Circular No. 3298 — Discloses the Regulation on Cash Custody of the Central Bank of Brazil and Provides Other Measures

CIRCULAR NO. 003298

Discloses the Regulation on Cash Custody of the Central Bank of Brazil and Provides Other Measures.

The Collegiate Board of the Central Bank of Brazil, considering the provisions of Resolution No. 3,322, of October 27, 2005, of the National Monetary Council,

DECIDED:

Article 1. To disclose the Regulation on Cash Custody of the Central Bank of Brazil, attached to this Circular.

Sole Paragraph. The Department of Circulating Medium (Mecir) is responsible for managing the Cash Custody of the Central Bank of Brazil, verifying balances, and monitoring compliance with norms and procedures.

Article 2. The Custodian is entitled to remuneration to be paid by financial institutions, applicable to each confirmed withdrawal request and each deposit request effectively carried out in its premises authorized to perform the custody service.

§ 1. The remuneration will be fixed as a percentage incident on the total value of the operation, to be set by Mecir, taking into account the total cost of the custody system and the principle that lower-cost points subsidize higher-cost points.

§ 2. Cash movements carried out at the Central Bank of Brazil will not be remunerated.

Article 3. To establish the Technical Council for Cash Custody (CTCN), of a consultative nature, which will be responsible for carrying out studies and proposing solutions related to the execution of circulating medium policies.

§ 1. The CTCN will be composed of representatives:

I - of the Central Bank of Brazil;

II - of each Custodian institution authorized by the Central Bank of Brazil;

III - of non-custodian financial institutions, users of the Cash Custody of the Central Bank, indicated by the Brazilian Federation of Banks (Febraban);

IV - of the Confederation of Commercial and Business Associations of Brazil (CACB).

§ 2. The CTCN has the following attributions:

I - to carry out studies on matters pertinent to the Cash Custody of the Central Bank of Brazil;

II - to evaluate the cost statements incurred in the custody operation;

III - to propose the inclusion and exclusion of custodian premises.

Article 4. To establish that the CTCN will be governed by its own regulation, to be disclosed by the Central Bank of Brazil, which will provide, among other things, for the quantity of representatives of the institutions mentioned in § 1 of Article 3.

Article 5. This Circular enters into force on the date of its publication.

Article 6. Articles 4 and 5 of Circular No. 3,109, of April 10, 2002, are revoked.

Brasília, November 1, 2005.

João Antônio Fleury Teixeira
Director

Regulation attached to Circular 3,298, of November 1, 2005, which deals with the Cash Custody of the Central Bank of Brazil

General Provisions

Article 1. The Cash Custody of the Central Bank of Brazil (Bacen) is the activity of maintaining non-monetized cash of Bacen in an institution specially authorized for this purpose, called Custodian, with the purpose of carrying out the operations provided for in this Regulation.

§ 1. The following may be authorized to perform the cash custody service:

I - banking financial institution; and

II - association of financial institutions, constituted for this purpose.

§ 2. The provision of custody services will be carried out in the premises of the Custodian, under its administrative and operational control, and must:

I - enforce compliance with the provisions of this Regulation within the premises;

II - define and apply the security policy of the premises; and

III - implement necessary modifications to the physical facilities of the premises.

§ 3. Annex I discriminates and defines the terms used in this Regulation.

Article 2. The Custodian may maintain custody in premises exclusively dedicated to this purpose or in premises dedicated to other banking operations.

§ 1. The premises referred to in this article must be registered in the National Registry of Legal Entities of the Federal Revenue as premises of the Custodian.

§ 2. The premises dedicated to other banking operations must be registered in the Information System on Entities of Interest of the Central Bank (Unicad) as agency or advanced service point installations.

Article 3. It is up to Bacen to decide on the granting of the status of custodian, primarily considering the interest of meeting society's needs, respecting the conditions provided for in this Regulation.

§ 1. The assumption of custody will occur through a contract between the Custodian and Bacen.

§ 2. For a period of 30 months, counted from the date of disclosure of this Regulation, Bacen may only contract a custodian with a financial institution that, on that same date, already holds the status of custodian.

Article 4. It is up to Bacen to decide on the inclusion and exclusion of custodian premises, observing the provisions of Article 5 of this Regulation and considering the cost/benefit ratio of the custody system.

Article 5. There will be only one custodian premises per municipality.

Sole Paragraph. At Bacen's discretion, custodian premises may be exceptionally authorized in the following locations:

I - municipalities of large territorial extent that have more than one significant urban center; and

II - large urban centers, where the existence of more than one custodian premises may contribute to increasing the efficiency of value movements.

Attributions

Article 6. The attributions of the Custodian are:

I - to hold and administer the custody of non-monetized cash at the order of Bacen, with the purpose of receiving deposits and paying cash withdrawals to banking financial institutions;

II - to provide the arrangement, classification, and storage of the custodied cash according to the rules defined by Bacen;

III - to carry out the verification and selection of the received cash, separating that classified as unsuitable for circulation, for delivery to Bacen;

IV - to distribute metal coins and supply the change offer;

V - to send to Bacen unusable cash, in the form of this Regulation;

VI - to carry out cash collection, following Bacen's instructions; and

VII - to comply with this Regulation and the circulating medium policies defined by Bacen.

Sole Paragraph. The entries resulting from custody operations will be made through messages from the Circulating Medium (CIR) group of the message catalog of the Brazilian Payments System (SPB).

Observance of Management Policies

Article 7. The management policies of the Cash Custody of the Central Bank of Brazil, issued by the Department of Circulating Medium (Mecir) of Bacen involve, among others, determinations on:

I - banking service operating hours;

II - criteria for the sanitization of cash;

III - collection of banknotes and metal coins;

IV - composition of cash withdrawals, establishing denominations of banknotes to be preferentially provided;

V - composition of cash deposits, establishing denominations of banknotes to be accepted;

VI - definition of locations for delivery/pickup of cash (reinforcement/relief); and

VII - segregation, classification, and arrangement of the custodied cash.

Limit for Custodied Values

Article 8. The Custodian is responsible for the cash maintained in custody, answering for its integrity.

§ 1. The responsibility provided for in the caput of this article is limited, in any event, to the equivalent, in national currency, to the sum of the face values of the banknotes and metal coins custodied.

§ 2. Mecir will define the maximum limit admitted for the total values custodied, based on a justified justification of the custodian financial institution.

§ 3. In exceptional situations, the maximum limit may be flexible, at Mecir's discretion, upon motivated request of the Custodian.

§ 4. In the custody assumption contract, the requirement that the Custodian present guarantees corresponding to the financial value of the cash maintained in custody may be included.

Service to Other Banks

Article 9. Financial institutions will be served exclusively in the custodian premises in which they are previously registered.

Article 10. The custodian premises will guarantee a safe environment for the storage and movement of values, and this condition will be proven by a security plan approved by the Federal Police Department and registered in UNICAD, as provided in Communication 11,224, of July 17, 2003, of the Central Bank of Brazil.

Arrangement and Classification of Custodied Cash

Article 11. The composition by denomination of the cash custodied in a custodian premises will maintain constant correspondence with the respective record in the Circulating Medium Management System (Sismecir).

Article 12. The cash custodied will be permanently separated from other values in the safes of the custodian premises, in such a way as to allow, at any time, its perfect identification.

Article 13. The arrangement of the cash custodied in the safes of the custodian premises will be done in a way that enables the verification of the stock.

Article 14. The following types of cash are permitted for custody:

I - new banknotes (Type I);

II - banknotes to be selected (Type II);

III - banknotes selected for recirculation/manual selection (Type III);

IV - banknotes selected for recirculation/automated selection (Type IV);

V - banknotes classified as unusable or unfit for circulation (Type V);

VI - collected banknotes (Type VI), resulting from a collection process in progress, determined by Bacen;

VII - new metal coins (Type VII);

VIII - collected metal coins (Type VIII), resulting from a collection process in progress, determined by Bacen; and

IX - unusable metal coins (Type IX).

§ 1. The cash custodied will be separated according to the specification provided for in the items of the caput of this article, and each volume must contain only one denomination.

§ 2. Banknotes of Types II to VI will be grouped in hundreds, each with an identifying band containing information to be defined by Bacen.

§ 3. The hundreds of banknotes of Types II to VI will be grouped in thousands.

§ 4. The new metal coins, referred to in item VII of this article, will be packaged in the original containers of the Brazilian Mint, which must not be broken, and, unless expressly determined by Bacen otherwise, are intended exclusively for cash exchange operations.

§ 5. For cash classified as Type I and Type II, a fraction of a hundred is not permitted in cash custody, except where there is an exclusive counter for the provision of change.

§ 6. For cash of Types III to VI, only one fraction of a hundred per denomination will be admitted.

§ 7. For cash of Types III to VI, only one fraction of a thousand per denomination will be admitted.

Article 15. In withdrawal operations, cash of Types I to IV will be used.

Sole Paragraph. The use of Type II cash in withdrawal operations may only occur in accordance with the management policy of Cash Custody, defined by Mecir, in the form of Article 7 of this Regulation.

Verification of Cash

Article 16. The Custodian will carry out the verification of the cash received from financial institutions, in accordance with the management policy of Cash Custody, defined by Mecir, in the form of Article 7 of this Regulation.

§ 1. The verification process will be carried out in a safe environment.

§ 2. The Custodian will inform Bacen of the data resulting from the processing of cash through a message from the CIR group of the SPB message catalog.

Article 17. In the composition of the cash custodied of Types III or IV, the presence of up to 1% (one percent) of banknotes of Type V will be accepted.

Article 18. In the composition of the cash custodied or relieved of Type V, the presence of up to 1% (one percent) of banknotes of Types III or IV will be accepted.

Custody Reinforcements

Article 19. Custody reinforcement operations will occur in the following situations:

I - delivery of cash directly by Bacen;

II - withdrawal of cash on behalf of Bacen; and

III - withdrawal of cash in a custodian premises of another financial institution.

§ 1. In the case of custody reinforcement in the form of item I of this article, Bacen is responsible for the costs and risks of the movement and the definition of locations and dates of delivery. Air deliveries may be made at destination airports.

§ 2. In the case of custody reinforcement in the form of items II and III of this article, the costs and risks of the movement will be borne by the interested Custodian.

§ 3. Requests for custody reinforcement made by another Custodian will be treated as withdrawal operations, including for the purpose of paying the corresponding remuneration.

Custody Reliefs

Article 20. Custody relief operations will occur in the following situations:

I - forwarding to Bacen of collected cash;

II - forwarding to Bacen of unusable cash;

III - forwarding of cash to another custodian.

§ 1. The costs and risks of custody relief operations will be borne by the Custodians.

§ 2. In the cases of custody relief in the form of items I and II of the caput of this article, Bacen may, at its discretion, promote the receipt directly at the custodian premises, with Bacen being responsible for the costs and risks of the movement and the definition of locations and dates of the receipts.

§ 3. Requests for custody relief made by another Custodian will be treated as deposit operations, including for the purpose of paying the corresponding remuneration.

Provision of Change to the Population

Article 21. The Custodian will provide change to the population.

§ 1. Bacen will indicate to the Custodian the municipalities where there must be an exclusive counter for the provision of change to the population.

§ 2. The exclusive counters must have a distinct identification from the other public service counters existing in the same location.

Collection of Banknotes and Metal Coins

Article 22. When a collection operation is determined, the collected banknotes or coins must be sent to the Bacen representations indicated by it.

§ 1. The costs and risks of this movement will be borne by the Custodian.

§ 2. For each collection process, Bacen will issue specific guidance.

Remuneration to the Custodian and Cost Statements

Article 23. In fixing the remuneration due to the Custodian, Mecir will consider the following items:

I - expenses with cash transportation;

II - expenses with service to financial institutions;

III - expenses for the execution of circulating medium sanitization, coin distribution, cash collection, and provision of change to the population; and

IV - expenses with insurance and funds for loss provision for incidents not covered by insurance.

§ 1. The Custodian will maintain a specific system for controlling and calculating the costs inherent to the custody activity and the execution of related tasks, preparing periodic statements, as Bacen provides.

§ 2. The cost control and calculation system will be subject to direct inspection by Bacen.

Article 24. The Custodian is entitled to remuneration, applicable to the value of:

I - each confirmed withdrawal request; and

II - each deposit request effectively carried out in its custodian premises.

§ 1. The financial institution Custodian will not pay remuneration on withdrawal and deposit operations carried out in its premises.

§ 2. The operations referred to in the previous paragraph will be included in the calculation of the expenses specified in Article 23 of this Regulation.

Article 25. The remuneration will be fixed periodically by Mecir, as a percentage incident on the total value of the operation, valid for the entire national territory, approved by Bacen.

§ 1. The Custodian may adopt a remuneration percentage lower than that fixed by Bacen, understood that, for any period of time examined, the calculation of any deficit or surplus, resulting from the comparison of revenues and expenses with custody operations, will refer to the percentage adopted.

§ 2. At any time and upon proof of relevant facts, after analysis and decision by Bacen, the remuneration percentage may be reviewed, to restore the economic and financial balance of the custody contract.

Article 26. Cost statements, incurred by the Custodian, which serve as the basis for calculating the remuneration percentage, will require validation by Bacen.

§ 1. The cost statements mentioned in this article must be discriminated according to the model standardized by Bacen.

§ 2. In the case of the cost statements referred to in this article not being delivered or containing discrepancies:

I - Bacen will arbitrate values for the purpose of calculating the remuneration percentage, possibly adopting, as a provisional measure, the last accepted cost statement, adjusted to the estimated levels of banking service in the following period; and

II - once the discrepancies are resolved, eventual discrepancies relative to what was arbitrated will be compensated in the calculations of the subsequent remuneration percentage.

§ 3. Periodically, Bacen will make public the cost statements incurred by the Custodian and other statistical information of interest to the financial institutions using the cash custody.

Monitoring of Service Quality

Article 27. The monitoring of the quality of services provided by the Custodian will occur through:

I - research with the financial institutions using the Custodian's services;

II - analysis of reports produced by Mecir's inspection teams;

III - opinion research with the population of the area served by a custodian premises; and

IV - meetings with representative associations of commerce and/or the community in the place where there is a custodian premises.

Inspection

Article 28. Without prior notice, Mecir will carry out inspections in the custodian premises with a view to compliance with this Regulation, especially to verify the physical existence of the values recorded in Sismecir and their correspondence with the respective record.

Article 29. Access to the custodian agencies by Bacen representatives will occur through identification and simultaneous confirmation with Mecir.

Penalties

Article 30. The contract referred to in § 1 of Article 3 of this Regulation will establish the application of penalties and the situations that entail them.

§ 1. Non-compliance with contractual provisions subjects the offender to penalties of warning and fine, according to the severity of the offense and without prejudice to the civil and criminal sanctions that the case entails.

§ 2. The following occurrences are considered irregularities, for the purpose of applying penalties:

I - non-compliance with any of the provisions relating to items I to VII of Article 7;

II - non-compliance with the provisions relating to the collection of banknotes or metal coins;

III - failure to provide the information requested by Mecir, within the deadline established in Article 33;

IV - storage of cash outside the typology specified in the caput of Article 14 of this Regulation;

V - storage of cash in disagreement with the packaging form provided for in the paragraphs of Article 14 of this Regulation;

VI - when the custodian premises is not a safe environment;

VII - non-segregation of the custodied cash;

VIII - impossibility or hindrance to the verification of the custodied stock due to the arrangement of the cash;

IX - excess difference in value in the custodied cash;

X - discrepancy in the composition by denomination of the custodied cash;

XI - existence of a fraction of a hundred in cash classified as Type I;

XII - existence of a fraction of a hundred in cash classified as Type II;

XIII - existence of more than one fraction of a hundred by denomination in the cash of types III to V;

XIV - existence of a percentage greater than 1% (one percent) of type V banknotes in the cash of types III and IV held or relieved;

XV - existence of a percentage greater than 1% (one percent) of banknotes suitable for circulation in type V cash held or relieved;

XVI - failure to deliver the cost statements mentioned in Article 26 of this Regulation within the period set by Mecir;

XVII - existence of a shortfall in value in the custodied cash;

XVIII - hindrance or any obstruction to the inspection by Mecir at the facilities of the Custodian.

§ 3º The provisions of items IV and XVII of this article shall not apply to the cash of types I, II, VI, VII, VIII and IX, if it is proven that the wrappers of the referred cash maintain the original seal affixed by Bacen or the depositing institution.

§ 4º Recidivism in an infraction punished with a warning penalty will imply the application of a fine penalty.

§ 5º Recidivism in an infraction punished with a fine penalty will result in its application doubled.

§ 6º The fine penalty may be applied triplefold if the irregularity that motivated the application of a warning or fine is not resolved within the deadline set for such purpose.

Art. 31. If a shortfall is verified in the custodied cash, it must be immediately remedied.

§ 1º The existence of illegitimate cash in the custodied balance constitutes a shortfall, and the Custodian must proceed in accordance with the caput of this article, without prejudice to the application of the applicable penalty.

§ 2º The provisions of this article shall not apply to the cash of types I, II, VI, VII, VIII and IX, if it is proven that the wrappers of the referred cash maintain the original seal affixed by Bacen or the depositing institution.

Art. 32. A method of random sampling may be used to form a judgment regarding the characteristics of the total or part of the custodied cash, and its result may serve as the basis for applying a penalty.

General Provisions

Art. 33. The Custodian will provide information to Bacen within a period of two (2) business days counted from the date of receipt of the respective request.

Art. 34. Formal communications from Bacen to the Custodians will occur through:

I - electronic message from the "Electronic Mail" (CE) of the Central Bank Information System (Sisbacen) or another form of electronic message that allows confirmation of receipt;

II - paper document, registered in the protocol service of Bacen.

Art. 35. If a deadline established in this Regulation coincides with a non-business day, the deadline will be automatically transferred to the subsequent business day.

Art. 36. Situations not foreseen in this Regulation will be decided by the Director of Administration of Bacen.

Annex I of the Regulation
Terminology

Custody Relief Operation by which non-monetized cash in custody is delivered to Bacen

Hundred Bundle containing 100 banknotes

Denomination Value of an item of cash (banknote or coin). Examples: R$ 1 (one real), R$ 5 (five reais), R$ 0.01 (one cent)

Deposit Receipt operation of cash in custody, in which monetized cash is transformed into non-monetized, through a credit in the bank reserves account in favor of the depositing banking institution, carried out by the SPB. Originates from banking institutions, exclusively

Thousand Block containing 10 hundreds (1,000 banknotes)

Cash Banknotes and metallic coins

Cash to select Cash that has not yet been submitted to the cleaning process

Unusable Cash Cash that does not meet conditions to return to circulation

Manually Selected Cash Cash suitable to return to circulation, resulting from a manual cleaning process

Machine Selected Cash Cash suitable to return to circulation, resulting from automated cleaning

Withdrawal Process by which cash with specific characteristics is permanently removed from circulation, regardless of its state of conservation

Custody Reinforcement Operation by which non-monetized cash is introduced into custody

Cleaning Sorting process of cash, carried out with the aim of purging it of possible counterfeits and unusable cash

Withdrawal Withdrawal operation from custody, in which non-monetized cash is transformed into monetized, through a debit in the bank reserves account against the withdrawing banking institution, carried out by the SPB. Are effected by banking institutions, exclusively

Tray Volume containing 30 hundreds (3,000 banknotes)

Exchange Operation by which non-monetized cash from custody is exchanged for monetized cash from the circulating medium. This operation alters the composition of denominations of banknotes and coins in custody, having no repercussion on the bank reserves account. Metallic coins enter circulation exclusively through the exchange operation. The exchange can be carried out both with banking institutions and with the public.