BRASILIA, May 29 (Reuters) - Brazil's Credit Guarantee

Fund (FGC) should hold accounting reserves equivalent to 1% of

eligible deposits but is currently at 0.35%, the fund's head

Daniel Lima said on Thursday.

Discussions on necessary adjustments will take place in the

coming months, Lima stressed.

Speaking at an event hosted by payment industry group

Abipag, Lima also noted that the FGC's liquidity indicator

stands at around 2.3% of eligible deposits, compared to a target

range of 2.3% to 2.7%.

The FGC is a private nonprofit entity created to manage

protection mechanisms for clients of financial institutions in

the event of bank resolution.

The fund has drawn renewed attention following the

high-profile acquisition

of lender Banco Master by BRB, a deal currently

being analyzed by the central bank.

The transaction has sparked

scrutiny

as it involves two similarly sized banks, with Master

having grown rapidly in recent years through an aggressive

funding model based on high-yield debt distributed via

investment platforms.

Lima noted that addressing potential contagion risks from

mid-sized banks requires more timely access to information from

each institution.

The

central bank said

earlier this year that it would carry out a scheduled

review of the FGC next year as part of its regular four-year

cycle on the matter.

Debt securities issued by banks are insured by the FGC up

to a limit of 250,000 reais ($44,028) per financial institution.