Circular No. 3692 — Procedures for Conversion into Shares and Extinction of Outstanding Balances of Eligible Capital Instruments

The Collegiate Board of the Central Bank of Brazil, in a session held on December 12, 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 considering Resolutions Nos. 3,988 of June 30, 2011, 4,192 and 4,193, both of March 1, 2013, and 4,279 of October 31, 2013,

R E S O L V E:

Art. 1 This Circular sets forth the procedures related to the conversion into shares and the extinction of the outstanding balance of instruments authorized to compose the Supplementary Capital or Level II of the Reference Equity (PR) of financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Art. 2 The issuing institution of instruments eligible for Supplementary Capital or Level II of the PR, within the scope of its capital management, provided for in Resolution No. 3,988 of June 30, 2011, must immediately notify the Central Bank of Brazil of any situation, projection, or estimate that indicates the possibility of its Core Capital reaching, in the subsequent 12 (twelve) months, a value lower than 5.125% (five and one hundred twenty-five thousandths percent) or 4.5% (four and five tenths percent) of the amount of Risk-Weighted Assets (RWA), calculated in the manner established by Resolution No. 4,193 of March 1, 2013.

Art. 3 The institution mentioned in Art. 2 must immediately disclose the occurrence of the situations provided for in Art. 17, item XV, and Art. 20, item X, of Resolution No. 4,192 of March 1, 2013.

§ 1 The disclosure referred to in the main text must be carried out in a single location, publicly accessible and easily located, on the institution's website, in the same section used for the disclosure of information regarding risk management, risk exposure, the calculation of the RWA amount, as provided for in Resolution No. 4,193 of 2013, and the calculation of the PR, defined in accordance with Resolution No. 4,192 of 2013.

§ 2 The Central Bank of Brazil must be formally notified of the occurrence of the situations provided for in Art. 17, item XV, letter “a”, and Art. 20, item X, letter “a”, of Resolution No. 4,192 of 2013.

Art. 4 In the occurrence of the situations provided for in Art. 17, item XV, and Art. 20, item X, of Resolution No. 4,192 of 2013, the institution mentioned in Art. 2 must immediately adopt the necessary measures so that:

I - trading involving instruments whose balances are extinguished or which are converted into shares is ceased; and

II - the occurrence of the extinction or conversion into shares is informed to the holders of the respective instruments.

Art. 5 The issuing institution of instruments eligible for Supplementary Capital or Level II of the PR not mentioned in Art. 1 of Circular No. 3,678 of October 31, 2013, must observe the provisions contained in Arts. 4, 5, 6, and 18 of that Circular.

§ 1 The institution mentioned in the main text must disclose the information referred to in Arts. 4, 5, and 6 of Circular No. 3,678 of 2013, referring to, at minimum, the last five years, accompanied by a comparative evaluation and an explanation for relevant variations.

§ 2 The disclosure of information for base dates prior to December 31, 2013, is waived.

§ 3 Credit cooperatives issuing instruments eligible for Supplementary Capital or Level II that perform the calculation of the minimum requirements for PR, Level I, and Core Capital in the manner established in Resolution No. 4,194 of March 1, 2013, must disclose the RWARPS amount in substitution for the RWA amount and its components mentioned in Art. 6 of Circular No. 3,678 of 2013.

Art. 6 This Circular enters into force on the date of its publication, with the exception of Art. 5, which shall enter into force as of June 30, 2014.

Luiz Edson Feltrim
Deputy Director of Regulation