By Marcelo Ballve.
Brazil’s government may step in to sort out the crisis roiling mid-sized banks.
São Paulo is awash with reports that regulators at the Central Bank are studying a kind of super asset-backed security, basically a loan receivables-backed investment fund, to unburden the balance sheets of mid-sized banks. A kind of troubled assets relief program-lite.
In São Paulo, a prominent credit workers’ union (CONTEC, Confederação Nacional dos Trabalhadores Nas Empresas de Crédito) released a bulletin today, distributing the Estado de São Paulo newspaper story that first aired the supposed government plans (the story was picked up by U.S. news agencies). So far, there has been no confirmation, but the fact that a bank workers’ union has disseminated the story is ample evidence that a debate is underway in Brazil on how to get the mid-sized banks out of trouble.
The supposed troubled asset fund is being nicknamed the FIDCÃO, appending the Portuguese superlative suffix to the name for asset-backed securities in Brazil, FIDCs. That’s an acronym that stands for Fundo de Investimento em Direitos Creditórios, and is actually pronounced “fi-dee-keehs.”
Such a solution would come with a dose of irony included. Because as I’ve written in this space, the misuse of FIDC issuance– either to feed unsustainable funding arrangements & loan expansion, or to inflate the books– appears to be one reason why many of Brazil’s small and medium-sized banks are in trouble in the first place.
Marcelo Ballve is a reporter who for over ten years specialized in Latin America. During that time, he worked in about a dozen countries, and wrote about politics, arts and culture, and business. He was a Jorge Paulo Lemann Fellow at Columbia University’s School of International and Public Affairs (SIPA) and the Fundação Getulio Vargas School of Management in São Paulo.