reported separately.

As a result, Caixa will have to allocate its own capital to make loans to states and municipalities not endorsed to the National Treasury, Valor Econômico reported.

Brazil's central bank will review and disclose as soon as possible the rules to forecast the provisions for this loan segment.