Banks allowed to set aside less capital for consumer loans

Brazil’s central bank on Friday allowed banks to set aside less capital for some consumer loans of up to five years, seeking to protect local credit markets from the impact of global financial turmoil.

Policymakers lowered the so-called risk factor by which lenders calculate the capital necessary to originate payroll-deductible, auto and other consumer loans to a range of 75 percent to 100 percent from a previous range of 100 percent to 150 percent.

For similar loans with longer maturities, the factor was raised to 300 percent, the bank said in a statement.

The bank kept unaltered a rule that sets the minimum monthly payment for credit-card purchases at 15 percent of the total value.

The measures came after policymakers began discussions last week over the partial or full removal of restrictions on bank lending — which at the time were dubbed as macro prudential measures — as the situation in Europe deteriorated.

Latin America’s largest economy, which expanded last year at the fastest pace in a quarter of a century partly because of a consumer credit boom, is slowing rapidly with demand for credit falling.

One source said that additional measures, including the elimination of the IOF transactions tax on stock trading, are under study.

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