Circular No. 3920 — Amends Circular No. 3,809 of August 25, 2016 Regarding Mitigating Instruments for Risk-Weighted Assets (RWA) for Credit Risk Exposures Under the Standardized Approach

The Collegiate Board of the Central Bank of Brazil, in a session held on December 5, 2018, based on the provisions of Articles 9, 10, item IX, and 11, item VII, of Law No. 4,595, of December 31, 1964, and Articles 3, paragraph 2, and 15 of Resolution No. 4,193, of March 1, 2013,

R E S O L V E:

Art. 1. Circular No. 3,809, of August 25, 2016, shall be effective with the following alterations:

“Art. 4. .......................................................

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IV - securities issued by central governments of foreign jurisdictions and their respective central banks whose external risk classification, conferred by a credit rating agency registered or recognized in Brazil by the Securities and Exchange Commission (Comissão de Valores Mobiliários), is equivalent to investment grade;

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VII - ............................................................

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b) ...............................................................

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2. meet the minimum capital requirements established by the National Monetary Council or the competent authority in its jurisdiction, in the case of a financial institution headquartered abroad;

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§ 8. The procedures provided for in § 7 must be carried out in an entity distinct from the financial institution and ensure the identification of the issuance characteristics, the holders of rights over the collateral, and the types of liens and encumbrances constituted.” (NR)

“Art. 10. .......................................................

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§ 1. ............................................................

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II - financial institutions and other institutions authorized to operate by the Central Bank of Brazil, as well as financial institutions headquartered in the jurisdictions referred to in Article 4, item IV;

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IV - financial investment funds headquartered in the jurisdictions referred to in Article 4, item IV, subject to government regulation and supervision, as well as to capital requirements or leverage limits;

V - pension funds in Brazil or headquartered in the jurisdictions referred to in Article 4, item IV, subject to government regulation and supervision; and

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“Art. 13. .......................................................

I - the compliant party must have the right to immediately terminate the operations backed by the agreement in the event of non-compliance;

II - the institution must monitor and control relevant exposures, considering the net exposure after risk mitigation; and

III - the agreement must not contain clauses establishing that, after maturity, the calculation and settlement of obligations, the compliant party limits the immediate payment of the final amount due, or even does not pay, if the non-compliant party is a creditor.” (NR)

“Art. 18. .......................................................

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III - financial institutions and other institutions authorized to operate by the Central Bank of Brazil, as well as financial institutions headquartered in the jurisdictions referred to in Article 4, item IV; or

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§ 3. The surety guarantee provided by the entity mentioned in item II of the main text that ensures coverage of at least the country risk and the transfer risk, as defined in Article 21 of Resolution No. 4,557, of February 23, 2017, exempts compliance with the requirements set forth in Article 19-A, items I, II, and III, of Circular No. 3,644, of 2013, for the application of the RWA established by the regulatory authority of the foreign jurisdiction to operations with the central government of that jurisdiction and its respective central bank, as well as securities issued by them.” (NR)

Art. 2. This Circular enters into force on the date of its publication.

                              Otávio Ribeiro Damaso Director of Regulation