Brazil: Central bank considers tighter capital rules
Banks under scrutiny over lending growth; Central bank praised for its supervision
Henrique Meirelles: about to get tougher
The Brazilian central bank is considering obliging banks with fast-growing loan portfolios to increase their capital requirements. Brazilian banks already have some of the toughest capital requirements of any sizeable economy (at 11% compared with the international standard of 8%). Until the sub-prime crisis, some analysts were critical of this, believing it hindered the growth of the credit markets and put a brake on the economy. But in the wake of the financial crisis, experts now laud the Brazilian model for having been so prudent. Furthermore, the central bank under its president, Henrique Meirelles, may become even tougher to ensure that fast growth in a bank’s loan portfolio "does not become a boom", according to Moody’s. The authorities would take into account a bank’s credit risk and any faster than expected shrinking of its capital base.
"The banks would not be readily willing to do this since they think that 11% is already enough on an international comparison," says Ceres Lisboa, senior analyst on Brazilian banks at Moody’s.