The National Monetary Council (CMN) expanded the scope and extended the term of aid measures to stimulate credit and reduce the impact of the pandemic on the economy. The minimum levels of provisioning (resources stopped at banks’ cash), which were valid only for some programs, were extended to all operations supported by federal credit programs.
Until now, the application of lower levels of provisioning has been restricted to loans under the Emergency Employment Support Program (Pese). With today’s decision (24), any operation partially funded with federal resources will require a smaller volume of resources stopped over the portion of the operation funded by the financial institution.
The measure will benefit actions such as the Emergency Credit Access Program (Peac-FGI), Peac-Maquininhas and the National Support Program for Micro and Small Enterprises (Pronampe).
According to the head of the Central Bank’s Regulation Department (BC), João André Pereira, the measure was necessary because only Pese was in effect when the new provisioning model was adopted. The rest of the programs were created later.
Through provisions, financial institutions leave funds standing in cash to cover the risk of default in credit operations. When operating loans with federal funds, banks assume the risk of default by borrowers, using provisions to cover possible losses. The higher the provisioning, the lower the loaned volume.
The CMN also extended the validity of the measures that made it possible to classify the renegotiated loans between March 1 and September 30 to the level at which they were classified on February 29 of this year. The reclassification may be applied to renegotiations made up to December 31.
With the measure, borrowers who defaulted during the covid-19 pandemic and renegotiated the debt will not have to pay higher interest rates when taking out new loans in the financial system. This is because the risk rating of the failed loan will not change and will not affect the borrower’s name.
The deadline to dispense with the characterization of a defaulting credit operation as a problematic asset of the financial institution was also extended, reaching restructured operations between 16 March and 31 December 2020. The previous term also ended on 30 September.