Brazil's new rule establishing a net stable funding ratio, or NSFR, next year will further strengthen banks' liquidity framework and should be a credit positive for the system, Fitch Ratings said.
"The NSFR is a prudential structural liquidity rule that is part of the central bank's implementation of the Basel III regulatory process," Fitch said, noting that the ratio will help banks manage funding risks and limit excessive risk-taking. It will also have no significant direct impact on banks' profitability, growth or business models.
"Furthermore, it intends to measure the banks' ability to absorb shocks and complements the leverage limits and minimum capital ratios that mitigate excessive growth during periods of rapid economic expansion."
Under the new rule, the banking sector will be able to adapt through recent strong stable sector capitalization and subdued credit growth especially among larger private banks. However, small and midsized banks face more pressures due to their reliance on small-term wholesale funding.