Banks, Financial Services, Fintechs and Digital Assets Newsletter – August and September 2024

REGULATIONS

Brazilian National Monetary Council (“CMN”)

CMN Resolution No. 5,163, of August 22, 2024

CMN Resolution No. 5,163, of August 22, 2024, amends CMN Resolution No. 5,118, of February 01, 2024, which provides for the backing of the issuance of Agribusiness Receivables Certificates (“CRAs”) and Real Estate Receivables Certificates (“CRIs”) to provide for the backing of the issue of Agribusiness Credit Rights Certificates (“CDCAs”).

CMN Resolution No. 5,163 entered into force on the date of its publication.

Read CMN Resolution No. 5,163 in full.

CMN Resolution No. 5,166, of August 22, 2024

CMN Resolution No. 5,166, of August 22, 2024, provides for the conditions for issuing Certificates of Structured Transactions (“COEs”) by the financial institutions indicated.

According to the resolution, only the following institutions can issue a COE:

• • multiple banks;
  • commercial banks;
  • investment banks;
  • Federal Savings Bank (Caixa Econômica Federal);
  • the Brazilian National Bank for Economic and Social Development (“BNDES”);
  • credit, financing, and investment companies (“SCFI”).

CMN Resolution No. 5,166 entered into force on September 02, 2024.

Read CMN Resolution No. 5,166 in full.

CMN Resolution No. 5,167, of August 22, 2024

CMN Resolution No. 5,167, of August 22, 2024, amended Resolution No. 5,070, of April 20, 2023, which provides for credit derivative operations in Brazil by financial institutions and other institutions authorized to operate by the Central Bank of Brazil (“BC”).

CMN Resolution No. 5,167 entered into force on September 02, 2024.

Read CMN Resolution No. 5,167 in full.

CMN Resolution No. 5,169, of August 22, 2024

CMN Resolution No. 5,169, of August 22, 2024, provides for the issuing conditions of Development Credit Notes (“LCDs”).

According to the regulation, institutions issuing LCDs must meet the following conditions:

(i) the sum of nominal amounts of LCDs issued per year must not exceed 6.5% of the amount of the institution’s net worth, limited to BRL 10 billion; and

(ii) the balance of the LCDs issued must not exceed 25% of the institution’s net worth.

In addition, the issuing and participating institutions in the distribution, placement or negotiation of LCDs must adopt procedures to ensure (a) the adjustment of the title to the investor profile and (b) the investor’s access to the information needed for the investment decision.

Thus, the investor must be provided with at least the following LCD information:

(a) impossibility of redemption, total or partial, before 12 months, from the date of issuance;

(b) conditions for repurchasing by the issuing institution;

(c) redemption possibility for amounts lower than the issuance amount, according to the remuneration criteria; and

(d) conditions applicable to the coverage of the Credit Guarantee Fund (“FGC”).

CMN Resolution No. 5,169 entered into force on the date of its publication.

Read CMN Resolution No. 5,169 in full.

CMN Resolution No. 5,171, of August 29, 2024

CMN Resolution No. 5,171, of August 29, 2024, provides for the calculation methodology and the application methodology of the Legal Rate, which is addressed in Article 406 of Law No. 10,406, of January 10, 2002 (Brazilian Civil Code – CCB).

Among the key points of the resolution, we highlight the following:

(i) Calculation methodology: The Legal Rate will be calculated monthly based on the ratio between the accumulation of daily SELIC rates and the variation rate of the IPCA-15 of the month preceding the reference month. If the calculation of the Legal Rate results in a negative amount, the fee will be considered equal to zero for the reference month.

(ii) Application method: The Legal Rate will be enforced using the simple interest regime, both for the accumulation of monthly rates and for calculating pro rata interest. This regime is already employed in judicial convictions against the tax authority and in other judicial cases, such as for payments to public officers, social security and welfare benefits, and liquidation of awards.

(iii) Publication: The first Legal Rate, for August 2024, was published on August 30, 2024. As of September 2024, the Legal Rate will always be published on the first business day of each reference month.

(iv) Interactive app: The BC will provide a public interactive app to simulate the effects of the Legal Rate in everyday financial situations. The Citizen Calculator (Calculadora do Cidadão), available on the BC website, will have a specific feature for adjusting amounts based on the Legal Rate.

CMN Resolution No. 5,171 entered into force on the date of its publication.

Read CMN Resolution No. 5,171 in full.

Read our Client Alert on CMN Resolution No. 5,171, of August 29, 2024, in full.

Central Bank of Brazil

BCB Resolution No. 404, of August 01, 2024

BCB Resolution No. 404, of August 01, 2024, amends Circular No. 3,862, of December 07, 2017, which establishes the procedures for calculating the share of risk-weighted assets (“RWA”) in relation to credit risk exposures subject to the calculation of the capital requirement through a simplified, standardized approach.

BCB Resolution No. 404 entered into force on September 02, 2024.

Read BCB Resolution No. 404 in full.

BCB Resolution No. 406, of August 02, 2024

BCB Resolution No. 406, of August 02, 2024, provides for the sharing of the payment transaction initiation service without redirecting to other environments or electronic systems, including of other institutions, within the scope of Open Finance.

According to the resolution, sharing the payment transaction initiation service without redirection encompasses (i) account linking and (ii) the payment transaction.

Institutions participating in the sharing are responsible for:

(i) the technological environments and electronic systems made available by them to perform the actions that make up the stages of both account linking and payment transaction; and

(ii) the records generated during the execution of the two steps mentioned.

BCB Resolution No. 406 entered into force on the date of its publication.

Read our client alert on BCB Resolution No. 406, of August 02, 2024.

Read BCB Resolution No. 406 in full.

BCB Resolution No. 407, of August 02, 2024

BCB Resolution No. 407, of August 02, 2024, amends BCB Resolution No. 80, of March 25, 2021, which provides for the constitution and operation of payment institutions, establishes the parameters so that institutions can submit authorization requests for operating, and addresses the rules regarding the provision of payment services by other institutions authorized to operate by the BC.

BCB Resolution No. 407 entered into force on the date of its publication.

Read our client alert on BCB Resolution No. 407, of August 02, 2024.

Read BCB Resolution No. 407 in full.

BCB Resolution No. 408, of August 15, 2024

BCB Resolution No. 408, of August 15, 2024, creates BC’s Center of Excellence for Data Science and Artificial Intelligence (“CDE IA”).

According to this resolution, the CDE IA is responsible for proposing to:

(a) The Information Technology Department (“DEINF”):

(i) the governance guidelines for the safe and ethical use and development of software services based on data science and artificial intelligence within the BC; 

(ii) the requirements for generative artificial intelligence products and services to be used within the BC; and

(b) The Department of People Management, Education, Health and Organization (“DEPES”):

(i) the permanent program encompassing training actions in data science and artificial intelligence.

Regarding its formation, the CDE IA will feature: 

• • A coordinator and an alternate, both of which are indicated by DEINF; 
  • A technical leader, appointed by the heads of office or equivalent officers, of up to two officers with experience in data science and AI from each area of the BC, which must also be members of the CDE IA; and 
  • Other members (without limitation as to number), officers of BC’s sectors, who can participate after awareness and approval by their immediate leaders, in order to perform the tasks assigned to the CDE IA.

BCB Resolution No. 408 entered into force on September 01, 2024.

Read our Client Alert on BCB Resolution No. 408, of August 15, 2024, in full.

Read BCB Resolution No. 408 in full.

BCB Resolution No. 410, of September 11, 2024

BCB Resolution No. 410, of September 11, 2024, amended BCB Resolution No. 278, of December 31, 2022, which regulates Law No. 14,286, of December 29, 2021. Such amendment concentrated on foreign capital in Brazil, involving foreign credit and foreign direct investment operations, as well as the provision of information to the BC.

BCB Resolution No. 410 entered into force on October 01, 2024.

Read BCB Resolution No. 410 in full.

Read our client alert on BCB Resolution No. 410 in full.

BCB Normative Instruction No. 511, of August 30, 2024

BCB Normative Instruction (“IN”) No. 511, of August 30, 2024, regulating PIX, establishes the necessary procedures to apply for the following:

• • adherence to PIX;
  • change in the participation method within the scope of PIX;
  • change in the access method to the Transactional Account Identifiers Directory (“DICT”) and participation in the Instant Payment System (“SPI”);
  • change of DICT participant, liquidator or service provider in charge;
  • offering of additional or optional products and services; and
  • registration update on other applicable information.

BCB Resolution No. 511 entered into force on the date of its publication.

Read BCB Resolution No. 511 in full.

BCB Normative Instruction No. 512, of August 30, 2024

BCB IN No. 512, of August 30, 2024, provides for the amount limits for transactions under PIX.

It is worth highlighting that the provisions of BCB IN No. 512 apply to PIX participants in the following situations: (i) framed in the transactional account provider category, as to the provision of services to individual clients; and (ii) those that render withdrawal facilitation services.

BCB Resolution No. 512 will enter into force on the following dates:  (i) on April 01, 2025, for the provisions of Articles 7, 8, and 10, § 2, item III; (ii) on June 16, 2025, for the provisions of Article 9, 10, § 2, item IV and Article 12, § 2; and (iii) on the date of its publication, for the other provisions.

Read BCB Resolution No. 512 in full.

BCB Normative Instruction No. 513, of August 30, 2024

BCB Normative Instruction No. 513, of August 30, 2023, establishes the operational procedures for the Automated PIX, Scheduled PIX, and PIX Charge.

BCB Resolution No. 513 will enter into force on the following dates:

• • on October 01, 2024, regarding the provisions of Articles 1, 12, 13, 14, and Article 10, item III, which will be effective, for the purpose of implementing the minimum user experience requirements for the Scheduled PIX, from April 01, 2025;
  • on June 16, 2025, regarding the provisions of Articles 2, 3, 4, 5, 6, 7, 8, 9, 9, 11 and 15 and Article 10, items I and II and sole paragraph; and
  • on the date of its publication, regarding the provisions of Article 16.

Read BCB Resolution No. 513 in full.

NEWS

BC’s public consultation: Third phase of the new market risk prudential framework

On August 20, 2024, the BC published Public Consultation Notice (“ECP”) No. 102/2024, which proposes normative changes to CMN Resolution No. 4,958, of October 21, 2021, and to BCB Resolution No. 200, of March 11, 2022. In addition, ECP No. 102/2024 introduces a new BCB resolution addressing the calculation of the portion of risk-weighted assets (“RWA”) relating to the calculation of the capital required for market risk exposures of instruments classified under the trading portfolio (“RWAsens”).

According to the BC, the drafts of this public consultation are chiefly based on the following documents: (i) Standardised approach: general provisions and structure (MAR20); (ii) Standardised approach: Sensitivities-based method (MAR21); and (iii) Standardised approach: Residual risk add-on (MAR23).

The new regulation will apply to institutions classified under Segments 1 (S1), 2 (S2) and 3 (S3), as provided for in Resolution No. 4,553, of January 30, 2017, and in BCB Resolution No. 197, of March 11, 2022.

Read our client alert on ECP No. 102/2024.

Read ECP No. 102/2024 in full.

BC’s public consultation: Improved regulations on risk management involving payment arrangements

On September 02, 2024, the BC placed under public consultation a draft resolution seeking to amend Annex I of BCB Resolution No. 150, in order to establish new regulations for improving the centralized risk management structures involving payment arrangements that integrate the Brazilian Payment System (“SPB”).

With a view to developing the activities aimed at authorizing, monitoring and supervising payment arrangements and, also, unifying risk management practices, the wording of ECP No. 104/2024 is based on the following key points:

• • New concepts introduced;
  • Providers’ obligations;
  • Additional items to be included in the regulations governing payment arrangements;
  • Tariff categories;
  • Shelving authorization requests without a determination on the merits;
  • Authorization dismissal to payment arrangement institutions;
  • Orderly withdrawal plan;
  • Ongoing and integrated risk management framework.

Read our client alert on ECP No. 104/2024.

Read ECP No. 104/2024 in full.

BC publishes a list of selected projects for the second testing phase under the DREX Pilot

On September 04, 2024, the BC published the list of selected projects, drafted jointly with the CVM, containing 13 themes selected for developing the 2nd testing phase of the DREX Pilot platform, of the 42 proposed use cases submitted. Among the themes and their developers are the following:

(1) Transfer of receivables: ABC and Inter;

(2) CBD-collateralized credit: BB, Bradesco, and Itaú;

(3) Collateralized credit in public securities: ABBC, ABC, And MB;

(4) Financing of international trade operations (Trade Finance): Inter;

(5) Exchange market optimization: XP-Visa and NuBank;

(6) Liquidity pool for trading public securities: ABC, Inter, and MB;

(7) Transactions with Bank Credit Notes (“CCBs”): ABBC;

(8) Transactions with debentures: B3, BTG, and Santander;

(9) Transactions with agribusiness assets: Tecban, MB, and XP-Visa;

(10) Transactions with decarbonization credits (“CBIOs”): Santander;

(11) Transactions with automobiles: B3, BV, and Santander;

(12) Real estate transactions: BB, Caixa Econômica Federal, and SFCoop; and

(13) Transactions with public network assets: MB.

During the second testing phase, the infrastructure created for the DREX Pilot will test the implementation of financial services, made available through smart contracts drafted and managed by third parties participating in the platform.

In addition, the selected topics are expected to be developed in the coming weeks in a debate environment devoted to each theme. Regulators and participants will be able to discuss matters involving the implementation, governance, and interaction of privacy solutions.

Read the BC article in full.