Circular No. 3,849 of September 18, 2017 — Amends Circulars No. 3,644 of March 4, 2013, No. 3,748 of February 27, 2015, and No. 3,809 of August 25, 2016

CIRCULAR NO. 3,849, OF SEPTEMBER 18, 2017

Amends Circulars Nos. 3,644, of March 4, 2013, 3,748, of February 27, 2015, and 3,809, of August 25, 2016.

The Collegiate Board of the Central Bank of Brazil, in a session held on September 18, 2017, based on the provisions of Arts. 9, 10, item IX, 11, item VII, and 37 of Law No. 4,595, of December 31, 1964, and Art. 1, § 1, of Complementary Law No. 130, of April 17, 2009, and having in view the provisions of Arts. 3, § 2, and 15 of Resolution No. 4,193, of March 1, 2013, and Resolution No. 3,988, of June 30, 2011,

RESOLVES:

Art. 1 Circular No. 3,644, of March 4, 2013, shall enter into force with the following alterations:

“Art. 3 ......
......
VI - the asset provided as collateral in favor of clearing houses or clearing and settlement service providers; VII - the participation in mutualized guarantee funds of clearing houses or clearing and settlement service providers; VIII - the operation with financial derivative instruments of own ownership; IX - the exposure to a central counterparty arising from committed operations, asset lending, or operations with financial derivative instruments carried out in the name of clients, settled in clearing houses or clearing and settlement service providers, in which the institution assumes a contractual obligation to reimburse losses arising from the insolvency of the central counterparty; and X - the exposure to the contracting client with the institution arising from committed operations, asset lending, or operations with financial derivative instruments settled in clearing houses or clearing and settlement service providers, in which an entity interposes itself as a central counterparty.
......
§ 2 For the purpose of calculating the RWACPAD portion, the following exposures shall not be considered:

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I - the joint obligations and other modalities of retention of risks and benefits arising from operations of sale or transfer of financial assets that remain registered in the institution’s assets, in accordance with current regulation; II - the shares of funds and the securitization titles associated with operations of sale or transfer of financial assets that remain registered in the institution’s assets, in accordance with current regulation, in proportion between the amount of transferred assets that remain registered in the institution’s assets and the total value of the assets of the respective fund or securitization process; III - the interdependencies operations and the other operations carried out with institutions that integrate the prudential conglomerate; IV - the equity elements deducted in the calculation of the Reference Equity (PR), as defined in Arts. 5 to 7 of Resolution No. 4,192, of March 1, 2013, gross of the deferred tax liabilities associated with them subtracted for the purpose of calculating the PR; V - the investments in stocks and commodities covered by the portion related to market risk exposures subject to the calculation of the capital requirement through the standardized approach (RWAMPAD) or the internal model authorized by the Central Bank of Brazil (RWAMINT) of the RWA amount, as provided in Resolution No. 4,193, of 2013; VI - the operations with financial derivative instruments carried out in the over-the-counter market in which the institution acts exclusively as an intermediary, not assuming rights or obligations arising from the fluctuation of the replacement value or the default of any of the parties; VII - the checks, payment slips, and credit documents (DOCs) to be credited to client accounts, when the release of the respective funds is linked to the actual clearing, in accordance with current regulation; VIII - the linked active operations, carried out according to the provisions of Resolution No. 2,921, of January 17, 2002; IX - the import letter of credit issued by the institution, linked to an import exchange contract, provided that the total delivery of the equivalent in national currency has occurred; and X - the credit operations with bodies and entities of the public sector regarding the deduction of a portion of the PR, in accordance with Art. 2 of Resolution No. 4,589, of June 29, 2017.
......

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§ 4 Mark-to-market, when provided for for the purpose of calculating the RWACPAD portion, must be carried out in a consistent and verifiable manner, even if not adopted for accounting purposes. § 5 In the operations mentioned in items IX and X of the caput, the exposures related to the counterparties involved must be considered, when the institution acts:
I - as a clearing member; or
II - through an institution not part of the prudential conglomerate that is:
a) a clearing member; or b) an intermediary with respect to a clearing member.
§ 6 The asset referred to in item VI of the caput includes that provided by a client, if the institution assumes a contractual obligation to reimburse it for any losses in its transactions due to the default of the Qualified Central Counterparty (QCCP), as defined in Art. 20. § 7 For the asset provided as collateral, referred to in item VI of the caput, the following must be considered:
I - the exposure related to counterparty credit risk, unless the asset is:
a) segregated from the equity of the depositary entity and the equity of the central counterparty; and b) identified in the name of the holder of the operation; and II - the exposure related to the underlying asset, in the case of own assets. § 8 The application of the Credit Conversion Factor for Credit to be Settled (FCL) or the Credit Conversion Factor (FCC), when necessary for calculating the value of the exposure, must occur prior to the deductions mentioned in § 1. § 9 The value of the exposure after the deductions mentioned in § 1 must be equal to or greater than zero.” (NR)

“Art. 11. ......
......
II - ......
......

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d) provision of guarantee for the distribution of securities in the primary and secondary markets, through public offering, in accordance with current regulation; e) provision of surety or guarantee in fiscal, judicial, or administrative proceedings; and
......
§ 1 In calculating the value of the exposure related to the provision of guarantee associated with an operation not recorded in the Balance Sheet, the lowest of the FCCs applicable to the guarantee or the guaranteed operation must be applied to the value of the guarantee. § 2 The guarantee modalities mentioned in the caput include those related to credit exposures to be released within 360 days as provided in Art. 10.” (NR)

“Art. 12. ......
§ 1 Operations with financial derivative instruments include operations for the future settlement of purchase or sale of foreign currency, gold, or securities.
§ 2 For the purpose of calculating the RWACPAD portion, the operations referred to in the caput must be marked to market.” (NR)

“Section IX-A
Of Derivatives Subject to Agreements for Clearing and Settlement of Obligations Art. 15-A. The value of the exposure related to operations with financial derivative instruments, including credit derivatives, subject to agreements for the clearing and settlement of obligations, according to Circular No. 3,809, of August 25, 2016, must correspond to the result of the sum:
I - the net replacement value, if positive; and II - the net future potential gain (GPFLíq), calculated according to Art. 15-B.
§ 1 The exposure value mentioned in the caput must be calculated per counterparty for the set of operations subject to the same agreement for the clearing and settlement of obligations. § 2 The net replacement value mentioned in item I of the caput is defined as the sum of the replacement values of operations with financial derivative instruments, calculated per counterparty for the set of operations subject to the same agreement for the clearing and settlement of obligations.

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Art. 15-B. The net future potential gain must be determined according to the following formula:
GPFLíq = GPFBruto * (0.4 + 0.6 * NGR), in which:
I - GPFBruto = sum of future potential gains calculated per operation with the same counterparty, according to Arts. 13 and 15; and II - NGR = ratio between the net replacement value, if positive, and the sum of the positive replacement values of the operations subject to an agreement for the clearing and settlement of obligations, calculated according to the following formula:

max(∑ 𝑀𝑡𝑀𝑖
,0)
𝑛
𝑖=1
∑ 𝑚𝑎𝑥(𝑀𝑡𝑀𝑖
,0)
𝑛
𝑖=1

, in which:
a) n = number of operations with the same counterparty; and b) 𝑀𝑡𝑀𝑖 = replacement value of operation “i”.
Sole paragraph. The NGR must be equal to zero in cases where the net replacement value is not positive.” (NR)

“Section XI
Of Investment Funds
Art. 17. ......
......
Art. 17-A. The exposures of the consolidated investment fund must be considered as if they were fully held by the institution.” (NR)

“Section XII
Of Securitization Titles
Art. 18. In calculating the RWACPAD portion, the same definitions as those provided in Art. 115 of Circular No. 3,648, of March 4, 2013, must be used for the exposures arising from investment in securitization titles. Art. 18-A. To the exposures arising from investment in securitization titles, the PRF is applied as defined in Circular No. 3,848, of September 18, 2017. Art. 18-B. For securitization processes in which the institution provides implicit support, as defined in Circular No. 3,648, of March 4, 2013, the exposures associated with the respective securitization titles must be considered as if they were fully held by the institution.” (NR)

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“TITLE III
OF THE RISK WEIGHTING FACTORS
CHAPTER I
OF THE 0% WEIGHTING
Art. 19. ......
......
II - values held in cash, in foreign currencies issued in the jurisdictions referred to in item VII, as well as exposures to underlying assets represented by said foreign currencies;
......
V - ......
a) World Bank Group, comprising the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA);
......
VI - advances of contributions to the Credit Guarantee Fund (FGC) and the Credit Cooperativism Guarantee Fund (FGCoop); and VII - operations with central governments of foreign jurisdictions and their respective central banks, as well as securities issued by them, whose external risk classification, conferred by a credit risk rating agency registered or recognized in Brazil by the Securities and Exchange Commission (CVM), is:
......
b) ......

1. the reference currency of the operation, security, or instrument is the local currency in the jurisdiction;
2. the institution’s fundraising is carried out in the local currency in the jurisdiction; and
3. the exposures are registered in the balance sheet of the subsidiary headquartered in the same jurisdiction.
   ......

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CHAPTER II
OF THE WEIGHTING APPLICABLE TO EXPOSURES TO BE SETTLED WITH QUALIFIED CENTRAL COUNTERPARTIES (QCCP)
Section I
Of the Definition of QCCP
Art. 20. For the purpose of calculating the RWACPAD portion, a Qualified Central Counterparty (QCCP) is considered to be the entity that interposes itself as a central counterparty, in operations to be settled in clearing houses or clearing and settlement service providers, that meets the following characteristics:
I - its systems are authorized by the Central Bank of Brazil, in accordance with Law No. 10,214, of March 27, 2001, and current regulation;
......
Section II
Of Participation in Mutualized Guarantee Funds of QCCP Art. 20-A. For participation in the QCCP funds mentioned in Art. 3, item VII, the value of the RWACPAD portion related to this exposure (𝑃𝑎𝑟𝑐𝐷𝐹) must be calculated according to the following formula:

𝑃𝑎𝑟𝑐𝐷𝐹 = max (12.5 × 𝐾𝑄𝐶𝐶𝑃 × [
𝐷𝐹𝑝𝑟ó𝑝𝑟𝑖𝑜
𝐷𝐹𝑄𝐶𝐶𝑃+ 𝐷𝐹𝐶𝑀]; 2% × 𝐷𝐹𝑝𝑟ó𝑝𝑟𝑖𝑜)

in which:
I - 𝐾𝑄𝐶𝐶𝑃 = hypothetical regulatory capital of the QCCP, as provided in the sole paragraph; II - 𝐷𝐹𝑝𝑟ó𝑝𝑟𝑖𝑜 = value of the institution’s participation in the fund; III - 𝐷𝐹𝑄𝐶𝐶𝑃 = value of the QCCP’s participation in the fund; and IV - 𝐷𝐹𝐶𝑀 = total value of the fund, minus the value of the participation mentioned in item III. Sole paragraph. The 𝐾𝑄𝐶𝐶𝑃, reported by the central counterparty, is calculated according to the following formula:

𝐾𝑄𝐶𝐶𝑃 = ∑𝑖 𝐸𝐴𝐷𝑖 × 20% × 8%,

in which 𝐸𝐴𝐷𝑖 refers to the exposure to which the central counterparty is subject as a result of the operations to be settled with clearing member “i”.

Circular No. 3,849, of September 18, 2017 Page 8 of 25

Section III
Of Operations with QCCP
Subsection I
Of Operations of Own Ownership
Art. 20-B. A RWF of 2% (two percent) must be applied to the exposures arising from operations of own ownership, as provided in Art. 3, items I and VIII, carried out directly with a QCCP, to be settled in the systems mentioned in Art. 20. Art. 20-C. The following RWFs must be applied to the exposures arising from operations of own ownership, as provided in Art. 3, items I and VIII, carried out with a QCCP through a financial institution not part of the prudential conglomerate:
I - 2% (two percent), if the following requirements are cumulatively met:
a) the operation is registered at the QCCP:
1. in the name of the holder of the operation; or
2. in the name of the clearing member, segregated from own operations, in the case of multiple clients in a single operation;
b) the terms of the contract signed between the parties allow for the adoption of the necessary measures and procedures for the timely settlement or transfer of assets, including any guarantees provided, in the event of liquidation, bankruptcy, or default of any entity in the chain of responsibility between the holder of the operation and the QCCP; c) the holder of the operation is protected from any losses arising from liquidation, bankruptcy, or default:
1. of any entity in the chain of responsibility between it and the QCCP; and
2. of the other clients, in the case of multiple clients in a single operation; and
d) the contract signed between the parties has legal force in all relevant forums, including in other jurisdictions where it must or may produce effects; II - 4% (four percent), if the requirements of items “a”, “b”, and “d” of item I are met; or III - RWF as provided in Art. 23, meeting the provisions of its items I and II, in other cases.

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Subsection II
Of Operations Carried Out in the Name of Clients Art. 20-D. The following RWFs must be applied to the operations referred to in Art. 3, item IX:
I - 2% (two percent), if the institution acts as a clearing member; or II - those established in Art. 20-C, meeting the respective requirements, when carried out through an institution not part of the prudential conglomerate. Sole paragraph. For the purpose of the provision of item II of the caput, the contracting client with the institution is considered the holder of the operation. Art. 20-E. The provisions of Arts. 19, 23, 24, 24-A, and 25 must be applied to the operations referred to in Art. 3, item X.
Section IV
Of Assets Provided as Collateral to QCCP, Not Segregated or Not Identified Art. 20-F. An RWF of 2% (two percent) must be applied to the exposure associated with assets provided as collateral to QCCP, as provided in Art. 3, § 7, item I, if the institution acts as a clearing member. Art. 20-G. The following RWFs must be applied to the exposure associated with assets provided as collateral to QCCP, as provided in Art. 3, § 7, item I, through an institution not part of the prudential conglomerate:
I - 2% (two percent), if the following requirements are met:
a) the asset provided as collateral is identified:

1. at the QCCP as provided by the holder of the operation; or
2. in a manner segregated from the own operations of the entities in the chain of responsibility between the multiple clients and the QCCP, in the case of multiple clients in a single operation;
   b) the terms of the contract signed between the parties allow for the adoption of the necessary measures and procedures for the timely settlement or transfer of the traded assets, including any guarantees provided, in the event of liquidation, bankruptcy, or default of any entity in the chain of responsibility between the holder of the operation and the QCCP; c) the holder of the operation is protected from any losses resulting from liquidation, bankruptcy, or default:

Circular No. 3,849, of September 18, 2017 Page 10 of 25

1. of any entity in the chain of responsibility between the holder of the operation and the QCCP; and
2. of the other clients, in the case of multiple clients in a single operation; and
   d) the contract signed between the parties has legal force in all relevant forums, including in other jurisdictions where it must or may produce effects; II - 4% (four percent), if the requirements “a”, “b”, and “d” mentioned in item I are met; or III - 50% (fifty percent), in other cases. Art. 20-H. The RWF corresponding to the counterparty must be applied, according to the provisions of Arts. 19, 23, 24, 24-A, and 25, to the exposure associated with assets provided as collateral in a depositary entity, as provided in Art. 3, § 7, item I.

CHAPTER III
OF THE 20% WEIGHTING
Art. 21. ......
......
II - demand bank deposits, in foreign currency issued in a jurisdiction whose sovereign entity has an external risk classification, conferred by a credit risk rating agency registered or recognized in Brazil by the Securities and Exchange Commission, equivalent to investment grade;
......
IV - operations with an original maturity of up to three months, in national currency, carried out with financial institutions and other institutions authorized to operate by the Central Bank of Brazil, with which consolidated accounting statements are not prepared, provided they are not subject to a special regime; V - securities issued by the institutions mentioned in item IV, with an original maturity of up to three months; VI - credit operations with an original maturity of up to three months, in national currency, carried out with clearing houses or clearing and settlement service providers, as provided in Law No. 10,214, of 2001, considered systemically important in accordance with current regulation;

Circular nº 3.849, de 18 de setembro de 2017 Página 11 de 25 VII - credit operations with an original maturity of up to three months, carried out with clearing houses or settlement and payment service providers located abroad and subject to regulation compatible with the principles established by CPMI and IOSCO, and contracted in:
a) ......
b) local currency, in jurisdictions with the characteristic mentioned in item II;
......
X - operations with a maturity of up to three months carried out with financial institutions located in jurisdictions with the characteristic mentioned in item II, with which consolidated financial statements are not prepared, provided they are not subject to a special or similar regime abroad, and contracted in:
......
b) local currency, in jurisdictions with the characteristic mentioned in item II; and XI - securities issued by the institutions mentioned in item X, with an original maturity of up to three months, denominated in national currency or local currency.
......
CHAPTER IV
OF THE 35% WEIGHTING
Art. 22. ......
......
II - first-degree mortgage, if the property is located in a jurisdiction with the characteristic mentioned in art. 21, item II, provided that the average effective recovery period for the collateral, according to the practice observed in the jurisdiction, is less than 24 months.
......
CHAPTER V
OF THE 50% WEIGHTING
Art. 23. ......
......

Circular nº 3.849, de 18 de setembro de 2017 Página 12 de 25 II - operations with financial institutions located in jurisdictions with the characteristic mentioned in art. 21, item II, with which consolidated financial statements are not prepared, provided they are not subject to a special or similar regime abroad, as well as securities issued by them;
......
V - loans secured by fiduciary alienation of residential property located in Brazil, new or used, whose contracted value is up to 50% (fifty percent) of the collateral's appraised value, at the date of credit grant;
......
VIII - credit operations granted to FGC and FGCoop; and IX - loans secured by mortgage of residential property, new or used, whose contracted value is up to 50% (fifty percent) of the collateral's appraised value, at the date of credit grant, when the collateral is located in a jurisdiction with the characteristic mentioned in art. 21, item II, observing the provisions of art. 22, item II and § 3º.
CHAPTER VI
OF THE 75% AND 85% WEIGHTINGS
Art. 24. ......
§ 1º ......
I - whose counterparty is a private legal entity with annual gross revenue less than R$15,000,000.00 (fifteen million reais) or natural person;
......
IV - ......
......
b) R$3,000,000.00 (three million reais), when the counterparty is a private legal entity.
§ 2º For the purposes of the provisions of § 1º, the natural or legal person or the connected counterparties as defined in Resolution nº 4.557, of February 23, 2017, must be considered as a single counterparty, provided that the sums referred to in § 1º, item IV, are met individually and jointly.
......

Circular nº 3.849, de 18 de setembro de 2017 Página 13 de 25
§ 4º ......
......
II - the values of financing for the acquisition of residential property, new or used, secured by fiduciary alienation or mortgage of the financed property that receive a Risk Weighting Factor (FPR) of 35% (thirty-five percent) or 50% (fifty percent) must be disregarded. § 5º The connected counterparties mentioned in § 2º, containing one or more legal entities, must observe the limit set in § 1º, item IV, letter “b”.
......
CHAPTER X
OF THE 1,250% WEIGHTING
Art. 29. ......
......
III - relating to participation in funds mentioned in art. 3º, item VII, in entities not characterized as QCCPs under the terms of art. 20.
Sole paragraph. To obtain the value of the RWACPAD portion related to the exposures mentioned in item III of the caput, the product of the exposure value by the FPR mentioned in the caput must be multiplied by the value corresponding to 0.08/F, where F is the factor defined in art. 4º of Resolution nº 4.193, of 2013. ......” (NR)
“Art. 35. ......
......
III - EXPi = exposure mentioned in arts. 12, 14 and 15-A, calculated per counterparty “i”;
......
§ 1º ......
I - to be settled in clearing houses or settlement and payment service providers, in which an entity acts as a central counterparty; ......” (NR)

Circular nº 3.849, de 18 de setembro de 2017 Página 14 de 25 Art. 2º The name of Title IV of Circular nº 3.644, of 2013, is amended to read as follows:
“TITLE IV
ON THE ADJUSTMENT ASSOCIATED WITH THE VARIATION IN THE VALUE OF DERIVATIVES DUE TO VARIATION IN THE CREDIT QUALITY OF THE COUNTERPARTY (CVA)” (NR) Art. 3º Circular nº 3.748, of February 27, 2015, is amended as follows:
“Art. 2º ......
......
Sole paragraph. ......
......
b) the value highlighted from Level I for the institution that opts for the highlighting of instruments eligible for Level I under the terms of art. 2º of Resolution nº 4.589, of June 29, 2017.” (NR) “Art. 4º-A Mark-to-market, when provided for in the calculation of RA, must be carried out in a consistent and verifiable manner, even if not adopted for accounting purposes.” (NR) “Art. 4º-B Bilateral agreements for the clearing and settlement of obligations must meet the requirements established in Circular nº 3.809, of August 25, 2016.” (NR)
“Art. 5º ......
......
§ 4º ......
......
IV - checks, promissory notes, and credit documents (DOCs) to be credited to customer accounts, when the release of the respective funds is linked to effective clearing, in accordance with current regulation; V - linked active operations, carried out according to the provisions of Resolution nº 2.921, of January 17, 2002; VI - credit operations with government agencies and entities in which there is exclusive application of a highlighted portion of instruments eligible for Level I under the terms of art. 2º of Resolution nº 4.589, of 2017; and

Circular nº 3.849, de 18 de setembro de 2017 Página 15 de 25 VII - the import letter of credit issued by the institution, linked to an import exchange contract, provided that the total delivery of the equivalent in national currency has occurred.
......
§ 6º Item VII of the caput includes any guarantee provided by the institution regarding:
I - committed operations and asset lending operations; and II - operations with financial derivative instruments carried out on behalf of customers, settled in clearing houses or settlement and payment service providers. § 7º The application of the Credit Conversion Factor (FCC), when necessary to calculate the exposure value, must occur prior to the deductions mentioned in § 1º. § 8º The exposure value after the deductions mentioned in § 1º must be equal to or greater than zero.” (NR) “Art. 8º For the purposes of calculating exposures related to operations with financial derivative instruments, the following must be considered:
I - operations of own ownership; and
II - operations carried out on behalf of customers, observing the provisions of §§ 3º and 5º.
......
§ 2º The operations mentioned in item II of the caput include the operations with financial derivative instruments referred to in art. 5º, § 6º, item II.
§ 3º For the purposes of the provisions of the caput:
I - exposures related to operations with financial derivative instruments carried out in the over-the-counter market in which the institution acts exclusively as an intermediary, not assuming rights or obligations arising from the fluctuation in the replacement value or the default of any of the parties, must not be considered; and II - the deduction of the exposure related to the central counterparty that meets the requirements established in art. 20 of Circular nº 3.644, of March 4, 2013, is permitted, provided there is no contractual obligation for the institution to reimburse the customer for any value losses in transactions due to the bankruptcy or default of the entities responsible for the settlement and clearing of the transactions.

Circular nº 3.849, de 18 de setembro de 2017 Página 16 de 25 § 4º The exposure value related to operations with financial derivative instruments subject to agreements for the clearing and settlement of obligations must comply with the provisions of art. 13. § 5º In operations with financial derivative instruments carried out on behalf of customers, two exposures related to the counterparties involved in the transaction intermediation must be considered.” (NR) “Art. 13. The exposure value related to operations with financial derivative instruments, including credit derivatives, subject to agreements for the clearing and settlement of obligations must correspond to the result of the sum:
......” (NR)
“Art. 14. ......
......
II - NGR = ratio between the net replacement value, if positive, and the sum of the positive replacement values, of operations subject to agreements for the clearing and settlement of obligations with the same counterparty, calculated according to the following formula:
......
Sole paragraph. The NGR must be equal to zero in cases where the net replacement value is not positive.” (NR)
“Art. 15. ......
I - ......
......
c) is subject to the same agreement for the clearing and settlement of obligations as the associated derivative; and ......” (NR)
“Art. 18. ......
......
§ 1º ......
I - from the book value of the resale minus the mark-to-market value of the asset subject to the operation, in the case of a purchase operation with a commitment to resell;
......

Circular nº 3.849, de 18 de setembro de 2017 Página 17 de 25 § 2º For operations subject to agreements for the clearing and settlement of obligations, the exposure value to counterparty credit risk must correspond to the value, if positive, of the sum of the financial resources and securities delivered to the counterparty referred to in the agreement, minus the sum of the financial resources and securities received from it.
......
§ 4º The provisions of item II of the caput do not apply to exposures related to committed operations and securities lending and borrowing operations carried out on behalf of a customer in which the institution assumes rights or obligations only on the difference in value between the financial resources and securities delivered and received. ......” (NR)
“Art. 22. ......
......
II - ......
a) bid bonds and participation in auctions; b) performance bonds, including clauses of perfect functioning and compliance with service levels; c) guarantee of supply of goods; d) provision of guarantee for the distribution of securities in primary and secondary markets, through public offering, in accordance with current regulation; and e) provision of surety or guarantee in judicial or administrative proceedings, when of a fiscal nature; and
......
§ 1º In calculating the exposure value related to the provision of guarantee for an operation not recorded in the Balance Sheet, the lower of the FCCs applicable to the guarantee or the guaranteed operation must be applied to the guarantee value. § 2º The provisions of the caput do not apply to the guarantees referred to in art. 5º, § 6º, to which the provisions of arts. 8º to 18 apply.” (NR) Art. 4º Annexes I and II of Circular nº 3.748, of 2015, are amended to read as set forth in the annex to this Circular.

Circular nº 3.849, de 18 de setembro de 2017 Página 18 de 25 Art. 5º Circular nº 3.809, of August 25, 2016, is amended as follows:
“Art. 2º ......
......
§ 6º The exposure resulting from a bilateral agreement for the clearing and settlement of obligations is subject to credit risk mitigation through financial collateral or surety guarantee. § 7º Customer financial collateral provided as security in favor of clearing houses or settlement and payment service providers may be used as a mitigator for the exposures referred to in art. 3º, item X, of Circular nº 3.644, of March 4, 2013.” (NR)
“Art. 4º ......
......
II - time deposits, interbank deposits, financial letters, real estate credit letters, agribusiness credit letters, equipment leasing letters, and certificates of structured operations (COE), when these instruments are of own issuance and held by the institution itself or custodied in its favor by third parties; ......” (NR)
“Art. 5º ......
......
§ 1º ......
......
II - in the absence of an FPR defined in this Circular, to the FPR defined by Circulations ns. 3.644, of 2013, 3.848, of September 18, 2017, for an exposure of the same nature as the collateral.
......
§ 4º The portion of the exposure covered by financial collateral referred to in art. 4º, item X, must be applied the weighted average FPR of the exposures that make up the collateral, respecting the provisions of art. 17 of Circular nº 3.644, of 2013.” (NR)
“Art. 9º ......
......

Circular No. 3,849, of September 18, 2017 Page 19 of 25

§ 3º ......
......
II - 25% (twenty-five percent), for exposures related to securities, securities, investment fund shares or structured operations, not listed in art. 4º; III - 0% (zero percent), for exposures to financial derivative instruments and for exposures not related to securities, securities, investment fund shares and structured operations; ......” (NR)

“Art. 14. ......
......
§ 2º The standardized Hfx adjustment factor referred to in item III of the caput must be applied only to the portion of obligations that present currency mismatch with respect to the currency used as the main reference in the bilateral agreement.” (NR)

“Art. 15. ......
......
§ 4º The result of the compensation between derivatives, referred to in item II of the caput, must correspond to the exposure value determined according to the provisions of art. 15-A of Circular No. 3,644, of 2013.” (NR)

“Art. 16. ......
......
IV - ES = absolute value of the net position in each financial instrument; V - HS = standardized adjustment factor associated with the financial instrument relative to the ES, according to the criteria defined in art. 9º, § 2º to §4º; ......” (NR)

“Art. 18. ......
......
§ 3º The surety guarantee provided by the entity mentioned in item II of the caput that ensures coverage, at minimum, of country risk and transfer risk, as defined in art. 21 of Resolution No. 4,557, of February 23, 2017, dispenses with compliance with art. 19, item VII, letter “b”,

Circular No. 3,849, of September 18, 2017 Page 20 of 25 items 1 to 3, of Circular No. 3,644, of 2013, for the application of the PRC of 0% (zero percent).” (NR)

“Art. 25. ......
......
§ 3º ......
......
III - in the case where the credit risk mitigation instrument has an effective residual maturity equal to or less than three months.” (NR)

“Art. 30. ......
......
Sole paragraph. Starting from September 1, 2018, the guarantee referred to in item III of the caput does not apply to exposures resulting from payroll-deducted credit card operations.” (NR)

Art. 6º This Circular enters into force on January 1, 2018.

Art. 7º The §§ 8º and 9º of art. 17, the §§ 1º, 2º and 3º of art. 18, the items I and II of § 2º of art. 24, the items I and II of art. 29, and the arts. 33 and 34 of Circular No. 3,644, of March 4, 2013, are repealed.

Otávio Ribeiro Damaso
Director of Regulation

This text does not replace the one published in the DOU of 9/20/2017, Section 1, p. 12-16, republished in the DOU of 9/21/2017, Section 1, p. 49-52, and in Sisbacen.

Circular No. 3,849, of September 18, 2017 Page 21 of 25

ANNEX

ANNEX I TO CIRCULAR NO. 3,748, OF FEBRUARY 27, 2015
Comparative Summary between Published Financial Statements and Leverage Ratio

Line Number | Item | Value (R$ thousand)
1 | Total assets according to published financial statements 2 | Adjustment resulting from accounting consolidation differences 3 | Adjustment related to assets pledged or transferred with substantial transfer of risks and benefits and recognized in accounting 4 | Adjustment related to the method of calculating financial derivative instruments 5 | Adjustment related to the method of calculating committed operations and asset lending 6 | Adjustment related to operations not accounted for in the total assets of the prudential conglomerate 7 | Other adjustments 8 | Total Exposure

Filling Instruction for the Table “Comparative Summary between Published Financial Statements and Leverage Ratio”

Line Number | Item
1 | Total assets presented in the published financial statements relative to the institution's individual Balance Sheet or relative to the consolidated Balance Sheet, in case of publication on consolidated bases. 2 | Adjustment related to accounting consolidation differences between total assets presented in the published financial statements mentioned in line 1 and the total assets relative to the institution's individual Balance Sheet, in case of LR calculation on individual bases, or of the prudential conglomerate calculation base, in case of LR calculation on consolidated bases, in accordance with the Accounting Plan of the Institutions of the National Financial System (Cosif). 3 | Values corresponding to art. 5º, § 4º, items I and II. 4 | Value determined by:
I - the sum of the values corresponding to:
a) the replacement values regarding the counterparties involved in the case of operations with financial derivative instruments carried out in the name of clients, referred to in art. 8º, item II, observing the treatment provided in art. 8º, § 3º, item II; b) future potential gains resulting from operations with financial derivative instruments mentioned in the caput of art. 9º and in art. 11, item I; c) net future potential gains mentioned in art. 13, item II; and d) adjusted reference values of credit derivative contracts in which the institution acts as the risk-receiving counterparty, as per art. 17; and II - the deduction of values corresponding to:
a) the adjustments provided for in arts. 15 and 16; and b) the adjustments necessary for the determination:

1. of the replacement value, if it differs from the accounting pricing procedure; and
2. of the net replacement value, mentioned in art. 13, item I.
   5 | Value determined by:
   I - the sum of values corresponding to art. 18, item I; and II - the deduction of values corresponding to the adjustments provided for in art. 18, § 3º.
   6 | Value corresponding to the sum of the exposures mentioned in arts. 19 to 22.
   7 | Value determined by:
   I - the sum of values corresponding to the granting of advances not registered in the total assets relative to the institution's Balance Sheet, in case of LR calculation on individual bases, or of the prudential conglomerate calculation base, in case of LR calculation on consolidated bases, in accordance with Cosif, as per art. 7º; II - the deduction of values corresponding to:
   a) prudential adjustments, as per art. 2º, item II, letter “b”; b) the exposures mentioned in art. 5º, § 4º, items III to VII, and § 5º; and c) the exposures mentioned in art. 8º, § 3º, item I, registered in assets; and III - the sum or deduction, as the case may be, of adjustments for mark-to-market not adopted for accounting purposes, as per art. 4º-A. 8 | Sum of lines 1 to 7.

Circular No. 3,849, of September 18, 2017 Page 22 of 25

ANNEX II TO CIRCULAR NO. 3,748, OF FEBRUARY 27, 2015
Common Model for disclosure of information on the Leverage Ratio

Line Number | Item | Value (R$ thousand)

Items accounted for in the Balance Sheet (BS)
1 | Equity items, except financial derivative instruments, securities and securities received by loan and resale to be settled in committed operations 2 | Adjustments related to equity elements deducted in the determination of Level I 3 | Total of exposures accounted for in the BS

Operations with Financial Derivative Instruments 4 | Replacement value in derivative operations.
5 | Future potential gain resulting from derivative operations 6 | Adjustment related to the guarantee provided in derivative operations 7 | Adjustment related to daily margin provided 8 | Derivatives in the name of clients in which there is no contractual obligation of reimbursement due to bankruptcy or default of the entities responsible for the settlement system 9 | Adjusted reference value in credit derivatives 10 | Adjustment under the adjusted reference value in credit derivatives 11 | Total of exposures related to operations with financial derivative instruments

Committed Operations and Lending of Securities and Financial Instruments (SFI) 12 | Applications in committed operations and SFI lending 13 | Adjustment related to repurchases to be settled and creditors for SFI lending 14 | Value related to counterparty credit risk 15 | Value related to counterparty credit risk in intermediary operations 16 | Total of exposures related to committed operations and lending of securities and financial instruments (sum of lines 12 to 15)

Items not accounted for in the Balance Sheet (BS) 17 | Reference value of operations not accounted for in the BS 18 | Adjustment related to the application of specific Credit Conversion Factors (CCF) to operations not accounted for in the BS 19 | Total of exposures not accounted for in the Balance Sheet

Capital and Total Exposure
20 | Level I
21 | Total Exposure

Leverage Ratio (LR)
22 | Basel III Leverage Ratio

Circular No. 3,849, of September 18, 2017 Page 23 of 25

Filling Instruction for the Table “Common Model for disclosure of information on the Leverage Ratio”

Line Number | Item | Value (R$ thousand)

Items accounted for in the Balance Sheet
1 | As per art. 6º, considering the provisions of the sole paragraph of the mentioned article, and art. 7º.
2 | Prudential adjustments as per art. 2º, item II, letter “b”. Negative Value.
3 | Sum of Lines 1 and 2.

Operations with Financial Derivative Instruments 4 | Sum of replacement values, if positive, of each operation with financial derivative instruments mentioned in art. 9º and art. 11 and of net replacement values, if positive, as per art. 13, item I, considering the provisions of art. 15. 5 | Sum of future potential gains resulting from operations with financial derivative instruments mentioned in the caput of art. 9º and in art. 11, item I. and of net future potential gains mentioned in art. 13, item II. 6 | Not applicable in Brazil. 7 | Value corresponding to the deduction of daily margin provided, as per art. 16. Negative Value. 8 | Value corresponding to the deduction of exposure regarding the central counterparty, if it meets the requirements established in art. 20 of Circular No. 3,644, of 2013, resulting from operations with financial derivative instruments carried out in the name of clients in which there is no contractual obligation of the institution in the event of bankruptcy or default of the entities responsible for the mentioned systems, as per art. 8º, § 3º, item II. Negative Value. 9 | Sum of reference values of credit derivative contracts in which the institution acts as the risk-receiving counterparty, mentioned in the caput of art. 17. 10 | Value corresponding to the deductions provided for in art. 17, § 2º. Negative Value. 11 | Sum of lines 4 to 10.

Committed Operations and Lending of Securities and Financial Instruments 12 | Value corresponding to resale to be settled in a committed purchase operation with commitment to resell and to securities and financial instruments received by loan, as per art. 18, item II. 13 | Value corresponding to the deduction provided for in art. 18, § 3º. Negative Value. 14 | Value corresponding to art. 18, item I, excluding the operations mentioned in § 4º of the same article.

Circular No. 3,849, of September 18, 2017 Page 24 of 25

15 | Value corresponding to art. 18, item I, relative to the operations mentioned in § 4º of the same article.
16 | Sum of lines 12 to 15.

Items not accounted for in the Balance Sheet (BS) 17 | Sum of exposure values referred to in arts. 19 to 22, disregarding the application of Credit Conversion Factors (CCFs).
18 | Sum of exposure values referred to in arts. 19 to 22, disregarding the application of CCFs, multiplied by (CCF – 1), where CCF corresponds to the Credit Conversion Factor applicable to the mentioned exposures, as per the mentioned articles. Negative Value. 19 | Sum of lines 17 and 18. Corresponding to the sum of the exposures mentioned in arts. 19 to 22.

Capital and Total Exposure
20 | As per art. 2º, item I, observing the provisions of the sole paragraph of the same article.
21 | Sum of lines 3, 11, 16 and 19.

Leverage Ratio (LR)
22 | Ratio between lines 20 and 21.

Circular No. 3,849, of September 18, 2017 Page 25 of 25