Circular Letter No. 4.024

The Head of the Department of Monitoring of the Financial System (Desig), using the authority conferred upon him by art. 23, item I, subitem "a", of the Internal Regulations of the Central Bank of Brazil, annexed to Portaria No. 84.287, of 27 February 2015, based on art. 77, item III, and in view of the provisions of Resolutions Nos. 4.571, of 26 May 2017, and 4.795, of 2 April 2020, Circulars Nos. 3.870, of 19 December 2017, and 3.996, of 6 April 2020, and Circular Letter No. 3.869, of 19 March 2018,

RESOLVES:

Art. 1 The financial institutions referred to in art. 2 of Resolution No. 4.795, of 2 April 2020, which adhere to the contractual conditions and operational procedures established by the Central Bank of Brazil for formalizing the issuance of the Financial Letter and mobilization of the financial assets or securities guaranteeing it under the aforementioned Resolution, and of Circular No. 3.996, of 6 April 2020, and the entities authorized to exercise the activities of central depository or registration of financial assets and securities must follow the guidelines contained in this Circular Letter.

ON THE GUIDELINES FOR FINANCIAL INSTITUTIONS

Art. 2 Only credit operations, leasing operations, other operations with the characteristic of granting credit, commercial notes and debentures that comply with the provisions of Resolution No. 4.795, of 2 April 2020, and Circular No. 3.996, of 6 April 2020, which have been submitted to the Central Bank of Brazil through document 3040 - Credit Risk Data, whose information has been processed and incorporated into the database of the Credit Information System (SCR), may be subject to binding for the constitution of guarantees for the purpose of issuing Guaranteed Financial Letters (LFG).

• § 1 The binding referred to in the caput must be carried out by the financial institution that will issue the LFG.

• § 2 Only the operations contained in document 3040 - Credit Risk Data referring to the base date immediately prior to the date of binding of the financial assets or securities shall be considered.

• § 3 If the document referred to in the previous paragraph has not yet been submitted and the FI is within the deadline for submission, established in § 2 of art. 2 of Circular Letter No. 3.869, of 19 March 2018, the operations contained in document 3040 sent on the immediately previous base date shall be considered.

Art. 3 For the calculation of the information referred to in this Circular Letter, the information contained in the SCR Layouts, available on the Central Bank of Brazil's website on the internet, at the electronic address https://www.bcb.gov.br/estabilidadefinanceira/scr, item "For financial institutions", subitem "Preparation and submission of documents", must be observed, as follows:

• I - for articles 4, 6, 7, 9 and 10: Layout of document 3040; and

• II - for articles 5 and 8: Layout of file 3046 - Position of clients in the SCR.

Art. 4 Financial assets or securities registered and that fall into at least one of the following situations shall not be accepted as collateral for LTEL-LFG under the terms of art. 8 of Circular 3.996, of 2020:

• I - in relation to the financial assets referred to in item I of art. 8 of Circular 3.996, of 2020:

  • a) operations that have the characteristic of revolving credit: "Annex 3: Operation Modality" - domains 0101, 0204, 0213, 0214, 0218 and 1304;

  • b) operations considered problematic assets under the terms of art. 24 of Resolution No. 4.557, of 23 February 2017: "Annex 1: Maturity Code" - domain greater than or equal to 240 and "Annex 8: Special Characteristic" - domains 11 and 19;

  • c) operations recovered from loss: "Annex 8: Special Characteristic" - domain 2;

  • d) operations renegotiated under the Special Asset Cleanup Program (Pesa), under the terms of Resolution No. 2.471, of 26 February 1998: "Annex 8: Special Characteristic" - domain 3;

  • e) operations renegotiated under the terms of the Revitalization Program for Agricultural Production Cooperatives (Recoop): "Annex 8: Special Characteristic" - domain 4;

  • f) operations in judicial collection or whose issuer is in judicial recovery: "Annex 8: Special Characteristic" - domain 9 and operations whose clients have been registered by the FI in the SCR Management Panel under Judicial Recovery not yet concluded, according to the "Manual of Legal and Administrative Restrictions", available on the Central Bank of Brazil's website on the internet, at the electronic address https://www.bcb.gov.br/estabilidadefinanceira/scr, item "For financial institutions", subitem "Preparation and submission of documents";

  • g) operations that do not have payments scheduled in the next 6 (six) months: difference between the date of the next installment due (DtaProxParcela), from the "Basic Information of the Operation", and the last day of the month to which document 3040 refers, greater than 6 months;

  • h) operations that have amounts to be released: "Annex 1: Maturity Codes" - existence of balance in domains 20 to 80;

  • i) operations assigned by the institution in negotiation with substantial retention of risk and benefits: "Annex 2: Nature of the Operation" - different from domains 01 to 03;

  • j) operations linked to interfinancial transfers from the National Bank for Economic and Social Development (BNDES), the Special Industrial Financing Agency (Finame), constitutional funds, state or district funds, funds or special programs of the Federal Government and operations linked to transfers of any kind from abroad and financing granted under controlled resources of rural credit: "Annex 4 - Origin of Resources" - different from domains 0199, 0208, 0209, 0213 and 0299;

  • k) operations considered non-maturing by force of norm: "Annex 8: Special Characteristic" - domain 5;

  • l) operations with maturity date postponed by force of norm: "Annex 8: Special Characteristic" - domain 6;

  • m) operations with deferred payment by an official body or program awaiting release of funds: “Annex 8: Special Characteristic” - domain 7;

  • n) linked operations under Resolution No. 2,921, of 17 January 2002: “Annex 8: Special Characteristic” - domain 10;

  • o) operations whose debtors do not have a valid registration in the Individual Taxpayer Registry (CPF) or in the National Legal Entity Registry (CNPJ): as per consultation in the databases of the Brazilian Federal Revenue Service.

• II - in relation to debentures, referred to in item IV of art. 5 of Resolution No. 4,795, of 2020:

  • a) issuer that has financial assets listed in items I, II and III of art. 5 of Resolution No. 4,795, of 2020, which fall under subitems “b”, “c” and “f” of item I of article 8 of Circular No. 3,996, of 2020, observing that the calculation must consider all entities that are part of the prudential conglomerate.

• III - in relation to commercial notes, referred to in item V of art. 5 of Resolution No. 4,795, of 2020:

  • a) issuer that has financial assets listed in items I, II and III of art. 5 of Resolution No. 4,795, of 2020, which fall under subitems “b”, “c” and “f” of item I of article 8 of Circular No. 3,996, of 2020, observing that the calculation must consider all entities that are part of the prudential conglomerate.

  • Sole paragraph. Additionally, the institution must observe the provisions of subitems “p” and “q” of item I, subitems “b” and “c” of item II, subitems “b” and “c” of item III, and § 1 of art. 8 of Circular No. 3,996, of 2020.

Art. 5 The IF must consider the following parameters for the purpose of calculating the non-compliance index (ID) in the SCR referred to in art. 9 of Circular No. 3,996, of 2020:

• I - CV>30 = credits overdue in the active portfolio for more than 30 days: “Annex 3: Operation Modalities” - domains 1 to 13 and “Annex 1: Maturity Code” - domains 220 to 290;

• II - CB48 = credits written off as loss up to 48 months: “Annex 3: Operation Modalities” - domains 1 to 13 and “Annex 1: Maturity Code” - domains 310 and 320;

• III - CA = active portfolio: modalities 1 to 13 of Annex 3: “Annex 3: Operation Modalities” - domains 1 to 13 and “Annex 1: Maturity Code” - domains 110 to 290.

Art. 6 In calculating the value of the financial assets provided for in art. 10 and art. 15 of Circular No. 3,996, of 2020:

• I - For the purposes of the provisions of item I of article 10 referred to in the caput, the IF must consider domains 1 to 13 of “Annex 3: Operation Modality” and domains 130 to 190 of “Annex 1: Maturity Code”;

• II - For the purposes of the provisions of item II of article 10 referred to in the caput, the IF must consider domain 1803 of “Annex 3: Operation Modality” and domains 160 to 190 of “Annex 1: Maturity Code”;

• III - For the purposes of the provisions of the sole paragraph of article 10 referred to in the caput, in calculating the 25% limit for the financial assets and securities of a single issuer or debtor, the IF must consider the total active portfolio, calculated from domains 110 to 290 of “Annex 1: Maturity Code”, and prior to the application of the weighting factors provided for in art. 6 of Resolution No. 4,795, of 2020;

• IV - For the purposes of the provisions of the sole paragraph of article 15 referred to in the caput, in calculating the 5% parameter for the financial assets or securities of a single issuer or debtor, the IF must consider the total active portfolio, calculated from domains 110 to 290 of “Annex 1: Maturity Code”, and prior to the application of the weighting factors provided for in art. 6 of Resolution 4,795, of 2020.

Art. 7 The sum of the provision constituted reported in the field Provision Constituted (ProvConsttd), of the “Basic Operation Information”, must be deducted from the amounts calculated in items I and II of art. 6 of this Circular Letter, for the purposes of the provisions of § 1 of art. 6 of Resolution 4,795, of 2020.

Art. 8 For the identification of the client that has operations contracted with other financial institutions referred to in art. 6 of Resolution 4,795, of 2020, the IF must observe the number of IFs (QtdIf), reported in document 3046.

• Sole paragraph. In the assessment referred to in the caput, the IF must consider the operations reported in domains 1 to 13 and 15, except domains 1511 and 1512, of “Annex 3: Operation Modality”.

Art. 9 For the identification of credit operations with payroll deduction of installments from the public sector, referred to in art. 6 of Resolution 4,795, of 2020, the following parameters must be taken into consideration:

• I - “Annex 3: Operation Modality” - domain 0202; and

• II - “Annex 26: Additional Information” - domain 1501.

Art. 10 For the purposes of the linking referred to in art. 2, only debentures and commercial notes that have the identification code with the registry entity informed in document 3040 in the fields relating to additional information – “Annex 26: Additional Information” - domain 04 will be accepted.

ON THE GUIDELINES FOR ENTITIES AUTHORIZED TO EXERCISE THE ACTIVITIES OF CENTRAL DEPOSITORY OR REGISTRATION OF FINANCIAL ASSETS OR SECURITIES

Art. 11 The central depository or the registry entity must send monthly, by the 10th business day of the subsequent month, information relating to the entirety of the set of financial assets and securities forming part of the basket of guarantees linked to the set of Financial Letters issued by each of the IFs, under the LTEL-LFG, through the following files:

• I - AMCTP331 - for information relating to:

  • a) credit operations;

  • b) leasing operations;

  • c) other operations with the characteristic of granting credit;

• II - AMCTP945 - for information relating to:

  • a) debentures;

  • b) commercial notes.

  • Sole paragraph. The files referred to in the caput must be sent to the Central Bank of Brazil through the File Transfer System (STA), in the form of Circular Letter No. 3.588, of 18 March 2013, available on the Central Bank of Brazil's page on the Internet, at the address https://sta.bcb.gov.br/sta/.

Art. 12. The central depository or the registry entity must forward the information relating to the creation of encumbrances on the assets used as collateral for the issuance of LFG, as well as the financial assets and securities that are included or changed, on the first business day following their occurrence, through the files specified in art. 11.

Art. 13. This Circular Letter enters into force on the date of its publication.

Gilneu Francisco Astolfi Vivan