Central Bank of Brazil Circular No. 4001 Amending Circular No. 3916 to Establish Deduction for Own-Issued Financial Notes in Compulsory Reserve Requirements

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The Collegiate Board of the Central Bank of Brazil, in an extraordinary session held on April 13, 2020, based on Article 10, items III and IV, of Law No. 4,595 of December 31, 1964, and Article 66 of Law No. 9,069 of June 29, 1995,

R E S O L V E:

Art. 1º Circular No. 3,916 of November 22, 2018, shall be amended as follows:

“Art. 5º-B A deduction shall apply to the liability, net of the blocked balance of the compulsory reserve on time deposits established by Article 9 of Circular No. 3,994 of 2020, for the balance of Financial Notes of own issuance repurchased by the issuing financial institution in the manner set forth in § 6 of Article 10 of Resolution No. 4,733 of June 27, 2019.

§ 1º The liability referred to in the main text shall be calculated based on Articles 4 and 5, applying to the calculation result the deduction provided for in Article 5º-A.

§ 2º For the purpose of performing the calculation provided for in the main text, the balance of the compulsory reserve on time deposits established by Article 9 of Circular No. 3,994 of 2020 and the balance of Financial Notes of own issuance repurchased by the issuing financial institution in the manner set forth in § 6 of Article 10 of Resolution No. 4,733 of 2019 shall be verified on the last business day of the calculation period.

§ 3º The deduction referred to in the main text shall remain in effect until the calculation period in which the final term for the repurchase of Financial Notes of own issuance occurs, in accordance with the provisions of § 6 of Article 10 of Resolution No. 4,733 of 2019.

§ 4º The deduction referred to in the main text is limited to the total value, verified on the last business day of the calculation period, of debentures acquired by the financial institution within the timeframe provided for in the main text of Article 2 of Resolution No. 4,786 of March 23, 2020, and which meet the requirements established in Article 5 of that Resolution.

§ 5º The deduction referred to in the main text may not exceed 15% (fifteen percent) of the liability of the compulsory reserve on time deposits, calculated in accordance with Articles 4, 5, and 5º-A.

§ 6º The deduction referred to in the main text, added to the blocked balance of the compulsory reserve on time deposits referred to in Article 9 of Circular No. 3,994 of 2020, verified on the last day of the calculation period, may not exceed 30% (thirty percent) of the liability of the compulsory reserve on time deposits, calculated in accordance with Articles 4, 5, and 5º-A.

§ 7º Financial Notes repurchased from an institution within the same conglomerate as the issuer or from an investment fund administered by an institution within the same conglomerate as the issuer are not eligible for the deduction referred to in the main text.” (NR)

“Art. 5º-C Starting from the calculation period following that referred to in § 3 of Art. 5º-B and until the calculation period beginning on June 14, 2021, and ending on June 18, 2021, whose adjustment will occur on June 28, 2021, a deduction equal to the nominal value ascertained in the manner of Art. 5º-B verified in the last calculation period covered by that article shall apply to the liability calculated in accordance with Articles 4, 5, and 5º-A.” (NR)

“Art. 5º-D Starting from the calculation period beginning on June 21, 2021, and ending on June 25, 2021, whose adjustment will occur on July 5, 2021, the value of the deduction referred to in Art. 5º-C shall be progressively reduced, in each new calculation period, by a constant nominal value equivalent to 2% (two percent) of the nominal value ascertained in the manner of Art. 5º-B verified in the last calculation period covered by that article, until its definitive extinction.” (NR)

Art. 2º This Circular enters into force on the date of its publication, producing effects starting from the calculation period beginning on April 13, 2020, and ending on April 17, 2020, whose adjustment will occur on April 27, 2020.

Bruno Serra Fernandes
Director of Monetary Policy

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