Febraban says Brazil c. bank should bail out banks-report

Brazil’s central bank,
and not the privately-owned deposit insurance fund FGC, should
engineer and carry out bank bailouts, the head of the Febraban
banking industry lobby group said in a newspaper interview on
Monday.

The central bank is responsible for making sure that failed banks are rescued or liquidated, Febraban President Murilo Portugal told O Estado de S. Paulo newspaper in an interview.

The fund should continue to help guarantee certain deposits
owned by bank clients and encourage lending, instead of taking
full responsibility for rescuing troubled banks, Ferreira, a
former International Monetary Fund official, told Estado.

Asked whether bail-outs were a responsibility of the FGC,
Ferreira said that “those are not the functions that I think the
FGC should have. Those are, yes, the functions that the central
bank has in its statutes.”

The Sao Paulo-based FGC is increasingly in the spotlight for
overseeing a number of bailouts since 2009. Roberto Setubal,
chief executive of Brazil’s biggest private sector bank Itau
Unibanco Holding said in a recent newspaper interview
that the government, not private banks, should carry out
bailouts.

Monday’s story highlights the growing importance of the FGC
at a time when the financial crisis afflicting Europe and some
wealthy economies and eroding credit fundamentals in the largest
Latin American economy threatens to bring down more banks.

Ferreira noted that no banks should be discriminated against
when facing a solvency crisis, saying that “when you have a
problem, you don’t set priorities — I will go and bail out this
one or this other one.”

FGC, whose funding comes mainly from compulsory
contributions made by the nation’s lenders, could also get state
help in case of an emergency.