Haddad sees less turbulence than expected in the markets in reaction to the collapse of SVB bank.
Haddad acknowledged that "the Fed's actions over the weekend were positive," offering reassurances to account holders.
(Reuters)- Finance Minister Fernando Haddad stated on Monday that the market's reaction to the US banking crisis is proving less turbulent than initially feared, and said he had spoken with the Central Bank president, Roberto Campos Neto, over the weekend about the issue.
"I'm receiving information about the episode. It's not that it isn't turbulent, but it's less turbulent than we imagined at the opening of trading," Haddad told reporters this afternoon when questioned about the repercussions of the bankruptcy of the American bank Silicon Valley Bank.
Earlier, Haddad said he spoke with Campos Neto over the weekend about SVB's bankruptcy and its impact on Brazil, and praised the Federal Reserve's response to the collapse of the U.S. lender.
"What happened is serious. We'll see throughout the day... if the monetary authority in Brazil will have to take any action due to the effects (of the SVB collapse) on peripheral economies; that's not clear yet," said Haddad at an event organized by the newspapers Valor Econômico and O Globo.
The Ibovespa closed the day down 0,55%, after falling more than 1% earlier in the day in a more nervous initial reaction to concerns about the SVB. The spot dollar rose 1,16%.
Although he said that the information from the US is still insufficient to know the extent of the problem, Haddad acknowledged that "the Fed's actions over the weekend were positive," offering guarantees to account holders. "This is the first measure the monetary authority has taken to prevent a bank run," said the minister.
U.S. government and central bank officials launched emergency measures on Sunday to bolster confidence in the banking system after the collapse of Silicon Valley Bank, and subsequently Signature Bank of New York, threatened to trigger a wider financial crisis in the country.
The Fed, for example, announced that it will make additional funding available through a new Term Financing Program for Banks, which will offer loans of up to one year to depository institutions, secured by Treasury securities and other assets held by those institutions.
SVB was abruptly closed last Friday after a failed capital increase. On Monday, global markets showed great instability, with investors weighing the risks in the financial sector against institutional support measures and hopes that the Fed will moderate its monetary tightening as early as this month.