Publicado em 26/06/2020

Covid-19 | Updates – Emergency support measures presented by the main agents of the financial market and other matters of interest

In another round of updates, we have selected below the main economic measures launched by different financial markets agents, in the last three weeks, to address the economic impacts resulting from Covid-19, as well as other matters of interest:

Brazilian Development Bank (BNDES)

Emergency Credit Access Program

BNDES announced the general guidelines for the credit operations made within the scope of the Emergency Credit Access Program, created by the Provisional Measure No. 975 of 06.01.2020, that aims at facilitating the access to credit through the provision of guarantees and at preserving small and medium-sized companies, to protect jobs and income.

We highlight the following features of the line of credit:

  • Destination: companies with gross revenue between R$ 360 thousand and R$ 300 million;
  • Credit Line: the companies may borrow from R$ 5 thousand to R$ 10 million;
  • Interest rate: to be negotiated between the company and the financial institution, provided that the average rate of the financial agent’s portfolio shall not exceed 1.2% per month;
  • Payment term: 12 to 60 months, with a grace period of 6 to 12 months;
  • Funds source: the Investment Guarantee Fund (FGI), managed by BNDES, will provide the necessary funds for the guarantees.
  • Coverage: the guarantees will cover 80% of the credit value of each transaction, which is subject to the analysis criteria of each financial institution; and
  • Additional guarantee: the financial institution may request additional collateral from the borrowing company.

Central Bank of Brazil (Banco Central – BACEN)

BACEN Resolution No. 4,033 of 06.24.2020

It changes the conditions for the fulfillment of the requirement for reserve requirements, allowing financial institutions to deduct the balance of credit operations for working capital financing and the balance of investments in financial institutions not belonging to the same conglomerate from the reserve requirements on savings deposits.

We highlight the following main features of the regulation:

  • Destination: credit operations to finance working capital for companies with annual revenue of up to R$ 50 million;
  • Term: credit operations must have (a) a minimum term of 365 days; and (b) minimum grace period for payment of the principal of 180 days;
  • Contracting limit: Transactions entered into and investments carried out between June 29, 2020 and December 31, 2020 are subject to be deducted; and

According to BACEN’s estimate such deduction has the potential to release up to R$ 55,8 billion for working capital operations and for DPGE investments.

Circular BACEN No. 4,030 of 06.23.2020

  • Purpose: it aims at facilitating the provision of liquidity to small institutions by reducing the Risk Weight Factor (FPR) from 50% to 35% for the Time Deposit with Special Guarantee’s (DPGE) exposure for financial institutions associated with the Credit Guarantee Fund (FGC); and
  • Requirement: the FPR of 35% must be applied to the holder’s total amount of credit against the same institution, within the limit of R$ 400 million for the total amount of credit.

Circular BACEN No. 4,028 of 06.23.2020

It regulates the purchase and sale of private assets in the national secondary market by the BACEN, within the scope of financial, capital and payment markets.

We highlight the following main features of the regulation:

  • Eligibility: the private securities must have the following characteristics: (i) rating equivalent to or superior than BB- from at least one of the following agencies: Moody’s, Standard & Poor’s and Fitch; (ii) reference price published by a financial market entity accredit by BACEN;(iii) issuance in book-entry form and deposited in a central depository authorized by BACEN or Securities and Exchange Commission (CVM); (iv) maturity term of 12 months or more; and (v) absence of subordination, conversion of shares, renegotiation or swap clauses and not subject to liens or encumbrances;
  • Concentration limits when purchasing the assets: (i) 7,5% concentration per issuer, in relation to the total amount of private assets in BACEN’s portfolio; and (ii) 25% concentration per series of assets, in relation to the total amount of said series in the market (this limit will be of 35% if the assets were issued by micro companies and small and medium-sized enterprises (SMEs)).