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Caixa could still recapitalize with FGTS funds, says CEO

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Caixa could still recapitalize with FGTS funds, says CEO

Despite having abandoned a plan to utilize resources from workers' fund FGTS, Caixa Econômica Federal said they could still proceed with the plan and use alternative means to boost its capital levels, Valor Econômico reported, citing CEO Gilberto Occhi.

Speaking at en event, the executive reportedly said Caixa still had legal basis to receive a loan from FGTS which could benefit Brazilian society as a whole as the state-run bank would not have to seek more expensive financing in capital markets locally or abroad, thus improving its efficiency.

"If a private individual trusts Caixa, why wouldn't FGTS trust [the bank]? Caixa is taking its steps to not use [FGTS], but ... I think we have to always leave an open door," Occhi reportedly said.

The comments come after Caixa decided in January to forego a plan to use the workers' fund for its capitalization to comply with Basel III rules, after a number of groups opposed the measure, including Brazil's workers' fund institute, deeming it too risky.

Earlier that month, President Michel Temer signed into law a bill allowing for the use 15 billion Brazilian reais from FGTS to capitalize Caixa. However, despite Temer's go-signal, the bank's board approved a capital contingency plan to come up with alternate sources of funds to ensure compliance with capital requirements for 2018 and 2019.

The plan included the recapitalization of Caixa dividends owed to the National Treasury; the issuance of perpetual debt instruments, considered level I capital, in the international market; and the securitization and sale of credit portfolios without risk retention.

According to earlier reports, Caixa needs about 6.00 billion reais this year to meet stricter capital requirements and to fall within the guidelines of sound financial institutions.

As of March 12, US$1 was equivalent to 3.26 Brazilian reais.