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

REGULATION

Central Bank of Brazil (“BC”)

BCB Resolution No. 371, March 26, 2024

BCB Resolution No. 371, of March 26, 2024, amends BCB Resolution No. 308, of March 28, 2023, to establish a quorum for making decisions on the drafting and amendment of the convention for exercising registration and centralized deposit activities involving real estate receivables.

Articles 12, 14 and 17 of BCB Resolution No. 308 were amended. According to the new regulation, changes to the convention and its corresponding manuals must observe the following quorums:

(i) a qualified majority of 2/3 of the institutions able to participate in the drafting or amendment process, in relation to the changes in matters involving (a) the interoperability tariff structure; (b) the rights and obligations of the convention participants; and (c) the interoperability governance structure; and

(ii) an absolute majority of institutions able to participate in the drafting or amendment process, in other cases.

It is worth highlighting that the provisions of the resolution also apply to the convention’s approval procedures under examination by the BC.

This resolution entered into force on April 01, 2024.

Read BCB Resolution No. 371.

BCB Resolution No. 372, March 26, 2024

BCB Resolution No. 372, published on March 26, 2024, amends BCB Resolution No. 339, of August 24, 2023, to establish a quorum for making decisions on the drafting and amendment of the convention for exercising bookkeeping, registration and centralized deposit activities of book duplicates.

Articles 30, 33, 35 and 36 of BCB Resolution No. 339 were amended. According to the new regulation, changes to the convention and its corresponding manuals must observe the following quorums:

(i) a qualified majority of 2/3 of the institutions able to participate in the drafting or amendment process, in relation to changes in matters relating to: (a) the interoperability tariff structure; (b) the rights and obligations of the convention participants; and (c) the interoperability governance structure; and

(ii) an absolute majority of institutions able to participate in the drafting or amendment process, in other cases.

It is worth highlighting that the provisions of this resolution also apply to the convention’s approval procedures under examination by the BC.

This resolution entered into force on April 01, 2024.

Read BCB Resolution No. 372.

BCB Resolution No. 373, March 26, 2024

BCB Resolution No. 373, of March 26, 2024, amends BCB Resolution No. 264, of November 25, 2022, to establish a quorum for making decisions on the amendment of the convention between registration entities.

Articles 18 and 23 of BCB Resolution No. 264 were amended. According to the new regulation, changes to the convention and its corresponding manuals must observe the following quorums:

(i) a qualified majority of 2/3 of the institutions able to participate in the amendment process, in relation to changes in matters involving: (a) the interoperability tariff structure; (b) the rights and obligations of the convention participants; and (c) the interoperability governance structure; and

(ii) an absolute majority of institutions able to participate in the amendment process, in other cases.

The provisions of this resolution also apply to the convention’s approval procedures under examination by the BC.

This resolution enters into force on May 02, 2024.

Read BCB Resolution No. 373.

BCB Resolution No. 374, March 27, 2024

BCB Resolution No. 374, of March 27, 2024, provides for BC’s Liquidity Financial Lines (LFL), approves the regulations governing its operation and repeals BCB Resolution No. 110, of 2021.

The following regulations governing the operation of LFL are approved by BCB Resolution No. 374/2024, as set out in its Annexes I to IV:

(i) Annex I – provides for the subject, categories, access, contracting and other general aspects of loan operations carried out under LFL;

(ii) Annex II – provides for the admissibility, eligibility, pricing, discounts and other aspects relating to debentures and commercial notes offered as collateral for generating credit limits within the scope of LFL;

(iii) Annex III – provides for the admissibility of credit operations and eligibility, pricing, discounts and other aspects relating to bank credit notes offered as collateral for generating credit limits within the scope of LFL; and

(iv) Annex IV – provides for the financial limits on credit, withdrawal of guarantees, recomposition of these limits and the procedures for contracting and offsetting loan operations carried out under the LFL.

This resolution enters into force: (i) on May 02, 2024, subject to the provisions of section II; and (ii) on July 01, 2024, in relation to the provisions of Article 7, which establishes that BCB Resolution No. 110, of 2021, is repealed.

Read BCB Resolution No. 374.

BCB Normative Instruction No. 457, March 19, 2024

BCB Normative Instruction No. 157, of March 19, 2024, amends BCB Normative Instruction No. 443, of December 20, 2023, which publishes the regulations and the schedule for control points involved in the process of changing the Open Finance security profile.

This normative instruction entered into force on the date of its publication.

Read BCB Normative Instruction No. 457.

BCB Normative Instruction No. 459, March 26, 2024

BCB Normative Instruction No. 459, of March 26, 2024, amends BCB Normative Instructions No. 268, No. 270, No. 271, No. 273 and No. 275, all of which published on April 01, 2022, as well as BCB Normative Instruction No. 315, of October 27, 2022, to create and amend the accounting items of the list of accounts integrating the Accounting Standard of Institutions Regulated by the Central Bank of Brazil (COSIF).

This normative instruction comes into force on May 01, 2024.

Read BCB Normative Instruction No. 459.

BCB Normative Instruction No. 460, March 28, 2024

BCB Normative Instruction No. 460, of March 28, 2024, amends the wording of Circular Letter No. 3,853, of December 19, 2017, and Normative Instruction No. 389, of June 06, 2023, detailing, respectively, the accounting items to be used in the calculation of the share of risk-weighted assets in simplified form (RWAS5), with regard to credit risk, and the accounting items to be used in the calculation of the share of risk-weighted assets regarding payment services rendered (RWAsp).

This normative instruction entered into force on the date of its publication.

Read BCB Normative Instruction No. 460.

National Monetary Council (“CMN”)

CMN Resolution No. 5,121, March 01, 2024

CMN Resolution No. 5,121, of March 01, 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”).

This resolution included paragraphs 1 and 2 in Article 2, with clarification regarding the definition of “related party”, in accordance with the meaning defined in the Brazilian Accounting Pronouncements Committee, approved by the CVM, and with “debt securities”. The amendment aimed to clarify that contracts or obligations of a commercial nature, such as duplicates, lease contracts, purchase and sale contracts, and usufruct contracts related to real state, can be used as backing for CRA and CRI transactions.

In addition, the resolution also amended the wording of section I of Article 3 and its corresponding paragraph “b”, in order to, respectively:

(i) allow debt securities whose issuers are not characterized as debtors, co-debtors or guarantors to also constitute backing for CRAs and CRIs, such as the Real Estate Credit Note (“CCI”); and

(ii) restrict the application of the new regulation to financial institutions or entities authorized to operate by the BC, entities that integrate a prudential conglomerate, or their respective subsidiaries.

This resolution entered into force on the date of its publication.

Read our client alert on CMN Resolution No. 5,118/2024.

Read CMN Resolution No. 5,121.

ADMINISTRATIVE AND LEGAL DECISIONS

Superior Court of Justice (“STJ”)

SELIC rate must be applied to adjust civil debts, according to the STJ

The Special Court of the STJ decided, under Special Appeal (REsp) No. 1,795,982/SP, by majority, that the SELIC rate is the index that must be applied to adjust civil debts, a discussion that revolves around the interpretation of Article 406 of the Brazilian Civil Code.

Applying the SELIC rate to adjust these debts was the (consolidated) opinion adopted by the Second Panel in numerous cases, ruling that the rate was composed of legal interest and pecuniary adjustment.

According to this provision: “In cases in which the default interest is not agreed upon, or is not stipulated, or when it is determined by law, it must be fixed at the rate in force for the default payment of taxes due to the National Treasury”. The divergence revolved around the potential reference to the SELIC rate, used for updating federal taxes, or to default interest of 1% per month, provided for in the Brazilian Tax Code (CTN).

According to Minister Raul Araújo, there is no reason to impose a high rate on debtors, as SELIC is the index that governs the Brazilian financial system and there is no doubt as to its reference in Article 406 of the Brazilian Civil Code. According to the justice, applying 1% default interest per month in addition to the pecuniary adjustment leads to a situation in which creditors obtain remuneration far above that of any financial investment. In turn, the decision will be valid for all cases in which the default interest had not been agreed upon previously.

Access the decision in full.

Court of Justice of the State of São Paulo (“TJSP”)

TJSP holds that banks cannot be held responsible for fake employee scam

According to the 17^th Private Law Chamber of the TJSP, banks are not responsible for transfers made by clients who were victims of scams involving fake employees of financial institutions. According to the reporting judge, there is no legal or contractual bank obligation to supervise or verify each transaction carried out by users.

This specific case involved an indemnity proceeding filed by a supply distributor against a financial institution. The plaintiff claimed that undue payment transactions had been made from her current account after she was the victim of a scam perpetrated by a fake employee of the financial institution.

At first instance, the bank was sentenced to compensate the plaintiff for the alleged material damage. However, bearing in mind of being a third-party event (a cause that excludes liability), the TJSP fully reversed the lower court’s decision, dismissing the proceeding on appeal filed by the financial institution.

NEWS

BC launches public consultation on climate risks publication

The BC launched Public Consultation No. 100/2024 to update the regulations for publishing the Social, Environmental and Climate Risk and Opportunities Report (GRSAC Report), launched by financial institutions.

This public consultation aims to align measures of the BC to both the international standards and the new requirements agreed upon by the Basel Committee on Banking Supervision (BCBS) involving the banking sector. The public consultation encompasses six major topics:

(i) context and scope of the information published;

(ii) interaction of prudential regulations on publishing information with the standards published by the International Sustainability Standards Board (ISSB);

(iii) climate risk management indicators;

(iv) voluntary pledges and transition plans;

(v) scope of application and deadline for implementation of the regulations; and

(vi) general statements.

Those interested in contributing to the topic have until June 28, 2024, to submit their contributions.

Read the article in full.

Access Public Consultation No. 100/2024.

Open Finance, tokenization, artificial intelligence, and prudential measures: check BC’s 2024 regulatory agenda

The BC announced its 2024 regulatory targets for the National Financial System (SFN). During a press conference, BC’s regulatory officer, Otavio Damaso, highlighted that innovation is essential to improve the effectiveness of numerous aspects involving the financial system, and further stressed the need to deepen the regulatory agenda focused on prudential matters. Damaso also stated that the Open Finance system is a reality and that the BC has already registered approximately 1.4 billion calls on information exchange, millions of consents, in addition to a wide range of products and services on offer.

A major focus in the institution’s regulatory area, in addition to Artificial Intelligence – which is a widely debated topic –, is the tokenization of assets. Given the emergence of a wide array of financial products and services involving tokenization, the BC does not yet plan to create specific regulations on the subject, although it is closely monitoring the process. In addition, regulating the work of virtual asset service providers and implementing Basel III prudential regulations are also considered to be priorities by the BC.

In short, among the key initiatives of BC’s regulatory board, the following topics are worth highlighting: (i) Exchange and Foreign Capital; (ii) Prudential; (iii) Sustainability; (iv) Rural Credit; (v) Innovation; and (vi) Others.

Read the article in full.

Access BC’s 2024 Regulatory Priority List.

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