Americana’s scandal potential impact will be “insignificant”

Brazil’s central bank stated that the potential impact of the accounting scandal involving retailer Americanas SA on banks would be “insignificant” even in an extreme scenario.

Americanas filed for bankruptcy in January after disclosing “accounting inconsistencies” worth R$ 20 billion, leading banks to increase their provisioning in their most recent earnings release.

The central bank noted that the provisions stem from “a specific event related to a large company” and have already absorbed most of the materialization of the risk.

“The central bank estimated the remaining potential impact, plus a contagion scenario over the entire production and supply chain that depends on the company in a relevant way,” it said.

“In this extreme scenario, the impact on the consolidated financial system is insignificant and there would be no capital default in any financial institution,” it added.

The central bank also stated that “one-off events in large companies” generated a deterioration in asset prices in the private bond market, with increased volatility, spreads and risk aversion, in addition to impact on some lines in the credit market.

Its committee will continue to monitor developments and is ready to act in case of dysfunctionality, it said.

In addition to Lojas Americanas, energy company Light  disclosed earlier this year that it had hired a firm known for acting in bankruptcy protection, raising fears about it, which the company later denied.

The two incidents resulted in a flight of funds from credit funds. This occurred shortly after a new rule from the Brazilian securities industry regulator CVM began to take effect in January, implementing mark-to-market in fixed-income investments, which ended up helping to make the picture worse.

Original Story: Reuters |Marcela Ayres  
Photo: Getty images
Edition: Prime Yield