Brazil’s Monetary Council (CMN) has blocked banks from paying out dividends and raising salaries of their board members. The idea is to preserve capital that can be used in loans for individuals and companies.
As we explained in our April 6 Daily Briefing, the government has struggled to make its budget for helping companies actually reach the business community. Economy Minister Paulo Guedes said over the weekend that the money set aside for the Covid-19 effort is “clogged within the financial system.” According to Central Bank head Roberto Campos Neto, banks are “afraid” of default risks as the country — and the global economy — drives towards a recession.
For Marcel Campos, a financial analyst at brokerage firm XP, the CVM’s move should have limited impact — “as [XP] believes banks’ dividends payment behavior will likely be conservative.”
Correction: an earlier version of this post stated that the ban on dividends payments was issued by the Securities and Exchange Commission. The post has been updated.