Brazil adopts "prime" rate to improve loan market

SAO PAULO: Brazil's central bank will start publishing in September a new "prime" interest rate to be granted to low-risk clients, the bank's chief, Alexandre Tombini, said on Friday.

The aim is to increase market transparency and help companies better negotiate with banks.

The move is part of an "agenda to improve conditions for competitiveness in the (banking) system," Tombini said at an event in Sao Paulo.

Brazil has some of the highest interest rate spreads of any major economy and entrepreneurs frequently complain that high borrowing costs undermine their international competitiveness. The central bank's benchmark rate currently stands at 12.5 percent.

The new indicator will be published first as part of the central bank's financial stability report in mid-September and would be similar to that of the "prime rate" used in other countries, Tombini said.

The central bank already publishes average interest rates charged by banks but does not distinguish them by credit risk.

Copyright Reuters, 2011