Prepared by Michael Moore.
For background and more details, see the discussion of Brazil’s financial system in Chapter V of the IMF staff country report No. 98/24, April 1998.
The total number in Table 7.4 exceeds 35 as several of the banks have been divided into separate parts for privatization, conversion into a developmental agency, and liquidation.
BEMGE, CREDIREAL, BANDEPE, BANERJ and BANEB are already privatized. The federal government has taken over BANESPA and expects to privatize it in the last quarter of 1999. Paraná is to be privatized during the first half of 2000.
Currently, many banks use internal models to consider their capital requirements. In time, the BCB will consider allowing the use of internal models as an alternative to the standardized model
Basle Committee on Banking Supervision, 1996, Amendment to the Basle Capital Accord to Incorporate Market Risks (Basle: Bank of International Settlements).
Standards accepted internationally are U.S. Generally Accepted Accounting Principles (U.S. GAAP) as promulgated by the U.S. Financial Accounting Standards Board and International Accounting Standards (IAS) as promulgated by the International Accounting Standards Committee.
Law 9430 of 1996 determines the tax deductibility of provision expenses. Provisions are deductible depending upon the loan balance, whether secured or unsecured, and the number of days overdue as follows: loans up to R$5,000 after 180 days, unsecured credits over R$5,000 after one year and secured credits in any amount after two years. For loans over R$30,000, the financial institution needs to have begun judicial proceedings against the borrower for provisions to be deductible. Furthermore, provisions for loans to borrowers that are temporarily protected from creditors are deductible only when the courts declare the borrower bankrupt.