Circular No. 3,947 — Amends Circulars Nos. 3,634, 3,635, 3,636, 3,637, 3,638, 3,639, 3,641, 3,645 and 3,646 of March 4, 2013, Establishing Procedures for Calculating the Risk-Weighted Assets (RWA) Portion for Market Risk Exposures

CIRCULAR NO. 3,947, OF JUNE 25, 2019

Amends Circulars Nos. 3,634, 3,635, 3,636, 3,637, 3,638, 3,639, 3,641, 3,645 and 3,646, all of March 4, 2013, which establish procedures for calculating the portion of risk-weighted assets (RWA) related to market risk exposures, as provided for in Resolution No. 4,193, of March 1, 2013.

The Collegiate Board of the Central Bank of Brazil, in a session held on June 25, 2019, based on arts. 10, item IX, and 11, item VII, of Law No. 4,595, of December 31, 1964, and having in view the provisions of arts. 3, § 2, and 15 of Resolution No. 4,193, of March 1, 2013,

RESOLVES:

Art. 1 Circular No. 3,634, of March 4, 2013, shall enter into force with the following alterations:

“Art. 1 The calculation of the daily value of the portion of risk-weighted assets (RWA), related to exposures subject to variation in fixed interest rates denominated in reais, for which the capital requirement is calculated using the standardized approach (RWAJUR1), as provided for in Resolution No. 4,193, of March 1, 2013, must be carried out based on the following formula:

RWAJUR1_t = (1/F) * {max [(M^pre_t / 60) * Σ_{i=0}^{59} VaR^Padrão_{t-i}, VaR^Padrão_t] + max [(1/60) * Σ_{i=0}^{59} sVaR^Padrão_{t-i}, sVaR^Padrão_t]},

in which:
.........................................................................................................................
II - M^pre_t = multiplier for day "t", published daily by the Central Bank of Brazil, determined as a decreasing function of volatility, whose value is comprised between 1 and 5; ...................................................................................................................” (NR)

“Art. 2 For the determination of the daily value of the RWAJUR1 portion, each cash flow is defined as the net result of the value of active positions minus the value of passive positions that mature on the same day, referring to the set of operations kept open on the day to which the determination refers.
.........................................................................................................................

§ 4 The values of assets and liabilities that make up the cash flows must be marked to market by using the term structure of interest rates that represents the rates in force in the market on the day to which the determination refers. ................................................................................................................” (NR)

Art. 2 Circular No. 3,635, of March 4, 2013, shall enter into force with the following alterations:

“Art. 2 For the determination of the daily value of the RWAJUR2 portion, it is defined that each position is the cash flow corresponding to the net result of the value of active positions minus the value of passive positions that mature on the same day, referring to the set of operations kept open on the day to which the determination refers.
.........................................................................................................................

§ 4 The values of assets and liabilities that make up the cash flows must be marked to market by using the term structure of interest rates that represents the rates in force in the market on the day to which the determination refers.
.........................................................................................................................

§ 9 Cash flows resulting from derivative financial instruments may be excluded from the calculation of exposures, when they meet the following conditions, cumulatively:
I - have the same underlying asset or same reference rate; II - the sum of purchased exposures is of the same nominal value and denominated in the same currency as the sum of sold exposures; III - have a difference in revaluation or maturity dates corresponding to at most:
a) five business days, when the terms until the revaluation or residual maturity dates of the instruments are from twenty-one business days to two hundred and fifty-two business days from the date of determination of the exposure; and b) twenty-one business days, when the terms until the revaluation or maturity dates of the instruments are greater than two hundred and fifty-two business days from the date of determination of the exposure.

§ 10. Cash flows of a futures or forward contract and cash flows of the underlying asset itself may be excluded from the calculation of exposures when they meet the following conditions, cumulatively:
I - the sum of purchased exposures is of the same nominal value and denominated in the same currency as the sum of sold exposures;

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II - have a difference in revaluation or maturity dates corresponding to at most:
a) five business days, when the terms until the revaluation or residual maturity dates of the instruments are from twenty-one business days to two hundred and fifty-two business days from the date of determination of the exposure; and b) twenty-one business days, when the revaluation or maturity dates of the instruments are greater than two hundred and fifty-two business days from the date of determination of the exposure.

§ 11. The option for the exclusions mentioned in §§ 9 and 10 must meet consistent, documented and verifiable criteria.” (NR)

“Art. 4 ............................................................................................................
.........................................................................................................................
II - for positions at vertex P2, Y2 is 0.15% (fifteen hundredths percent); III - for positions at vertex P3, Y3 is 0.30% (thirty hundredths percent); IV - for positions at vertex P4, Y4 is 0.40% (forty hundredths percent); V - for positions at vertex P5, Y5 is 0.80% (eighty hundredths percent); VI - for positions at vertex P6, Y6 is 1.50% (one and fifty hundredths percent); VII - for positions at vertex P7, Y7 is 2.90% (two and ninety hundredths percent); VIII - for positions at vertex P8, Y8 is 4.20% (four and twenty hundredths percent); IX - for positions at vertex P9, Y9 is 5.60% (five and sixty hundredths percent); X - for positions at vertex P10, Y10 is 6.80% (six and eighty hundredths percent); and XI - for positions at vertex P11, Y11 is 13.50% (thirteen and fifty hundredths percent).” (NR)

“Art. 12. ..........................................................................................................
§ 1 Exposures arising from operations with securities denominated in foreign currencies must be determined in reais, by conversion of the respective values, based on the selling quotes available in the PTAX System for the closing of the day to which the determination refers. ................................................................................................................” (NR)

Art. 3 Circular No. 3,636, of March 4, 2013, shall enter into force with the following alterations:

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“Art. 2 For the determination of the daily value of the RWAJUR3 portion, each cash flow is defined as the net result of the value of active positions minus the value of passive positions that mature on the same day, referring to the set of operations kept open on the day to which the determination refers.
.........................................................................................................................

§ 4 The values of assets and liabilities that make up the cash flows must be marked to market by using the term structure of interest rates that represents the rates in force in the market on the day to which the determination refers.
.........................................................................................................................

§ 9 Cash flows resulting from derivative financial instruments may be excluded from the calculation of exposures, when they meet the following conditions, cumulatively:
I - have the same underlying asset;
II - the sum of purchased exposures is of the same nominal value and denominated in the same currency as the sum of sold exposures; III - have a difference in revaluation or maturity dates corresponding to at most:
a) five business days, when the terms until the revaluation or residual maturity dates of the instruments are from twenty-one business days to two hundred and fifty-two business days from the date of determination of the exposure; and b) twenty-one business days, when the terms until the revaluation or maturity dates of the instruments are greater than two hundred and fifty-two business days from the date of determination of the exposure.

§ 10. Cash flows of a futures or forward contract and cash flows of the underlying asset itself may be excluded from the calculation of exposures when they meet the following conditions, cumulatively:
I - the sum of purchased exposures is of the same nominal value and denominated in the same currency as the sum of sold exposures; II - have a difference in revaluation or maturity dates corresponding to at most:
a) five business days, when the terms until the revaluation or residual maturity dates of the instruments are from twenty-one business days to two hundred and fifty-two business days from the date of determination of the exposure; and b) twenty-one business days, when the revaluation or maturity dates of the instruments are greater than two hundred and fifty-two business days from the date of determination of the exposure.

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§ 11. The option for the exclusions mentioned in §§ 9 and 10 must meet consistent, documented and verifiable criteria.” (NR)

“Art. 4 ............................................................................................................
.........................................................................................................................
II - for positions at vertex P2, Y2 is 0.15% (fifteen hundredths percent); III - for positions at vertex P3, Y3 is 0.30% (thirty hundredths percent); IV - for positions at vertex P4, Y4 is 0.40% (forty hundredths percent); V - for positions at vertex P5, Y5 is 0.80% (eighty hundredths percent); VI - for positions at vertex P6, Y6 is 1.50% (one and fifty hundredths percent); VII - for positions at vertex P7, Y7 is 2.90% (two and ninety hundredths percent); VIII - for positions at vertex P8, Y8 is 4.20% (four and twenty hundredths percent); IX - for positions at vertex P9, Y9 is 5.60% (five and sixty hundredths percent); X - for positions at vertex P10, Y10 is 6.80% (six and eighty hundredths percent); and XI - for positions at vertex P11, Y11 is 13.50% (thirteen and fifty hundredths percent).” (NR)

Art. 4 Circular No. 3,637, of March 4, 2013, shall enter into force with the following alterations:

“Art. 2 For the determination of the daily value of the RWAJUR4 portion, each cash flow is defined as the net result of the value of active positions minus the value of passive positions that mature on the same day, referring to the set of operations kept open on the day to which the determination refers.
.........................................................................................................................

§ 4 The values of assets and liabilities that make up the cash flows must be marked to market by using the term structure of interest rates that represents the rates in force in the market on the day to which the determination refers.
.........................................................................................................................

§ 9 Cash flows resulting from derivative financial instruments may be excluded from the calculation of exposures, when they meet the following conditions, cumulatively:
I - have the same underlying asset;

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II - the sum of purchased exposures is of the same nominal value and denominated in the same currency as the sum of sold exposures; III - have a difference in revaluation or maturity dates corresponding to at most:
a) five business days, when the terms until the revaluation or residual maturity dates of the instruments are from twenty-one business days to two hundred and fifty-two business days from the date of determination of the exposure; and b) twenty-one business days, when the terms until the revaluation or maturity dates of the instruments are greater than two hundred and fifty-two business days from the date of determination of the exposure.

§ 10. Cash flows of a futures or forward contract and cash flows of the underlying asset itself may be excluded from the calculation of exposures when they meet the following conditions, cumulatively:
I - the sum of purchased exposures is of the same nominal value and denominated in the same currency as the sum of sold exposures; II - have a difference in revaluation or maturity dates corresponding to at most:
a) five business days, when the terms until the revaluation or residual maturity dates of the instruments are from twenty-one business days to two hundred and fifty-two business days from the date of determination of the exposure; and b) twenty-one business days, when the revaluation or maturity dates of the instruments are greater than two hundred and fifty-two business days from the date of determination of the exposure.

§ 11. The option for the exclusions mentioned in §§ 9 and 10 must meet consistent, documented and verifiable criteria.” (NR)

“Art. 4 ............................................................................................................
.........................................................................................................................
II - for positions at vertex P2, Y2 is 0.15% (fifteen hundredths percent); III - for positions at vertex P3, Y3 is 0.30% (thirty hundredths percent); IV - for positions at vertex P4, Y4 is 0.40% (forty hundredths percent); V - for positions at vertex P5, Y5 is 0.80% (eighty hundredths percent); VI - for positions at vertex P6, Y6 is 1.50% (one and fifty hundredths percent); VII - for positions at vertex P7, Y7 is 2.90% (two and ninety hundredths percent);

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VIII - for positions at vertex P8, Y8 is 4.20% (four and twenty hundredths percent); IX - for positions at vertex P9, Y9 is 5.60% (five and sixty hundredths percent); X - for positions at vertex P10, Y10 is 6.80% (six and eighty hundredths percent); and XI - for positions at vertex P11, Y11 is 13.50% (thirteen and fifty hundredths percent).” (NR)

Art. 5 Circular No. 3,638, of March 4, 2013, shall enter into force with the following alteration:

“Art. 2 The calculation of the daily value of the RWAACS portion, as provided for in art. 1, applies to exposures in equities and to derivative financial instruments referenced therein on the day to which the determination refers. ................................................................................................................” (NR)

Art. 6 Circular No. 3,639, of March 4, 2013, shall enter into force with the following alteration:

“Art. 1 ............................................................................................................
.........................................................................................................................

§ 1 The calculation of the daily value of the RWACOM portion referred to in the caput applies to operations kept open on the day to which the determination refers, subject to variation in the price of commodities traded in organized exchange or over-the-counter markets, including derivative financial instruments, with the exception of operations referenced in gold, financial asset, or foreign exchange instrument. ................................................................................................................” (NR)

Art. 7 Circular No. 3,641, of March 4, 2013, shall enter into force with the following alteration:

“Art. 1 ............................................................................................................
.........................................................................................................................

§ 2 Exposures must be determined in reais, by conversion of the respective values, based on the selling quotes available in the PTAX System for the closing of the day to which the determination refers. ................................................................................................................” (NR)

Art. 8 Circular No. 3,645, of March 4, 2013, shall enter into force with the following alterations:

“Art. 2 ............................................................................................................
I - M^ext = 3.5, for the RWAJUR2 portion;

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II - M^pco = 3.0, for the RWAJUR3 portion; and III - M^jur = 2.5, for the RWAJUR4 portion.” (NR)

Art. 9 Circular No. 3,646, of March 4, 2013, shall enter into force with the following alterations:

“Art. 6 The daily value related to the RWAMINT portion must correspond to the following formula:

RWAMINT_t = max {[ (1/F) * max((M/60 * Σ_{i=0}^{59} VaR_{t-i}), VaR_t) + (1/F) * max((M/60 * Σ_{i=0}^{59} sVaR_{t-i}), sVaR_t) + RWAMINT(Partial)_t ] , [SM * RWAPAD_t]},

in which:
................................................................................................................” (NR)

Art. 10. This Circular enters into force on October 1, 2019.

Otávio Ribeiro Damaso
Director of Regulation

This text does not replace the published in the DOU of 6/27/2019, Section 1, p. 47/48, and in Sisbacen.