Brazilian Open Banking Regulation

The National Monetary Council (“CMN”) and the Central Bank of Brazil (“BACEN”) published on Monday, May 4, Joint Resolution No. 1, providing for the implementation of the Open Financial System (“Open Banking”).

The Joint Resolution provides for the implementation of Open Banking, a standardized system for sharing data and services by opening and integrating systems of financial institutions, payment institutions and other institutions authorized to operate by BACEN.

The bodies’ joint initiative provides for the basic principles of Open Banking in Brazil, namely: (1) the encouragement of innovation, (2) promotion of competition, (3) promotion of financial citizenship and, finally, (4) an increase in the efficiency of the Brazilian Financial System and the Brazilian Payments System.

The disclosure of data or services related to customers between institutions can only be carried out through free, informed, prior and unequivocal expression of will, through electronic means, whereby the customer agrees to share his or her personal data or services for specific purposes, in line with the guidelines of the Brazilian Data Protection Law (Lei Geral de Proteção de Dados in Portuguese, “LGPD”), being shared with the other institutions participating in Open Banking, without the need to enter into an agreement for such purpose.

In addition, the data can also be shared, with the express and revocable consent of the client, with institutions not regulated by the Central Bank through specific partnership agreements.

The institutions will have to comply with a series of guidelines to ensure the protection of the consenting consumers’ data, including the creation of mechanisms for monitoring data sharing and holding the institution and its managers accountable, providing security to the customers.

Within the scope of the project the following features are covered:

I – Data on: service channels; registration of customers and their representatives; and products, services and transactions related to accounts, credit or foreign exchange operations, insurance and private pension plans.

II – Initiation of payment transactions and forwarding services of proposals for credit transactions.

The list of all data and services that fall within the scope of  Open Banking is provided for in BACEN Circular No. 4,015/2020.

As for the participating institutions, in the case of data sharing above, the participation of institutions framed in the prudential segments S1 and S2 is mandatory, which include: multiple banks, commercial banks, investment banks, foreign exchange banks; savings banks and other institutions that have a size equal to or greater than 1% of the Brazilian GDP; or exercise relevant international activity, regardless of their size. It is worth remembering that all institutions authorized to operate by BACEN can participate in Open Banking on a voluntary basis.

In the case of sharing payment transaction initiation services, the participation is mandatory for any institution holding deposit accounts, savings accounts and/or pre-paid payment accounts, as well as institutions initiating payment transactions.

In the case of sharing a credit proposal forwarding service, all institutions authorized to operate by BACEN that have entered into a banking correspondent agreement in the country aimed at providing products and services under the responsibility of the contracting institution to its customers and users, as per Resolution 3,954/ 2011, must also participate in Open Banking.

Through phased implementation, the Open Banking schedule is planned for commencement on November 30, 2020 and completion in October 2021. The implementation will be divided into the following phases:

• 1st phase – November 30, 2020: public access to data related to products, services and customer service channels of participating institutions, as well as services related to demand or savings deposit accounts, payment accounts or credit transactions;

• 2nd phase – May 31, 2021: sharing of information on the registration of customers and their representatives between participating institutions, as well as transactional data on products and services related to the 1st phase;

• 3rd phase – August 30, 2021: sharing of the payment transaction initiation service and forwarding of a credit transaction proposal between the participating financial institutions and, in the latter case, with banking correspondents hired for this purpose;

• 4th phase – October 25, 2021: expansion of the scope of data to cover foreign exchange, investments and insurance transactions, as well as accreditation services in payment schemes, open supplementary pension and salary accounts, both on publicly accessible and shared transactional data between participating institutions.

Demarest’s Banking and Finance team is closely monitoring these and other measures and is ready to assist you in any matters regarding this topic. For more information, please feel free to contact us.