Brazil to end savings reserve requirement for real estate funding

BRASILIA, Oct 10 (Reuters) -

Brazil's government unveiled on Friday a new real estate funding model that will scrap mandatory central bank reserves and earmarked requirements tied to savings accounts, starting in January 2027.

Until then, banks will continue to allocate 65% of savings deposits to housing loans, as currently required, the government said in a statement, but will be able to reduce compulsory deposits.

Of the 35% in remaining savings resources excluding earmarked funds, 20% are held as compulsory central bank deposits, while 15% are freely available.

During the transition, reserve requirements will drop to 15%, and the other 5% will be allocated under the government's new model.

Under such a framework, when a bank raises funds in the market and fully allocates them to real estate lending, it may use an equivalent amount from savings accounts, which have a lower cost, for free allocation over a set period.

However, 80% of housing loans must follow the rules of the so-called Housing Finance System, which caps interest at 12% annually.

The rule changes follow years of government

debate

amid heavy outflows from Brazil's traditional savings accounts, which are tax-exempt but offer low returns.

High interest rates, broader financial literacy and easier access to investment platforms have made fixed-income alternatives more attractive, fueling savings outflows.

Brazil's benchmark

Selic interest rate

is at 15%, its highest in nearly two decades, after a central bank tightening cycle that began about a year ago as part of an effort to curb inflation.

From January to September, withdrawals from savings exceeded deposits by 78.5 billion reais ($14.51 billion) in Latin America's largest economy.

($1 = 5.4104 reais) (Reporting by Marcela Ayres; Editing by Mark Porter and Paul Simao)