Circular No. 3.701

The Board of Directors of the Central Bank of Brazil, in a session held on 13 March 2014, based on the provisions of arts. 9, 10, item IX, and 37 of Law No. 4.595 of 31 December 1964, and in arts. 2 and 12 of Resolution No. 4.280 of 31 October 2013,

R E S O L V E S :

Art. 1 The consolidated financial statements referred to in art. 2 of Resolution No. 4.280 of 31 October 2013 must be prepared and submitted to the Central Bank of Brazil through the lead institution of the prudential conglomerate.

§ 1 In the preparation referred to in the caput, appropriate techniques must be used that make it possible to ascertain the accounting information of two or more entities belonging to the conglomerate subject to consolidation, as if together they represented a single entity, based predominantly on the techniques of consolidation of financial statements.

§ 2 The amounts in the consolidated financial statements must be expressed in reais, including centavos.

Art. 2 The Analytical Balance Sheet – Prudential Conglomerate, referred to in art. 2, item I, of Resolution No. 4.280 of 2013, called Document 4060, must be submitted monthly, by the last business day of the month following the respective base date, with code 42.1.3.006-2, of the Document Catalog (Cadoc).

Sole paragraph. For the submissions of the document referred to in the caput, relating to the base dates of January 2014 to April 2014, the following deadlines must be observed:

• I - the balance sheets of January and February 2014 must be submitted by 30 May 2014; and

• II - the balance sheets of March and April 2014 must be submitted by 15 June 2014.

Art. 3 The Analytical Balance Sheet – Prudential Conglomerate, referred to in art. 2, item II, subitem “a”, of Resolution No. 4.280 of 2013, called Document 4066, must be submitted semiannually by the last business day of the month following the respective base date, with code 42.1.6.031-7, of Cadoc.

Sole paragraph. The submission of the financial statements provided for in subitems “b”, “c” and “d” of item II of art. 2 of Resolution No. 4.280 of 2013 is waived until the deadlines and conditions for their submission are disclosed.

Art. 4 The consolidated financial statements must be prepared based on the primary financial statements of the entities, located in the country or abroad, over which the institution holds direct or indirect control, corresponding to the same base date, at the stage immediately prior to the distribution of results.

Art. 5 The financial statements of the institutions belonging to the prudential conglomerate must be adjusted, at each base date, so that, in the evaluation and recognition of assets, liabilities, revenues and expenses of these entities, the same classifications, criteria, procedures and accounting policies used by the lead institution are applied.

Sole paragraph. The adjustments referred to in the caput must allow the evaluation and recognition of assets, liabilities, revenues and expenses of entities that are not subject to the rules of the Accounting Plan for Institutions of the National Financial System (Cosif) to reflect the provisions of the regulations concerning that Accounting Plan.

Art. 6 The consolidated financial statements must cover, at each base date, all the institutions subject to them, considering those included in the period and disregarding those excluded.

Art. 7 In the case of transactions carried out between institutions belonging to the prudential conglomerate, the following must be eliminated:

• I - the balances of any accounts, represented in the assets of one entity, against the respective balances represented in the statements of the other; and

• II - unrealized results that are included in the assets of one entity, against the respective result for the year or shareholders' equity of the other.

Art. 8 If there are equity interests, direct or indirect, among the companies belonging to the prudential conglomerate, the following procedures must be observed:

• I - eliminate the value of the investment of one entity against the corresponding interest in the shareholders' equity of the other;

• II - eliminate dividends declared between entities belonging to the document;

• III - eliminate the provision for losses on investments, against the corresponding balance constituted due to imminent loss in transactions carried out by the investee;

• IV - eliminate any reciprocal interests;

• V - present the portion corresponding to any premium or discount that is not absorbed in the consolidation in a specific account, and the following must be evidenced:

  • a) the excess amount due to the expectation of profitability based on projected results or due to other economic reasons; and

  • b) the shortfall amount due to the expectation of loss based on projected results or due to other economic reasons;

• VI - reclassify the portion corresponding to tax charges arising from unrealized results, related to transactions carried out between entities belonging to the prudential conglomerate, from the net profit or loss for the period to:

  • a) current assets or liabilities, if the realization of the resulting profit or loss is expected in the course of the following year, under the heading deferred taxes; and

  • b) long-term realizable assets or long-term liabilities, if the realization of the resulting profit or loss is expected after the end of the following year, under the heading deferred taxes;

• VII - present the non-controlling interests separately in the consolidated financial statements; and

• VIII - present in the group's liabilities the shares of consolidated investment funds belonging to entities that are not part of the prudential conglomerate.

Art. 9 All investment funds in which the entities comprising the conglomerate, in any form, assume or retain substantially risks and rewards must be included in the consolidated financial statements.

§ 1 The consolidation referred to in the caput must allow the line-by-line identification of the fund's equity composition, even in cases of indirect participation and retention of risks and rewards.

§ 2 Excepted from the consolidation mentioned in the caput are investment funds whose substantial assumption or retention of risks and rewards occurs through insurance companies, reinsurance companies, capitalization companies and open supplementary pension entities.

Art. 10 In the disclosure referred to in art. 2, § 1, of Resolution No. 4,280, of 2013, the criteria for preparation, disclosure and auditing of financial statements provided for in Cosif must be fully observed.

§ 1 The inclusion of information in the models of disclosure documents that improve the quality and transparency of the consolidated financial statements is permitted.

§ 2 The institutions referred to in art. 1 are allowed to present comparative financial statements provided for in this Circular relating to base dates prior to 30 June 2014.

§ 3 The disclosure referred to in the caput must be made on the institution's website on the internet, and the information must remain available for public access for a minimum period of five years.

Art. 11 Financial institutions and other institutions authorized to operate by the Central Bank of Brazil that do not belong to a prudential conglomerate, except credit cooperatives, must inform the Central Bank of Brazil of this condition, in the manner to be established by the Department of Monitoring of the Financial System (Desig).

Art. 12 This Circular enters into force on the date of its publication.

Art. 13 Circular No. 3,694, of 26 December 2013, is revoked.

Luiz Awazu Pereira da Silva Anthero de Moraes Meirelles Director of Regulation Director of Supervision