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Brazil's House of Representatives approves use of FGTS fund to capitalize Caixa

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Brazil's House of Representatives approves use of FGTS fund to capitalize Caixa

Brazil's House of Representatives approved a bill allowing the use of state workers' fund FGTS for the capitalization of Caixa Econômica Federal, Valor Econômico reported.

The proposal will help the state-owned bank comply with Basel III rules starting January 2019. The bill will be forwarded to the Senate.

According to the bill, Caixa could negotiate with FGTS the exchange of the bank's debt with 15-year perpetual bonds. The operation should involve 10 billion Brazilian reais, the report said.

Meanwhile, FGTS' trustee council will vote on the proposal at its next meeting, sources reportedly told Valor.

The Congress' approval opens the room for Caixa to use the FGTS funds without the approval of federal audit court TCU, which is proposing to prohibit the transaction due to the perceived violation of the law that governs the FGTS.

As of Dec. 6, US$1 was equivalent to 3.24 Brazilian reais.