Presidential Decree delegates to Central Bank of Brazil the power to authorize the participation of foreign entities in Brazilian financial institutions

Aiming at accelerating requests for authorization of inflow of foreign capital into Brazilian financial institutions, the Executive Branch issued, on September 26, Decree No. 10,029 (“Decree”), delegating to the Central Bank of Brazil powers to examine and recognize as being of interest to the Brazilian Government the increase of foreign participation in the capital stock of Brazilian financial institutions. In addition, the monetary authority is now empowered to authorize the installation of new branches of foreign financial institutions within the Brazilian territory.

Until the issuance of such Decree, the recognition of the Government’s interest occurred through the issuance of presidential decrees applicable to specific applications for inflow of foreign capital.

With the entry into force of the Decree, such recognition becomes a direct attribution of the Central Bank of Brazil, which shall, jointly with the National Monetary Council, issue the respective regulation adopting, when appropriate, the same conditions applicable to Brazilian individuals and legal entities.

The new Decree therefore introduces innovations to foreign investors as it lessens the bureaucracy for the access to the capital stock of Brazilian financial institutions and equates them to domestic investors.

In addition, by delegating such power to the Central Bank of Brazil, the Decree makes the process of permitting foreigners to enter into the National Financial System even more technical. The technical analysis to be conducted by the monetary authority must continue to take into account the potential impacts and benefits arising from foreign participation in the local market, without losing sight of maintaining continued soundness of the National Financial System.

Demarest’s Banking and Finance team is available to assist clients in connection with any aspect related to this topic.