Senate CAE approves Legal Framework for Guarantees

For this, the new regulation intends to increase the efficiency of bank guarantees, by reducing the risk of default and the legal uncertainty perceived by the financial sector. In practice, it means executing the guarantees quickly and cheaply in the case of banks, when there are cases of default by the borrower.

The text had been approved in the Chamber of Deputies almost a year ago, but Senator Weverton Rocha (PDT-MA), rapporteur for the matter at CAE, presented a new version. The substitute retains the possibility of movable property, such as vehicles, being subject to extrajudicial collection in case of default by the debtor. Today, when a vehicle is given as collateral and the borrower fails to pay the loan, banks need the approval of justice to seize the good. With the change, financial institutions will be able to execute the guarantee without going to court, which is already possible for real estate, such as houses and apartments.

According to Rocha, this measure at the time of recovery of guarantees for movable property will help to reduce the interest charged by banks.

“Interest rates are high, because Brazil’s risk is also very high. Brazil is the country in the world that least recovers (guarantees). As you recover little, the bank says: ‘I’ll lend you money, you’ll buy the car, but you may not pay me and it may take me a while to recover it in court. With that, you will have to pay a lawyer, it will depreciate the asset. When he has access to this asset, it is auctioned, it is no longer worth the debt. So, the risk for those who are giving this money is very high”, he exemplifies.

“With this project, you get out of court. I have my contract, I pay it on time, the interest will be much cheaper, because there I authorize whoever lent me to say that, if I don’t fulfill it, he can, in a simplified way, recover this good and auction it”, he emphasizes.

The Legal Framework for Guarantees also allows the same property to be given as guarantee in different financing operations, which is currently not possible. With the changes, the tendency is for interest on loans and financing to end up falling thanks to greater security given to financial institutions.

Changes

Senator Weverton Rocha withdrew the article that created the Guarantee Management Institutions (IGGs). They would be responsible for bridging the gap between banks and businesses — and citizens seeking credit. The IGGs would evaluate real and personal guarantees; register them in a notary and enforce the debt in case of default by the borrower. The senators also excluded from the text approved by the deputies the possibility of the family’s only property being pledged. The proposal goes to the full Senate. If approved, it goes back to the Chamber of Deputies, where it will undergo a new analysis because it has undergone changes.

Treasury calls for urgency in voting on the legal framework for loan guarantees