Circular No. 1120 - Investment Banks - Credit, Financing and Investment Companies. Real Estate Credit Companies. Operations with Individuals and Acquisition of Creditor Rights Linked to These Operations. Regulation - Revocation of Circulars 1045, 1059, 1092 and Circular Letters

CIRCULAR NO. 001120

To
Investment Banks, Credit, Financing and Investment Companies and Real Estate Credit Companies

We communicate that the Board of Directors of the Central Bank of Brazil, in a session held on 27.01.87, in view of the provisions of item III of Resolution No. 1,243, of 31.12.86, resolved to issue the following norms disciplining credit operations with individuals, by financial institutions in the capital market sector.

2. Investment banks are prohibited from carrying out credit operations of any nature with individuals, including in this prohibition the acquisition of creditor rights, from commercial banks and credit, financing and investment companies, with or without the co-obligation of the assigning institution, related to these operations.

3. The acquisition of creditor rights from commercial banks and credit, financing and investment companies, by real estate credit companies, in accordance with the "d" clause of Circular No. 1,111, of 21.01.87, may not cover credits related to operations with individuals.

4. The balances of credit operations granted to individuals, under any modality, by credit, financing and investment companies, may not exceed the following limits:

a) 3 (three) times the net equity of the financial institution, when it is linked to a commercial bank; or

b) 5 (five) times the net equity of the institution, in other cases.

5. The acquisition of creditor rights from commercial banks and credit, financing and investment companies, related to credit operations to individuals, is included in the limits established in the previous item, regardless of whether there is co-obligation of the assigning financial institution, and in such circumstances, there may be fulfillment of an additional limit of up to 01 (one) times the Net Equity of Credit, Financing and Investment Companies with operations of this kind.

6. Credit operations to individuals supported by regulations of programs provided for in the Agroindustrial Credit Manual (MCA) and the Rural Credit Manual (MCR) are not included in the limitations established by this Circular.

7. The verification of compliance with the limits fixed in item 4 of this regulation will be done monthly, based on the accounting balances of the institutions' balance sheets, in the manner that will be published opportunistically by this Agency.

8. Upon express request by the interested institution, the application of seasonality coefficients in the control of the limits referred to in this Circular may be admitted.

9. In the calculation of accounting balances for the purpose of the contingency provided for herein, the net value of the financing accounts will be considered, that is, subtracting the values recorded as "revenues to be appropriated".

10. Credit, financing and investment companies, whose applications in operations with individuals are, on 31.01.87, below the limits established in item 4, may gradually expand these operations, respecting the additional maximum equivalent to 50% (fifty percent) of the net equity, per bimonthly period.

11. Financial companies whose applications in operations with individuals are, on 31.01.87, above the limits established in item 4, must suspend their operations of this nature, until their compliance.

12. Non-compliance with the limits fixed in this Circular will imply the remittance of the excesses to the Central Bank, in current currency, until the 15th (fifteenth) day of the month following that in which the non-compliance is verified.

13. Credit, financing and investment companies must enter into an agreement with a commercial bank that expressly authorizes the Central Bank to make all entries linked to the remittance referred to in the previous item in their BANK RESERVES account.

14. Before the deadline for remittance, established in item 12, the credit, financing and investment company will inform the Central Bank of the amount to be remitted and the commercial bank in whose BANK RESERVES account the debit will be made.

15. The release of the resources remitted in the form of this Circular will be effected until the 10th (tenth) business day following the date of forwarding of the control map regarding the position in which compliance occurs.

16. From the effective date of this Circular, the authorizations granted by the Central Bank to credit, financing and investment companies, for exceeding the limits of credit operations to individuals, established in previous regulations, based on atypical or exceptional situations, are cancelled.

17. Credit, financing and investment companies may only finance the acquisition of goods, new or used, upon presentation of the first copy of the Invoice, except when this has mandatory destination linked to the registration of the property of the good in a competent body. The provisions of this item also apply to the financing of services, requiring the presentation of the first copy of the relevant fiscal document.

18. The substitution of fiduciary alienation in guarantees of financed goods based on the "a" and "b" clauses of item I of Resolution No. 1,094, of 20.02.86, by the fiduciary alienation of goods mandatorily financeable for shorter terms, is prohibited.

19. This Circular will enter into force on 01.02.87, when Circulars Nos. 1,045, of 03.07.86, 1,059, of 21.08.86 and 1,092, of 14.11.86, as well as Circular Letters Nos. 1,431, of 08.07.86, 1,433, of 08.07.86, and 1,482, of 03.10.86, will be revoked, however, all these regulations will prevail for purposes of calculation and remittance of excesses related to the position of January 1987.

Brasília-DF, January 30, 1987

Fernão Carlos Botelho Bracher
President