Under its Regulatory Agenda, the Central Bank of Brazil (BCB) instituted the Financial Liquidity Facilities (LFL, in the Portuguese acronym), designed to improve market efficiency and systemic stability, applicable to specific financial institutions. Operations will commence in November 2021.
The Central Bank of Brazil (BCB), through BCB Resolution n. 110/2021, instituted the Financial Liquidity Facilities in national currency (LFL, in the Portuguese acronym), as a means to improve BCB’s systemic role in providing liquidity to financial institutions. Two operational modalities for the LFL were enacted (Annex, article 2):
- Immediate Liquidity Facility (LLI, in the Portuguese acronym): a short-term liquidity facility (up to five business days), designed for cash flow management, and costing the Selic policy rate plus a 0.6% premium per year (Annex, article 14); and
- Term Liquidity Facility (LLT, in the Portuguese acronym): a liquidity facility covering up to 359 calendar days, designed for asset-liability mismatch management, and costing the Selic policy rate plus a premium ranging from 0.75% to 0.4% per year (scaling down over time) (Annex, article 14).
The Central Bank will apply such modalities in order to provide loans against a collateral of financial assets (Annex, article 7), provided at the institution’s request or at the initiative of BCB, to the financial institutions listed in article 11 that adhere to the LFL (see articles 4 and 12 from the Annex).
The LFL will be fully operational on November 16, 2021. More information is available at BCB’s website. The newly instituted LFL instrument comprises BCB’s Regulatory Agenda’s competitiveness dimension – initiatives on market efficiency.
