Circular No. 3,976 — Amends Circulars Nos. 3,644 of March 4, 2013, 3,748 of February 27, 2015, 3,809 of August 25, 2016, and 3,904 of June 6, 2018, regarding the procedure for calculating capital requirements for credit risk exposures and the leverage ratio methodology

CIRCULAR NO. 3,976, OF JANUARY 22, 2020

Amends Circulars Nos. 3,644, of March 4, 2013, 3,748, of February 27, 2015, 3,809, of August 25, 2016, and 3,904, of June 6, 2018, regarding the procedure for calculating the capital requirement for exposures subject to credit risk and the leverage ratio methodology.

The Collegiate Board of the Central Bank of Brazil, in a session held on January 22, 2020, based on the provisions of Arts. 9, 10, item IX, and 11, item VII, of Law No. 4,595, of December 31, 1964, Arts. 3, § 2, and 15 of Resolution No. 4,193, of March 1, 2013, and Art. 1 of Resolution No. 4,615, of November 30, 2017,

RESOLVES:

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

“Art. 3 ...........................................................................................................
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§ 2 .................................................................................................................
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IV - the equity elements deducted in the calculation of Reference Equity (PR), as defined in Arts. 5 to 8-B of Resolution No. 4,192, of March 1, 2013, gross of deferred tax liabilities associated with them subtracted for the purpose of calculating the PR; ................................................................................................................” (NR)

“Art. 19-A. Exposures related to:
I - operations with central governments of foreign jurisdictions and their respective central banks, as well as securities issued by them, denominated in the local currency of the jurisdiction; and II - values held in cash in the local currency of the jurisdiction, as well as exposures to assets represented by the aforementioned currency. may receive the FPR applied by the regulatory authority of the foreign jurisdiction, regardless of their external risk classification.

Sole Paragraph. The treatment provided for in the caput may only be applied if the following conditions are met:
I - the institution’s fundraising is carried out in the local currency in the jurisdiction; and II - the exposures are recorded in the balance sheet of the subsidiary located in the same jurisdiction.” (NR)

Circular No. 3,976, of January 22, 2020 Page 2 of 5

“Art. 21 ..........................................................................................................
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II - demand bank deposits, in foreign currency issued in a jurisdiction whose sovereign entity has an external risk classification, granted by a credit rating agency registered or recognized in Brazil by the Securities and Exchange Commission (CVM), equivalent to investment grade;
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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; XII - operations with central governments of foreign jurisdictions and their respective central banks, as well as securities issued by them whose external risk classification, granted by a credit rating agency registered or recognized in Brazil by the Securities and Exchange Commission (CVM), is equal to or greater than A- and less than AA or equivalent classification; XIII - values held in cash in the foreign currencies issued in the jurisdictions referred to in item XII, as well as exposures to assets represented by the aforementioned currencies; and XIV - operations with the New Development Bank (NDB), irrevocable and unconditional credit limits, granted to the aforementioned EMD, as well as the guarantees provided to it and securities issued by it. ................................................................................................................” (NR)

“Art. 23 ..........................................................................................................
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VII - financing for the construction of real estate, secured by fiduciary alienation or by mortgage, in first degree, provided that the institution of affected assets, as provided for in Law No. 10,931, of August 2, 2004, is adopted;
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X - operations with central governments of foreign jurisdictions and their respective central banks, as well as securities issued by them whose external risk classification, granted by a credit rating agency registered or recognized in Brazil by the Securities and Exchange Commission (CVM), is equal to or greater than BBB- and less than A or equivalent classification; and

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XI - values held in cash in the foreign currencies issued in the jurisdictions referred to in item X, as well as exposures to assets represented by the aforementioned currencies. ................................................................................................................” (NR)

“Art. 23-A. An FPR of 60% (sixty percent) must be applied to exposures guaranteed by rural or non-residential urban real estate when:
................................................................................................................” (NR)

“Art. 24 ..........................................................................................................
§ 1 .................................................................................................................
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IV - present a sum of current exposures with the same counterparty of less than R$3,000,000.00 (three million reais). ................................................................................................................” (NR)

“Art. 25. An FPR of 100% (one hundred percent) must be applied:
I - to investments in instruments eligible for Supplementary Capital and Level II not deducted in the calculation of PR; and II - to exposures for which no specific FPR is established.” (NR)

“Art. 26-A. An FPR of 150% (one hundred and fifty percent) must be applied to the following exposures:
I - operations with central governments of foreign jurisdictions and their respective central banks, as well as securities issued by them, whose external risk classification, granted by a credit rating agency registered or recognized in Brazil by the Securities and Exchange Commission (CVM), is less than B- or equivalent classification; and II - values held in cash in the foreign currencies issued in the jurisdictions referred to in item I, as well as exposures to assets represented by the aforementioned currencies.” (NR)

“Art. 30. Exposures related to values not deducted in the calculation of PR mentioned in § 9 of Art. 8-A of Resolution No. 4,192, of 2013, must receive an FPR of 250% (two hundred and fifty percent).” (NR)

Art. 2 Circular No. 3,748, of February 27, 2015, shall enter into force with the following alteration:

“Art. 17 ..........................................................................................................
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§ 2 .................................................................................................................
I - the values corresponding to negative variations in the market value of the credit derivative in which the institution acts as the counterparty

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receiver of the risk, provided that the expenses resulting from negative variations have been recognized in the calculation of Level I of the PR; and ................................................................................................................” (NR)

Art. 3 Circular No. 3,809, of August 25, 2016, shall enter into force with the following alterations:

“Art. 4 ............................................................................................................
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II - time deposits, interbank deposits, financial letters, real estate credit letters, agribusiness credit letters, lease letters, guaranteed real estate 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. 18 ..........................................................................................................
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IV - entities subject to an FPR of 85% (eighty-five percent), in accordance with Art. 24-A of Circular No. 3,644, of 2013. ................................................................................................................” (NR)

Art. 4 Circular No. 3,904, of June 6, 2018, shall enter into force with the following alterations:

“Art. 14 ..........................................................................................................
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§ 1 .................................................................................................................
I - their respective cash flows dependent on two distinct risk factors belonging to the same asset class; and ................................................................................................................” (NR)

“Art. 22 ..........................................................................................................
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§ 1 The RCdcc is calculated by means of the following formula:
RCdcc = max {Σcc max {Vcc ; 0} - max {Cam; 0};0} + max {Σcc min { Vcc ; 0} - min {Cam ; 0} ; 0}, where:
................................................................................................................” (NR)

“Art. 23 ..........................................................................................................
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§ 1 The standardized volatility (𝜎) assumes the following values:

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I - 50% (fifty percent), for the interest rate class; II - 15% (fifteen percent), for the exchange rate class; III - for the credit class:
a) 100% (one hundred percent), for options referenced to legal entities; or b) 80% (eighty percent), for credit options referenced to a credit index; and IV - for the equity class:
a) 120% (one hundred and twenty percent), for options referenced to legal entities; or b) 75% (seventy-five percent), for options referenced to an equity index; and V - for the commodities class:
a) 150% (one hundred and fifty percent), for options referenced to commodities that belong to the electricity type; or b) 70% (seventy percent), for options referenced to other commodities. § 2 If the position of the traded derivative instrument cannot be promptly identified as bought or sold, the institution must verify which risk factor most sensitizes its market value, observing the provisions of Art. 13, § 3, treating the position as bought, if the predominant risk factor is from the active position, or as sold, if it is from the passive position.” (NR)

Art. 5 The following are revoked:
I - item III of Art. 19-A of Circular No. 3,644, of 2013; II - items “a” and “b” of item IV of § 1 of Art. 24 of Circular No. 3,644, of 2013; III - Art. 27 of Circular No. 3,748, of 2015; and IV - the sole paragraph of Art. 23 of Circular No. 3,904, of 2018.

Art. 6 This Circular enters into force on April 1, 2020.

Otávio Ribeiro Damaso
Director of Regulation

This text does not replace the published in the DOU of 1/24/2020, Section 1, p. 24, and in Sisbacen.