BCB Resolution No. 395 — Amends Resolutions BCB Nos. 319, 313, and 229 to harmonize RWA calculation for credit risk exposures in the trading book

Resolution No. 395

BCB RESOLUTION NO. 395,
OF JUNE 26, 2024

Amends Resolutions
BCB Nos. 319, of May 18, 2023, 313, of April 26, 2023, and 229, of May 12, 2022, to maintain harmony with the calculation of the risk-weighted assets portion - RWA relative to credit risk exposures of financial instruments classified in the trading book - RWADRC.

The Collegiate Board of the Central Bank of Brazil, in a session held on June 5, 2024, based on the provisions of art. 9º-A, caput, item I, of Law No. 4.728, of July 14, 1965, and arts. 9º, caput, items II and IX, letter “b”, and 15 of Law No. 12.865, of October 9, 2013, and taking into account the provisions of arts. 3º, caput, item VIII, and 14 of Resolution No. 4.282, of November 4, 2013, of the National Monetary Council and arts. 3º, caput, item I, and 4º of CMN Resolution No. 5.105, of September 28, 2023,

R E S O L V E :

Art. 1º
Resolution BCB No. 319, of May 18, 2023, published in the Official Gazette of the Union on May 22, 2023, shall enter into force with the following alterations:

“Art. 2º Payment institutions that are part of Type 3 prudential conglomerates, defined in BCB Resolution No. 197, of March 11, 2022, and securities brokerage firms, securities distribution companies and currency brokerage firms, leaders of prudential conglomerates or not part of prudential conglomerates, must observe the maximum exposure limits per client and the maximum limit of concentrated exposures, in accordance with the following articles of this Resolution:

I - arts. 3º to 18 and 25, for institutions classified in Segment 2 (S2), Segment 3 (S3) and Segment 4 (S4), according to the provisions of Resolution No. 4.553, of January 30, 2017, and in BCB Resolution No. 197, of March 11, 2022; or

II - arts. 19 to 25, for institutions classified in Segment 5 (S5), according to the provisions of Resolution No. 4.553, of January 30 2017, and BCB Resolution No. 197, of March 11, 2022.

.........................................................................................................................” (NR)

“Art. 3º The institution mentioned in art.
2º, caput, item I, must limit the total of its exposures to a same client to the maximum amount of 25% (twenty-five percent) of Level I of its Reference Equity - PR, defined in CMN Resolution No. 4.955, of October 21, 2021, and BCB Resolution No. 199, of March 11, 2022.

.........................................................................................................................” (NR)

“Art. 5º For the purposes of this Title, a client shall be considered a natural or legal person who is a counterparty in exposure of the institution, in accordance with Resolution No. 4.557, of February 23 2017, and BCB Resolution No. 265, of November 25, 2022.

.........................................................................................................................” (NR)

“Art. 6º Counterparties that share the credit risk towards the institution shall be considered as a single client, in accordance with art. 22 of Resolution No. 4.557, of February 23 2017, and art. 20 of BCB Resolution No. 265, of November 25, 2022.

.........................................................................................................................” (NR)

“Art. 7º The limits referred to in arts.
3º and 4º cover each exposure considered in the calculation of the following portions of the RWA referred to in CMN Resolution No. 4.958, of October 21, 2021 and BCB Resolution No. 200, of March 11, 2022, which has a counterparty that is a natural or legal person:

I - RWACPAD, relative to credit risk exposures subject to the calculation of the capital requirement through the standardized approach;

II - RWACIRB, relative to credit risk exposures subject to the calculation of the capital requirement through internal credit risk classification systems (IRB approaches) authorized by the Central Bank of Brazil; and

III - RWADRC, relative to credit risk exposures of financial instruments classified in the trading book.

§ 1º ...........................................................................................................................

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V - the exposures deducted for the purposes of the calculation of Level I of PR, in accordance with CMN Resolution No. 4.955, of October 21, 2021, and BCB Resolution No. 199, of March 11, 2022;

.........................................................................................................................” (NR)

“Section I
Of the value of exposures in the banking book

Art. 8º Except as provided for exposures subject to specific treatment, the value of the exposure in the banking book, defined in Resolution No. 4.557, of February 23, 2017, and in BCB Resolution No. 265, of November 25, 2022, must correspond:

I - to its respective value immediately before the application of the Risk Weighting Factor - RWF for the purposes of the calculation of the RWACPAD portion mentioned in CMN Resolution No. 4.958, of October 21, 2021, and BCB Resolution No. 200, of March 11, 2022, in the case of exposure considered in the calculation of the capital requirement through standardized approach; and

II - to its respective value of the parameter indicating the exposure to credit risk used in the calculation of the RWACIRB portion mentioned in CMN Resolution No. 4.958, of October 21, 2021, and BCB Resolution No. 200, of March 11, 2022, in the case of exposure considered in the calculation of the capital requirement through internal credit risk classification systems (IRB approaches) authorized by the Central Bank of Brazil.

.........................................................................................................................” (NR)

“Section II
Of the value of exposures in the trading book

Art. 8º-A Except as provided for exposures subject to specific treatment, the value of the exposure to securities or marketable securities in the trading book, defined in Resolution No. 4.557, of February 23 2017, and BCB Resolution No. 265, of November 25, 2022, shall correspond to the value of its gross exposure - JTD used in the calculation of the RWADRC portion in accordance with BCB Resolution No. 313, of April 26 2023.

§1º In obtaining the JTD referred to in the caput:

I - a loss factor given default equal to 100% (one hundred percent) shall be considered;

II - adjustments resulting from the maturity of the security or marketable security shall not be applied; and

III - risk weightings shall not be applied.

§ 2º The value of the exposure relative to positions in the trading book towards a single client composed of a set of connected counterparties, as provided in art. 6º, shall be the sum of the positive net exposures (purchased) towards the counterparty components of the single client, prohibiting offsetting with negative net positions (sold) towards other counterparty components of the single client.” (NR)

“Section I
Of exposures associated with derivatives

Art. 9º For a derivative financial instrument, the following must be recognized distinctly:

...................................................................................................................................

§ 1º For the purposes of the provision of item I of the caput, the value of the counterparty exposure shall be calculated in accordance with art. 8º, caput, item I.

.........................................................................................................................” (NR)

“CHAPTER VI
OF OFFSETTING BETWEEN
POSITIONS IN THE TRADING BOOK

Art. 16. Offsetting between the purchased position and the sold position is admitted only for instruments classified in the trading book, in accordance with Resolution No. 4.557, of February 23 2017, and BCB Resolution No. 265, of November 25, 2022, provided that the following conditions are met:

I - the purchased position and the sold position refer to instruments of the same issuer with the same form of remuneration, same reference currency and same maturity term; or

II - the purchased position and the sold position refer to instruments of the same issuer, with distinct forms of remuneration or reference currency, provided that the instrument to which the purchased position refers has a higher or equal payment priority to the instrument to which the sold position refers, including positions protected by a credit derivative.

...................................................................................................................................

§ 4º The offsetting of the purchased position with the sold position provided for in the caput through protection by a credit derivative instrument implies the simultaneous recognition of exposure of equal value towards the issuer of the derivative.

§ 5º For the purposes of the provision of § 4º, the Central Bank of Brazil may determine the equivalence to a credit derivative of another derivative when this significantly covers the credit risk of the underlying asset.” (NR)

“Art. 17. The mitigation of credit risk through a mitigating instrument used for the purposes of the calculation of the portions referred to in art. 7º must also be recognized for the purposes of the provision of this Resolution.

...................................................................................................................................

§ 7º For the purposes of the provision of item I of § 2º, the Central Bank of Brazil may determine the equivalence to a credit derivative of another derivative when this significantly covers the credit risk related to the underlying asset.” (NR)

“Art. 19. The institution mentioned in art.
2º, caput, item II, must limit the total of its exposures to a same client to the maximum amount of 25% (twenty-five percent) of its Simplified Reference Equity - PRS5, in accordance with the Resolution No. 4.606, of October 19, 2017, and BCB Resolution No. 201, of March 11 2022.

.........................................................................................................................” (NR)

Art.
2º BCB Resolution No. 229, of May 12, 2022, published in the Official Gazette of the Union on May 16, 2022 and rectified in the Official Gazette of the Union on September 2, 2022, shall enter into force with the following alterations:

“Art. 3º The RWACPAD portion must include in its calculation:

I - all exposures classified in the banking book; and

II - exposures related to counterparty credit risk of transactions classified in the trading book.

..................................................................................................................................

§ 3º For the purposes of the provision of the caput, the definitions of banking book and trading book established in art. 26 of Resolution No. 4.557, of February 23, 2017, and in art. 26 of BCB Resolution No. 265, of November 25, 2022 shall be considered.” (NR)

Art. 3º
The following are revoked:

I - the art. 38 of BCB Resolution No. 313, of April 26, 2023, published in the Official Gazette of the Union on April 28, 2023; and

II - the following provisions of BCB Resolution No. 319, of May 18, 2023, published in the Official Gazette of the Union on May 22, 2023:

a) the art.
8º, caput, item III;

b) the header of Section II of Chapter V of Title II;

c) the arts. 10 and 11; and

d) the art. 16, § 2º.

Art. 4º
This Resolution enters into force:

I - on the date of its publication, regarding art. 3º, caput, item I; and

II

• on July 1, 2024, regarding the remaining provisions.

Otávio
Ribeiro Damaso
Director of Regulation