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

REGULATION

Federal Executive Branch

Extrajudicial Search and Seizure of Movable Assets Subject to Fiduciary Sale

On December 14, 2023, the Brazilian Congress overthrew a partial veto to 16 provisions of Law No. 14,711, of October 30, 2023 (“Legal Framework for Guarantees”), which provides for the:

1. 1.  improvement of the guarantee regulations;
   2. extrajudicial enforcement of mortgage-guaranteed credits;
   3. extrajudicial enforcement of real estate guarantee in creditors’ tenders;
   4. extrajudicial search and seizure of movable assets in the event of default of fiduciary sale contracts, among other topics.

Read the Client Alert published on this topic.

Central Bank of Brazil

BCB launches public consultation with proposed regulations on recovery and resolution of financial institutions

On January 24, 2024, the BCB launched a public consultation as a public call for contributions, through Notice No. 98 (“ECP 98”), with the aim of collecting contributions and substantial information for the drafting of normative acts aimed at regulating the planning process for the recovery and resolution of financial institutions and other entities authorized to operate by the BCB.

In short, the proposals encompass: 

• 1. A CMN resolution regarding the planning process for recovery and resolution of financial and other authorized institutions, including their duties while implementing the process in question, as well as the set of fundamental terms linked to these plans; and
  2. A BCB resolution, which will provide for the structures, elements and requirements for the drafting and submission of the Recovery and Organized Exit Plan (“PRSO”) to the BCB. The PRSO is a document dedicated to recording analyses, diagnoses, and results of the institution’s recovery and resolution plan.

The proposals, which are expected to be applied, above all, to institutions in Segment 1 (S1) – comprising, under the prudential regulation, banks with 10% GDP or more or major international activity –, aim to contribute to maintaining the soundness, stability, and regular functioning of the National Financial System (“SFN”), the Brazilian Payment System (“SPB”) and the real economy.

Contributions to ECP 98 should be made by March 08, 2024.

Read ECP Resolution 98 in full.

CMN Resolution No. 5,115, January 25, 2024

CMN Resolution No. 5,115, of January 25, 2024, changes the annual global limits authorized for contracting credit transactions with bodies and entities of the public sector for the three-year cycle 2024-2026. The resolution amends the annex to CMN Resolution No. 4,995, of March 24, 2022.

This resolution will enter into force on March 01, 2024.

Read CMN Resolution No. 5,115 in full.

CMN Resolution No. 5,112, of December 21, 2023 – implementation of Law No. 14,690/2023 (Desenrola Brasil)

CMN Resolution No. 5,112, published on December 21, 2023, provides for:

• 1. The implementation of measures provided for by Law No. 14,690, of October 03, 2023, which establishes the Emergency Debt Renegotiation Program for Individuals in Default (Desenrola Brasil);
  2. Regulations for simplifying access to credit and mitigating the risks of default and over-indebtedness among individuals, by defining credit transactions’ purpose to finance the outstanding balance of revolving credit and installment credit card bills; and
  3. Portability of the outstanding balance of credit card bills (revolving credit and in installments) and other post-paid payment instruments.

CMN Resolution No. 5,112 also establishes the 100% ceiling for interest on revolving credit – interest and charges charged after the delay in the payment of the credit card bill – on the original amount of the debt.

This resolution entered into force on the date of its publication regarding the amendments to CMN Resolution No. 4,549/2017 (which provides for the financing of the outstanding balance of the credit card bill and other post-paid payment instruments). The remaining changes will enter into force as of July 01, 2024.

Read CMN Resolution No. 5,112 in full.

Read Law No. 14,690/2023 in full.

CMN Resolution No. 5,111, December 21, 2023

CMN Resolution No. 5,111, published on December 21, 2023, regulates the definition of “investment entity” and “credit rights” for the purposes of Articles 19 and 23 of Law No. 14,754, of December 12, 2023[1].

According to the regulation, investment funds in Brazil are classified as “investment entities”, which cumulatively:

1. 1. Raise funds from one or more investors to invest in one or more assets;
   2. Are managed, at their sole discretion, by professional agents or service providers, duly qualified and authorized to carry out such activity, when required by law; and
   3. Provide, in their regulations and other constitutional documents, the strategies, if any, to be used to generate returns for investors, involving one or more of the following strategies:
      1. Investment and divestment of the assets that integrate the portfolio of the fund, according to the strategy, market conditions and, if applicable, the deadline provided for in the portfolio in order to maximize the return for the quota holders;
      2. Investment and maintenance, in whole or in part, of the assets that form the fund’s portfolio according to its investment policy until these assets are settled, through payment or any form of negotiation or until the fund is settled, aiming for a return in the form of appreciation of capital, income or both; and/or
      3. Investment and maintenance of the assets that form the fund’s portfolio, without a determined deadline for settlement or divestment, seeking the appreciation of the invested capital and return through redemption, amortization of quotas or mechanisms that ensure the negotiation of quotas in the secondary market.

In addition, for the purposes of the provisions in article 19 of Law No. 14,754/2023, CMN Resolution No. 5,111/2023 establishes as “credit rights”:

1. 1. credit representative rights and securities;
   2. credit representative securities;
   3. certificates of receivables and other securities representing securitization transactions that are not backed by non-standard credit rights; and
   4. by equivalence, quotas of credit rights investment funds (“FIDC”) that comply with the provisions of art. 4 of the regulation.

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

Read CMN Resolution No. 5,111 in full.

BCB Resolution No. 369, January 25, 2024

BCB Resolution No. 369, of January 25, 2024, provides for the certification of employees of securities brokerage companies, securities distributors and exchange brokerage companies authorized to operate by the BCB.

The regulation establishes that the institutions mentioned above must ensure that:

1. 1.  their employees’ qualifications are previously certified by an entity of recognized technical capacity, in order to carry out the activities of distribution and mediation of securities and derivatives; and
   2. their qualified employees’ expertise is regularly updated.

This resolution will enter into force on March 01, 2024.

Read BCB Resolution No. 369 in full.

BCB Resolution No. 365, December 21, 2023

BCB Resolution No. 365, of December 21, 2023, amends BCB Resolution No. 96/2021, which provides for the opening, maintenance and closure of payment accounts.

The amendments aim to improve the regulations relating to transparency, conduct and suitability (also known as investor profile analysis) in the offering and provision of services involving the payment account, in particular to the post-paid payment account, in light of the governmental measures provided for in Law 14,690/2023 (law integrating the program Desenrola Brasil), establishes the mitigation of risks involving default and over-indebtedness of individuals, with special focus on credit cards and other post-paid payment instruments.

This resolution will enter into force on July 01, 2024.

Read BCB Resolution No. 365 in full.

BCB Resolution No. 363, December 14, 2023

BCB Resolution No. 363, of December 14, 2023, amends BCB circular letters and resolutions establishing procedures for calculating portions of the amount of risk-weighted assets (RWA) for credit risk, operational risk and risks involving payment services.

Amendments were implemented into:

1. 1. article 3 of Circular Letter No. 3,640, of March 04, 2013;
   2. article 3 of Circular Letter No. 3,862, of December 07, 2017;
   3. article 4, of Circular Letter No. 3,863, of December 07, 2017;
   4. article 7 of BCB Resolution No. 198, of March 11, 2022;
   5.  the contents of BCB Resolution No. 202, of March 11, 2022;
   6. the preamble and articles 1, 2, 3 and 6 of BCB Resolution No. 202, of March 11, 2022; and
   7. article 4 of BCB Resolution No. 229, of 2022.

This resolution entered into force on January 01, 2024.

Read BCB Resolution No. 363 in full.

BCB Resolution No. 361, December 07, 2023

BCB Resolution No. 361, of December 07, 2023, amends Annex I to BCB Resolution No. 177, of December 22, 2021, which approves the Penalties Manual of the Brazilian Instant Payment System (“PIX”), to adjust and include penalty-related provisions in the event of noncompliance with the Automated PIX (“Pix Automático”) regulations.

Changes were implemented relating to the inclusion of operating regulations for the new “Automated PIX” product and its offer to users, as well as the daily fine referred to in art. 120 of the PIX regulations.

This resolution will enter into force on October 01, 2024.

Read BCB Resolution No. 361 in full.

BCB Resolution No. 360, December 07, 2023

BCB Resolution No. 360, of December 07, 2023, amends the regulation attached to BCB Resolution No. 1, of August 12, 2020, which regulates the PIX payment system and approves its regulation, in order to establish the operating regulations for the Automated PIX transactions as well as to amend the provisions relating to the Scheduled PIX transactions.

This resolution will enter into force on October 01, 2024.

Read BCB Resolution No. 360 in full.

BCB Normative Instruction No. 449, January 12, 2024

BCB Normative Instruction No. 449, of January 12, 2024, launches version 3.6 of the PIX Safety Manual, which integrates the PIX Regulation, according to article 2 of the regulation attached to BCB Resolution No. 1, of August 12, 2020.

Among the implemented amendments, we highlight: (i) the inclusion (Section 5.2) of a regulatory deadline for updating digital certificates; (ii) wording adjustments to emphasize the requirement for proper custody of private cryptographic keys and good practices for managing certificates and keys (Sections 5.2 and 5.3); and (iii) wording adjustments for greater clarity.

The current version of the PIX Safety Manual is available at:  https://www.bcb.gov.br/content/estabilidadefinanceira/cedsfn/Manual_de_Seguranca_PIX.pdf

 This normative instruction entered into force on February 01, 2024.

Read BCB Normative Instruction No. 449 in full.

BCB Normative Instruction No. 448, January 04, 2024

BCB Normative Instruction No. 448, of January 04, 2024, amends BCB Normative Instruction No. 374, of April 26, 2023, which provides for the procedures, deadlines, documents and information necessary for filing authorization requests relating to the operation of the Financial Market Systems (“SMF”) within the scope of the SPB. This normative instruction also provides for the types of changes in SMFs and regulations that pose a major risk to their safety, efficiency or integrity, as well as to the regular functioning of the SPB or SFN.

BCB Normative Instruction No. 448 amended the following provisions of BCB Normative Instruction No. 374:

1. 1. Art. 2, paragraph 2, section II;
   2. Art. 5, section V, items “a” and “b”, section VIII, and sole paragraph, sections I, II and III;
   3. Article 7, section V and sole paragraph, sections I, II and III;
   4. Article 9, section V and sole paragraph, sections I, II and III;
   5. Article 11, section II,  item “c” and section III;
   6. Art. 21, paragraphs 5, 6 and 7; and
   7. Art. 23, section II, item “d” and section VI, items “a”, “b” and “c”.

This normative instruction entered into force on January 08, 2024.

Read BCB Normative Instruction No. 448 in full.

BCB Normative Instruction No. 443, December 20, 2023

BCB Normative Instruction No. 443, of December 20, 2023, provides for the regulations and schedule of checkpoints entailed in the process of changing the Open Finance security profile and interoperability guidelines that must be applied to the Open Finance Application Programming Interface (API).

In one of the implementation phases for the creation of a new security profile, as established by the Open Finance Governance Structure, the Dynamic Client Management (“DCM”) must be carried out. In this phase, the institutions must inform, on a bilateral basis, the standards used and recognized by each institution – a critical step for the proper interoperability of the Open Finance system, which must comply with the regulations and checkpoints established in the normative instruction in question. This phase ends on April 14, 2024, and must be followed by all participants.

The DCM process (by the participants listed in Articles 8 and 9 of the instruction) must follow this schedule:

This normative instruction entered into force on February 01, 2024.

Read BCB Normative Instruction No. 443 in full.

BCB Normative Instruction No. 441, December 20, 2023

BCB Normative Instruction No. 441, published on December 20, 2023, provides for version 1.0 of the Open Finance Monitoring Manual.

Compliance with the Open Finance Monitoring Manual is mandatory by all participating institutions. The latest version of this manual is available on the Open Finance and the BCB websites, as well as on the Brazilian Open Finance portal.

This normative instruction will enter into force on March 01, 2024.

Read BCB Normative Instruction No. 441 in full.

BCB Normative Instruction No. 439, December 15, 2023

BCB Normative Instruction No. 243, of December 15, 2023, amends BCB Normative Instruction No. 243, of March 16, 2022, which publishes the procedures to be followed regarding direct participation in the Instant Payment System (“SPI”), opening the Instant Payment Account (“IP Account”), and defines the maximum terms for validation and settlement of instant payment orders, provided for in the regulation attached to BCB Resolution No. 195, of March 03, 2022.

This resolution entered into force on January 02, 2024.

Read BCB Normative Instruction No. 439 in full.

BCB Normative Instruction No. 436, December 07, 2023

BCB Normative Instruction No. 436, of December 07, 2023, establishes the operational procedures for the: (i) Automated PIX; (ii) Scheduled PIX (“Pix Agendado”); and (iii) PIX Charge (“Pix Cobrança”).

This instruction details the operational procedures, as provided for in Chapter V, Section II, Subsections I, II and IV of the regulation attached to BCB Resolution No. 1 of August 12, 2020 (Pix Regulation).

This normative instruction will enter into force on October 01, 2024.

Read BCB Normative Instruction No. 436 in full.

[1] CMN Resolution No. 5,111 provides for the taxation of deposits on investment funds in Brazil as well as on the income earned by individuals residing in Brazil in foreign financial funds, controlled entities and trusts.

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NEWS

The Framework for Guarantees and Extrajudicial Enforcement

On January 12, 2024, our partner Fabio Braga published the article: “The Framework for Guarantees and Extrajudicial Enforcement” in Valor Econômico, whose governing Law No. 14,711/2023 provides for major legal advances in numerous economic segments and activities, including the real estate industry as well as the financial and capital markets, and introduces new developments to retail relations. The article delves into the main impacts on transactions in the credit market in relation to the new procedure for extrajudicial search and seizure of movable assets subject to fiduciary sale.

Read our Client Alert published on this theme.

Read the article in full.

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