Riggs National Corporation & Subsidiaries - Page 17




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         would draw down its Banking Reserves Account at the Central Bank             
         below the legally required minimum level, the Central Bank would             
         advance Banco do Brazil funds sufficient to replenish and maintain           
         its reserves account at the required level.  The Central Bank would          
         level Banco do Brazil’s reserves account daily.  (Banco do Brazil            
         and the Central Bank each maintained a movement account in which             
         they kept track of the funds the Central Bank advanced to Banco do           
         Brazil.)                                                                     
              The Central Bank financed the Brazilian Government’s operations         
         and the governmental functions that Banco do Brazil carried out              
         through its issuance of (1) Brazil’s currency and (2) governmental           
         securities in the name of the National Treasury.  Essentially, the           
         automatic transfer mechanism previously described (whereby the               
         Central Bank provided funds to Banco do Brazil though crediting its          
         Banking Reserves Account) recognized and reflected that the                  
         Brazilian Government ultimately financed the governmental functions          
         that Banco do Brazil and the Central Bank carried out.11                     



               11   The record does not reveal whether daily surplus funds            
          in the Banking Reserves Account were turned over to Banco do                
          Brazil or whether the Central Bank kept such surpluses in                   
          repayment of the funds it had advanced.  When the caixa unico               
          system ended in 1987, the Central Bank was owed several billions            
          of dollars by Banco do Brazil.  The liability of Banco do Brazil            
          to the Central Bank, however, was offset by an equivalent                   
          liability that the National Treasury owed to Banco do Brazil.  In           
          ending the caixa unico system, a novation was effected whereby              
          Banco do Brazil’s liability to the Central Bank was canceled and            
          the National Treasury directly assumed the liability that Banco             
          do Brazil owed to the Central Bank.                                         





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