Rio, May 4, 2004 (Agência Brasil) - The government is working to maintain the trend towards falling interest rates and to reduce bank spreads (the difference between what it costs banks to obtain resources and what they charge for loans), according to the president of the Central Bank (BC), Henrique Meirelles.

To do so, Meirelles stressed the need to broaden the powers of the Administrative Council for Economic Protection (Cade) to oversee the financial system, especially when it comes to mergers and takeovers. He views this as an important way to increase competition in the sector.

The president of the BC informed that the measures and projects under consideration in the National Congress to increase competition in the banking sector and diminish spreads include the creation of a unified banking register, which will allow individuals and firms to transfer their listings from one institution to another, and the new law on bankruptcies and receiverships.

With respect to market interest rates, Meirelles affirmed that their decline is the result of the government's greater credibility and the reduction of economic risk. "This is what will produce - and is producing - a gradual drop in the rates."

The president of the BC cited as a positive example loans to workers with repayment installments discounted from their paychecks. This shows that competition leads banks to reduce their interest rates, with a lower risk of bad debts.

Translator: David Silberstein