In a fresh sign of the strains caused by Brazils suspension of interest payments on its medium-and long-term debt U.S. bank regulators have lowered their rating of the countrys creditworthiness to substandard bankers said. Brazil was previously ranked as an other transfer risk problem. Reserves would have to be set aside for loans to Brazil only if its credit rating were lowered by another notch to value impaired but bankers said the regulators decision should be read as a sign of official concern about the deterioration in Brazils finances. The downgrading was decided by the Interagency Country Valuation Review Committee which groups regulators from the Federal Reserve Board the Federal Deposit Insurance Corp and the Comptroller of the Currency. The downgrading coincides with the move by several major U.S. banks to place their loans to Brazil on non-accrual status because of the February 20 suspension of interest on 68 billion dlrs of term debt. By declaring the loans non-performing the banks wipe out tens of millions of dollars of accrued but uncollected interest payments from their first-quarter accounts.
U.S. REGULATORS DOWNGRADE BRAZIL TO SUBSTANDARD