The CMN, Brazil’s highest economic policy body that includes the economy minister and central bank president, said the measures will also restrict financial institutions’ share buybacks.
The CMN had previously stipulated that these measures would run through to the end of September.
“The objective is to maintain credit in the economy and ensure any future losses can be absorbed (by banks),” the central bank said in a statement, adding that it expects banks to exercise more “conservatism” with regard to dividends and pay.
“Any payments within the established limits must be made with prudence, given the uncertainties of the current situation,” the central bank said.
Economy Ministry officials and central bank president Roberto Campos Neto have said that some parts of the economy are not getting sufficient access to credit, particularly small and medium-sized firms.
Campos Neto said on Thursday this is a major worry for policymakers, adding that further measures to tackle this will be announced soon.
Figures this week showed that 90-day loan default ratios rose in April for the fourth month in a row, something not seen since the 2015-16 recession. The household default ratio of 5.34% was the highest since October 2017.
Fernando Rocha, head of statistics at the central bank, said household defaults will continue to rise as the economy struggles, but companies should be better protected by credit guarantee programs.
Source: Economy - investing.com
