Circular No. 4032 — Establishes the Initial Structure for Open Banking Governance Implementation

The Collegiate Board of the Central Bank of Brazil, in a session held on June 23, 2020, based on Article 9 of Law No. 4.595 of December 31, 1964, Article 15 of Law No. 12.865 of October 9, 2013, and Article 46, item I, of Joint Resolution No. 1 of May 4, 2020,

R E S O L V E S:

Art. 1º This Circular regulates the initial structure responsible for the governance of the process of implementing the Open Banking System in the Country, in accordance with the Annexed Regulation.

§ 1º The initial structure referred to in the main text must be formalized by July 15, 2020, through a contract signed by the associations or groups of associations representing financial institutions and other institutions authorized to operate by the Central Bank of Brazil that are elected in accordance with the provisions of Article 8 of the Annexed Regulation.

§ 2º The Deliberative Council referred to in Article 2, item I, of the Annexed Regulation must decide on the definitive structure responsible for governance by October 25, 2021, replacing the structure referred to in this Circular.

§ 3º The decision referred to in § 2º must be submitted to the Central Bank of Brazil for approval.

Art. 2º This Circular enters into force on the date of its publication.

Otávio Ribeiro Damaso Director of Regulation

ANNEXED REGULATION TO CIRCULAR NO. 4,032, OF JUNE 23, 2020

Establishes the initial structure responsible for the governance of the process of implementing Open Banking in the Country.

CHAPTER I

PURPOSE

Art. 1º This Regulation provides for the initial structure responsible for the governance of the process of implementing the Open Banking System in the Country, as referred to in Article 46, item I, of Joint Resolution No. 1 of May 4, 2020.

Sole Paragraph. The structure referred to in the main text shall be private and non-profit.

CHAPTER II

LEVELS OF THE INITIAL STRUCTURE RESPONSIBLE FOR GOVERNANCE

Art. 2º The initial structure responsible for governance shall be composed of three levels, namely:

I - strategic, integrated by a Deliberative Council;

II - administrative, integrated by a Secretariat; and

III - technical, composed of Technical Groups.

Sole Paragraph. The activities performed by the administrative level referred to in item II of the main text may be subject to outsourcing contracts, observing the provisions of Articles 3, item VIII, and 14, § 1º.

CHAPTER III

ATTRIBUTIONS OF THE LEVELS OF THE INITIAL STRUCTURE RESPONSIBLE FOR GOVERNANCE

Section I

Attributions of the Deliberative Council

Art. 3º The attributions of the Deliberative Council referred to in Article 2, item I, are:

I - define the internal regulations of the initial governance structure;

II - define the internal schedule of activities, including the frequency of Deliberative Council meetings, considering the deadlines defined in Articles 47 and 55 of Joint Resolution No. 1 of 2020;

III - deliberate on the convention and its amendments, according to the principles, objectives, and rules of Open Banking defined in Joint Resolution No. 1 of 2020;

IV - approve the budget of the structure responsible for governance;

V - appoint and dismiss:

a) the independent councilor, based on Articles 9, 12, §§ 3º to 5º, and 14, § 2º; and

b) the Secretary-General, the Coordinators of the Technical Groups, and their substitutes, based on Article 14, main text;

VI - decide on the formation, themes, and composition of the Technical Groups, observing the provisions of Article 11;

VII - define guidelines for the administrative and technical levels, as well as evaluate and decide on technical proposals and work plans from the administrative and technical levels;

VIII - decide on the eventual hiring of services;

IX - dialogue with regulatory bodies and other stakeholders, potentially indicating the Secretary-General to represent it;

X - deliberate on changes to the organizational structure; and

XI - deliberate on other issues necessary for the implementation of Open Banking.

§ 1º The Deliberative Council may delegate to the Coordinators of the Technical Groups the definition of composition referred to in item VI of the main text.

§ 2º The internal regulations referred to in item I of the main text must be:

I - sent to the Central Bank of Brazil; and

II - disclosed to the public in an accessible and free manner.

Section II

Attributions of the Secretariat

Art. 4º The attributions of the Secretariat referred to in Article 2, item II, are:

I - organize work plans and technical proposals presented by the Technical Groups for submission to the Deliberative Council;

II - schedule and organize Deliberative Council meetings, observing the provisions of Article 10, sole paragraph;

III - propose, execute, and manage the budget of the structure responsible for governance, considering the demands of the Technical Groups;

IV - monitor the execution of the work plans of the Technical Groups, including for compliance with the internal schedule defined by the Deliberative Council;

V - coordinate joint actions of the Technical Groups, when necessary;

VI - keep the Deliberative Council informed about the development of technical proposals and other relevant issues related to the progress of the Technical Groups' work;

VII - represent the Deliberative Council in discussions with regulatory bodies and other stakeholders, when indicated to do so;

VIII - organize the internal and external communication of the structure responsible for governance;

IX - monitor and manage risks inherent to the structure responsible for governance, ensuring the independence of this activity; and

X - execute other operational and administrative activities necessary for the proper functioning of the initial structure responsible for governance.

Section III

Attributions of the Technical Groups

Art. 5º The attributions of the Technical Groups referred to in Article 2, item III, are:

I - develop studies and technical proposals for the implementation of Open Banking, according to the work plans approved by the Deliberative Council;

II - propose work plans and technical proposals to the Secretariat to be submitted for deliberation by the Deliberative Council;

III - periodically report to the Secretariat on the development of proposals and other relevant issues; and

IV - standardize technical decisions, facilitating the deliberation and decision of the Deliberative Council, formalizing divergences.

CHAPTER IV

COMPOSITION OF THE LEVELS OF THE INITIAL STRUCTURE RESPONSIBLE FOR GOVERNANCE

Section I

Composition of the Deliberative Council

Art. 6º The Deliberative Council of the initial structure referred to in this Regulation shall be composed of seven councilors with voting rights in deliberative processes, divided into the following groups:

I - group 1: three councilors indicated by associations that, observing the provisions of Article 7, items I and II, letter "a", have significant representation of institutions providing services related to deposit accounts or retail credit operations, classified in the following segments referred to in Resolution No. 4.553 of January 30, 2017:

a) sub-group 1.1: Segments 1 (S1) and 2 (S2);

b) sub-group 1.2: Segments 3 (S3) and 4 (S4), excluding direct credit societies and peer-to-peer lending societies; and

c) sub-group 1.3: Segment 5 (S5), excluding direct credit societies and peer-to-peer lending societies;

II - group 2: three councilors indicated by associations or groups of associations that, observing the provisions of Article 7, items I and II, letter "b", have significant representation of:

a) sub-group 2.1: institutions providing payment services that:

1. participate in prudential conglomerates classified in S1 or S2; or

2. are controlled by an institution classified in S1 or S2;

b) sub-group 2.2: payment institutions authorized to operate by the Central Bank of Brazil that are not classified in the definition referred to in letter "a" of this item; and

c) sub-group 2.3: direct credit societies and peer-to-peer lending societies; and

III - group 3: one independent councilor.

§ 1º The Central Bank of Brazil may monitor the discussions of the Deliberative Council referred to in the main text, without voting rights in the deliberative processes.

§ 2º The indication of councilors referred to in the main text covers the designation of a primary councilor and a substitute for the respective sub-group to which the association or group of associations was elected, observing the following conditions to be fulfilled at the time of indication:

I - not be impeded by special law, nor convicted of bankruptcy, tax evasion, malfeasance, active or passive corruption, extortion, embezzlement, against the popular economy, public faith, property, or the National Financial System, or sentenced to a penalty that prohibits, even temporarily, access to public office; and

II - not be declared ineligible or suspended from exercising positions of fiscal councilor, administrative councilor, director, or managing partner in a financial institution, in complementary pension entities, insurance companies, capitalization societies, publicly held companies, or entities subject to the supervision of the Securities and Exchange Commission.

§ 3º The designation of the independent councilor must be carried out observing the provisions of Articles 3, item V, 9, and 14, § 2º.

Art. 7º The definition of the associations that must indicate the councilors referred to in Article 6, items I and II, shall be carried out based on the electoral process referred to in Article 8, considering the following eligibility criteria to be observed by the associations:

I - be constituted for more than twelve months;

II - have as members institutions with the characteristics of one of the sub-groups mentioned in Article 6, items I and II, at least:

a) one of the sub-groups of group 1 referred to in Article 6: twenty authorized institutions; or

b) one of the sub-groups of group 2 referred to in Article 6: seven authorized institutions or twenty institutions, considering among these the authorized institutions and those with a formalized authorization process at the Central Bank of Brazil; and

III - have formally expressed to the Central Bank of Brazil the interest in participating in the electoral process for the indication of a councilor to the Deliberative Council for one of the sub-groups provided for in items I and II of Article 6.

§ 1º The criteria referred to in items I and II of the main text must be verified based on the base date of May 27, 2020.

§ 2º Associations are permitted to form groups to compete in the electoral process for the sub-group of group 2 referred to in item II of Article 6.

§ 3º In the case of the formation of groups of associations, the requirement referred to in item II, letter "b", of the main text, must be observed based on the sum of members of all associations that make up the respective group.

§ 4º Associations, individually or in a group referred to in § 2º, are prohibited from competing for the indication of a councilor in more than one sub-group provided for in Article 6, items I and II.

§ 5º The Central Bank of Brazil will publish the list of associations and groups of associations that meet the requirements referred to in the main text, prior to the electoral process referred to in Article 8.

Art. 8º Institutions authorized to operate by the Central Bank of Brazil must elect the associations or groups of associations that will indicate representatives to the Deliberative Council.

§ 1º The institutions referred to in the main text must register their votes through the APS-Siscom System, available at the electronic address "www3.bcb.gov.br/siscom/es".

§ 2º For the purposes of registering the vote referred to in § 1º, each institution may choose only one association or group of associations to indicate a councilor to the Deliberative Council.

§ 3º The choice referred to in § 2º must:

I - be compatible with the sub-group referred to in Article 6, items I and II, in which the institution is classified; and

II - correspond to an association or a group of associations to which the institution itself or any member of its prudential conglomerate is affiliated as of the base date referred to in Article 7, § 1º.

§ 4º The associations or groups of associations that obtain the largest number of indications for each of the sub-groups referred to in Article 6, items I and II, will indicate the councilors.

§ 5º In the event of a tie between associations or groups of associations regarding the number of indications referred to in § 4º, the indication of councilors will be made by the association or group of associations that has the largest number of affiliated authorized institutions meeting the characteristics of the respective sub-group, observing the provisions of Article 7, § 3º, in the case of a group of associations.

§ 6º In the case of groups of associations, the indication of councilors referred to in § 4º must take into account the representativeness among the associations that make up the group, in terms of the number of regulated members of the respective sub-group.

§ 7º It is optional for the institutions referred to in the main text not to choose eligible associations or groups of associations.

§ 8º In the case of institutions that are part of prudential conglomerates, the classification referred to in § 3º, item I, must correspond to that of the leading institution of the respective prudential conglomerate, observing the provisions of § 10, except with respect to payment institutions, which will observe their own classification.

§ 9º In situations where the institution at the individual level and, if applicable, the members of its prudential conglomerate are not affiliated with eligible associations or groups of associations for the sub-group in which they were classified according to § 3º, item I, and § 8º, the institution is assured the possibility to choose among all eligible associations or groups of associations for that sub-group.

§ 10. The possibility of choosing only one association or group of associations provided for in § 2º is excepted for institutions that simultaneously meet the characteristics of sub-groups 1.1 and 2.1 referred to in Article 6, items I, letter "a", and II, letter "a", which may present an indication for both sub-groups.

Art. 9º The requirements for the independent councilor of the Deliberative Council are:

I - have academic training compatible with the function, with proven experience in the financial and information technology areas, as well as knowledge of Open Banking regulation and the structure of the National Financial System;

II - not maintain a link with an institution participating in Open Banking in the twelve months preceding its indication;

III - not be impeded by special law, nor convicted of bankruptcy, tax evasion, malfeasance, active or passive corruption, extortion, embezzlement, against the popular economy, public faith, property, or the National Financial System, or sentenced to a penalty that prohibits, even temporarily, access to public office; and

IV - not be declared ineligible or suspended from exercising positions of fiscal councilor, administrative councilor, director, or managing partner in a financial institution, in complementary pension entities, insurance companies, capitalization societies, publicly held companies, or entities subject to the supervision of the Securities and Exchange Commission.

§ 1º The independent councilor referred to in the main text must perform its activities in favor of competition, innovation, data security and privacy, as well as consumer protection, with a balance between public interest and private interests.

§ 2º The link referred to in the main text, item II, is configured when the independent councilor incurs in the following situations:

I - be an administrator of an institution participating in Open Banking, its direct or indirect parent, or controlled or society subject to common direct or indirect control;

II - be an administrator or person authorized to exercise a position in a statutory or contractual body of an institution participating in Open Banking;

III - hold direct or indirect participation in the capital of an institution participating in Open Banking;

IV - maintain an employment relationship or arising from a permanent professional services contract with an institution participating in Open Banking; and

V - be a spouse, partner, or relative up to the second degree of persons classified in items I to IV.

Section II

Composition of the Other Levels of the Initial Structure Responsible for Governance

Art. 10. The Secretariat referred to in Article 2, item II, must be composed of, at least, one Secretary-General and respective substitute, designated by the Deliberative Council.

Sole Paragraph. The Secretary-General must participate in the meetings of the Deliberative Council, without voting rights in the deliberative processes.

Art. 11. The Technical Groups referred to in Article 2, item III, shall be formed considering the following requirements:

I - have a Coordinator and a substitute for each Technical Group;

II - have a number of members compatible with the complexity of the themes of each Technical Group;

III - be specialized in themes compatible with the aspects referred to in Article 44 of Joint Resolution No. 1 of 2020.

§ 1º The coordination referred to in item I of the main text may be exercised by a natural person or by a group of natural persons.

§ 2º Participation in the Technical Groups referred to in the main text:

I - is not limited to representatives of the associations or groups of associations that indicated councilors to the Deliberative Council; and

II - may include natural or legal persons who are not affiliated with associations representing institutions participating in Open Banking.

CHAPTER V

MANDATES OF ASSOCIATIONS IN THE DELIBERATIVE COUNCIL

Art. 12. The mandate of the associations or groups of associations elected to designate the councilors of groups 1 and 2 of the Deliberative Council, as well as that of the independent councilor referred to in Article 6, shall be twelve months counted from the first meeting following their indication.

§ 1º The Central Bank of Brazil may extend the period referred to in the main text for a period compatible with the implementation calendar of Open Banking referred to in Article 55 of Joint Resolution No. 1 of 2020.

§ 2º The primary and substitute councilors indicated in accordance with Article 6 may be replaced at any time by the associations or groups of associations that designated them, observing the conditions of Article 6, § 2º, by communicating to the Secretariat at least five business days in advance.

§ 3º The internal regulations referred to in Article 3, item I, must provide for the reasons that justify the dismissal of associations or groups of associations represented in the Deliberative Council, as well as of the independent councilor, based on fair, reasonable, objective, and equitable parameters.

§ 4º Among the reasons for dismissal referred to in § 3º, the internal regulations must include, at least, the finding of unjustified absences of primary and substitute councilors in three consecutive meetings or in six non-consecutive meetings.

§ 5º The dismissal referred to in § 3º, in the case of associations or groups of associations, implies the holding of another electoral process, based on the parameters specified in Articles 7 and 8, assuming as the base date the date of effective dismissal by the Deliberative Council.

CHAPTER VI

MEETINGS AND DECISION-MAKING PROCESS OF THE DELIBERATIVE COUNCIL

Art. 13. The Deliberative Council must meet with a frequency defined by itself.

Sole Paragraph. For the purposes of the provision in the main text, the Deliberative Council must deliberate on mechanisms for convening extraordinary meetings.

Art. 14. The decisions of the Deliberative Council shall be taken by a simple majority of votes of the councilors.

§ 1º Excepted from the provision in the main text, and to be decided by a qualified majority of six councilors, are the deliberations related to:

I - approval of the budget of the structure;

II - hiring of services; and

III - alteration of the structure responsible for governance.

§ 2º The deliberation regarding the indication and dismissal of the independent councilor must be taken with the majority obtained from at least four votes of the councilors of groups 1 and 2 referred to in items I and II of Article 6.

§ 3º For the deliberations of the Deliberative Council, 100% (one hundred percent) of the councilors with voting rights must be present.

§ 4º Excepted from the provision in § 3º is the deliberation regarding the indication and dismissal of the independent councilor, in which only the councilors of groups 1 and 2 referred to in items I and II of Article 6 must be present.

CHAPTER VII

COSTS OF MAINTAINING THE INITIAL STRUCTURE RESPONSIBLE FOR GOVERNANCE

Art. 15. The Deliberative Council may define a system for funding the maintenance activities of the initial structure responsible for governance referred to in this Regulation by the participating institutions of Open Banking specified in Article 6 of Joint Resolution No. 1 of 2020, based on the following criteria:

I - existence of proportionality between the share of costs due by each institution and its net worth; and

II - prohibition of duplicate payment.

§ 1º For the purposes of the provision in the main text:

I - participating institutions referred to in the main text are those defined in items I to III of Article 6 of Joint Resolution No. 1 of 2020; and

II - it is optional for participating institutions of Open Banking that are part of a prudential conglomerate to pay in a consolidated manner by all institutions that make up the respective conglomerate.

§ 2º In the case referred to in item II of § 1º, the net worth of the prudential conglomerate must be considered for the purposes of meeting the criterion set forth in item I of the main text.

§ 3º The Deliberative Council may establish a system for paying differentiated values at the time of adherence of a new participating institution of Open Banking, to compensate for the costs of the governance structure incurred before its adherence.

§ 4º For the eventual definition of the systems referred to in the main text and § 3º, the Deliberative Council must observe the simple majority criterion set forth in the main text of Article 14.