CMN Resolution No. 4820 — Establishes Temporary Prohibitions on Remuneration of Equity Capital, Increases in Executive Compensation, Share Buybacks, and Capital Reduction

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4.595 of December 31, 1964, makes public that the National Monetary Council, in a session held on May 29, 2020, based on Articles 4, item VIII, of the aforementioned Law, 20, § 1, of Law No. 4.864 of November 29, 1965, 7 and 23, item “a”, of Law No. 6.099 of September 12, 1974, 1 and 12 of Complementary Law No. 130 of April 17, 2009, 2, item VI, 8, 9, 10, item I, and 29, item I of Law No. 4.728 of July 14, 1965, 6 of Decree-Law No. 759 of August 12, 1969, 1 of Law No. 10.194 of February 14, 2001, 7 of Decree-Law No. 2.291 of November 21, 1986, and 16 of Law No. 12.838 of July 9, 2013, having in view Article 8, item I, of Constitutional Amendment No. 106 of May 7, 2020, and considering the potential effects of the coronavirus (Covid-19) pandemic on the National Financial System,

R E S O L V E S:

Art. 1. This Resolution establishes transitional prudential requirements applicable to financial institutions and other institutions authorized to operate by the Central Bank of Brazil, with the objective of ensuring the solidity, stability, and regular functioning of the National Financial System, especially during the period of public calamity decreed due to the coronavirus (Covid-19) pandemic.

Sole Paragraph. The provisions of this Resolution apply to confederations constituted by central credit cooperatives.

Art. 2. The institutions mentioned in Art. 1 are prohibited from:

I - remunerating equity capital, including in the form of advance payments, above:

a) the amount equivalent to the mandatory minimum dividend, established by Art. 202 of Law No. 6.404 of December 15, 1976, including in the form of interest on equity capital, in the case of institutions constituted as joint-stock companies; or

b) the amount equivalent to the minimum profit distribution established in the articles of association in the case of institutions constituted as limited liability companies;

II - repurchasing their own shares, subject to the provisions of § 4;

III - reducing social capital, except when the reduction:

a) is mandatory, in accordance with the governing legislation; or

b) is approved by the Central Bank of Brazil, aiming to ensure the solidity of the institution and the stability and regular functioning of the National Financial System; and

IV - increase the remuneration, fixed or variable, including in the form of advance payments, of directors, administrators, and members of the board of directors and the audit committee.

§ 1. The amounts subject to the prohibitions mentioned in the caput cannot be the object of future disbursement obligations, including in the form of profit distribution.

§ 2. The prohibitions determined in the caput must be observed regardless of the maintenance of resources in an amount higher than the Additional Core Capital (ACP), as dealt with in Resolution No. 4.193 of 2013 and Resolution No. 4.783 of March 16, 2020.

§ 3. The variable remuneration referred to in item IV of the caput:

I - includes bonuses, profit sharing, as well as any deferred remuneration portions and other performance-linked remuneration incentives;

II - may not exceed, either in nominal values or percentage, the remuneration paid in the same period of the previous fiscal year.

§ 4. The share repurchase referred to in item II of the caput may be authorized by the Central Bank of Brazil, provided it occurs in a stock exchange or organized over-the-counter market environment, for treasury retention and subsequent sale, up to a limit of 5% (five percent) of the issued shares, including in this percentage the shares accounted for in treasury on the date of entry into force of Resolution No. 4.797 of April 6, 2020.

§ 5. For the purposes of the provision in item I of the caput, the last version of the bylaws or articles of association registered in the competent public registry up to the date of entry into force of Resolution No. 4.797 of 2020 must be considered.

§ 6. The provision in item III of the caput does not apply to credit cooperatives.

§ 7. Any advance payment of the amounts mentioned in items “a” and “b” of item I of the caput must be carried out in a conservative, consistent, and compatible manner with the uncertainties of the current economic situation.

Art. 3. The prohibitions referred to in items I and IV of Art. 2 apply to values related to the 2020 fiscal year, regardless of the date of disbursement of the resources.

§ 1. Profit reserves are included in the prohibition established in item I of Art. 2, even if constituted in previous fiscal years.

§ 2. The prohibition established in item IV of Art. 2 does not apply to increases in remuneration, fixed or variable, of directors, administrators, and members of the board of directors and the audit committee, whose procedures for granting, according to applicable legislation, were concluded before the date of entry into force of Resolution No. 4.797 of 2020.

Art. 4. The prohibitions referred to in items II and III of Art. 2 apply from the date of entry into force of Resolution No. 4.797 of 2020 until December 31, 2020.

Sole Paragraph. The prohibition referred to in item III of Art. 2 does not cover requests for capital reduction filed with the Central Bank of Brazil before the date of entry into force of Resolution No. 4.797 of 2020.

Art. 5. The distribution of profits, payment of interest on equity capital, and remuneration of directors, administrators, and members of the board of directors and the audit committee, related to fiscal years prior to 2020, must be carried out in a conservative, consistent, and compatible manner with the uncertainties of the current economic situation, observing, in addition, the provisions of Resolution No. 3.921 of November 25, 2010, when applicable.

Art. 6. The prohibitions on the remuneration of equity capital referred to in Art. 2, item I, of this Resolution and Art. 8, item I, of Constitutional Amendment No. 106 of May 7, 2020, do not affect the payment of remuneration of instruments authorized to compose Complementary Capital, as dealt with in Art. 17 of Resolution No. 4.192 of March 1, 2013.

Art. 7. Resolution No. 4.797 of 2020 is hereby revoked.

Art. 8. This Resolution enters into force on the date of its publication.

Roberto de Oliveira Campos Neto President of the Central Bank of Brazil