President Luiz Inacio Lula da Silva authorized federally controlled banks Banco do Brasil SA and Caixa Economica Federal to buy stakes in financial institutions to ease a credit crunch that’s hurting small and medium-size lenders. Lula, in a decree published Oct. 22, also allowed Caixa Economica Federal, known as CEF, to create a unit to buy stakes in homebuilders. Banco do Brasil fell as much as 8.5 percent in Sao Paulo trading. CEF isn’t publicly traded. Authorities are stepping up efforts to inject cash into the financial system after local funding costs for smaller banks surged and loan issuance fell in October. The move follows recent central bank measures to contribute more than USD 71 billion to the banking system by easing reserve requirements regulations. (Bloomberg)
