New rule for use of the FGC by institutions comes into effect; see what changes
The new rules that change the ways in which the FGC (Credit Guarantee Fund) is used by financial institutions come into force this Monday (1st), according to an announcement from the Central Bank (BC) last Friday (29th).
The changes come after the crisis involving Banco Master, which left the fund a billion-dollar loss.
In practice, the rules work as a strategy to hinder the use of the resource, and were approved by the CMN (National Monetary Council) at the end of April this year.
Now, banks must also follow the "Reference Asset". The AR will function as an indicator of the quality, diversification and transparency of the assets held by the institution, highlighting the risk involved in the investments of these institutions.
In addition to these new indicators, the VR (Reference Value), which represents the FGC's risk of having to pay out if the institution goes bankrupt, and the Adjusted Net Equity (PLA), which refers to the institution's ability to absorb losses, have undergone improvements.
Every time the VR exceeds the AR, institutions must pocket part of the resources in federal public bonds from institutions associated with the FGC, considering that these assets are less exposed to risk.
"The changes increase the consistency of metrics used in regulation, improve the quality of available information and reinforce the capacity of financial institutions to deal with risks", said the BC.
In short, if a bank raises a lot of money with products covered by the FGC, but has low quality or difficult-to-sell assets, it will be forced to invest part of these resources.
What is the FGC?
The guarantee fund is a private, non-profit association, whose purpose is to protect investors from financial institutions in the event of intervention or extrajudicial liquidation.
The maximum amount of coverage is R$250,000 per customer. In the case of joint accounts, this limit is divided between the holders. The following financial instruments are covered by the guarantee:
- Demand deposits, term deposits or deposits withdrawable upon prior notice;
- Savings deposits;
- Bills of exchange and mortgage bills;
- Real estate credit bills (LCI);
- Agribusiness credit bills (LCA);
- Repurchase agreements backed by securities issued, as of March 8, 2012, by a related company.
The BC also warns that, if more than one institution from the same conglomerate is under extrajudicial intervention or liquidation, the limit of R$250,000 encompasses the total deposits and investments held in these institutions.
New rules for the use of FGC by banks impact institutions, says expert | MORNING CALL
Source: CNN