Circular No. 3911 — Amends Circular No. 3,846 of September 13, 2017 Regarding Internal Capital Adequacy Assessment Process (ICAAP) Procedures and Parameters

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The Collegiate Board of the Central Bank of Brazil, in a session held on August 30, 2018, based on arts. 9, 10, item IX, and 11, item VII, of Law No. 4,595, of December 31, 1964, and considering the provisions of art. 40, §§ 2 and 3, of Resolution No. 4,557, of February 23, 2017,

R E S O L V E:

Art. 1 The heading of Circular No. 3,846, of September 13, 2017, shall be effective with the following wording:

“Establishes procedures and parameters relating to the Internal Capital Adequacy Assessment Process (ICAAP) and the Simplified Internal Capital Adequacy Assessment Process (ICAAPSimp).” (NR)

Art. 2 Circular No. 3,846, of 2017, shall be effective with the following amendments:

“Art. 1 This Circular provides for the Internal Capital Adequacy Assessment Process (ICAAP) and the Simplified Internal Capital Adequacy Assessment Process (ICAAPSimp), as provided for in art. 40, § 2, items “a” and “b”, of Resolution No. 4,557, of February 23, 2017.

Sole paragraph. The ICAAPSimp shall meet the same requirements as the ICAAP, except regarding the content of the annual report referred to in art. 5, which shall follow a simplified model.” (NR)

“Art. 2 The ICAAP and the ICAAPSimp must allow for the assessment of the sufficiency of the capital maintained by the institution over a three-year horizon, considering:

............................................................” (NR)

“Art. 3 The ICAAP and the ICAAPSimp must encompass:

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§ 2 The ICAAP and the ICAAPSimp must additionally consider projections of asset and liability values, exposures not recorded on the balance sheet, and revenues and expenses forecasted in the capital plan, as provided for in art. 41, sole paragraph, item II, of Resolution No. 4,557, of 2017.

............................................................” (NR)

“Art. 4 The ICAAP and the ICAAPSimp must be submitted to an independent validation process of the execution process that evaluates, at minimum:

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§ 1 The validation process is the exclusive responsibility of the institution and must be carried out, at minimum, every three years and, in particular, whenever there is any relevant change in the ICAAP, the ICAAPSimp, or the institution's risk profile.

§ 2 The validation process must be adequately documented and its results submitted to the institution's board of directors, the risk committee, and the board of administration, if it exists.

§ 3 For institutions classified under S2 that, on the base date of December 31, 2017, were not subject to the implementation of the ICAAP, in accordance with art. 40, § 3, of Resolution No. 4,557, of 2017, compliance with the provisions of the main text shall be:

I - optional, until June 30, 2019; and

II - mandatory, from July 1, 2019.

§ 4 The exercise of the option mentioned in § 3, item I, must be evidenced in the annual report referred to in art. 5 of this Circular.” (NR)

“Art. 5 An annual report with a base date of December 31 must be prepared regarding the ICAAP or the ICAAPSimp, as applicable.

Sole paragraph. The reports referred to in the main text must be:

I - prepared according to models established by the Central Bank of Brazil;

II - approved by the board of administration or, in its absence, by the institution's board of directors;

III - made available to the Central Bank of Brazil by April 30 of the year following the reference base date; and

IV - kept available to the Central Bank of Brazil for a period of five years.” (NR)

Art. 3 This Circular enters into force on the date of its publication.

         Otávio Ribeiro Damaso                Paulo Sérgio Neves de Souza Director of Regulation                 Director of Supervision