BRASILIA, May 5 (Reuters) - Brazil’s central bank is seeking more legal cover exempting policymakers from personal liability if the bank buys private-sector bonds as part of its new crisis-fighting arsenal, two Brazilian economic officials told Reuters.
The lower house of Congress is expected to pass this week a constitutional amendment granting the central bank emergency powers to buy public and private sector assets. However, the sources said there was concern that directors and staff could face accusations of corruption or improper conduct regarding any purchases of individual company assets, even in a court of law.
“If there is no clear protection, some formal shielding, the scope of the constitutional amendment will be useless. It will only be possible to buy public bonds,” said one of the sources, who spoke on condition of anonymity.
“It is very difficult to buy a private security if there is no protection. The (central bank) becomes an easy target for public prosecutors and the federal audit court,” the source added.
The central bank did not respond to a request for comment.
The lower house of Congress on Monday approved in a first round of voting the proposed constitutional amendment loosening certain fiscal rules and allowing the central bank to buy private-sector securities in the secondary market, as well as public securities on local and international secondary markets.
This means the central bank will be able to act as a buyer of last resort, effectively a form of “quantitative easing,” assuming credit market risk and pumping billions of reais of liquidity into the financial system at a time of acute market and economic crisis.
President Jair Bolsonaro put forward a presidential decree in late March exempting central bank directors and civil servants from accountability for their actions during the coronavirus crisis. Fifteen days later, however, he withdrew the safeguard.
The sources told Reuters that the federal audit court was initially against legal protection for individuals, but has become more open to the idea in conversations with members of the government’s economic team.
A third source said that Economy Minister Paulo Guedes may propose a bill offering broader protection to executives and directors, including those at the central bank. The decision on the appropriate legal instrument, whether in the form of presidential decree or not, will be made by the president’s office. (Reporting by Marcela Ayres Writing by Jamie McGeever Editing by Rosalba O’Brien)