With growing concerns from local monetary authorities regarding the steadiness of the country’s financial system, a Guaranty Fund (FGC) has been created i 1995, as a non-profit civil association, working as a private company, and with the mission of managing mechanisms of protection for credit owners agains financial institutions. The main objective of FGC is to provide credit guarantees against the associated institutions, in order to prevent any crash on the banking ecosystem. It focus on protecting investors and deposits up to a determined limit.
Any institution that wants to join the FGC must contribute with a monthly parcel of 0.0125% of the total amount of all acounts to be guaranteed by the fund. As to the conditions to require special guarantees, those institutions also need to contribute with further 0.0833% of forward deposits with special guarantees (DPGE), until the limit established by the country’s monetary council. The total amount of contributions cannot exceed BRL5bn before December 2014, and BRL3bn as of January 1st 2015.
Institutions allowed to join the FGC:
- Caixa Econômica Federal;
- Multiple banks;
- Commercial banks;
- Investment banks;
- Development banks;
- Lending, investing and financing societies;
- Housing credit societies;
- Mortgage administrators;
- Savings and lending associations established in the country.
Among the investments guaranteed and secured by the fund:
- Cash deposits and those executable under previous notice;
- Savings deposits;
- Forwards, with or without certificate;
- Deposits maintained for paying wages, salaries, fees, pensions, retirement fees and similars;
- Bills of exchange;
- Mortgage-backed securities;
- Mortgage notes;
- Real estate notes;
-Agricultural credit bills;
- Buyback operations tied to notes issued after March 8th 2012.
Among those which are not guaranteed by the fund:
- Deposits or lines of credit, or loans raised from elsewhere but Brazil;
- Operations related to governmental interests determined by law;
- Legal deposits;
- Any financial instrument that comes with subordination clauses, either authorized or not by the Central Bank.
- Government bonds;
- Investment clubs or fund of any nature;
- Shares, options or any other derivative or commodity.
FGC maximum guarantee to any investment account stands at BRL250,000.00. That includes any account with more than one titular. For those investments backed with special guarantees, also known as forward deposits or DPGE in Brazil, guarantees can reach up to BRL20,000,000.00, to be paid in 3 days or less after an administration decreed and liquidation and bankruptcy of an institution.
How proceed in case of a bankruptcy of a financial institution
If you have money invested in any institution whose assets have been interviened by the Central Bank, as long as secured by FGC, there is not much you can actually do. Your assets will be blocked until the FGC accounts all guaranteed assets, from all creditors. It is crucial that your investment is registered at CETIP, because if so, the FGC can assess it easily. For that, when investing in any assets that requires a CETIP registration, ask the bank or broker a registration number for you to keep.
As to the values, they will be updated until the date of intervention. For instance, if you invested money in October 10th 2013, with expiry dates for October 10th 2014, and the Central Bank’s intervention took place by April 19th 2014, your money yields profits from the investment date through the intervention date. In average, it takes 2 or 3 months for getting you money back, but once the intervention is decreed, the invested money stands still.
To get the money back, you must follow the official website of FGC, where notes and communications will be issued and updated informing the moves of the institution. Once everything is accounted and assessed, the website is going to name an address, date and bank to cash it back, usually some specific bank branches. Thereafter, you must show up at the respective branch with personal documents, ID, address accreditation and, if possible, a certificate of your investment. A simple form must be filled in, where you will indicate a bank account for receiving the money back.