Circular No. 206 — Complementary Norms to Circular 126 of 20.03.69 on Successive Interconnections in Financial Groups

CIRCULAR N. 000206

To
Financial Institutions

We communicate that the National Monetary Council, in a session on 17.5.1973, resolved to issue the following complementary norms to Circular No. 126, of 20.03.69:

I - Successive interconnections, in a set of financial institutions that form part of the same economic group, shall be admitted only in cases where these interconnections involve commercial banks and investment banks or vice versa, and provided that at least one of the following conditions is met:

a) the participations of the Commercial Bank in the Investment Bank, or vice versa, and of the participating entity in another financial institution, originated at a time prior to the issuance of Circular No. 126, of 20.03.69;

b) it concerns the transfer of shareholdings from a Commercial Bank to an Investment Bank, regarding capital participations in Brokerage Companies, Distribution Companies, or Investment Companies;

c) it concerns the transfer of shareholdings from an Investment Bank to a Commercial Bank, regarding capital participations in credit and financing companies or mixed-type companies.

II - In any case, even in these special instances, whenever successive participations occur, the equity assets of the second institution (that which, at the same time, is controlled by an institution of the Group and participates in another) must be deducted from capital, both for the purpose of calculating operational limits and for meeting the minimum capitalization conditions required by current legislation.

III - The successive interconnections referred to in this Circular will depend on prior authorization from the Central Bank of Brazil, requested, in each case, by the interested institutions.

IV - Reciprocal capital participations remain prohibited under any pretext.

Brasília-DF, May 17, 1973

Francisco De Boni Neto
Director