Circular No. 3400 — Establishes procedures for central credit cooperatives regarding compliance with special duties under Chapter IV of Resolution No. 3,442 of 2007

CIRCULAR NO. 003400

Establishes procedures for central credit cooperatives, regarding compliance with the special duties provided for in Chapter IV of Resolution No. 3,442 of 2007, and gives other provisions.

The Collegiate Board of the Central Bank of Brazil, in a session held on July 29, 2008, based on the provisions of Chapter IV of Resolution No. 3,442 of February 28, 2007, and Article 6 of Resolution No. 2,554 of September 24, 1998,

D E C I D E D:

Article 1. For the purpose of complying with the special duties provided for in Chapter IV of Resolution No. 3,442 of February 28, 2007, the activities of central credit cooperatives, in relation to affiliated single cooperatives, must involve, at a minimum, the following processes:

I - periodic direct inspections;

II - monitoring the results of audit work carried out in the affiliates;

III - process of indirect and systematic monitoring of the operations of the affiliates;

IV - monitoring the regularization plans, adaptation plans, economic-financial feasibility studies, and business plans presented to the Central Bank of Brazil, in accordance with current regulation;

V - preparation and sending, to the Technical Management of the Department of Supervision of Cooperatives and Non-Bank Institutions (Desuc) of the Central Bank of Brazil, of reports on the programming of periodic direct inspections, annually:

a) by September 30, containing the programming of direct inspections planned for the period from January 1 to December 31 of the following year, detailing the aspects that must be verified in the inspections;

b) by March 31, containing details on the implementation of the programming of direct inspections established for the period from January 1 to December 31 of the previous year, accompanied by justifications if the forecast was not carried out;

VI - sending of the communications provided for in Article 19 of Resolution No. 3,442 of 2007, to the Technical Management of Desuc, including relevant facts detected in periodic direct inspections and in the indirect and systematic monitoring process, carried out within a maximum period of thirty days from the identification of the facts, accompanied by information on the initial measures adopted by the single cooperative and the respective central cooperative, aimed at resolving the situations identified, as well as subsequent measures related thereto.

§ 1. The processes provided for in this article must have, at a minimum, the following characteristics:

I - execution on a continuous basis, encompassing an adequate combination of on-site action and indirect monitoring; and

II - extent compatible with the size and complexity of the products, services, activities, processes, and systems of the affiliated single cooperatives.

§ 2. For the execution and effectiveness of the processes provided for in this article, central credit cooperatives must have an organizational structure compatible with the quantity, size, and operational complexity of the affiliated single cooperatives.

§ 3. The annual inspection work schedule shall be prepared based on the definitions of frequency and scope cited in Article 3, sole paragraph, item III.

§ 4. Desuc may determine adjustments to the annual schedule of direct inspections, which alter the frequencies or scopes proposed by central credit cooperatives.

Article 2. Desuc will publish the minimum procedures necessary for the performance of the processes cited in Article 1.

Sole paragraph. The minimum procedures referred to in the caput must also be observed by the internal audit of single cooperatives not affiliated and of central credit cooperatives, in relation to their own operations.

Article 3. For the performance of the periodic direct inspection process, provided for in Article 1, item I, central credit cooperatives must execute procedures for evaluating affiliated single cooperatives regarding:

I - adequacy of institutional policies;

II - rules and governance practices;

III - adequacy of risk management structures and processes;

IV - adequacy of the economic-financial situation;

V - adequacy of internal control systems; and

VI - compliance with legal and regulatory provisions.

Sole paragraph. In the execution of the procedures referred to in this article, the following requirements must be observed:

I - the work must be carried out on-site by representatives of the central credit cooperative;

II - at the discretion of the central credit cooperative, evaluation procedures already carried out by internal or external audit performed in the affiliated single cooperative may be utilized, provided that the corresponding work papers prepared are verified and the information provided is confirmed, with a reasonable degree of confidence;

III - the frequency of execution and the scope of the periodic direct inspections carried out in the affiliated single cooperative shall be defined taking into consideration:

a) the complexity of the operations and the size of the affiliated single cooperative; and

b) the preliminary risk assessment carried out by the central credit cooperative, based on the indirect monitoring process cited in Article 1, item III, and the results of inspections and audits previously carried out in the single cooperative to be inspected.

Article 4. Central credit cooperatives must produce and keep available to the Central Bank of Brazil the following documentation:

I - updated register of affiliates, containing, at least, the number of members and information about cooperative service points in operation and about the employees responsible for management and accounting work, including training for the position;

II - reports relating to the procedures of periodic direct inspections carried out in the affiliated single cooperatives, as well as their respective work papers;

III - documents produced by the indirect and systematic monitoring process;

IV - rules adopted in financial centralization;

V - report on liquidity loans granted within the scope of financial centralization;

VI - files of the processes of affiliation or disaffiliation of single cooperatives;

VII - detailed report on situations involving the use of resources from guarantee funds managed by the central credit cooperative itself.

Sole paragraph. The period for maintaining the documentation cited in items II to VII is five years.

Article 5. Desuc may require central credit cooperatives to carry out complementary examinations and reports or establish specific periodicities and deadlines for compliance with the duties provided for in this circular and in complementary regulation.

Article 6. This circular enters into force on the date of its publication.

Brasília, August 1, 2008.

Alexandre Antonio Tombini Alvir Alberto Hoffmann Director Director