Brazil eases capital rules to prevent credit squeeze

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. Policy-makers 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 come after policy-makers began discussions this week over the partial or full removal of restrictions on bank lending - which at the time were dubbed as macroprudential measures - as the situation in Europe deteriorated. Latin America's largest economy, which expanded last year at the fastest pace in a quarter century partly because of a consumer credit boom, is slowing rapidly with demand for credit falling.