CNSP and CMN regulate the use of pension funds, personal insurance, and capitalization securities as guarantee for credit operations

The Brazilian National Council for Private Insurance (“CNSP”) and the Brazilian National Monetary Council (“CMN”) published Joint Resolution No. 12/2024 regulating Law No. 14,652/2023. This resolution provides for the use of funds accumulated in open supplementary pension plans, personal insurance plans, and capitalization securities as guarantee for credit operations carried out with financial institutions.

This measure aims to (i) reduce the default level in credit operations – offering financial institutions greater security and, consequently, fostering the provision of credit – and (ii) encourage the creation of pension savings, which is a critical source of funding for long-term projects.

With the new regulation, clients will have greater flexibility in combining the provision of their rights as a source of guarantee with better access conditions to the credit market, without the need to settle their investments. Their positions in relation to these assets can be used as a source of financial coverage in the event of any default regarding the obligations under credit operations, which can be backed by financial funds from open supplementary pension plans, personal insurance plans, and capitalization securities.

This joint resolution clarifies the scope of credit operations that can use these funds as guarantees and further establishes the requirements and obligations for financial institutions to operate in this segment, aiming to provide efficient and safe conditions for clients.

The highlights of the new regulation are as follows:

• Eligible products for use as guarantee for credit operations:
  • Open complementary pension plans with survival coverage structured in variable contribution mode;
  • Personal insurance plans with survival coverage structured in variable contribution mode; and
  • Capitalization securities structured in the traditional mode.
• Permission to use more than one product to guarantee a credit operation and for a single product to guarantee more than one credit operation – with the exception of capitalization securities that do not allow partial redemption and have already been pledged as guarantee.
• The secured amount involved in the credit operation must comply with an economically rational relationship, including a long-term risk, and the conditions for partial release of the secured amount that is blocked must be established in the event of a reduction in the outstanding balance involving such credit operation.
• Any consultation aimed to provide a guarantee depends on the client’s prior and express participation. Clients must be informed of all the characteristics, data, and restrictions within the scope of such operation.
• If there is insurance with death coverage tied to the credit operation, such insurance must be activated by the financial institution as a priority for settling the guarantee.

Another major point raised by this regulation is that insurance companies, open complementary pension entities, or capitalization companies are responsible for maintaining an electronic system managed by a financial market infrastructure that is authorized by the Central Bank of Brazil (“BC”). The system in question will be chosen freely so that information and document intermediation can be submitted within 12 months from publication.

Finally, the resolution also establishes a 90-day deadline for these companies to submit, on their websites, the operational method for granting redemption rights to financial institutions. The granting of guarantees must observe a standardized procedure, with no distinction whatsoever between procedures for different financial institutions and no rejections of applications that comply with the obligations arising from the corresponding legislation and resolution.

Demarest’s Insurance, Reinsurance, Health, and Private Pension team is monitoring the development of DPVAT and remains available to provide further clarifications in conjunction with our Banking and Finance team.