Caixa Economica Federal, a government-controlled lender, plans to be the first Brazilian bank to issue local debt with a maturity of at least two years after the central bank opened up the market for such sales.
Caixa, a Brasilia-based bank founded in 1861, may sell about 50 million reais ($27.5 million) of bonds called “letras financeiras” in May, Marcio Percival Alves Pinto, the bank’s vice-president of finance, said in a telephone interview.
The central bank established the new debt instrument last month in a bid to broaden local banks’ access to longer-term capital and boost credit growth. Brazilian banks were previously only allowed to sell longer-term debt in international markets.
“Especially in a year where there’s going to be a lot of investment in the economy, the idea is to lend the money to businesses for expansion,” Percival said.
Brazil’s credit-to-gross domestic product ratio will reach 49 percent by the end of 2010, compared with 33.4 percent in December 2007, according to central bank estimates. Latin America’s biggest economy may expand 6.4 percent this year, the fastest pace in more than two decades, according to Goldman Sachs Group Inc.
Brazilian regulators allowed the sale of the debt securities after smaller banks lost access to short-term credit during the global financial crisis as investors shifted money to larger financial institutions they viewed as more stable, said Maria Celina Vansetti, head of Latin American bank research at Moody’s Investors Service in New York.
‘Culture’ Change
The central bank is seeking to change a “culture” where pension funds and institutional investors buy securities with short maturities to limit their credit risk, Vansetti said.
“For small banks that do not have access to core deposits, they need longer-term funding, and they were not getting longer- term funding,” Vansetti said. “The way the market has evolved in Brazil, there’s a concern about liquidity.”