Circular No. 3751 — Establishes the calculation of information for the assessment of Global Systemic Importance (GSI) of financial institutions and the submission to the Central Bank of Brazil and the disclosure of such information

CIRCULAR NO. 3,751, OF MARCH 19, 2015

Establishes the calculation of information for the assessment of Global Systemic Importance (GSI) of financial institutions and the submission to the Central Bank of Brazil and the disclosure of such information.

The Collegiate Board of the Central Bank of Brazil, in a session held on March 19, 2015, based on the provisions of Articles 10, item IX, 11, item VII, and 37 of Law No. 4,595, of December 31, 1964,

RESOLVES:

CHAPTER I
PRELIMINARY PROVISIONS

Section I
Object and Scope of Application

Art. 1. This Circular provides for the information for the assessment of Global Systemic Importance (GSI) of financial institutions and the conditions for calculation, submission to the Central Bank of Brazil, and disclosure of such information.

Art. 2. The GSI comprises:
I - the Global Systemic Importance Index (GSI); and II - the set of auxiliary indicators.

Art. 3. The provisions of this Circular apply to multiple banks, commercial banks, investment banks, and savings banks that:
I - have Total Exposure, as provided in Circular No. 3,748, of February 27, 2015, greater than BRL 500,000,000,000.00 (five hundred billion reais); or II - are part of a prudential conglomerate, in accordance with Resolution No. 4,280, of October 31, 2013, which has Total Exposure greater than BRL 500,000,000,000.00 (five hundred billion reais).

Sole Paragraph. The provisions of the caput do not apply to institutions under corporate control of natural or legal persons resident or domiciled abroad, in accordance with Resolution No. 4,122, of August 2, 2012.

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Section II
Procedures for Calculating Financial Information for the Assessment of Global Systemic Importance

Art. 4. The information referred to in this Circular must have as the base date December 31, except for the provisions in items I and III of Article 12 and XII of Article 16, whose information must correspond to the calendar year.

Art. 5. For institutions that are part of a prudential conglomerate, the calculation of the GSI must be performed on a consolidated basis.

Sole Paragraph. For the purposes of the calculation referred to in the caput:
I - the respective advances received, provisions, and income to be appropriated must be deducted from the values of the operations referred to in this Circular; II - the valuation procedures must follow the criteria established in the Accounting Plan of the Institutions of the Financial System (Cosif); and III - operations denominated in foreign currency must be calculated in reais, by converting the respective values, based on the quotes used for the preparation of balance sheets and financial statements, in accordance with the criteria established in Cosif.

CHAPTER II
CALCULATION OF THE GLOBAL SYSTEMIC IMPORTANCE INDEX

Section I
General Provisions

Art. 6. The GSI, referred to in Article 2, item I, must be calculated based on the following formula:

GSI = (Size + Interconnectedness + Substitutability + Complexity + Cross-border Activity) / 5

where:
I - "Size" = indicator referring to the institution's relative participation in global banking activity; II - "Interconnectedness" = indicator referring to the institution's relative degree of connection with the institutions referred to in the sole paragraph of Article 8 and with the global capital market; III - "Substitutability" = indicator referring to the institution's relative participation in the global supply of financial services; IV - "Complexity" = indicator referring to the relative complexity of the institution's operations; and

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V - "Cross-border Activity" = indicator referring to the institution's relative international activities.

Sole Paragraph. The GSI value must correspond to the nearest integer to the result obtained according to the formula in the caput.

Section II
Calculation of the "Size" Indicator

Art. 7. The "Size" indicator is calculated based on the following formula:

Size = (Gross Total Exposure / ETB) * 10,000

where:
I - "Gross Total Exposure" = corresponds to Article 2, item II, letter "a", of Circular No. 3,748, of 2015; and II - ETB = value defined according to Article 15, item I.

Section III
Calculation of the "Interconnectedness" Indicator

Art. 8. The "Interconnectedness" indicator is calculated based on the following formula:

Interconnectedness = ((Interbank Assets + Interbank Liabilities + Marketable Securities) / 3) * 10,000

where:
I - "Interbank Assets" = amount of assets and rights held against the entities mentioned in the sole paragraph of this article; II - "Interbank Liabilities" = amount of obligations assumed against the entities mentioned in the sole paragraph of this article; III - "Marketable Securities" = amount of funding instruments issued by the institution; and IV - AIF, PIF, and TVM = values defined according to items II, III, and IV of Article 15.

Sole Paragraph. For the purposes of calculating the amounts mentioned in items I and II of the caput, only operations with the following counterparties or issuing entities, headquartered in the country or abroad, shall be considered:
I - entities mentioned in Article 1 of Resolution No. 4,280, of 2013, with the exception of the National Bank for Economic and Social Development (BNDES); II - investment funds and investment funds in shares of investment funds, in accordance with current regulation;

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III - pension funds and open complementary pension entities; IV - insurance companies, reinsurance companies, and capitalization companies; and V - clearinghouses and providers of clearing and settlement services.

Art. 9. The "Interbank Assets", referred to in Article 8, item I, consists of the sum of the values corresponding to the assets and rights held by the institution as follows:
I - deposits made without issuance of a certificate, except in margin accounts, including interbank deposits, loans, and financing granted; II - deposits made with issuance of a certificate; III - unused value of the credit limit granted, considering both the unconditional and unilateral non-cancelable credit limit and the unconditional and unilateral cancelable credit limit, as defined, respectively, in the sole paragraph of Article 19 and the sole paragraph of Article 20 of Circular No. 3,748, of 2015; IV - guaranteed debt securities without subordination clause; V - unsecured debt securities without subordination clause; VI - debt securities with subordination clause; VII - promissory notes with an original maturity of up to 1 (one) year; VIII - amount of net positions in each share, if positive, plus investments in shares of the entities mentioned in items II and III of the sole paragraph of Article 8; IX - exposures arising from repo operations and securities lending and borrowing, subject to the provisions of §§ 2 and 3 of this article; and X - exposures arising from over-the-counter financial derivative instrument operations, subject to the provisions of §§ 4 and 5 of this article.

§ 1. The amount of assets and rights arising from operations classified in the category "operations with retention of substantial risks and benefits", referred to in Resolution No. 3,533, of January 31, 2008, must be included in the calculation of item I of the caput.

§ 2. The value of the exposure arising from a repo operation and securities lending and borrowing, referred to in item IX of the caput, subject to the provisions of § 3 of this article, must correspond to the result, if positive:
I - of the accounting value of the resale minus the accounting value of the asset subject to the operation, in the case of a purchase with a commitment to resell; II - of the accounting value of the asset subject to the operation minus the financial resources received, in the case of a sale with a commitment to repurchase and in the case of a securities lending and borrowing operation where the institution acts as the lending counterparty; and

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III - of the financial resources delivered minus the accounting value of the received asset, in the case of a securities lending and borrowing operation where the institution acts as the borrowing counterparty.

§ 3. For repo operations and securities lending and borrowing subject to agreements for the clearing and settlement of obligations within the National Financial System (SFN), governed by Resolution No. 3,263, of February 24, 2005, the value of the exposure referred to in item IX of the caput must correspond to the result, if positive, of the sum of the financial resources and securities delivered to the counterparty referred to in the agreement minus the sum of the financial resources and securities received from it.

§ 4. The value of the exposure arising from an over-the-counter financial derivative instrument operation, referred to in item X of the caput, whose replacement value is greater than or equal to zero, subject to the provisions of § 5 of this article, must correspond to its replacement value, plus the future potential gain, calculated according to criteria defined in Articles 13 and 15 of Circular No. 3,644, of March 4, 2013.

§ 5. For operations with financial derivative instruments subject to agreements for the clearing and settlement of obligations within the SFN, governed by Resolution No. 3,263, of 2005, the value of the exposure referred to in item X of the caput must correspond to the result, if positive, of the sum of the replacement values of each operation plus the net future potential gain (GPFLíq), referred to in Article 14 of Circular No. 3,748, of 2015, calculated for the same counterparty referred to in the agreement.

Art. 10. The "Interbank Liabilities", referred to in Article 8, item II, consists of the sum of the values corresponding to the obligations assumed by the institution as follows:
I - deposits received without issuance of a certificate, including interbank deposits, from:
a) multiple banks, commercial banks, savings banks, development banks, investment banks, credit cooperatives, mortgage companies, credit, financing and investment companies, microentrepreneur credit companies, leasing companies, real estate credit companies, and savings and loan associations, consortium administrators; and b) other entities referred to in the sole paragraph of Article 8; II - loans and financing taken; III - unused value of the credit limit taken, considering both the unconditional and unilateral non-cancelable credit limit and the unconditional and unilateral cancelable credit limit, as defined respectively in the sole paragraph of Article 19 and the sole paragraph of Article 20 of Circular No. 3,748, of 2015;

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IV - obligations arising from repo operations and securities lending and borrowing operations, subject to the provisions of §§ 2 and 3 of this article; and V - obligations arising from over-the-counter financial derivative instrument operations, subject to the provisions of §§ 4 and 5 of this article.

§ 1. The amount of obligations arising from operations classified in the category "operations with retention of substantial risks and benefits", referred to in Resolution No. 3,533, of 2008, must be included in the calculation of item I of the caput.

§ 2. The value of the obligation arising from a repo operation and securities lending and borrowing, referred to in item IV of the caput, subject to the provisions of § 3 of this article, must correspond to the result, if positive:
I - of the accounting value of the asset subject to the operation minus the accounting value of the resale, in the case of a purchase with a commitment to resell; II - of the financial resources received minus the accounting value of the asset subject to the operation, in the case of a sale with a commitment to repurchase and in the case of a securities lending and borrowing operation where the institution acts as the lending counterparty; and III - of the accounting value of the received asset minus the financial resources delivered, in the case of a securities lending and borrowing operation where the institution acts as the borrowing counterparty.

§ 3. For repo operations and securities lending and borrowing subject to agreements for the clearing and settlement of obligations within the SFN, governed by Resolution No. 3,263, of 2005, the value of the obligation referred to in item IV of the caput must correspond to the result, if positive, of the sum of the financial resources and securities received from the counterparty referred to in each agreement minus the sum of the financial resources and securities delivered to it.

§ 4. The value of the obligation arising from an over-the-counter financial derivative instrument operation, referred to in item V of the caput, whose replacement value is less than zero, subject to the provisions of § 5 of this article, must correspond to the absolute value of its replacement value, plus the future potential gain, calculated according to criteria defined in Articles 13 and 15 of Circular No. 3,644, of 2013.

§ 5. For operations with financial derivative instruments subject to agreements for the clearing and settlement of obligations within the SFN, governed by Resolution No. 3,263, of 2005, the value of the exposure referred to in item V of the caput must correspond to the absolute value of the result, if negative, of the sum of the replacement values of each operation plus the GPFLíq, referred to in Article 14 of Circular No. 3,748, of 2015, calculated for the same counterparty referred to in the agreement.

Art. 11. The "Marketable Securities", referred to in Article 8, item III, consist of the sum of the values corresponding to the securities and marketable instruments issued by the institution and in circulation as follows:

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I - guaranteed debt securities without subordination clause; II - unsecured debt securities without subordination clause; III - debt securities with subordination clause; IV - promissory notes with an original maturity of less than 1 (one) year; V - deposits received with issuance of a certificate; VI - shares; and VII - other forms of funding with subordination clause not included in item III.

Sole Paragraph. The value of the shares referred to in item VI of the caput must be determined by multiplying the total number of shares issued and in circulation by the respective stock exchange quote on the calculation base date.

Section IV
Calculation of the "Substitutability" Indicator

Art. 12. The "Substitutability" indicator is calculated based on the following formula:

Substitutability = ((Payments + Custody + Origination) / 3) * 10,000 / 500

where:
I - "Payments" = sum of the gross value of the following payments made to third parties in the country or abroad, in each calendar year:
a) processed directly in the Reserve Transfer System (STR), except for transfer orders related to compulsory deposits, rediscounting by the Central Bank of Brazil, and currency in circulation; and b) processed in payment and resource transfer systems or through correspondent banks, denominated in:

1. Australian dollar;
2. Canadian dollar;
3. Swiss franc;
4. Renminbi yuan;
5. Euro;
6. British pound;
7. Hong Kong dollar;

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8. Indian rupee;
9. Yen;
10. Swedish krona; and
11. United States dollar;
    II - "Custody" = sum of the values corresponding to the stock of securities, marketable instruments, and other financial assets of third parties, including gold, received in custody and held by the institution itself or by trustees; III - "Origination" = sum of the values corresponding to origination operations of securities and marketable instruments issued by third parties, excluding financial derivative instruments, carried out in the country or abroad, in each calendar year, subject to the provisions of §§ 3 to 5 of this article, discriminated in:
    a) equity participations, including direct and indirect participations in companies, with or without voting rights, including through embedded derivative instruments, and convertible bonds; and b) other instruments not included in letter "a"; and IV - PAG, CUST, and ORIG = values defined according to items V, VI, and VII of Article 15.

§ 1. For the purposes of the provisions in the caput, a third party is considered to be an entity that is not part of the prudential conglomerate of the institution subject to the calculation of the GSI.

§ 2. In the calculation of "Custody", referred to in item II of the caput, third-party financial assets administered by the institution, but whose custody is not its responsibility, must not be considered.

§ 3. For the purposes of calculating the "Origination" mentioned in item III of the caput, the following must be considered:
I - all values subscribed, in proportion to the institution's participation in the origination process; and II - the values of the financial derivative instruments embedded in the securities and marketable instruments.

§ 4. In operations contracted under the best efforts regime, the calculation of the origination value referred to in item III of the caput must consider only the securities and marketable instruments effectively subscribed.

§ 5. The equity participations referred to in item III, letter "a", of the caput include instruments that present the same structure as those eligible for the composition of equity in accordance with Cosif.

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Section V
Calculation of the "Complexity" Indicator

Art. 13. The "Complexity" indicator is calculated based on the following formula:

Complexity = ((Level 3 Assets + Non-ELR Instruments + OTC Derivatives) / 3) * 10,000

where:
I - "OTC Derivatives" = sum of the reference values of operations with financial derivative instruments carried out in the over-the-counter market and settled in:
a) clearing settlement systems or clearing and settlement providers; and b) other environments; II - "Non-ELR Instruments" = financial instruments not eligible to compose the High Quality Liquid Assets (HQLA) stock, as provided in Circular No. 3,749, of March 5, 2015, which must be calculated by:
a) the sum of the values corresponding to securities and marketable instruments classified, in accordance with Circular No. 3,068, of November 8, 2001, in the following categories:

1. "Trading securities"; and
2. "Available-for-sale securities"; and
   b) the deduction of the values corresponding to assets classified, as provided in Circular No. 3,068, of 2001, in the categories "Trading securities" and "Available-for-sale securities" as follows:
3. Level 1 HQLA, as defined in Article 6 of Circular No. 3,749, of 2015; and
4. Level 2 HQLA, as defined in Articles 7, 8, and 9 of Circular No. 3,749, of 2015;
   III - "Level 3 Assets" = sum of the values of financial instruments valued according to the model-based valuation methodology, as provided in Resolution No. 4,277, of October 31, 2013; and IV - DB, INLCR, and AN3 = values defined according to items VIII, IX, and X of Article 15.

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Section VI
Calculation of the "Cross-border Activity" Indicator

Art. 14. The "Cross-border Activity" indicator is calculated based on the following formula:

Cross-border Activity = ((External Assets + External Liabilities) / 2) * 10,000

where:
I - "External Assets" = consolidated position of international assets plus the active positions of foreign branches calculated based on the International Banking Statistics (EBI) document, referred to in Circular No. 3,047, of July 13, 2001; II - "External Liabilities" = sum of the values corresponding to:
a) liabilities of banking units located in the country in any currency whose counterparties are residents abroad; b) liabilities of banking units located abroad in any currency whose counterparties are non-local residents, with the exception of residents in the country; c) liabilities of banking units abroad with local residents in non-local currency; and d) passive positions of foreign branches, calculated based on the EBI, referred to in Circular No. 3,047, of 2001; and III - AE and PE = values defined according to items XI and XII of Article 15.

§ 1. For the purposes of calculating items I and II of the caput, operations with financial derivative instruments must not be considered.

§ 2. For the purposes of this Circular, a banking unit is considered to be a branch, dependency, subsidiary, agency, headquarters, or similar entity with identical operational nature, located in a specific country.

Art. 15. For the purposes of calculating the GSI, the following information published by the Basel Committee on Banking Supervision, available on the website http://www.bis.org/bcbs/gsib/, must be used:
I - ETB = value referring to the denominator Total exposures as defined for use in the Basel III leverage ratio; II - AIF = value referring to the denominator Intra-financial system assets; III - PIF = value referring to the denominator Intra-financial system liabilities; IV - TVM = value referring to the denominator Total marketable securities; V - PAG = value referring to the denominator Payments;

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VI - CUST = value related to the denominator Assets under custody;

VII - ORIG = value related to the denominator Values of underwritten transactions in debt and equity markets;

VIII - DB = value related to the denominator OTC derivatives notional value;

IX - INLCR = value related to the denominator Held for trading and available for sale assets minus HQLA;

X - AN3 = value related to the denominator Level 3 assets;

XI - AE = value related to the denominator Cross-jurisdictional claims; and

XII - PE = value related to the denominator Cross-jurisdictional liabilities.

Sole paragraph. The information referred to in the main text must be calculated by converting the respective values into Brazilian reais, based on a specific quotation published on the website mentioned in the main text and relative to the base date mentioned in Article 4.

CHAPTER III

OF AUXILIARY INDICATORS

Article 16. The auxiliary indicators, referred to in Article 2, item II, comprise the amounts related to:

I - current liabilities and long-term due liabilities, in accordance with Cosif, deducted from the values corresponding to:

a) social and statutory liabilities;

b) fiscal liabilities for capital increase;

c) appropriations for capital increase; and

d) provisions for payments to be made;

II - total deposits, deducted from the values corresponding to deposits:

a) mentioned in Article 10, item I, letter “a”;

b) with certificates received from the institutions referred to in the sole paragraph of Article 8;

c) received from central banks; and

d) backed by counterparty not eligible for classification of its exposures in the “retail” category, as defined in §§ 1 and 2 of Article 24 of Circular No. 3,644, of 2013;

III - operational revenues, in accordance with Cosif;

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IV - net revenue, which consists of the value referred to in item III of the main text minus the value corresponding to financial intermediation expenses, in accordance with Carta Circular No. 3,316, of April 30, 2008;

V - net external revenue, corresponding to the value referred to in item IV of the main text originating from banking units located abroad;

VI - the sum of financial resources delivered in cases of repurchase agreements (purchase with commitment to resell) and securities borrowed by loan, and of the book values of assets delivered in cases of reverse repurchase agreements (sale with commitment to repurchase) and securities lent by loan;

VII - the sum of financial resources received in cases of reverse repurchase agreements (sale with commitment to repurchase) and operations related to securities lent by loan, and of the book values of assets in cases of repurchase agreements (purchase with commitment to resell) and operations related to securities borrowed by loan;

VIII - the sum of the replacement values of operations with financial derivative instruments carried out in the over-the-counter market whose replacement value is greater than or equal to zero;

IX - the sum of the replacement values of operations with financial derivative instruments carried out in the over-the-counter market whose replacement value is less than zero;

X - the number of jurisdictions in which the institution has a banking unit, considering, including, the Country;

XI - securities classified in the category “securities held to maturity”, in accordance with Circular No. 3,068, of 2001; and

XII - the gross value of payments made to third parties not part of the prudential conglomerate of the institution subject to the calculation of GSII, made in the Country or abroad, in each calendar year, processed through payment and resource transfer systems or through a correspondent bank, denominated in:

a) Mexican peso;

b) New Zealand dollar; and

c) Russian ruble.

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CHAPTER IV

OF THE SUBMISSION OF INFORMATION TO THE CENTRAL BANK OF BRAZIL

Article 17. Reports on the calculation of GSII must be sent to the Central Bank of Brazil, in the format to be defined by it, within a maximum period of 90 (ninety) days after the respective base date of calculation:

I - by the leading institution of each conglomerate, in the case of consolidated information; and

II - by the other financial institutions subject to the calculation of GSII, not belonging to conglomerates, in the case of providing information of each entity.

CHAPTER V

OF THE DISCLOSURE OF INFORMATION

Article 18. Information related to GSII must be disclosed, according to the standardized formats defined in:

I - Annex 1, within a maximum period of 120 (one hundred and twenty) days after the respective base date of calculation, in thousands of reais; and

II - Annex 2, within a maximum period of 12 (twelve) months after the respective base date of calculation, in basis points.

Sole paragraph. The Banking Supervision Department (Desup) may determine the disclosure of supplementary information to that provided in this Circular, if inconsistencies are found in the disclosed information.

Article 19. The information referred to in Article 18 must be available in a single location, publicly accessible and easily located, in a specific section on the institution’s website.

§ 1st The information referred to in the main text must be available together with those related to risk management, the calculation of the amount of risk-weighted assets (RWA), and the calculation of Reference Equity (PR), as provided in Article 18 of Circular No. 3,678, of October 31, 2013.

§ 2nd The institution must publish, together with the published financial statements, the location of the information mentioned in the main text on its website.

Article 20. Institutions subject to the calculation of GSII must make available the information referred to in Article 18 relating, at minimum, to the last five years, accompanied by a comparative evaluation between the information related to the current base date and the immediately preceding base date, and an explanation for relevant variations.

Sole paragraph. Disclosure of GSII, including the comparative evaluation mentioned in the main text for base dates prior to December 31, 2015, is exempted.

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CHAPTER VI

OF FINAL PROVISIONS

Article 21. Observing the provision of the sole paragraph of Article 3, Desup may, within up to 15 (fifteen) days after the respective base date of calculation, in accordance with Article 4, determine the application of the provisions of this Circular to institutions that do not meet the criteria defined in Article 3, if information related to the indicators referred to in Articles 6 or 16 is considered relevant.

Article 22. The director indicated in accordance with Article 14 of Resolution No. 4,193, of March 1, 2013, is responsible for the information referred to in this Circular.

Article 23. Institutions subject to the calculation of GSII must keep available to the Central Bank of Brazil, for a minimum period of five years, the documentation that served as support for the preparation of the information referred to in this Circular.

Article 24. This Circular enters into force on the date of its publication.

Anthero de Moraes Meirelles
Director of Regulation

This text does not replace that published in the DOU of 3/23/2015, Section 1, p. 14-16, and in Sisbacen.

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Annex 1

Values of Global Systemic Importance Index Indicators

Line Number Item Value (R$ thousand)

Size Indicator
1 Gross total exposure
Interconnection Indicator
2 Interbank asset
3 Interbank liability
4 Securities
Substitution Indicator
5 Payments
6 Custody
7 Origination
Complexity Indicator
8 OTC derivatives
9 Instruments not eligible for LCR
10 Level 3 assets
External Activity Indicator
11 External asset
12 External liability

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Annex 2

Relative Participation in Global Systemic Importance Index Indicators

Line Number Item Basis Points

Size Indicator
1 Gross total exposure / GTE × 10,000
2 Size Indicator
Interconnection Indicator
3 Interbank asset / IBA × 10,000
4 Interbank liability / IBL × 10,000
5 Securities / S × 10,000
6 Interconnection Indicator
Substitution Indicator
7 Payments / P × 10,000
8 Custody / CUST × 10,000
9 Origination / ORIG × 10,000
10 Substitution Indicator
Complexity Indicator
11 OTC derivatives / DB × 10,000
12 Instruments not eligible for LCR / INLCR × 10,000 13 Level 3 assets / AN3 × 10,000 14 Complexity Indicator External Activity Indicator 15 External asset / AE × 10,000 16 External liability / PE × 10,000 17 External Activity Indicator Global Systemic Importance Index (GSII) 18 GSII