Circular No. 3996 — Regulations on Loan Operations via Temporary Special Liquidity Line for Acquisition of Financial Notes with Guarantee in Financial Assets or Securities (LTEL-LFG)

CIRCULAR NO. 3,996, OF APRIL 6, 2020

Regulates loan operations through the Temporary Special Liquidity Line for Acquisition of Financial Notes with Guarantee in Financial Assets or Securities (LTEL-LFG), as provided for in Resolution No. 4,795, of April 2, 2020.

The Collegiate Board of the Central Bank of Brazil, in an extraordinary session held on April 5, 2020, based on art. 10, item V, of Law No. 4,595, of December 31, 1964, and Resolution No. 4,795, of April 2, 2020,

RESOLVES:

CHAPTER I
OF THE OPERATIONAL MODALITY

Art. 1. This Circular regulates the Temporary Special Liquidity Line for Acquisition of Financial Notes with Guarantee in Financial Assets or Securities (LTEL-LFG), as provided for in Resolution No. 4,795, of April 2, 2020.

Art. 2. The LTEL-LFG is operationalized through loans against a guarantee portfolio, constituted by the registration of a lien on financial assets or securities registered in a registry entity or deposited in a central depository, as provided for in Law No. 12,810, of May 15, 2013.

§ 1. The guarantee portfolio constituted in the manner of the main text enables the opening of a credit limit for the financial institution, which will guide the issuance of Financial Notes, the instrument that embodies the loan operations granted under the LTEL-LFG.

§ 2. All loan operations granted to a financial institution under the LTEL-LFG and embodied in Financial Notes are guaranteed by all financial assets and securities comprising the linked guarantee portfolio.

§ 3. The granting of loan operations is subject to the technical judgment of discretion of the Central Bank of Brazil, manifested in the manner provided for in art. 13.

CHAPTER II
OF ADHERENCE

Art. 3. To adhere to the LTEL-LFG, financial institutions that meet the provisions of art. 2 of Resolution No. 4,795, of 2020, must submit to the Department of Banking Operations and Payment System (Deban):

I - instrument of fiduciary assignment of rights over movable property for the purpose of obtaining loans from the Central Bank of Brazil, under the LTEL-LFG, according to the model published in a circular letter and available on the Central Bank of Brazil website, signed by 2 (two) or more representatives with statutory powers for this purpose;

II - documentation issued by the Federal Revenue Secretariat and the Attorney General's Office of the National Treasury attesting to the absence of debts with the social security system, for the purpose of compliance with § 3 of art. 195 of the Federal Constitution; and

III - standard form containing identification of representatives of the institution who will make operational contacts.

§ 1. The instrument referred to in item I of the main text must be signed by means of a digital certificate issued by a certification authority of the Brazilian Public Key Infrastructure (ICP-Brasil) and sent to Deban electronically.

§ 2. Movements of financial assets or securities for the purpose of constituting and deconstituting guarantees carried out within the central depository or registry entity will constitute amendments to the instrument referred to in item I of the main text.

§ 3. Updates to the documents referred to in this article must be provided promptly, due to loss of validity, or at the request of the Central Bank of Brazil.

§ 4. Deban will inform the representatives of the institutions that have adhered to the LTEL-LFG of the lien account owned by the Central Bank of Brazil, so that guarantees can be constituted, in accordance with the operational procedures of the central depository or registry entity.

§ 5. The financial institution that adheres to the LTEL-LFG must carry out the necessary confirmations for the registration of the instrument referred to in item I of the main text, in a lien account owned by the Central Bank of Brazil at the central depository or registry entity.

CHAPTER III
OF FINANCIAL CHARGES

Art. 4. A percentage increase of 0.60% p.a. (sixty hundredths of a percent per year) to the Selic Rate, as provided for in Circular No. 3,671, of October 18, 2013, is established for loan operations within the LTEL-LFG, observing the method of calculating the charge fixed in art. 4 of Resolution No. 4,795, of 2020.

CHAPTER IV
OF PRE-POSITIONING AND ADDITIONAL CRITERIA FOR ACCEPTANCE OF ASSETS

Art. 5. The financial institution must notify the Department of Financial System Monitoring (Desig) of the pre-positioning of guarantee assets, which is done by constituting a lien on the financial assets or securities registered in a registry entity or deposited in a central depository.

Art. 6. The constitution of a lien on financial assets or securities for the purpose of granting a loan under the LTEL-LFG must be reported by the central depository or registry entity to Desig by the day following the constitution of the lien.

Art. 7. The constitutive registration of the Financial Note, its centralized deposit, and the constitution of liens on financial assets or securities in favor of the Central Bank of Brazil must be carried out within the scope of the same entity authorized by the Central Bank of Brazil to offer these services.

Art. 8. The following financial assets or securities listed in art. 5 of Resolution No. 4,795, of 2020, which possess one or more of the following characteristics, will not be accepted as guarantee for the LTEL-LFG:

I - regarding the financial assets referred to in items I, II, and III of art. 5 of Resolution No. 4,795, of 2020:

a) operations that have the characteristic of revolving credit; b) operations considered problematic assets in accordance with art. 24 of Resolution No. 4,557, of February 23, 2017; c) operations recovered from loss; d) operations renegotiated under the Special Program for Asset Sanitation (Pesa), in accordance with Resolution No. 2,471, of February 26, 1998; e) operations renegotiated under the Program for Revitalization of Agricultural Production Cooperatives (Recoop); f) operations under judicial collection or whose issuer is in judicial reorganization; g) operations that do not have payments scheduled in the next 6 (six) months; h) operations that have values to be released; i) operations assigned by the institution in negotiation with substantial retention of risk and benefits; j) operations linked to interbank transfers from the National Bank for Economic and Social Development (BNDES), the Special Industrial Financing Agency (Finame), constitutional funds, state or district funds, or special funds or programs of the Federal Government, and operations linked to transfers of any kind from abroad and financing granted under the LTEL-LFG using resources controlled by rural credit; k) operations considered non-matured by force of regulation; l) operations with maturity date postponed by force of regulation; m) operations with payment deferred by an official body or program awaiting release of resources; n) operations linked in accordance with Resolution No. 2,921, of January 17, 2002; o) operations whose debtors do not have a valid registration in the Individual Taxpayer Registry (CPF) or the National Registry of Legal Entities (CNPJ), as applicable; p) operations that are registered as collateral for securities in entities authorized to exercise the activities of centralized deposit of financial assets; and

q) all operations provided for in this item when there is a delay, by the financial institution, in sending Document 3040 – Credit Risk Data – for more than 5 (five) business days, counted from the delivery deadline;

II - regarding the securities referred to in item IV of art. 5 of Resolution No. 4,795, of 2020:

a) issuer that has, in the same prudential conglomerate, financial assets listed in items I, II, and III of art. 5 of Resolution No. 4,795, of 2020, that fall under letters “b”, “c”, and “f” of item I of this article; b) linked to any type of commitment; c) all securities provided for in this item when there is a delay, by the financial institution, in sending Document 3040 – Credit Risk Data – for more than 5 (five) business days, counted from the delivery deadline;

III - regarding the securities referred to in item V of art. 5 of Resolution No. 4,795, of 2020:

a) issuer that has, in the same prudential conglomerate, financial assets listed in items I, II, and III of art. 5 of Resolution No. 4,795, of 2020, that fall under letters “b”, “c”, and “f” of item I of this article; b) linked to any type of commitment; c) all securities provided for in this item when there is a delay, by the financial institution, in sending Document 3040 – Credit Risk Data – for more than 5 (five) business days, counted from the delivery deadline.

§ 1. All financial assets and securities accepted as guarantee must be classified in the risk levels corresponding to them in accordance with Resolution No. 2,682, of December 21, 1999, for the purpose of classification under art. 6 of Resolution No. 4,795, of 2020.

§ 2. All financial assets and securities accepted as guarantee must have been previously reported to the Credit Information System (SCR).

§ 3. The Central Bank of Brazil may disqualify a specific operation based on other information available to the Autarchy, with prior communication to the financial institution.

Art. 9. For the purpose of eligibility of the operation as guarantee for the LTEL-LFG, the issuer or debtor of the financial assets or securities referred to in art. 5 of Resolution No. 4,795, of 2020, must have a default index (DI) in credit operations reported to the SCR of less than or equal to 0.05% (five hundredths of a percent), measured according to the following formula:

DI = (∑ (CV>30 + CB48) 6 months) / (∑ (CA + CB48) 6 months), where:

CV>30 = overdue credits in the active portfolio in the National Financial System (SFN) for more than 30 days; CB48 = credits written off as loss up to 48 months in the SFN; and

CA = active portfolio in the SFN.

Art. 10. In the calculation of the value of eligible financial assets provided for in art. 5 of Resolution No. 4,795, of 2020:

I - only values to mature from 60 (sixty) days will be considered for the financial assets referred to in items I, II, and III;

II - only values to mature from the 360 (three hundred and sixtieth) day will be considered for the securities referred to in item IV.

Sole paragraph. In the case of the same issuer or debtor, the sum of financial assets and securities is limited to up to 25% (twenty-five percent) of the total value of the portfolio of financial assets and securities accepted as guarantee, even if the total of the values offered for that issuer or debtor exceeds this percentage.

CHAPTER V
OF FINANCIAL LIMITS

Art. 11. The Total Financial Limit for contracting operations under the LTEL-LFG will be calculated based on the guarantee portfolio constituted by the financial institution, the criteria for acceptance of financial assets and securities as guarantee, and the rules for excess guarantees provided for in art. 6 of Resolution No. 4,795, of 2020.

Art. 12. The Available Financial Limit for new contracting of operations under the LTEL-LFG will be calculated for the purpose of subsequent issuance of Financial Notes and will reference the Total Financial Limit and the balance of open operations of the financial institution within the LTEL-LFG.

CHAPTER VI
OF GRANTING

Art. 13. The granting of a loan is conditioned to specific authorization from the Collegiate Board of the Central Bank of Brazil for each operation, observing the following steps:

I - request for operation by the interested financial institution, which must be addressed to Deban and contain the amount of loan and term requested;

II - authorization for the issuance of a Financial Note, on a specific date, based on the Available Financial Limit and the Reference Equity of the prudential conglomerate integrated by the interested institution;

III - issuance of a Financial Note, through its constitutive registration, by the financial institution in favor of the Central Bank of Brazil, in a central depository of financial assets and linking the guarantee portfolio previously constituted in favor of the Central Bank of Brazil; and

IV - granting of the loan, with financial settlement within 2 (two) business days after the issuance of the Financial Note.

§ 1. The presentation of the request referred to in item I of the main text is conditioned to the observance, by the financial institution, of the measures provided for in art. 3.

§ 2. In the operation request, the financial institution may authorize the Central Bank of Brazil to adjust the amount of the requested loan to the Available Financial Limit if the requested amount exceeds that limit.

§ 3. The financial settlement of the loan granting will occur through a message from the SLB Service Group, of the SFN Service Catalog, by crediting the corresponding value in the Bank Reserves account of the contracting financial institution.

Art. 14. The sum of the value of Financial Notes issued by financial institutions belonging to the same prudential conglomerate, as provided for in Resolution No. 4,280, of October 31, 2013, at the time of issuance, relating to loan operations in progress, may not exceed 100% (one hundred percent) of the amount of the Reference Equity of the conglomerate, calculated in accordance with Resolution No. 4,192, of March 1, 2013.

Sole paragraph. In granting the authorization referred to in the main text of art. 13, the Collegiate Board of the Central Bank of Brazil will divide, in stages, the use of the limit referred to in the main text according to the following schedule:

I - up to 50% (fifty percent) of the amount of the Reference Equity of the conglomerate in operations requested until April 30, 2020;

II - up to 25% (twenty-five percent) of the amount of the Reference Equity of the conglomerate in operations requested from May 18 to May 28, 2020;

III - up to 25% (twenty-five percent) of the amount of the Reference Equity of the conglomerate in operations requested from July 20 to July 31, 2020;

IV - up to 10% (ten percent) of the amount of the Reference Equity of the conglomerate, respecting the limit provided for in the main text, in operations requested from August 24 to August 27, 2020;

V - up to 10% (ten percent) of the amount of the Reference Equity of the conglomerate, respecting the limit provided for in the main text, in operations requested from September 21 to September 24, 2020;

VI - up to 10% (ten percent) of the amount of the Reference Equity of the conglomerate, respecting the limit provided for in the main text, in operations requested from October 26 to October 29, 2020;

VII - up to 10% (ten percent) of the amount of the Reference Equity of the conglomerate, respecting the limit provided for in the main text, in operations requested from November 23 to November 26, 2020; and

VIII - up to 50% (fifty percent) of the amount of the Reference Equity of the conglomerate, respecting the limit provided for in the main text, in operations requested from December 14 to December 17, 2020.

CHAPTER VII
OF THE PROVISION OF INFORMATION FOR MONITORING BY THE CENTRAL BANK OF BRAZIL

Art. 15. The financial institution must update the data reported to the central depository or registry entity whenever there is any change in the characteristics of the guarantees that may imply modification of classification or in the value of the financial assets or securities, at least once a month, relative to the data of the last day of the month, until the 6th (sixth) business day of the following month.

Sole paragraph. Changes relating to debtors whose operations represent more than 5% (five percent) of the guarantee financial assets or securities must be reported within 2 (two) business days, counted from the moment the change is identified.

Art. 16. The central depository or registry entity must report to Desig by the 10th (tenth) business day of each month and according to procedures specified by the Central Bank of Brazil the entire set of financial assets and securities comprising the guarantee portfolio linked to the set of Financial Notes issued by each financial institution, under the LTEL-LFG, respecting the eligibility and sufficiency criteria defined in this Circular and Resolution No. 4,795, of 2020.

§ 1. The information referred to in the main text must be updated in the manner provided for in art. 15.

§ 2. Whenever there is the constitution of new guarantees or if the change referred to in the sole paragraph of art. 15 is verified, the central depository or registry entity must provide the information referred to in the main text on the day following the occurrence.

Art. 17. The governance structure and controls of the central depository of the Financial Note aimed at ensuring the adherence of the guarantee portfolio constituted in favor of the Central Bank of Brazil to the sufficiency requirements provided for in this Circular and Resolution No. 4,795, of 2020, must include mechanisms aligned with the supervision process of the Autarchy, according to procedures specified by Desig.

CHAPTER VIII
OF RELEASE AND RECOMPOSITION OF GUARANTEE

Art. 18. The request for deconstitution of lien on guarantee financial assets and securities must be presented according to the procedures and in the manner established by Desig.

§ 1. The release of the guarantee is conditioned to the maintenance of the sufficiency of financial assets or securities linked to the fulfillment of obligations contracted under the LTEL-LFG.

§ 2. The assessment referred to in § 1 regarding the sufficiency of the remaining guarantees will be carried out based on the information in the SCR relating to the last base date made available to the SFN.

Art. 19. The financial institution must maintain guarantee financial assets and securities in an amount sufficient to meet the requirement provided for in art. 8 of Resolution No. 4,795, of 2020, and avoid the need for frequent recomposition of guarantees.

Art. 20. The financial institution that does not maintain guarantee financial assets and securities in an amount sufficient to meet the requirement provided for in art. 8 of Resolution No. 4,795, of 2020, must immediately notify the occurrence to Desig and promote the recomposition of the guarantee, in the manner provided for in said article, within 2 (two) business days counted from the date the insufficiency is verified.

Sole paragraph. The recomposition of the guarantee must observe the following procedures:

I - when met through the constitution of new guarantees at the central depository or registry entity, the financial institution must constitute a lien on the additional financial assets or securities and notify the fact to Desig within the period established in the main text; and

II - when met through the substitution of guarantee financial assets or securities, the linking of the new assets or securities must be carried out within the period established in the main text and the subsequent release of the substituted assets or securities must be requested according to the procedure provided for in art. 18.

Art. 21. The contracting financial institution must request the early redemption of the Financial Note, by the business day following the end of the period provided for in art. 20, when it does not carry out the recomposition of the guarantee.

CHAPTER IX
OF PAYMENT

Art. 22. The payment of loan operations will occur through the redemption of the Financial Note, which will occur on the maturity date of the Financial Note or in an early manner, at the request of the financial institution.

§ 1. The Central Bank of Brazil will send a collection notice to the financial institution on the business day prior to the maturity date of the Financial Note, informing about the need for payment to be made on the due date of the instrument.

§ 2. The collection notice referred to in § 1 will be sent through a message from the SLB Service Group, of the SFN Service Catalog.

§ 3. The early redemption of the Financial Note must be requested from the Central Bank of Brazil with a minimum advance of 1 (one) business day from the date of financial settlement of the instrument.

CHAPTER X
GENERAL PROVISIONS

Art. 23. The financial movement related to the operations provided for in this Circular is carried out in the Bank Reserves account maintained by the financial institution at the Central Bank of Brazil.

Art. 24. The offer of services of encumbrance and liens on financial assets aimed at providing the constitution of guarantees under the LTEL-LFG is not conditioned to the fulfillment of the prerequisite provided for in § 2 of art. 15-A of the Regulation Annex to Circular No. 3,743, of January 8, 2015.

Art. 25. Requests for loan operations under the LTEL-LFG may be made starting from April 20, 2020.

Art. 26. This Circular enters into force on the date of its publication.

Bruno Serra Fernandes
Monetary Policy Director

Paulo Sérgio Neves de Souza
Supervision Director

João Manoel Pinho de Mello
Director of the Financial System Organization and Resolution

This text does not replace the one published in the DOU of 4/7/2020, Section 1, p. 29/30, and in Sisbacen.