Circular No. 3949 — Amends Circulars Nos. 3,644 and 3,648, both of March 4, 2013, establishing new treatments, within the prudential framework for credit risk, for rural credit exposures and adjusting the treatment of exposures to large companies.

The Collegiate Board of the Central Bank of Brazil, at a meeting held on June 25, 2019, based on arts. 9, 10, item IX, and 11, item VII, of Law No. 4,595, of December 31, 1964, and in view of the provisions of arts. 3, § 2, and 15 of Resolution No. 4,193, of March 1, 2013, R E S O L V E S :
Art. 1 Circular No. 3,644, of March 4, 2013, shall come into force with the following amendments:
“CHAPTER V
OF THE 50%, 60% AND 70% WEIGHTINGS” (NR)
“Art. 23-A. A RW of 60% (sixty percent) must be applied to exposures related to rural financing formalized based on the legislation and regulation applicable to rural credit, guaranteed by rural or non-residential urban property when:
I - the outstanding balance is up to 60% (sixty percent) of the collateral's appraisal value on the credit granting date; II - the collateral is constituted by fiduciary alienation or first-degree mortgage; and III - the generation of cash flow by the property is not materially determinant for the fulfillment of the financial obligation. Sole Paragraph. In the case of multiple exposures guaranteed by the same property, item I of the caput must consider the sum of the outstanding balances.” (NR) “Art. 23-B. A RW of 70% (seventy percent) must be applied to the exposures mentioned in art. 23-A that do not comply with the provisions of its item III.” (NR) “Art. 24-A. A RW of 85% (eighty-five percent) must be applied to exposures arising from operations with a private legal entity counterparty that cumulatively presents:
............................................................” (NR) “Art. 24-B. A RW of 85% (eighty-five percent) must be applied to the exposure related to rural financing formalized based on the legislation and regulation applicable to rural credit with a private legal entity counterparty that does not meet the criteria established in art. 24 and in item II of art. 24-A.” (NR) Art. 2 Circular No. 3,648, of March 4, 2013, shall come into force with the following amendments:
“Art. 159-A. The provisions of art. 159 do not apply to the request for specific authorization for a rural credit business unit, observing the provisions of art. 11, provided that the institution has been using, for a minimum period of 3 (three) years, internal credit risk classification systems and parameter estimation aligned with the minimum requirements for using IRB approaches, observing the provisions of art. 12, item III, fully covering the exposures linked to such business unit. Sole Paragraph. During the prior use period referred to in the caput, the IRB approach is subject to the provisions of art. 145.” (NR)
“Art. 162. ......................................................
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§ 4 Institutions that opt for the request for specific authorization for a business unit, under the terms of art. 159-A, are exempt from the declaration referred to in § 3, item I, subparagraph “c”, and from the plan referred to in § 3, item II. § 5 The institutions referred to in § 4 must submit a declaration, accompanying the request referred to in the caput, attesting to the prior use, for a minimum period of 3 (three) years, of the IRB approach specified for risk classification and estimation of risk parameters, according to the provisions of art. 159-A, for the entirety of the exposures linked to the business unit subject to the application.” (NR)
“Art. 165. ......................................................
Sole Paragraph. The authorization referred to in the caput is not linked to exposure categories or business units, and may be restricted to products or another criterion established by Desup.” (NR) Art. 3 This Circular comes into force on the date of its publication. Otávio Ribeiro Damaso Director of Regulation