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

November 7th, 2024

REGULATIONS

Brazilian National Monetary Council

CMN Resolution No. 5,182, October 31, 2024

The Brazilian National Monetary Council (“CMN”) published Resolution No. 5,182, of October 31, 2024, amends Resolution No. 4,860, of October 23, 2020, which provides for the establishment and operation of an organizational ombudsman department by the institutions authorized to operate by the Central Bank of Brazil (“BCB”).

CMN Resolution No. 5,182 entered into force on the date of its publication.

Read CMN Resolution No. 5,181 in full.

CMN Resolution No. 5,181, October 23, 2024

CMN Resolution No. 5,181, of October 23, 2024, amends Section 7 (“Transitional Regulations”) of Chapter 3 (“Operations”) integrating the Rural Credit Manual (“MCR”) to authorize the renegotiation of rural credit operations in municipalities within the state of Rio Grande do Sul that have been affected by floods, heavy rainfalls, torrents, windstorms, landslides, or inundations.

CMN Resolution No. 5,181 entered into force on the date of its publication.

Read CMN Resolution No. 5,181.

Central Bank of Brazil

BCB Resolution No. 426, October 16, 2024

BCB Resolution No. 426, of October 16, 2024, amends BCB Resolutions No. 145, of September 24, 2021, No. 188, and No. 189, of February 23, 2022, which provide for the regulations on compulsory deposits. In addition, the resolution revokes Circular No. 3,380, of March 20, 2008, which provides for the applicability of prerogatives and obligations for foreign exchange, investment, and multiple banks without a trading portfolio.

BCB Resolution No. 426 will enter into force on January 01, 2025.

Read BCB Resolution No. 426 in full.

BCB Resolution No. 425, October 16, 2024

BCB Resolution No. 425, of October 16, 2024, amends the regulation attached to BCB Resolution No. 1, of August 12, 2020, which regulates the operation of the Pix payment arrangement, to adjust the provisions relating to the processes of membership, orderly exit, and exclusion from the arrangement, and to further adjust – for the sake of greater clarity – the wording of the provisions relating to the blocking of accounts, infringement notifications, rejection of transactions and the offer of Scheduled Pix.

BCB Resolution No. 425 entered into force on the date of its publication, taking effect on the following dates:

1. as of November 01, 2024, for the provisions amending Art. 89 of the regulation attached to BCB Resolution No. 1, of August 12, 2020, published in the Federal Official Gazette (“DOU”) of August 13, 2020; and
2. immediately for the remaining provisions.

Read BCB Resolution No. 425 in full.

BCB Resolution No. 417, October 02, 2024

BCB Resolution No. 417, of October 02, 2024, provides for the operational procedures under the BCB involving the Special Regime for the General Regularization of Foreign Exchange and Tax Assets (“General RERCT”), provided for by Law No. 14,973, of September 16, 2024.

Under the new regulation, the Special Secretariat of the Brazilian Federal Revenue (“RFB”) will submit a copy of the single regularization statement to the BCB – under the terms of Article 12 of Law No. 14,973, of September 16, 2024 – as provided for in Article 5, § 1, of RFB Normative Instruction (“IN”) No. 2,221, of September 19, 2024, of the Special Secretariat of the RFB.

In addition, the resolution also establishes that foreign currency funds of any kind included in the single subscription statement to the General RERCT must be reported in the annual declaration of Brazilian capital held abroad for December 31, 2024, in line with the general regulations established in BCB Resolution No. 279, of December 31, 2022.

Finally, the table “Brazilian capitals” addressed in Annex IV of BCB Resolution No. 277, of December 31, 2022, published in the DOU on December 31, 2022, is now effective as provided for in Annex I to this resolution.

BCB Resolution No. 417 entered into force on the date of its publication.

Read BCB Resolution No. 417 in full.

BCB IN No. 532, October 24, 2024

BCB IN No. 532, of October 24, 2024, amends BCB IN No. 385, of May 30, 2023, which updates the standardized tables for publishing the “Pillar 3 Report”, introducing the following tables in a new section with comparisons between the risk-weighted asset (“RWA“) calculated according to the Standardized Approach and the Internal Models Approach:

1. Table CMS1 – Comparison between the RWA calculated in the Standardized Approach and in the Internal Models Approach by type of risk; and
2. Table CMS2 – Comparison between credit risk exposures from the calculation of the capital requirement using the Standardized Approach (RWACPAD) and credit risk exposures using internal credit risk classification systems (IRB approaches) authorized by the BCB (RWACIRB), by category, subcategory and portfolio.

The regulation also updates tables OV1, MR1 and MR2 by adding new instructions for completion as well as lines to incorporate the required capital components for exposures to the credit risk of financial instruments framed in the trading portfolio (RWADRC) and exposures to the risk of variation in the value of derivative financial instruments as a result of variations in the creditworthiness of the counterparty (RWACVA) in the market risk portion.

BCB Resolution No. 532 will enter into force on December 01, 2024.

Read BCB Resolution No. 532 in full.

BCB IN No. 529, October 04, 2024

BCB IN No. 529, of October 04, 2024, amends BCB IN No. 243, of March 16, 2022, which lays down the procedures to be observed for direct participation in the Instant Payments System (“SPI”), for opening the Instant Payments Account (“PI Account”), and further sets the maximum deadlines for validating and settling instant payment orders, as addressed in the regulation attached to BCB Resolution No. 195, of March 03, 2022.

Read BCB Resolution No. 529 in full.

NEWS

BCB publishes regulation for the second phase of the Drex Pilot – registrations open until November 29, 2024

On October 10, 2024, the BCB established the regulations and procedures for the public call to submit business case proposals for testing within the scope of the second phase of the Drex Pilot, and assigns the necessary powers to the Executive Management Committee (“CEG”) of the Drex Pilot through BCB Resolution No. 423. The resolution amends the CEG Regulations for the Real Digital Platform (“Pilot RD”) and the Pilot RD Regulations, Annexes I and II to BCB Resolution No. 315 of April 27, 2023. In this phase of the Pilot Project, the BCB seeks to test use cases based on services developed and managed by the platform’s participants, with a view to designing the governance strategy for the smart contracts implemented, as well as assessing their compliance with the regulations.

Institutions operating in the financial market that are capable of testing the proposed business model are authorized to participate in the Pilot Project, including in transactions involving issuances, redemptions, or asset transfers, and to simulate the financial flows arising from trading events, if applicable.

The proposed business cases must be described in up to five pages – apart from the cover page –, and a technical representative must be appointed. Projects must have the following components: (1) cover page identifying the proposing consortium and the expected deadline for implementing the case; and (2) description of the business case clearly addressing:

1. the expected positive impacts on the financial system;
2. the need for privacy solutions to ensure compliance with the General Data Protection Law (“LGPD”), banking secrecy, and other applicable laws;
3. the test methodology of the proposed case; and
4. any legal or regulatory impediments already identified for production of the proposed case, as well as other requirements by the BCB, as detailed in Annex II to BCB Resolution No. 315, of April 27, 2023, as amended.

The CEG can request further information during the selection process. In addition, there is no initial limit as to the number of business cases that can be selected for testing, the final number being determined on the basis of the applications received and the BCB’s technical and operational capacity.

Proposals for participation in the Pilot Project can be submitted via e-mail (piloto.drex@bcb.gov.br) from October 14 to November 29, 2024.

Read our client alert on BCB Resolution No. 423, of October, 2024.

Read the BCB article on the Drex Pilot Regulation and the registrations for the Second Phase in full.

BCB consults society on individual prudential requirements and improvements to the Leverage Ratio

Recently, the BCB published Public Consultation Notice (“ECP”) No. 106, providing for the draft resolutions of the CMN to improve the regulation of prudential conglomerates. The aim was to address specific circumstances, change the general regulations for preparing and submitting accounting documents to the BCB, publish BCB’s draft resolution updating the scope and calculation methodology of the Leverage Ratio (“RA”), and lay down the minimum RA requirements of institutions under the BCB’s authority.

In short, these proposals are underpinned by:

1. Amendment to Resolution No. 4,557, of February 23, 2017, which introduces policies, strategies, and processes in the liquidity risk management structure ensuring the timely liquidity transfer between institutions integrating the same prudential conglomerate;
2. Amendment to Resolution No. 4,401, of February 27, 2015, to apply minimum limits for the Short-Term Liquidity (“LCR”) indicator on a sub-consolidated basis, encompassing the member entities of the prudential conglomerate with jurisdiction in Brazil;
3. Amendment to Resolution No. 4,615, of November 30, 2017, to introduce minimum RA requirements, on an individual basis, for materially relevant institutions in segments 1 (S1) and 2 (S2) under the CMN’s authority;
4. Amendment to CMN Resolution No. 4,911, of May 27, 2021, to require the output of the information required to comply with the new RA requirement, if conducted on a sub-consolidated basis; and
5. BCB resolution updating the scope and methodology for calculating the RA and extending the scope of the minimum RA requirement to all the institutions framed in the S2 segment under the BCB’s authority.

Interested parties can submit their contributions until November 22, 2024, through: (i) the option “Include suggestion” at the end of the webpage entitled “Consultation Details” on the BCB’s Public Consultations System; or (ii) the BCB’s Prudential and Exchange Regulation Department (“DEREG”) e-mail address: prudencial.dereg@bcb.gov.br.

Read the article in full.

Read ECP Resolution 106 in full.

BCB publishes ECP on proposed regulation regarding the provision of BaaS services

On October 29, 2024, the BCB submitted for public consultation the proposed regulation (through a joint resolution of the CMN and the BCB) of partnership models for providing financial or payment services, known as Banking as a Service (“BaaS”), by financial, payment institutions, and other institutions authorized to operate by the BCB (“ECP No. 108/2024”).

The proposal aims to provide more security, efficiency, competitiveness, solidity, risk prevention and mitigation for the products and services offered by regulated institutions, as well as for contracting their services and clients within the scope of BaaS.

The regulation establishes the concepts, responsibilities, and conditions for the provision of BaaS services, including the opening and maintenance of accounts, payment services, credit offers, among others. The BaaS provider will be responsible for identifying and qualifying customers, as well as preventing fraud and money laundering.

However, the proposal excludes from the Baas concept: (i) the provision of customer services in the BaaS service provider’s regulation; (ii) data processing, storage, and computing in the cloud; and (iii) partnerships within the scope of Open Finance. In addition, the regulation prohibits credit unions, leasing companies, and other entities from operating within the scope of BaaS.

ECP No. 108/2024 highlights special interest services, such as the accreditation of payment instruments, the initiation of payment transactions (“ITP”), international transfers (“eFX”), as well as the offering and contracting of credit operations.

Read our client alert on ECP No. 108/2024.

Read the proposal submitted to public consultation in full.