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Report: Brazilian banks, government members urging easing capital requirements amid rising corporate default threat

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Report: Brazilian banks, government members urging easing capital requirements amid rising corporate default threat

Brazilian banks and government members are urging to ease capitalrequirements to banks amid the rising default threats from large local companies, O Estado de S. Paulo reported April 10.

Debt from Brazil's 15 largest companies, excluding Petrobras,has reached 50 billion Brazilian reais and the amount rises to 150 billion reaisif financing abroad is included, the report said.

The idea is to have the central bank ease capital requirementswith the condition that such amounts will be allocated to refinancing lines of creditin order to allow indebted companies to redeem securities issued abroad, the publicationnoted.

Another measure being discussed is alleviating BIS requirements,but this idea faces resistance from the regulatory authority.

The goal is to prevent big companies — especially the ones probedin Brazil's Lava Jato corruption inquiry— from becoming delinquent, as it could trigger a mini banking crisis, especiallyamong midsized banks, the publication noted.

Most of the largest financial institutions in the country havealready set up an orchestratedapproach to default in those debts.

As of April 8, US$1 wasequivalent to 3.63 Brazilian reais.