Circular No. 3640 — Establishes procedures for calculating the risk-weighted asset (RWA) portion for operational risk capital under the standardized approach

CIRCULAR NO. 3,640, OF MARCH 4, 2013

Establishes the procedures for calculating the portion of risk-weighted assets (RWA) related to the calculation of capital required for operational risk through the standardized approach (RWAOPAD), as provided for in Resolution No. 4,193, of March 1, 2013.

The Collegiate Board of the Central Bank of Brazil, in an extraordinary session held on March 1, 2013, based on the provisions of Articles 9, 10, item IX, and 11, item VII, of Law No. 4,595, of December 31, 1964, and Articles 3, §2, and 15 of Resolution No. 4,193, of March 1, 2013,

RESOLVES:

Art. 1 The calculation of the portion of risk-weighted assets (RWA), related to the calculation of capital required for operational risk through the standardized approach (RWAOPAD) as provided for in Resolution No. 4,193, of March 1, 2013, must be carried out based on one of the following methodologies, at the discretion of the financial institution:

I - Basic Indicator Approach;
II - Alternative Standardized Approach; or
III - Simplified Alternative Standardized Approach.

Sole Paragraph. The methodology adopted must be included in the report referred to in Article 4 of Resolution No. 3,380, of June 29, 2006.

Art. 2 The value of the RWAOPAD portion must be determined semi-annually, considering the last three annual periods.

§ 1 An annual period is defined as the set of data corresponding to two consecutive semesters.

§ 2 The value of the RWAOPAD portion must be determined with information relative to the base dates of June 30 and December 31.

§ 3 The value of the RWAOPAD portion determined with information relative to each base date must be maintained until the next base date.

Art. 3 For the purposes of determining the RWAOPAD portion:

I - the Operational Risk Exposure Indicator (IE) corresponds, for each annual period, to the sum of the semi-annual values of financial intermediation revenues and service provision revenues, minus financial intermediation expenses;

II - the Alternative Operational Risk Exposure Indicator (IAE) corresponds, for each annual period, to the arithmetic mean of the semi-annual balances of credit operations, leasing operations, and other operations with characteristics of credit granting, and securities not classified in the trading portfolio, multiplied by the factor 0.035; and

III - the Equity Equivalence Indicator (IEP) corresponds, for each annual period, to the sum of the semi-annual values of the results from participations in affiliates and controlled entities, in Brazil and abroad.

§ 1 Losses or gains arising from the alienation of securities and derivative instruments not classified in the trading portfolio, in accordance with Circular No. 3,354, of June 27, 2007, must be excluded from the composition of the IE.

§ 2 In the calculation of the IE, expenses for the establishment of provisions, as well as revenues related to the reversal of provisions, must be disregarded.

§ 3 In the calculation of the IAE, the balances of established provisions must be disregarded.

Art. 4 For the purposes of determining the RWAOPAD portion, the following business lines are to be considered:

I - retail;
II - commercial;
III - corporate finance;
IV - trading and sales;
V - payments and settlements;
VI - financial agent services;
VII - asset management; and
VIII - retail brokerage.

§ 1 The "retail" business line includes operations classified in the credit portfolio corresponding to retail as per Circular No. 3,644, of March 4, 2013, and residential real estate credit.

§ 2 The "commercial" business line includes:

I - operations classified in the credit portfolio not considered in the "retail" business line; and

II - operations with securities and financial assets not classified in the trading portfolio, in accordance with Circular No. 3,354, of 2007.

§ 3 The "corporate finance" business line includes operations related to:

I - mergers and acquisitions;
II - financial and corporate restructuring;
III - capital subscription;
IV - privatizations;
V - public or private placement of securities and financial assets; VI - securitization; VII - own issuance; VIII - long-term project financing; IX - research and advisory services; X - revenue from syndicated loan services; and XI - cash management consulting.

§ 4 The "trading and sales" business line includes operations related to:

I - international borrowings and loans;
II - brokerage of securities not classified in the "retail brokerage" business line; III - international treasury; IV - corporate participations and other investments; V - securities and financial assets classified in the trading portfolio; VI - interbank deposits; and VII - financial derivative instruments.

§ 5 The "payments and settlements" business line includes operations related to:

I - asset transfer;
II - clearing and settlement;
III - payment systems;

IV - payroll;
V - tax collection; and
VI - debt collection.

§ 6 The "financial agent services" business line includes operations related to:

I - custody of securities and financial assets; II - affiliated services; and III - letters of credit, guarantees, endorsements, and sureties.

§ 7 The "asset management" business line includes operations related to the management of third-party resources.

§ 8 The "retail brokerage" business line includes operations related to the brokerage of stocks, securities and financial assets, and commodities.

Art. 5 For the Basic Indicator Approach mentioned in Article 1, item I, the following formula must be used:

RWAOPAD = max [ 0.15 ; 0 ] * (1/3) * Σ (from t=1 to 3) (IEt / F)

where:

I - F = factor established in Article 4 of Resolution No. 4,193, of 2013; II - IEt = Operational Risk Exposure Indicator in annual period "t"; and III - n = number of times, in the last three annual periods, that the value of the IE is greater than zero.

Art. 6 For the Alternative Standardized Approach mentioned in Article 1, item II, the following formula must be used:

RWAOPAD = max [ 0 ; (1/3) * Σ (from i=1 to 3) ( (1/2) * ( (1/3) * Σ (from t=1 to 3) (IAEi,t * βi) + (1/3) * Σ (from t=1 to 3) (IEi,t * βi) ) ) ]

where:

I - F = factor established in Article 4 of Resolution No. 4,193, of 2013; II - IAEi,t = Alternative Operational Risk Exposure Indicator, in annual period "t", determined for business lines "i" mentioned in Article 4, caput, items I and II; III - IEi,t = Operational Risk Exposure Indicator, in annual period "t", determined for business lines "i" mentioned in Article 4, caput, items III to VIII; and

IV - βi = weighting factor applied to business line "i".

§ 1 The value of the weighting factor (βi) corresponds to:

I - 0.12 for the business lines "retail", "asset management" and "retail brokerage", mentioned, respectively, in Article 4, caput, items I, VII and VIII; II - 0.15 for the business lines "commercial" and "financial agent services", mentioned, respectively, in Article 4, caput, items II and VI; and III - 0.18 for the business lines "corporate finance", "trading and sales" and "payments and settlements", mentioned, respectively, in Article 4, caput, items III, IV and V.

§ 2 All operations of the institution must be distributed among the business lines mentioned in Article 4, according to consistent and verifiable criteria.

§ 3 If an operation cannot be distributed in one of the business lines mentioned in Article 4, it must be allocated to one of the business lines whose weighting factor (βi) corresponds to 0.18.

§ 4 The process of distributing operations among the business lines mentioned in Article 4 must be documented, detailing the policy and procedures used, previously approved by the board of directors or the administrative council, if applicable.

Art. 7 For the Simplified Alternative Standardized Approach, as provided for in Article 1, item III, the following formula must be used:

RWAOPAD = max [ 0 ; 0.15 * Σ (from t=1 to 3) (IAEt) + 0.18 * Σ (from t=1 to 3) (IEt) ] * (1/3)

where:

I - F = factor established in Article 4 of Resolution No. 4,193, of 2013; II - IAEt = Alternative Operational Risk Exposure Indicator, in annual period "t", determined in an aggregated manner for the business lines mentioned in Article 4, caput, items I and II; and III - IEt = Operational Risk Exposure Indicator, in annual period "t", determined in an aggregated manner for operations not included in the business lines mentioned in Article 4, caput, items I and II.

§ 1 All operations of the financial institution must be distributed between the IAE and the IE, according to consistent and verifiable criteria.

§ 2 The process of distributing operations in an aggregated manner must be documented, detailing the policy and procedures used, previously approved by the board of directors or the administrative council, if applicable.

Art. 8 For institutions beginning activities, the calculation of the RWAOPAD portion must consider the estimates contained in the business plan established based on Resolution No. 3,859, of May 27, 2010, for credit cooperatives, and Resolution No. 4,122, of August 2, 2012, for other institutions.

Art. 9 For the financial institution resulting from a merger or acquisition process, the calculation of the RWAOPAD portion must use the sum of the IEs and IAEs of each original institution.

Art. 10 For financial institutions resulting from a spin-off process, the calculation of the RWAOPAD portion must use values for the respective IEs and IAEs proportionally to the division verified in the assets of the original institution.

Art. 11 The procedures defined in Articles 8, 9, and 10 may only be used for annual periods in which information relative to the new institution is not available.

Art. 12 For economic-financial consolidations, the RWAOPAD portion must include an additional amount determined according to the following formula, observing the provisions of Article 2:

AConef = max [ 0.15 ; 0 ] * (1/3) * Σ (from t=1 to 3) (IEPt / F)

where:

I - F = factor established in Article 4 of Resolution No. 4,193, of 2013; II - IEPt = Equity Equivalence Indicator in annual period "t"; and III - m = number of times, in the last three annual periods, that the value of the IEP is greater than zero.

§ 1 If the additional amount AConef is equal to zero, the RWAOPAD portion must be multiplied by the corresponding value of:

I - the ratio between the total assets of the economic-financial consolidation and the total assets of the financial conglomerate, for economic-financial consolidations that also prepare financial statements relative to a financial conglomerate; or II - the ratio between the total assets of the economic-financial consolidation and the total assets of the financial institution, in other cases.

§ 2 The value of the RWAOPAD portion for economic-financial consolidations cannot be lower than the value of the RWAOPAD portion of the financial conglomerate, for economic-financial consolidations that also prepare financial statements relative to a financial conglomerate, or the value of the RWAOPAD portion of the financial institution, in other cases.

Art. 13 The Central Bank of Brazil may require:

I - that the calculation of the RWAOPAD portion be carried out using the Basic Indicator methodology, in cases where the classification process into business lines does not demonstrate the use of adequate, consistent, and verifiable criteria; and II - an increase in the value of the RWAOPAD portion when the determined value is incompatible with the operational risks incurred by the institution.

Art. 14 A report detailing the determination of the RWAOPAD portion must be sent to the Central Bank of Brazil, in the manner to be established.

Sole Paragraph. Institutions must keep available to the Central Bank of Brazil, for a period of five years, the information used for the determination of the RWAOPAD portion.

Art. 15. The data used in the calculation of the RWAOPAD portion must be reconciled with audited information semi-annually and annually.

Art. 16. This Circular enters into force on October 1, 2013.

Art. 17. Circulars No. 3,383, of April 30, 2008, and No. 3,476, of December 24, 2009, are revoked from October 1, 2013.

Sole Paragraph. Citations to Circular No. 3,383, of 2008, shall henceforth refer to this Circular.

Luiz Awazu Pereira da Silva
Director of Regulation of the Financial System

This text does not replace the published in the DOU of 6/1/2013, Section 1, p. 17/18, and in Sisbacen.