Banco Central do Brasil Payment Systems and Systemic
Banco Central do Brasil Payment Systems and Systemic Risk Reduction: The Brazilian Experience XXXVIII Meeting of Governors of Central Banks of the American Continent Rio de Janeiro, May 2001 1
Banco Central do Brasil I. Overview: Monetary Policy in Brazil II. Towards a New Payments System III. Improving Prudential Standards 2
Banco Central do Brasil I - Overview: Monetary Policy in Brazil 3
Monetary Policy in Brazil F Monetary Policy in an Inflation Targeting Framework – July/1999: Implementation of new Monetary Regime – Floating exchange rate – Focus on the headline inflation rate (IPCA) – Declining inflation targets: 8% for 1999, 6% for 2000, 4% for 2001, 3. 5% for 2002, with a 2% tolerance interval – Central Bank: operational independence – Central Bank: accountability and transparency 4
Domestic Debt Management Policy Average Maturity - Public Debt Average Maturity - New Public Bonds Issues 32. 2 45. 5 31. 6 41. 7 30. 8 29. 0 29. 8 29. 9 29. 3 29. 0 28. 9 29. 0 26. 5 26. 6 Jan 00 27. 0 Mar 24. 0 16. 6 27. 3 24. 2 23. 3 24. 0 26. 7 28. 9 19. 1 9. 2 May Jul Sep In Number of Months Nov Jan 01 Jan 00 Mar May Jul Sep Nov Jan 01 5
Financial System and Capital Markets F Structural Reform Initiatives – New Payments System – Restructuring the Discount Window – New Prudential Standards – Lower intermediation spreads – Pension Funds reform – New Corporate and Bankruptcy Laws – Bovespa: “Neuer” Market 6
Payments System II - Towards a new Payments System 7
Payments System FMain Concern: Reduce Systemic Risk – Currently: • Central Bank carries all systemic risk • No-existence of Clearings for critical payments 8
Payments System FFocus – Lower Central Bank credit risk – Higher Liquidity in the secondary market for government bonds – Foster competition in the financial sector – Enhance efficiency in payment instruments 9
Payments System F Central Bank’s role: To ensure an adequate design for the new Payments System – Main outcomes: • Private risk transferred to private sector (clearings) • A more efficient, modern and globally integrated financial system • Central Bank operates RTGS (Real Time Gross Settlement) • Central Bank refuses negative reserve accounts 10
Payments System FSchedule – Test Period: June to October/2001 – Transition Period: November to December/2001 – Full Implementation: January 2002 11
Prudential Standards III - Improving Prudential Standards 12
Prudential Standards F Improvement of Risk Control Policies to reduce systemic risks and short-term volatility – Central Bank initiatives aimed at granting transparent regulatory standards to the financial sector – New standards to ensure a minimum Adjusted Net Worth to limit the risk in credit, exchange rate, swap and interest rate operations 13
Prudential Standards – Classification of credit operations (Credit Bureau) – Provision for non-performing loans – Interest rate and exchange rate risks accounted – Liquidity risk – Domestic and external consolidation of the balance sheet 14
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