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Brazil's financial institutions approve FGC's investor coverage limit

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Brazil's financial institutions approve FGC's investor coverage limit

Brazilian financial institutions associated with credit guarantee fund FGC have authorized the proposed changes in its rules, including placing a maximum coverage of 1 million Brazilian reais per investor it guarantees, Valor Econômico reported.

The new rule will impose the maximum coverage limit for a period of four years. For example, an investor who receives 250,000 reais in guarantees from FGC will have its coverage limit reduced to 750,000 reais. If it does not receive a guarantee payment after four years, the limit for the investor will return to 1 million reais.

The move aims to crack down on the perceived abuse of the fund, which FGC said has become a marketing tool for smaller banks and financial institutions to attract investors.

Other changes made in FGC's rules include the extension of the coverage for the deposits of foreign investors in associated financial institutions. The rule will be identical to the limit for local investors, which is 250,000 reais per institution.

The decisions will have to be approved by the national monetary council, or CMN, who will include the agenda in its Dec. 21 meeting. Other proposed changes in the fund include the possibility of raising the contribution of the institutions that use the coverage more frequently as a way to raise funds from clients. Limits in the funding were also suggested, the report said.

As of Dec. 18, US$1 was equivalent to 3.28 Brazilian reais.