Circular Letter No. 1131 — Updates the MNI

Circular Letter No. 1131, of November 26, 1984

CIRCULAR LETTER NO. 1131

Aiming to resolve doubts regarding the interpretation of the norm embodied in MNI 16-10-3, we communicate that subsection "b" of item 16-10-3-10 of the Manual of Norms and Instructions shall henceforth be worded as follows:

"b) the granting of bail or any other guarantee that may, directly or indirectly, enable the beneficiaries to obtain loans in general or raise funds from the public, or that ensures the payment of obligations arising from the acquisition of goods or services;"

2. Consequently, the necessary sheet for updating the aforementioned Manual is attached.

Brasília (DF), November 26, 1984.

DEPARTMENT OF BANKING ORGANIZATION AND AUTHORIZATIONS Maurício do Espírito Santo CHIEF

This text does not replace that published in the DOU and Sisbacen.

TITLE: COMMERCIAL BANKS – 16
CHAPTER: Accessory Operations – 10
SECTION: Bank Guarantees – 3

Circular Letter No. 1131, of 26.11.84 – MNI Update No. 795

1 — The commercial bank may provide bail provided that its value in national currency and its maturity are perfectly characterized.

2 — The bank granting the bail must require from the guarantor counter-guarantees compatible with the values and maturities of the guarantees granted.

3 — In granting bail, the commercial bank is subject to the following limits:
a) the balance of contracted and in-force bail may not exceed, at any time, 5 (five) times the amount of the bank's paid-in capital and reserves; b) the total of bail granted to a single client may not exceed, in value, 50% (fifty percent) of the sum of the bank's paid-in capital and reserves; c) any bail exceeding the limits mentioned in this item may only be provided with prior authorization from the Central Bank, in each case.

4 — In calculating the limits mentioned in the previous item, the commercial bank authorized to operate in foreign exchange must also compute the updated value of letters of credit for imports, opened without prior foreign exchange contracting.

5 — The commercial bank may grant bail to guarantee the filing of fiscal appeals and for the guarantee of fiscal execution, in which cases it must observe:
a) the conditions mentioned in items 2, 3, and 4; b) the adjustment with the guarantor of certain responsibility for each bail; c) the value of each bail may not be lower than that corresponding to the respective claim before the favored fiscal department; d) the bail contract may contain a clause for monetary correction of the fiscal debt.

6 — In cases of granting bail with the purposes provided in the previous item, if the exact value of the guarantee cannot be fixed, it is reduced to half of the limit of 5 (five) times the amount of paid-in capital plus reserves for the balance of the total bail granted.

7 — The commercial bank may grant bail, to guarantee the filing of fiscal appeals and for the guarantee of fiscal execution, for an indefinite term, in which cases it is incumbent upon it, at least once per semester, to request from the favored Fiscal Department, instance, or competent courts clarification on the progress of the process.

8 — The bail granted for the purposes of guaranteeing fiscal execution must contain, necessarily and expressly:

TITLE: COMMERCIAL BANKS – 16
CHAPTER: Accessory Operations – 10
SECTION: Bank Guarantees – 3

Circular Letter No. 1131, of 26.11.84 – MNI Update No. 795

a) a clause of solidarity, with waiver of the benefit of order; b) a declaration that the extent of the guarantee will cover the value of the original debt, interest, and other due charges, including monetary correction, as indicated in the Active Debt Certificate.

9 — Observing the provisions of item 5, the commercial bank may also provide bail for an indefinite term, to produce effects before official bodies or entities controlled by them, destined to ensure compliance, with them, of obligations assumed by the guarantor such as qualification in competitions, contracting and execution of public works, as well as other commitments whose time limitation is impracticable.

10 — The following are prohibited to the commercial bank:
a) the assumption of responsibilities by aval or granting of acceptance; b) the granting of bail or any other guarantee that may, directly or indirectly, enable the beneficiaries to obtain loans in general or raise funds from the public, or that ensures the payment of obligations arising from the acquisition of goods or services; c) the granting of aval or bail in foreign currency or involving the risk of exchange rate variation, except when it concerns operations linked to foreign trade.

11 — In the permitted cases of granting guarantees in foreign currencies (operations linked to foreign trade), it is mandatory to include a contractual clause providing for the update of the value in cruzeiros of the counter-guarantees received.

12 — The update of the value of the counter-guarantees, provided for in the previous item, must be automatic and concomitant with any update that may occur in the value of the bail or aval granted, due to any implicit or explicit condition in the mechanics of the contracted operation.

13 — The granting of aval or bail, in titles or contracts of any nature, of the states, municipalities, and their respective autonomous entities, is subject to prior approval by the National Monetary Council.

14 — In granting guarantees linked to real estate credit, the commercial bank must pay attention to the provisions of Items 16-9-5-6 and 16-9-5-7.

15 — The authorization referred to in subsection "c" of item 3 is requested from the Central Bank/Department of Banking Organization and Authorizations.