The expansion of midsize bank deposits is increasing the exposure of the Credit Guarantee Fund (FGC) to institutions with higher risk profiles. In five years, the insured deposits of these institutions jumped 7%, according to a report published by Moody’s Ratings.
Medium -sized banks and fintechs classified in categories S3 and S4 were considered to be considered for the Central Bank regulation – whose assets represent between 0.1% and 1% of GDP or less than 0.1% of GDP, respectively.
Within this universe of financial institutions, six had deposits greater than one third of Nubank’s liquidity was higher than the fund’s accumulated. In 2019, only one bank exceeded the same third, according to data from the Central Bank and FGC added by Moody’s.
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“We recognize, however, that this number may be overestimated, because it includes the total deposits instead of eligible deposits, given the lack of disclosure available on the amount of insured deposits of each financial institution,” the report.
Deposits are mostly from clients of the institutions themselves, highlights the rating agency, not outsourced financial brokerages – those that would be covered by the FGC.
The growth of securities distribution by retail investment platforms such as XP and BTG has served to reduce the disadvantage of mid -segment bank capture in Brazil.
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According to the study, brokerages brokered deposits accounted for 5% of the total in June 2024, excluding interbank deposits, and 2.3 times the total FGC liquidity was. The portion of deposits in the hands of banks outside the largest five in Brazil grew at an annual rate of 18% between 2018 and 2024, according to Moody’s based on Central Bank data.
“This increase in liquidity in the Brazilian capital market also led to a sharp growth of financial letters, which are the main instrument of long -term debt financing in the domestic market,” says Moody’s.
In September 2024, the volume of financial letters in circulation reached R $ 521 billion, an increase of 54% in five years.
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“This expansion, along with intermediated deposits, has helped banks mitigate increased uptake costs in a higher interest rate environment, while improving capture granularity and reduced dependence on foreign debt markets for long -term uptake,” they comment.
It follows the agenda of medium -sized banks the maintenance of the tightening of monetary policy, which should affect the profitability of these institutions. There is a challenge to compensate for fundraising costs “due to their lower retail deposits, which indicates a higher price -sensitive pricing dependence.”
Institutions whose wallets are focused on consumer loans end up with balance sheets with a more pronounced margin compression due to fixed and longer -rate loans, the report says. These are the cases of Banrisul, BMG and Banpará.
