Brazil acted fast to protect small banks

Brazil's central bank acted quickly to provide liquidity to small and medium-sized banks suffering from the global credit crunch, avoiding bigger problems in the sector, Finance Minister Guido Mantega said on Monday.

Speaking at a conference to investors in Washington, Mantega said small banks in Brazil have sound portfolios and were not having solvency issues.

"But if you step on the oxygen hose and you reduce liquidity, you may have a problem if you don't act fast," the minister told reporters at the event.

The Brazilian central bank has sharply reduced bank reserve requirements during the past few days, injecting some 200 billion reais in the banking system.