Circular No. 1106 - National Financial System - Interest Rates - Taxation on Private Nominal Securities and Changes to Limits for Repo Operations Involving Fixed Income Securities

CIRCULAR NO. 001106

We communicate that the Board of Directors of the Central Bank of Brazil, having regard to the provisions of Article 30 of the Regulation annexed to Resolution No. 1,088, of January 30, 1986, has decided:

a) to alter the limits for carrying out repo operations, as provided in the aforementioned Regulation, establishing:

a.1 - institutions qualified in accordance with Article 7: up to 30 (thirty) times the calculation base, observing the following:

I - up to 3 (three) times, for operations with any securities;

II - above 3 (three) up to 15 (fifteen) times:

• for operations with federal, state, and municipal public securities; and/or

• for operations with private securities contracted with financial institutions and other institutions authorized to operate by the Central Bank of Brazil;

III - above 15 (fifteen) up to 30 (thirty) times, for operations with Treasury Notes (Letras do Tesouro Nacional), Treasury Bonds (Obrigações do Tesouro Nacional), and Central Bank Notes (Letras do Banco Central);

a.2 - institutions qualified in accordance with Article 8: up to 15 (fifteen) times the calculation base, observing the following:

I - up to 3 (three) times, for operations with any securities;

II - above 3 (three) up to 15 (fifteen) times, for operations with Treasury Notes (Letras do Tesouro Nacional), Treasury Bonds (Obrigações do Tesouro Nacional), and Central Bank Notes (Letras do Banco Central);

b) to establish that institutions qualified in accordance with Articles 7 and 8 of the cited Regulation, when carrying out repo operations backed by private securities, must observe a maximum of 20% (twenty percent) of the total applications in these securities regarding papers issued, accepted, or co-obligated by the same company, such limitation not applying to those issued, accepted, or co-obligated by company(ies) affiliated with the qualified institution itself;

c) to adopt as the concept of affiliated company, for the purposes of the preceding clause, that defined in Article 15 of the Regulation annexed to Resolution No. 1,022, of June 5, 1985.

2. This Circular shall enter into force on the date of its publication, and Circular No. 1,081, of October 30, 1986, is hereby revoked.

Brasília-DF, January 14, 1987

Luiz Carlos Mendonça de Barros
Director