Brazil tightens credit fund rules to limit bank risk-taking

SAO PAULO (Reuters) -Brazil's National Monetary Council (CMN), the country's top economic policy body, approved on Friday fresh rules for the contributions that financial institutions associated with the country's Credit Guarantee Fund (FGC) must make to the fund.

Among the changes, the CMN increased the so-called additional contribution by doubling its multiplier to 0.02%. The new rules will come into effect in June 2026.

In a statement, the body said the measures aim to mitigate excessive risk-taking by the institutions.

The FGC is a private nonprofit entity created to manage protection mechanisms for clients of financial institutions in the event of bank resolution.

The fund has drawn renewed attention following the high-profile acquisition of lender Banco Master by BRB, a deal the central bank is currently analyzing.

The transaction has sparked scrutiny as it involves two similarly sized banks, with Master having grown rapidly in recent years through an aggressive funding model based on high-yield debt, backed by FGC guarantees and distributed via investment platforms.

Under another new rule approved by the monetary council, any member institution deemed excessively leveraged by the technical standards established by the central bank will be required to allocate excess funds to federal government bonds, seen as safe assets, thereby limiting risk-taking in other types of investments.

(Reporting by Andre Romani and Fabricio de Castro in Sao Paulo; additional reporting by Marcela Ayres in Brasilia; Editing by Natalia Siniawski)

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