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Brazil central bank: Banks' deal with depositors to bolster system stability

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Brazil central bank: Banks' deal with depositors to bolster system stability

An agreement under which Brazilian banks will compensate depositors who suffered losses due to the government's economic plans in the 1980s and 1990s contributes to the stability of the country's financial system, a Banco Central do Brasil representative said.

The negotiation enables banks that comply with the agreement to plan the payments without compromising their financial health, Isaac Sidney, director of institutional relations and citizenship at the Brazilian central bank, said in a statement.

"The agreement allowed financial institutions to dilute the payment within a defined and reasonable period, up to three years," Sidney said in a statement. "The reduction of litigation provided by the agreement will also limit a legal risk scenario for banks. In addition, the negotiated settlement avoids future losses with lawsuits from inflationary purges in savings, allowing banks to increase the supply of credit."

Currently, Itaú Unibanco Holding SA, Banco Bradesco SA, Banco Santander (Brasil) SA, Caixa Econômica Federal and Banco do Brasil SA have signed the deal. Other financial institutions can still join the agreement in the next 90 days.

The accord is expected to result in the settlement of more than 1 million lawsuits.