Banks, Financial Services, Fintechs and Digital Assets Newsletter – May 2024

REGULATION

Brazilian National Monetary Council

CMN Resolution No. 5,137, May 23, 2024

CMN Resolution No. 5,137, of May 23, 2024, provides for the criteria for establishing, until December 31, 2024, a provision for any losses in credit transactions carried out under federal programs aimed at addressing the economic consequences arising from the climate events in the state of Rio Grande do Sul, by financial and other institutions authorized to operate by the Central Bank of Brazil (“BC”).

However, CMN Resolution No. 5,137 does not apply to consortium administrators, payment institutions, securities brokerage firms, securities distributors and exchange brokerage firms, which must comply with the regulations of the BC while carrying out their legal duties.

CMN Resolution No. 5,137 entered into force on the date of its publication.

Read CMN Resolution No. 5,137.

CMN Resolution No. 5,133, May 13, 2024

Given the impacts of the climate emergency in Rio Grande do Sul, CMN Resolution No. 5,133, of May 13, 2024, establishes temporary criteria for the restructuring of operations by counterparties affected by such events, for the purposes of credit risk management.

CMN Resolution No. 5,133 entered into force on the date of its publication.

Read CMN Resolution No. 5,133.

Central Bank of Brazil

BCB Normative Instruction No. 475, May 23, 2024

BCB Normative Instruction No. 475, of May 23, 2024, amends BCB Normative Instruction No. 77, of February 11, 2021, which establishes procedures for submitting documents and information, involving the response to requirements and filing appeals, formalizing requirements, communicating decisions and other notifications relating to the support and analysis of authorization processes carried out by the Financial System Organization Department (“DEORF”).

BCB Normative Instruction No. 475 entered into force on June 01, 2024.

Read BCB Normative Instruction No. 475 in full.

BCB Normative Instruction No. 469, May 03, 2024

BCB Normative Instruction No. 469, of May 03, 2024, amends BCB Normative Instruction No. 195, of December 09, 2021, which establishes the procedures for remittance of the Analytical Trial Balance and the Analytical Balance Sheet by financial and other institutions authorized to operate by the BC.

BCB Normative Instruction No. 469 will enter into force on January 01, 2025.

Read BCB Normative Instruction No. 469 in full.

BCB Normative Instruction No. 468, April 29, 2024

BCB Normative Instruction No. 468, of April 29, 2024, provides for the operational procedures involving the Financial Liquidity Facilities (“LFL”), provided for in the regulations attached to BCB Resolution No. 374, of March 27, 2024.

BCB Normative Instruction No. 468 addresses topics, such as:

• • The procedure for eligible financial institutions to join the LFL;
  • The pre-positioning and handling of financial events involving debentures and commercial notes, as well as consulting services and handling of financial events involving Bank Credit Bills (“CCB”);
  • The withdrawal of assets pledged as collateral in transactions within the scope of LFL;
  • The eligibility, categorization and consultation services relating to debentures and commercial notes, as well as CCB consultation services, among others;
  • The pricing of eligible debentures, commercial bills and CCBs;
  • The concentration of assets, per issuer, in the secured basket as well as contracting and paying the Immediate Liquidity Facility (“LLI”) and the Term liquidity Facility (“LLT”) transactions;
  • Specific services provided to LFL participants; and
  • The recomposition of available limits.

In addition, BCB Normative Instruction No. 468 repeals:

• • BCB Normative Instruction No. 143, of August 19, 2021; and
  • BCB Normative Instruction No. 175, of October 19, 2021.

BCB Normative Instruction No. 468 entered into force on May 02, 2024.

Read BCB Normative Instruction No. 468 in full.

BCB Resolution No. 382, May 22, 2024

BCB Resolution No. 382, of May 22, 2024, amends the Regulation of the Executive Management Committee (“CEG”) of the Digital Brazilian Real Pilot Project Platform (“RD Pilot”) as well as the RD Pilot Regulations, Annexes I and II to BCB Resolution No. 315, of April 27, 2023.

Two paragraphs were repealed: (i) the sole paragraph of Article 10 of the CEG Regulations of the RD Pilot, Annex I to BCB Resolution No. 315, of 2023; and (ii) the sole paragraph of Article 6 of the RD Pilot Regulations, Annex II to BCB Resolution No. 315, of 2023.

According to the BC, “the pilot’s technological privacy solutions tested to date are not sufficiently mature to guarantee compliance with all legal requirements involving the safeguard of citizens’ privacy, although they have evolved over time”.

Thus, according to the BC, once the Drex Pilot Project guidelines are revised, the second testing phase can be initiated, in which the Drex platform will test the implementation of smart contracts created and managed by third parties participating in the platform. Participants will be able to create and manage their own services and new business models, and will no longer be limited to the services created by the BC.

During the third quarter of 2024, the BC will receive new proposals for applications from companies interested in joining the Drex Pilot Project.

BCB Resolution No. 382 entered into force on the date of its publication.

Read BCB Normative Instruction No. 382 in full.

BCB Resolution No. 380, May 15, 2024

BCB Resolution No. 380, of May 15, 2024, temporarily establishes the deadlines for submitting accounting documents to the BC by financial and other institutions authorized to operate by the BC, whose head offices or branches are located in the cities affected by climate events in Brazil’s southern region.

BCB Resolution No. 380 entered into force on the date of its publication.

Read BCB Resolution No. 380.

BCB Resolution No. 379, May 13, 2024

BCB Resolution No. 379, of May 13, 2024, amends BCB Resolution No. 188, of February 23, 2022, which establishes the compulsory collection on savings deposit funds, to provide for deductions from such compulsory collection due to the public calamity state provided for in Legislative Decree No. 36, of May 07, 2024.

According to BCB Resolution No. 379/2024, financial institutions that have registered on the BC’s Credit Information System (“SCR”) – through the form “Documento 3040” (credit risk data) on the base date of March 31, 2024 – at least 10% of their total volume of loans granted to individual residents or legal entities established in cities covered by the public calamity state (as provided for in Legislative Decree No. 36, of May 07, 2024), are entitled to 100% deduction on the compulsory collection of savings deposit funds in the free and rural categories.

The above will apply as of the calculation period: 

• • Beginning on May 13, 2024, and ending on May 17, 2024, the adjustment of which will take place on May 27, 2024;
  • Beginning on June 02, 2025, and ending on June 06, 2025, the adjustment of which will take place on June 16, 2025, in which the amount deducted will be progressively reduced for each new calculation period by 5% on the compulsory collection generated in that calculation period, until its extinction.

BCB Resolution No. 379 entered into force on the date of its publication.

Read our Client Alert on this topic.

Read BCB Resolution No. 379.

BCB Resolution No. 378, May 13, 2024

Given the economic impacts of the climate emergency in Rio Grande do Sul, BCB Resolution No. 378, of May 13, 2024, establishes temporary criteria for characterizing restructuring operations, for credit risk management purposes, by counterparties affected by these events, of prudential conglomerates classified as Type 2 or Type 3, payment institutions not belonging to a prudential conglomerate, securities distribution companies, securities brokerage companies and foreign exchange brokerage companies, as well as the conglomerates they lead.

According to BCB Resolution No. 378/2024, transaction restructurings are not considered “problem assets” due to the potential impact on the financial capacity of borrowers located in the state of Rio Grande do Sul, for the purposes of the provisions of: (i) paragraph 1, of Article 22 of BCB Resolution No. 265, of November 25, 2022; (ii) of paragraph 2, Article 22 of BCB Resolution No. 198, of March 11, 2022; (iii) of paragraph 1, Article 30 of BCB Resolution No. 201, of March 11, 2022; (iv) of paragraph 1, Article 24 of Resolution No. 4,557, of February 23, 2017; and (v) paragraph 1, of Article 27 of Resolution No. 4,606, of October 19, 2017.

The regulation also provides for the possibility of immediate reversal of characterization of the exposure triggered by such obligations as problem assets, thus considered based exclusively on the indication of full non-payment given that the counterparty does not have financial capacity to fulfill the obligation under the conditions originally agreed upon, in compliance with the terms of: (i) item I, of paragraph 1, of Art. 22, of BCB Resolution No. 265, of 2022; (ii) item I, of paragraph 2, of Art. 22, of BCB Resolution No. 198, of 2022; (iii) item I, of paragraph 1, of Art. 30, of BCB Resolution No. 201, of 2022; (iv) item I, of paragraph 1, of Art. 24, of Resolution No. 4,557, of 2017; or (v) item I, of paragraph 1, of Art. 27 of Resolution No. 4,606, of 2017.

In addition, the BC establishes that credit analysis documentation relating to restructuring transactions carried out under BCB Resolution No. 378 must remain available for 5 years.

BCB Resolution No. 378 entered into force on the date of its publication.

Read our Client Alert on this topic.

Read BCB Resolution No. 378.

NEWS

Next steps in the regulation of crypto assets and virtual service providers

The BC has announced the next steps for regulating virtual assets and virtual service providers, known as Virtual Asset Service Providers (“VASPs”).

According to the BC, the regulatory process will be implemented gradually, encompassing regulators’ increased understanding of the matter as well as measures proposed by international organizations. In collaboration with national regulatory and supervisory bodies, such as the Brazilian Securities and Exchange Commission (“CVM”), the BC has signaled that it will draft regulations aimed at specific virtual assets capable of attracting these bodies’ interest and competence.

Thus, on May 20, 2024, the BC established the following guidelines for the regulation of crypto assets:

• • New public consultation: As already expected by the market, a new public consultation on the general regulation for operating and authorizing the VASPs is expected to be initiated during the second half of 2024.
  • Regulation of stablecoins: The BC is expected to establish its internal plan to regulate stablecoins (a type of virtual asset, whose market value is backed by external value reference, seeking to hold its own value stable), especially regarding payments and the foreign exchange market.
  • Development and improvement of the regulations governing the VASPs: Finally, the BC is expected to draft and improve the operating regulations governing the VASPs, and address their activities in the foreign exchange market as well as aspects relating to their prudential regulation, provision of information to the BC, accounting, among other significant topics.

Read our Client Alert on this topic.

Read the BCB article in full.

Congress discusses new attempt to improve bankruptcy regulations for companies and business owners

On May 23, 2024, our partner Fabio Braga, who integrates Demarest’s Banking and Finance practice area, drafted an article published by Análise Editorial, in collaboration with partner Guilherme Bechara, who integrates Demarest’s Dispute Resolution, Restructuring and Bankruptcy, and Alternative Investments practice areas.

In brief, the article addresses Bill 03/2024, which aims to improve the bankruptcy procedure through changes in the provisions of Law 11,101, of February 09, 2005, regulating the court-supervised reorganization, extrajudicial reorganization, and bankruptcy of business owners and companies. The aim of Bill 03/2024 is to support the national economy’s growth and to reduce bureaucracy in the bankruptcy procedure.

In theory, these measures would generate a reduction in the judicialization of matters that could be solved through a more effective involvement of creditors. Among the most significant changes proposed by Bill 03/2024 to the current bankruptcy regime, is the creation of the “fiduciary manager” and the concept of “bankruptcy planning”, including changes to the regulations governing the appointment and remuneration of judicial managers.

Read the article published by Análise Editorial in full.