Circular Letter No. 4042: Procedures for Issuing Financial Notes and Debt Balance Calculation Methodology under the LTEL-LFG Line

The Head of the Department of Banking Operations and Payment Systems, using the powers conferred by Article 23, item I, clause "a", of the Internal Regulations of the Central Bank of Brazil, attached to Ordinance No. 84,287 of February 27, 2015, and considering the provisions of Article 13 and Article 22 of Circular No. 3,996 of April 6, 2020,

R E S O L V E:

Art. 1. This circular letter discloses the methodology for calculating the debt balance and the procedures to be observed for the issuance of Financial Notes by financial institutions whose loan request, through the Temporary Special Liquidity Line for Acquisition of Financial Notes with Collateral in Financial Assets or Securities (LTEL-LFG), as governed by Resolution No. 4,795 of April 2, 2020, and Circular No. 3,996 of April 6, 2020, has been authorized by the Collegiate Board of the Central Bank of Brazil.

Debt Balance of the Loan Operation

Art. 2. The value of the debt balance will be updated on each business day subsequent to the granting of the loan, according to the calculation methodology presented in Annex I of this circular letter.

Issuance of the Financial Note

Art. 3. The issuance of the Financial Note, through its constitutive registration in a central asset depository, by the financial institution in favor of the Central Bank of Brazil, must be carried out by 1:00 PM on the date of issuance, observing the procedures set forth in Annex II of this circular letter.

Art. 4. This Circular Letter enters into force on the date of its publication.

Flávio Túlio Vilela

ANNEX I

Calculation methodology for the daily update of the debt balance of the loan operation contracted through the LTEL-LFG:

SDt = SDt-1 * FatorEncargo

Where:

SDt: is the updated debt balance on date t, with precision of 2 (two) decimal places, by truncation;

SDt-1: is the debt balance prior to the update on date t, with precision of 2 (two) decimal places, by truncation;

FatorEncargo = FatorSelic * FatorAcréscimo, calculated with 8 decimal places, mathematically rounded;

FatorSelic = (1 + TaxaSelic / 100)^(1/252), calculated with 8 decimal places, mathematically rounded;

FatorAcréscimo = (1 + TaxaAcréscimo / 100)^(1/252), calculated with 8 decimal places, mathematically rounded;

TaxaSelic: is the Selic Rate, as defined in Circular No. 3,671 of October 18, 2013, on date t, expressed in annual terms, with two decimal places, and published by the Central Bank;

TaxaAcréscimo: is the percentage increase to the Selic Rate, provided for in Article 4 of Circular No. 3,996 of April 6, 2020, expressed in annual terms, with two decimal places.

ANNEX II

The following characteristics must be observed for the issuance of the Financial Note with the central depository:

Date of issuance, maturity date, quantity, and unit issuance value

The fields Date of issuance, maturity date, quantity, and unit issuance value must be filled with the values informed by the Central Bank (BC), according to §3 of Article 4 of Circular Letter No. 4,025 of April 13, 2020.

Issuance Term

The Issuance Term field must be filled with the number of calendar days between the maturity date and the issuance date, informed by the BC, and must not be confused with the term presented by the financial institution in the operation request, as defined in §1 of Article 4 of Circular Letter No. 4,025 of April 13, 2020.

Financial Issuance Value

Unit issuance value x Quantity

Yield/Index/Floating Rate

Must be filled as VCP Index.

At maturity, the BC will inform the updated value for the launch of the redemption unit price (PU).

Payment Method

Payment of interest and principal, at maturity

Public Distribution

No

Additional Description

"This Financial Note is backed by financial instruments specified in the pledge contract number [FILL IN]"

Deposit Operation

Use the option "Entry into custody without financing"

Beneficiary Account

Account number, informed by the BC

Unit Price (P.U.)

Same value informed in the "unit issuance value" field

Modality

No Modality

Payment Method

1st) Payment of interest and principal, at maturity

Index Description (VCP)

Selic Rate + 0.6%, as provided for in Article 4 of Circular No. 3,996 of April 6, 2020.

Index Indicator Type (VCP)

Selic LFG

Interest Rate/Spread

Do not fill