Nov 15, 2011

Brazil: Relief in Credit Tight

On November 11, 2011, the government announced measures in order to ease the credit, reversing some of the measures adopted in late 2010. Among the measures adopted in late 2010, we can cite the increasing in capital requirements, and the increasing in compulsory deposits. The aim of these measures in 2010, was to discourage economic activity, because the government’ analysis at the moment was that the level of activity was being very strong and could jeopardize the control of inflation.

The following chart shows the evolution of compulsory deposits of the financial system. At the end of 2008, there was a reduction of reserve requirements due to the global crisis, which was reversed in early 2010. At the end of 2010, there was an increase in the reserves requeriments (about BRL 80 million, in a base of approximate BRL 300 million).

With the economy already in a slower pace, the Central Bank decided to dismantle partially of the "package" of 2010, with relief in capital requirements for banks. There was not, at least for now, the reversal of the rise in compulsory deposits requirements.

Source: Central Bank of Brazil

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