June 23, 2020 / 7:44 PM / 21 days ago

UPDATE 1-Brazil's central bank unveils wide range of credit-boosting measures

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By Jamie McGeever

BRASILIA, June 23 (Reuters) - Brazil’s central bank on Tuesday announced a series of measures to potentially pump hundreds of billions of reais into the economy, boosting credit in particular to micro, small and medium-sized companies struggling in the coronavirus crisis.

The measures include allowing banks already extending loans to small and medium-sized enterprises, known as SMEs, to reduce reserve requirements, lowering banks’ requirements for contingent liabilities provisions, and possibly allowing firms to use real estate as collateral for new loans.

According to the central bank, the three measures could free up to 55.8 billion reais ($10.8 billion), 127 billion reais and 60 billion reais, respectively, in potential loans, with SMEs being the main beneficiaries.

In a presentation outlining the measures, central bank President Roberto Campos Neto said the flow of credit to SMEs has slowed in recent weeks and this sector needed the stimulus most.

Speaking in a virtual press conference from central bank headquarters in Brasilia, Campos Neto said the institution will “fight tirelessly” to support Brazil’s economy, Latin America’s largest, and would rather err on the side of doing too much than not enough.

As the central bank is not authorized to buy assets on the primary market or lend directly to companies, the measures announced on Tuesday are aimed at channeling liquidity and stimulus.

The biggest of the three programs is potentially the Working Capital Program to Safeguard Companies, which will allow banks to reduce provisions for contingent liabilities provided they lend these funds to SMEs. It could free up 127 billion reais, the central bank said.

Of that total, at least 50% must be lent to companies with revenues of up to 100 million reais, and up to 20% to companies with revenues between 100 million and 300 million reais, the central bank said. (Reporting by Jamie McGeever; Additional reporting by Marcela Ayres; Editing by Leslie Adler) ))

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