General Information & Client Services
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
July 13, 2017

IMF published its staff report and selected issues report in the context of 2017 Article IV consultation with Brazil. These reports assess the Brazilian financial sector in the backdrop of a deep recession. Directors observed that the financial sector has remained sound despite the severe stresses. To make the system more robust, they encouraged actions to further strengthen financial safety nets through enhanced monitoring and an improved crisis management framework.

The staff report highlights that the health of the banking sector has improved. To limit increases in nonperforming loans, banks have continued renegotiating the terms of loans and writing off delinquent loans. Capital ratios have increased on the back of a decline in private banks’ risk-weighted assets and higher unrealized gains on fixed income securities. However, capital ratios of public banks, much lower than those of private banks, continued declining because of higher Basel III deductions. Liquidity has also improved as withdrawals of saving deposits stopped and banks’ holdings of liquid assets increased. A reform of the bankruptcy framework is underway; its early conclusion would help expedite the bankruptcy process and reduce creditors’ default losses, which should in turn facilitate the financing of capital investment. Overall, the banking sector has weathered the recession well and ongoing efforts to bolster its resilience should continue.

 

Banking sector soundness indicators improved in 2016 as shocks to funding dissipated, interest margins rose, and non-performing loans moderated. From a structural perspective, it would be important to conclude actions aimed at strengthening financial safety nets further by enhancing the Central Bank’s ability to provide emergency liquidity assistance and implementing the new resolution regime for banks. These steps would strengthen the authorities’ capacity to deal with liquidity and solvency shocks. As recommended in the previous Financial Sector Assessment Program (FSAP), a committee with an explicit mandate for systemic risk monitoring should be established and a mandate should be given to a separate entity to set up a crisis management framework. Banks that consistently fail the stress tests performed by the Central Bank should be required to raise additional capital or, if they are state-owned, they should be recapitalized or allowed to retain profits to boost their capital.

 

The selected issues report discusses several issues such as the Brazil’s business environment and external competitiveness, distributional effects of the pension reform, regional inequalities, and existing issues related to interest rates and inflation in the country.

 

Related Links

Staff Report (PDF)

Selected Issues Report (PDF)

Keywords: Americas, Brazil, Banking, Article IV, NPL, Basel III, IMF, FSAP

Related Insights
News

IAIS Publishes Drafts of Revised ICP 8, ICP 15, ICP 16, and ICP 20

IAIS published the drafts of revised Insurance Core Principles on Public Disclosure (ICP 20), Investments (ICP 15), Enterprise Risk Management for Solvency Purposes (ICP 16), and Risk Management and Internal Controls (ICP 8), along with a revised draft of the glossary on enterprise risk management (ERM).

November 14, 2018 WebPage Regulatory News
News

MAS Amends Notice 637 on Capital Adequacy Requirements in Singapore

MAS published the final, revised Notice 637 on the risk-based capital adequacy requirements in Singapore.

November 13, 2018 WebPage Regulatory News
News

ESMA Updates Q&A on Implementation of CSD Regulation and MAR

ESMA updated questions and answers (Q&A) documents on the implementation of the Central Securities Depository (CSD) Regulation and Market Abuse Regulation (MAR).

November 12, 2018 WebPage Regulatory News
News

FSB Finalizes and Publishes the Cyber Lexicon

FSB published a cyber lexicon, following the public consultation earlier this year.

November 12, 2018 WebPage Regulatory News
News

SRB Updates Liability Data Reporting Template for 2019

SRB published version 2.7.1 of the Liability Data Reporting (LDR) Template.

November 12, 2018 WebPage Regulatory News
News

ECB to Conduct Comprehensive Assessment of Six Bulgarian Banks

ECB will undertake a comprehensive assessment of six Bulgarian banks. The exercise, comprising an asset quality review and a stress test, follows Bulgaria’s submission of a request to establish close cooperation with ECB on July 18, 2018.

November 12, 2018 WebPage Regulatory News
News

IMF Publishes Reports on the 2018 Article IV Consultation with Chile

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Chile.

November 09, 2018 WebPage Regulatory News
News

PRA Issues PS27/18 on Implementing the Extension of SM&CR to Insurers

PRA published the policy statement PS27/18, which provides feedback to responses to the consultation paper CP20/18, on implementing the extension of the Senior Managers and Certification Regime (SM&CR) to insurers (Part 2).

November 09, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for November 2018

EBA published answers to seven questions under the Single Rulebook question and answer (Q&A) updates for this week.

November 09, 2018 WebPage Regulatory News
News

FED Finalizes the Large Financial Institution Rating System

FED finalized the new supervisory rating system for Large Financial Institutions (LFIs), to better align with the current supervisory programs and practices for these firms.

November 09, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2204