Circular No. 3685 — Establishes criteria for evaluating the relationship between the initial investment in Certificates of Structured Operations (COE) and their potential results

The Collegiate Board of the Central Bank of Brazil, in a session held on November 19, 2013, based on Article 9 of Law No. 4,595 of December 31, 1964, and Articles 2, paragraph 1, and 18 of Resolution No. 4,263 of September 5, 2013,

R E S O L V E:

Article 1. The following criteria are established to be observed by institutions issuing Certificates of Structured Operations (COE), for the purpose of complying with the provisions of Article 2, paragraph 1, of Resolution No. 4,263 of September 5, 2013:

I - the issuance of the Certificate must have as its main characteristic the raising of resources by the issuing financial institution;

II - the issuance of the Certificate must not result, at any time, in exposure of the issuing financial institution to the credit risk of the Certificate holder;

III - the return structure of the Certificate must be expressed as a proportion of the value of the initial investment;

IV - scenarios that, at the time of issuance of the certificate, foresee total or negligible payment in relation to the initial investment must reflect extreme conditions of very low probability; and

V - the results to be used for comparison with the initial investment must be compatible with a one-year period or the term of the Certificate, whichever is shorter.

Sole Paragraph. The procedures used to comply with the criteria established in Article 1 are the responsibility of the COE issuing institution and must be carried out based on consistent and verifiable methodologies.

Article 2. The information, methodologies, and procedures used for the evaluation and compliance with the criteria established in this Circular must remain available to the Central Bank of Brazil for a minimum period of ten years, counted from the maturity date of each certificate.

Article 3. This Circular enters into force on January 6, 2014.

Luiz Edson Feltrim
Deputy Director of Regulation