Fitch: Brazilian Depositor Insurance Fund FGC Plays Central Role In Preserving Financial System.

NEW YORK & SAO PAULO -- Given the turmoil in global financial markets since September 2008, the Brazilian FGC (Fundo Garantidor de Credito), among several other formal deposit guarantee schemes and Deposit Insurance Funds (DIFs), has and continues to play a central role in preserving a sound financial system during periods of stress, according to Fitch Ratings Special Report, which analyses FGC's action as a banking systemic risk mitigation agent.

In Brazil, the significant risk aversion following the sub-prime crisis led to a marked concentration of liquidity in the four largest domestic banks. The country did not register any bank failures during the peak of crisis, as Fitch highlighted in February 2009, thanks to effective measures implemented by the regulator, the Brazilian Central Bank (Bacen), and the government, as well as the important role played by the FGC in helping improve the local financial system's liquidity.

The FGC's creation of a new deposit scheme in April 2009, called DPGE - Time Deposit with Special Guarantee, with a higher insurance coverage (up to BRL20 million per time deposit, versus BRL60,000 for regular deposits per depositor), was one of the most effective actions to solve banks' liquidity problems. It has been seen as an innovative product that will remain available as a contingent facility in future crises.

Fitch also debates in this report the investors' perception that FGC bears the same risk as the Brazilian sovereign. Fitch expects the governmental support would be provided to the fund in Brazil, if needed in a stressful scenario, although the agency believes that without additional external support, FGC would not withstand the failure of a systemically important bank. Today, its resources would be insufficient to cover, for example, the deposits of any of the country's top banks by deposits. This fact is not uncommon to other DIFs, as these have generally been designed to protect depositors from the idiosyncratic failure of small and medium-sized banks, rather than from systemic crises or the failure of a dominant financial institution; otherwise such funds would be financially extremely ineffective, but they however help reduce systemic risks significantly.

The full report 'FGC - Fundo Garantidor de Credito' is available on the Fitch Ratings' web site 'www.fitchratings.com.'

Additional information is available at www.fitchratings.com.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.