Brazil: Acting fast to stop the rot
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Brazil: Acting fast to stop the rot

Mindful of the nervousness of international markets the Brazilian central bank pulled out all the stops to ensure that the collapse of Banco Pontual was a controlled affair.

A weekend of hard work in early November meant that Pontual was ready to open its branches under the new management of Banco de Crédito Nacional (BCN) in the week following the central bank's intervention in Pontual the Friday before.

As a smaller largely non- retail bank, Pontual's demise did not on paper pose any systemic risk. But in the current environment, with investors reacting strongly to any slight sign of weakness, the Brazilian authorities did not want Pontual's failure to become a catalyst for something bigger.

The bank, which had a high profile president in the person of José Baia Sobrinho, was well known outside Brazil and this international reputation could have added an extra dimension.

"We would not ordinarily have expected the central bank to support Pontual. It wasn't that big and didn't have much of a retail operation. The impact of its collapse would have been fairly small," says Phillip Smith, bank analyst for the London-based rating agency Fitch IBCA.

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