The Central Bank (BC) facilitated the granting and renegotiation of credit for small and medium-sized companies. The measure has the potential to release approximately R $ 3.3 billion that can be used in new credit operations for the segment and allows restructuring of R $ 228 billion in credit operations for these companies.

In order to release these resources, the BC reduced the capital requirement for credit operations aimed at small and medium-sized companies.

"The objective is to stimulate the allocation of resources to a sector that has significant importance for the Brazilian economy, representing a relevant portion of production and employment," said the BC, in a note.

“The measure has the potential to release approximately R $ 3.2 billion from the regulatory capital requirement of financial institutions, which can be used for new operations. In addition, it allows for the eventual restructuring of R $ 228 billion in credit operations for small and medium-sized companies ”, added the BC.

With the change, the Risk Weighting Factor (FPR) applicable to credit operations with small and medium-sized companies goes from 100% to 85%. The change will be applied only to new credit operations or restructured operations to the benefit of the borrower, and will be limited to the period from April 1, 2020 to December 31, 2020. The rule covers companies with annual gross revenue between R $ 15 million and R $ 300 million, said the Central Bank.

“Small and medium-sized companies have less diversified revenue lines, less substantial liquidity reserves and greater dependence on resources provided by the banking sector. Thus, measures to combat the spread of covid-19 have had unfavorable effects for this segment, ”he added.

Debt renegotiation 

Another measure announced today (9), in Brasília, was the permission to reclassify default risk by banks. “In order to avoid an increase in the volume of provision for losses on economically viable credits, but which, due to the covid-19 crisis, have been delayed, including due to operational difficulties in the renegotiation of these operations, the National Monetary Council ( CMN) allowed financial institutions to reclassify renegotiated operations from March 1 to September 30, 2020 to the risk level they were rated in February 2020, before the economic effects of measures to combat covid-19 began. ”, Explained the BC.

He added that the increase in the provision (reserve for losses) impacts the supply of credit and, consequently, consumption and income, which further aggravates the economic and financial effects resulting from the fight against covid-19.

"This happens because the provisioning expenses reduce the reference equity necessary to face the risk of the operations assumed, thus limiting the institution's ability to take on new risks and, consequently, grant new loans", explained the BC.

He added that the measure does not apply to operations with a delay of 15 days or more on February 29, 2020, as well as operations with evidence that the counterparty will not be able to honor the obligation under the conditions agreed upon in the renegotiation.

Credit unions 

The Central Bank authorized credit unions to issue Mortgage Bonds (LCI). "The measure will create an additional fundraising instrument, compatible with the activities of these institutions, and has the potential to positively impact the real estate sector, providing conditions to increase competition and the offer of products and services in the financial system", concluded the note BC.