Brasilia - The Brazilian government on Wednesday authorized the country's main state financial institutions - the Bank of Brazil and the Federal Economic Bank (CEF) - to acquire stakes in private banks as a temporary lifeline to the struggling sector. The move - very similar to one that British Prime Minister Gordon Brown adopted recently - also allows the nationalization of banks that are facing financial difficulties in the light of the ongoing international crisis.
The new disposition authorized the Bank of Brazil and the CEF to create investment banks and subsidiaries abroad, and allows the Brazilian Central Bank to exchange reals for currency of other countries in direct negotiations with other central banks.
In a press conference, Brazilian Finance Minister Guido Mantega said permission for state banks to buy a stake in private institutions "is not a permanent move" and may be reversed "once credit and the liquidity of the economy are reestablished."
"It is a measure for a moment of difficulty, that is why it will probably be reversed in the future," he explained.
Mantega stressed that the move is preventive, since there are no signals that Brazilian banks may be facing serious problems so far.
"There are no bankrupt banks. The Brazilian financial system is solid, it is one of the most solid in the world. So far, banks which were in trouble could only be bought by private institutions. Now, we are creating an alternative," Mantega said.
On October 13, the British government announced the investment of 50 billion pounds in three banks affected by the crisis, the Royal Bank of Scotland (RBS), the Halifax Bank of Scotland (HBOS) and Lloyds-TSB.
