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Banks, Financial Services, Fintechs and Digital Assets Newsletter
No. 6 – June, 2023
July 19th, 2023
Federal Executive Branch
Law No. 14,478, of December 21, 2022 (Legal Framework for Virtual assets) and Decree No. 11,563, of June 13, 2023 enter into force
As a result of the conversion of Bill No. 4,401/2021, Law No. 14,478/2022 (Legal Framework for Virtual Assets) was published in the Federal Official Gazette of Brazil on December 22, 2022 and entered into force on June 20, 2022, along with the Decree that regulates such law, Decree No. 11,563/2023.
Law No 14,478/2022 provides for the guidelines to be followed in the provision of virtual asset services and in the regulation of virtual asset services providers, and equates virtual asset services providers to financial institutions, for the purposes of Law No 7,492, of June 16, 1986, which defines crimes against the Brazilian financial system.
In view of these guidelines, the Legal Framework for Virtual Assets establishes the crime of fraud with the use of virtual assets, securities or financial assets, and amends Law No. 9,613 of March 03, 1998, which provides for money laundering, to include virtual asset services providers in the list of its provisions.
It is important to highlight that the regulation defines virtual assets as “a digital representation of value that can be negotiated or transferred by electronic means and used for payment or investment purposes”, but does not include:
(i) Brazilian currency and foreign currencies;
(ii) digital currency, under Law No. 12,865 of October 09, 2013;
(iii) instruments that ensure that the holder has access to specified products or services or to the benefit from such products or services, such as points and rewards from loyalty programs; and
(iv) representations of assets whose issuance, bookkeeping, trading or settlement is provided for by law or regulation, such as securities and financial assets.
In line with the Legal Framework for Virtual Assets – which provides that the Federal Public Administration body or entity, defined in the act of the Executive Power, will be responsible for establishing which financial assets will be regulated, as well as for regulating the operation and supervision of virtual asset services providers – Decree No. 11,563/2023, of June 13, 2023, was published by the Federal Executive Branch.
Thus, in order to meet market expectations, these duties were assigned to the Central Bank of Brazil (“BCB”), without changing, however, any powers of the Securities and Exchange Commission (“CVM”), nor providing for security tokens subject to the regime of Law No. 6,385 of December 07, 1976.
In addition, other powers established by a separate legislation remained unchanged, such as the powers relating to the National Consumer Protection System (“SNDC”) and the prevention and repression of money laundering.
As the regulator of the Brazilian virtual assets market, the BCB is expected to standardize several aspects relevant to the virtual assets sector, initiating the publication of rules that provide for the incorporation and a minimum operation period of 06 months for entities that are already functioning to adapt to the new rules, in line with the Legal Framework for Virtual Assets.
Read in full Law No. 14,478 of December 21, 2022 and the Client Alert published on December 23, 2022.
Read in full Decree No. 11,563 of June 13, 2023 and the Client Alert published on the subject on June 15, 2023.
Central Bank of Brazil
BCB Resolution No. 321, June 02, 2023
Amends BCB Resolution No. 264 of November 25, 2022, which provides for the registration of receivables from transactions within the scope of payment arrangements based on post-paid account and deposit in cash of the Brazilian Payments System (“SPB”).
This Resolution entered into force on the date of its publication.
Read BCB Resolution No. 321 in full.
BCB Resolution No. 323, June 14, 2023
Amends BCB Resolution No. 229 of May 12, 2022, which establishes the procedures for calculating the share of risk-weighted assets (“RWA”) relating to credit risk exposures subject to the calculation of the capital requirement using a standardized approach (“RWACPAD”), provided for in CMN Resolution No. 4,958, of October 21, 2021, and BCB Resolution No. 200, of March 11, 2022.
Finally, paragraph 1 of art. 31 of BCB Resolution No. 229 of 2022 was repealed.
This Resolution entered into force on July 01, 2023.
Read BCB Resolution No. 323 in full.
BCB Resolution No. 324, June 14, 2023
Amends Circular No. 3,809 of August 25, 2016, which establishes procedures for the recognition of mitigating instruments in calculating the share of RWA relating to credit risk exposures subject to the calculation of the capital requirement using a standardized approach (“RWACPAD”) provided for in CMN Resolution No. 4,958, of October 21, 2021, and BCB Resolution No. 200, of March 11, 2022.
According to Vote No. 99/2023-BCB, of June 14, 2023, the new features brought by the Resolution are intended to include in the mitigation rule innovations of the Basel Committee on Banking Supervision (“BCBS”), contained in the document “Basel III: Finalising post-crises reforms“, published in December 2017, known as “Basel III“. In addition, the new proposal introduces necessary updates designed to align the mitigation rules with the new form of calculating the RWACPAD share, introduced by BCB Resolution No. 299, of May 12, 2022, in line with Basel III.
Finally, the following are repealed:
(i) 1 of BCB Resolution No. 239, of September 01, 2022, regarding the text that amends art. 18 of Circular No. 3,809, of 2016;
(ii) the following provisions of Circular No. 3,809, 2016: (a) item VI of paragraph 1 of art. 2; (b) paragraph 4 of art. 4; (c) the sole paragraph of art. 6; (d) items “c”, “d” and “e” of item IV of paragraph 2 of art. 9; and (e) item III of art. 16.
This Resolution:
(i) entered into force on the date of its publication, regarding the provisions of art. 2, item I;
(ii) will enter into force on October 01, 2023, regarding article 1, in the text that amends paragraph 6 of art. 9 of Circular No. 3,809, of 2016; and
(iii) entered into force on July 01, 2023, regarding the other provisions.
Read BCB Resolution No. 324 in full.
BCB Resolution No. 325, June 14, 2023
Amends BCB Resolution No. 100, of June 02, 2021, which consolidates the procedures for the submission of daily information regarding total exposure in gold, foreign currencies and in transactions subject to exchange rate variation and to shares relating to the market risk of RWA.
This Resolution:
(i) will enter into force on October 01, 2023, regarding art. 1, in the text that amends sections II and III of art. 2 of BCB Resolution No. 100, 2021; and
(ii) entered into force on July 01, 2023, regarding the other provisions.
Read BCB Resolution No. 325 in full.
BCB Resolution No. 326, June 14, 2023
Amends BCB Resolution No. 69 of February 10, 2021, which alters and consolidates the procedures for the submission of information regarding the establishment of limits and regulatory standards.
This Resolution:
(i) will enter into force on October 01, 2023, regarding art. 1, in the text that amends sections II and III of art. 2, III, sections IV and V of art. 3 and paragraph 3 of art. 4 of BCB Resolution No. 69 of 2021; and
(ii) entered into force on July 01, 2023, regarding the other provisions.
Finally, the following provisions of BCB Resolution No. 69 were repealed:
(i) sole paragraph of art. 2; and
(ii) sole paragraph of art. 4.
Read BCB Resolution No. 326 in full.
BCB Resolution No. 327, June 14, 2023
Amends BCB Resolution No. 207 of March 22, 2022, which consolidates and alters regulatory acts relating to the submission of information about the control of exposure to liquidity risk and the Short-Term Liquidity (“LCR”) index.
Finally, the following provisions of BCB Resolution No. 207, of 2002, were repealed:
(i) sole paragraph of art. 2; and
(ii) sole paragraph of art. 4.
This Resolution entered into force on July 01, 2023.
Read BCB Resolution No. 327 in full.
BCB Resolution No. 328, June 14, 2023
Amends BCB Resolution No. 84, of March 31, 2021, which consolidates the procedures for the submission of information regarding market risk exposures, interest rate variation risk on instruments listed in the banking portfolio (“IRRBB”) and market risk exposures related to the calculation of RWA, used to calculate the minimum requirements for Level I Reference Equity (“PR’), Core Capital and Additional Core Capital.
This Resolution:
(i) will enter into force on October 01, 2023, regarding art. 1, in the text that amends sections II and III of art. 2 of BCB Resolution No. 84, 2021; and
(ii) entered into force on July 01, 2023, regarding the other provisions.
Finally, the sole paragraph of art. 2 of BCB Resolution No. 84 of 2021was repealed.
Read BCB Resolution No. 328 in full.
BCB Resolution No. 331, June 27, 2023
Provides for the Social, Environmental and Climate Responsibility Policy (“PRSAC”) to be established by a prudential conglomerate classified as Type 3, and for the actions relating to its effectiveness.
The Resolution establishes that the leading institution of a prudential conglomerate classified as Type 3 and framed within Segment 2 (S2), Segment 3 (S3), Segment 4 (S4) or Segment 5 (S5), as provided for in BCB Resolution No. 197, of March 11, 2022, must establish the PRSAC and implement measures accordingly, which must be:
(i) proportional to the business model, to the nature of operations and to the complexity of the products, services, activities and processes of the conglomerate; and
(ii) suitable for the size and importance of the exposure to social, environmental and climate risks, provided for in BCB Resolution No. 265, of November 25, 2022.
In addition, Resolution No. 331/2023 defines the PRSAC as a set of principles and guidelines of social, environmental and climate nature, which must be followed by the prudential conglomerate classified as Type 3 while running its business, activities and processes, as well as in the relationship with its stakeholders.
This Resolution:
(i) entered into force on the date of its publication regarding art. 14; and
(ii) will enter into force on January 01, 2024, regarding the other provisions.
Read BCB Resolution No. 331 in full.
BCB Resolution No. 332, June 29, 2023
Amends BCB Resolution No. 265, of November 25, 2022, which provides for the risk management structure, the capital management structure and the disclosure policy of prudential conglomerate classified as Type 3 within Segment 2 (S2), Segment 3 (S3) or Segment 4 (S4), and BCB Resolution No. 201, of March 11, 2022, which provides for the optional simplified methodology for calculating the minimum requirement of Simplified Reference Equity (“PRS5”) for prudential conglomerates classified as Type 3, on the requirements for choosing this methodology and on the simplified structure of continuous risk management.
This Resolution enter into force:
(i) on January 01, 2024, regarding the following provisions related to BCB Resolution No. 265 of 2022: (a) amendments to art. 4; (b) inclusion of Section IX and articles 46a and 46b, which are part of it; and
(ii) on January 01, 2025, regarding the other provisions.
Read BCB Resolution No. 332 in full.
BCB Normative Instruction No. 389, June 06, 2023
Provides detailed information on the accounting entries to be used in the calculation of the share of risk-weighted assets relating to the payment services provided (RWASP) by a single payment institution, by a Type 2 conglomerate and by a Type 3 conglomerate framed within Segment 5 (S5).
This Normative Instruction establishes that, when calculating the RWASP share related to the payment services provided under section I of art. 6 of BCB Resolution No. 198 and section IV of art. 9 of BCB Resolution No. 201 (both of March 11, 2022), the balances of accounting entries from the Accounting Standard for Institutions Regulated by BCB (Cosif) must be used.
This Normative Instruction entered into force on July 01, 2023.
Read BCB Normative Instruction No. 389 in full.
BCB Normative Instruction No. 390, June 06, 2023
Provides detailed information on the composition of the Operational Risk Exposure Indicator (“IE”).
The regulation provides for the sum of amounts relating to:
(i) financial intermediation revenues;
(ii) revenues from the provision of services; and
(iii) financial intermediation expenses.
In addition, the regulation establishes that institutions subject to the calculation of RWASP, as provided for in paragraph 3 of art. 3 of CMN Resolution No. 4,958, of 2022, and BCB Resolution No. 200, of 2022, must deduct from revenues derived from the provision of services, referred to in art. 3, the amounts corresponding to the following payment services:
(i) accreditations;
(ii) initiation of Payment Transactions;
(iii) Instant Payments (“PIX”);
(iv) sale or rent of equipment and connectivity; and
(v) other services related to payment transactions.
The Normative Instruction also provides that revenues related to the service of issuing post-paid payment instruments (“CPOS”) must be included in the calculation of the IE, as provided for in Circular No. 3,640, art. 3, paragraph 5.
Finally, the following regulations were repealed:
(i) Circular Letter No. 3,316, of April 30, 2008; and
(ii) Circular Letter No. 3,765, of April 24, 2016.
This Normative Instruction entered into force on July 01, 2023.
Read BCB Normative Instruction No. 390 in full.
BCB Normative Instruction No. 392, June 13, 2023
Announces the schedule for checkpoints of the process for account holders to provide notification of the Open Finance Webhook API, whose preliminary (beta) specifications were published on the Open Finance portal on May 15, 2023. Account Holders will be required to comply with the following schedule:
(i) June 19, 2023 – Deadline for running the tests on the compliance engine and achieving success in at least 25% of the test modules.
(ii) July 03, 2023 – Deadline for running the tests on the compliance engine and achieving success in at least 50% of the test modules.
(iii) July 13, 2023 – Deadline for running the tests on the compliance engine and achieving success in at least 75% of the test modules.
(iv) July 26, 2023 – Deadline for running the tests on the compliance engine and achieving success in 100% of the test modules.
(v) August 03, 2023 – Deadline for application for functional certification.
(vi) August 18, 2023 – Final date for obtaining certification and initiation of production.
In turn, in order to obtain the calculation of success:
(i) at the discretion of the Open Finance Governance Structure (Structure), specific test modules may be disregarded at a given deadline (for example, due to recent and/or planned significant changes); and
(ii) results obtained with the latest engine version available at the date of execution will be considered, which can be based on a beta version, release candidate version or stable version of the
This Normative Instruction entered into force on the date of its publication.
Read BCB Normative Instruction No. 392 in full.
BCB Normative Instruction No. 394, June 23, 2023
Amends Normative Instruction No. 101, of April 26, 2021, which establishes the procedures for the submission of information on market risk exposures, interest rate variation risk on instruments listed in the banking portfolio (“IRRBB”) and exposures related to the calculation of RWA for market risk, used for calculating the minimum requirements for Level I Reference Equity (“PR”), Core Capital and Additional Core Capital, referred to in BCB Resolution No. 84, of March 31, 2021.
This Normative Instruction:
(i) will enter into force on October 01, 2023, regarding art. 1, in the text that amends sections II and III of art. 3 of BCB Normative Instruction No. 101, 2021; and
(ii) entered into force on July 01, 2023, regarding the other provisions.
Read BCB Normative Instruction No. 394 in full.
BCB Normative Instruction No. 395, June 23, 2023
Amends Normative Instruction No. 118, of June 24, 2021, which consolidates the procedures for the submission of daily information regarding the total exposure in gold, foreign currencies and transactions subject to exchange rate variation and the calculation of RWA for market risk, used for calculating the minimum requirements for Level I Reference Equity (PR), Core Capital and Additional Core Capital, and amends the instructions for filling out and the layout of the document coded 2011 – Daily Report for Monitoring Capital Requirement Shares and Operating Limits (DDR).
Read BCB Normative Instruction No. 395 in full.
BCB Normative Instruction No. 397, June 29, 2023
Amends BCB Normative Instruction No. 103, of April 2021, which discloses procedures, documents, deadlines and information necessary for the submission of authorization requests relating to the operation of payment institutions and the provision of payment services by other institutions authorized to operate by BCB, the form and terms to be followed in the development of the plan for the termination of activities relating to the services and payments provided by payment institutions.
This Normative Instruction entered into force on July 01, 2023.
Read BCB Normative Instruction No. 397 in full.
National Monetary Council
CMN Resolution No. 5,089, June 29, 2023
Amends Resolution No. 4,557, of February 23, 2017, which provides for the risk management structure, the capital management structure and the information disclosure policy, and Resolution No. 4,606 (of October 19, 2017), which provides for the optional simplified methodology used to calculate the minimum requirement of Simplified Reference Equity (“PRS5”), the requirements for choosing this methodology and the additional requirements for the simplified structure of continuous risk management.
This Resolution will enter into force:
(i) on January 01, 2024, regarding the following provisions of Resolution n° 4,557, 2017: (a) amendments to art. 6; (b) inclusion of Section IX and articles 38-G and 38-H, which are part of it; (c) repeal of items II and III of paragraph 3 of art. 21 and of item I of paragraph 3 of art. 23; and
(ii) on January 01, 2025, regarding the other provisions.
Read CMN Resolution No. 5,089 in full.
ALSO CHECK OUT: NEWS | ADMINISTRATIVE AND JUDICIAL DECISIONS
BCB analyzes Digital Brazilian Real and “tokenization” of the economy
The Brazilian Central Bank (“BCB”) has recently published the “Digital Brazilian Real: a Platform for Tokenized Finance” study, which discusses how the Brazilian Digital Real and tokenized versions of digital currencies issued by entities that are regulated by the BCB can meet the demand for a digital representation of liquidity in a “tokenized” finance environment. The analysis can be accessed in Box 9 of the Banking Economy Report (“REB”) of 2022, published on June 06, 2023.
In Box 9, it is particularly emphasized that “the transition to a digital economy, where tokens play a leading role, has accelerated. The BCB is in charge of setting a course of actions to ensure that this transition is carried out as orderly as possible, without affecting financial stability.” It was also stressed that digital currencies issued by central banks (Central Bank Digital Currency – CBDC), as a mechanism to facilitate innovation in financial markets, allow the incorporation of new technologies and new business models that have the potential to meet the population’s demand for originally digital means of settlement, similar to those available in the digital asset environment.
Read the Box 9 – Digital Brazilian Real: A Platform for Tokenized Finance in full.
BCB and Ibama will share databases on rural credit and environmental information
The Central Bank of Brazil (“BCB”) and the Brazilian Institute for the Environment and Renewable Natural Resources (“Ibama”) signed a Technical Cooperation Agreement (“ACT”) that allows the exchange of information on rural credit transactions and the Agricultural Activity Guarantee Program (Proagro) and various databases managed by Ibama, in line with the development of the Rural Credit Bureau, one of the priorities of the Agenda BC#, in the sustainability dimension.
Through the Rural Credit Bureau, the BCB will ensure compliance of rural credit operations of the National Financial System (“SFN”) with the rules of the National Monetary Council (“CMN”) and other legal and non-legal regulations.
The ACT entered into between BCB and Ibama will also provide greater efficiency to rural credit oversight measures (through the cross-checking of databases provided by the institution) and will support Ibama’s actions to prevent and repress environmental offenses.
Pix Forum releases expected schedule for launching Automatic Pix
The Central Bank of Brazil (“BCB”) held the 19th plenary meeting of the Pix Forum, a permanent advisory committee that coordinates several market agents in the participatory and transparent construction of the BCB’s instant payment service. The main highlight was Pix Automático (“Automatic Pix”), scheduled to be released in April 2024.
The Automatic Pix will enable recurring payments automatically, with prior authorization from the paying user. Product development is based on three pillars:
(i) security;
(ii) convenience to users (payers and recipients); and
(iii) flexibility, in order to allow its use in multiple business models, whether digital or by physical establishments.
The schedule should comply with the following dates and events:
(i) June to August/2023: specification.
(ii) September/2023: publication of rules (Pix regulation and manuals).
(iii) October/2023 to February/2024: system development.
(iv) March/2024: tests.
(v) April/2024: launch.
As a result of the launch, the scope of alternatives available for companies of all types and segments to receive recurring payments will be expanded, which will also bring greater competitiveness to the sector, since the model is open and can be offered to companies by any institution participating in Pix, from banks to fintechs and initiators. The companies, in turn, will be able to incorporate this new method of payment into their businesses in multiple ways, considering that the product was developed in a way that allows several alternatives, enabling several possibilities of use.
In addition, as well as the traditional Pix, the Automatic Pix will be free of charge to the payer and may be charged upon receipt by the companies.
The paying users will have at their disposal a number of features to manage recurring payments, such as setting a maximum limit on the installment amount of to be debited, with the possibility of canceling the authorization at any time. Finally, the improvement of rules related to outsourcing, as well as aspects related to the (permanent) security of Pix are also on the agenda of this year’s Pix Forum.
Learn more about the judgment on the application of the Selic rate or default interest of 1% per month
In March 2023, the Special Court of the Brazilian Superior Court of Justice (“STJ”), initiated the trial of Special Appeal No. 1,795,982, which can affect millions of proceedings, given that it discusses the possibility of applying the Selic rate for the correction of civil debts, as opposed to the system of inflation adjustment added to the default interest of 1% per month.
The discussion, which revolves around the interpretation of article 406 of the Brazilian Civil Code (“amounts will be fixed according to the rate in force for late payment of taxes due to the National Treasury“), diverges as to whether the interest rate or the default interest of 1% per month should be applied, as provided for in article 161 of the National Tax Code (“CTN”).
On March 01, 2023, the Reporting Justice voted against the use of the Selic rate, on the grounds that it would not be the appropriate criterion, since the Selic rate has not compensated for the devaluation of the currency in the last 20 years, thus establishing a situation of negative interest or default.
In the second part of the judgment, on June 07, 2023, Justice Raul Araújo disagreed with the Report by submitting a vote in favor of using the Selic rate, as there would be no reason to impose a default interest rate of 1% per month on the debtor of civil debts, which is why article 406 of the CTN should be interpreted in a literal manner.
Given its importance, the outcome of the trial will affect virtually all ongoing civil proceedings that involve convictions or pecuniary debts.
Read the Client Alert published on this topic.
CMN and BCB: new rules to prevent fraud
On June 09, 2023, our partner, Fabio Braga, in an interview published in Valor Econômico, discussed the new rules for the prevention of fraud committed through the use of channels for provision and availability of financial and payment services and products, given the position of monetary authorities so as to seek more integration among all institutions authorized to operate by the Central Bank of Brazil (“BCB”), considering Joint Resolution No. 6, of May 23, 2023.
In order to support and strengthen the internal procedures of institutions aimed at detecting and preventing the occurrence of fraud, the measure establishes the creation of a secure electronic system so that regulated entities can share data and information about fraud and scams.
According to Braga, the measure is a response to the dramatic increase in cases of fraud that have spread through the market in the wake of new technologies for financial transactions, such as Pix, an instant payment arrangement set up by BCB itself.
In addition, the various methods of scams and their expansion among all types of institutions include identity theft, the theft of amounts in deposit and payment accounts by hackers through transactions carried out by fraudsters, as well as events of “cyber theft” of data and information from users of all types of financial services.
In view of this situation, it became absolutely necessary to adopt the measure at issue, aiming to ensure the reliability of the financial system, security, transparency and efficiency of the new methods provided to facilitate access and use of products and services made available to the public through the adoption of ultra-innovative technologies.
ALSO CHECK OUT: REGULATION | ADMINISTRATIVE AND JUDICIAL DECISIONS
ADMINISTRATIVE AND LEGAL DECISIONS
Superior Court of Justice
Attachment can fall on acquisitive rights of unregistered promissory purchase and sale agreement
The Third Panel of the Superior Court of Justice (“STJ”) decided that an attachment can fall on acquisition rights arising from a promissory purchase and sale agreement, even when the agreement is not registered and if the creditor is the owner and seller of the property subject to attachment.
The reporting judge of the case, Justice Nancy Andrighi, noted that the measure requested through the special appeal can fall on any equity rights, without any legal reservation or special requirement in relation to the acquisitive rights resulting from the promissory purchase and sale, since the real right of acquisition arises with the registration of the agreement. However, before this stage the personal right derived from the contractual relationship already exists, and the payment of which can be required between the parties, according to the consolidated position of Precedent 239 of the STJ.
In addition, the judge emphasized that, upon the attachment of the acquisition rights of the debtor, if the debtor has not filed a motion to stay execution or if such motion has been rejected, article 857 of the Code of Civil Procedure (“CPC”) of 2015 determines that the creditor is subrogated to the rights of the debtor until the claim is settled. The judge also emphasized that not allowing the attachment on the acquisition rights can place the creditor/commited seller at a disadvantage in relation to other creditors, since it is through the act of constriction that the preemptive right in the execution arises, under the terms of article 797 of the CPC.
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