TITLE: Brazil's Central Bank Strengthens Credit Guarantee Fund Safeguards and Enhances Financial Institution Liquidity Rules
BODY:
On April 23, 2026, the National Monetary Council (CMN) approved a series of regulatory measures designed to strengthen liquidity management at financial institutions and enhance mechanisms associated with the Credit Guarantee Fund (Fundo Garantidor de Créditos – FGC), with the objective of reducing systemic risks and preserving stability in Brazil's financial system.
Regarding the FGC, the CMN amended Resolution CMN No. 4,222 of 2013, consolidating changes introduced by Resolution CMN No. 5,238 of August 1, 2025, and refining conditions requiring member institutions to maintain allocations in federal public securities. The changes introduce a new Reference Asset (Ativo de Referência – AR) indicator based on the composition and quality of institutional assets as triggers for mandatory allocation, complementing existing liability-based indicators. When FGC-guaranteed resources exceed the AR threshold, institutions must direct a portion of these resources to federal public securities on a gradual basis. These measures aim to mitigate moral hazard associated with excessive reliance on FGC guarantees.
The CMN also enhanced prudential liquidity requirements. The Short-Term Liquidity indicator (Liquidity Coverage Ratio – LCR), aligned with the Basel III international standard, now applies to Segment 2 institutions. Additionally, a Simplified Short-Term Liquidity indicator (LCRS) applies to Segment 3 and 4 institutions that accept public deposits or issue securities. Implementation follows a transition schedule with minimum limits set at 90 percent between January 1 and June 30, 2027, increasing to 100 percent from July 1, 2027. All measures take effect June 1, 2026.
REFERENCES:
- Resolution CMN No. 5,295
- Resolution CMN No. 5,296
- Resolution BCB No. 560