The Credit Guarantee Fund (FGC) is an instrument created in 1995 that provides protection to account holders and investors in several fixed income investments. This fund allows the account holder or investor to recover their assets invested in financial institutions in case of bankruptcy, intervention or liquidation of such institutions.
The FGC is a private, non-profit entity, comprised of a number of financial institutions, such as the Caixa Econômica Federal, commercial banks, investment banks, savings associations and credit societies. These institutions contribute with a percentage of 0.0125% of the total amounts traded in the investments that have the fund's coverage.
If the money needs to be returned to the investor, the fund does not stipulate a return period, although it does say that investors who have invested in medium-sized banks will only receive it after a period of 30 to 45 days. The average payment term in cases of settled institutions is 3 months.
The FGC covers up to R$ 1 million per CPF every four years, with the maximum that is covered per institution being R$ 250,000. In other words, an investor will be covered by the FGC if he invests up to R$ 250,000 in four different financial conglomerates over a four-year period. If he passes this, this additional investment will not be covered by the fund. After these four years, he may return to invest in assets covered by the FGC, provided he does so in institutions where he has not yet reached the R$ 250 thousand ceiling.
Assets covered by the FGC
The applications that are covered by FGC are the following:
- Real Estate Credit Bills (LCI)
- Agribusiness Credit Bills (LCA)
- Bills of Exchange (LC)
- Mortgage Letters (LH)
- Bank Certificates of Deposit (CDB)
- Bank Deposit Receipts (RDB)
- Savings book
- Special Guaranteed Time Deposits (DPGE)
- Deposit at sight or withdrawable upon notice
- Repurchase agreements for securities issued after March 8, 2012 by a related company
- Deposits kept in accounts movable by checks destined to record and control the flow of resources related to the rendering of services of payment of wages, salaries, retirements, pensions and similar.
Assets not covered by FGC
Some of the applications that are not covered by FGC follow below:
- Deposits or loans taken abroad
- Legal deposits
- Debentures
- Real Estate Receivables Certificates (CRI)
- Agribusiness Receivables Certificates (CRA)
- Treasury Direct
- Stock market applications
- Real Estate Guaranteed Bills (LIG)
- Deposits in pension funds, investment funds, credits from insurance companies, capitalisation companies and investment clubs.
Conclusion
The objectives of FGC are (i) to protect depositors and investors, up to the established limit values; (ii) to help maintain the stability of the financial system; (iii) to help prevent banking crises.
These objectives are met since the FGC brings liquidity to financial institutions by providing security to investors. Investors know that even in the event of a bank or brokerage house bankruptcy, the fund guarantees the return of money to it. This type of instrument is more than necessary to provide economic stability to the country.
If you are starting to invest and want to have security in your application, then assets that guarantee the FGC are perhaps the best alternatives available.
