CMN Resolution No. 1054 - Prohibits Commercial Banks from Providing Guarantees and Investment Banks from Providing Guarantees by Endorsement or Surety

RESOLUTION NO. 001054

THE CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the MONETARY COUNCIL, in a session held on this date, having regard to the provisions of Articles 3, item VI, and 4, item VI of the aforementioned Law,

RESOLVES:

I - To prohibit commercial banks from providing surety and investment banks from providing guarantees by endorsement or surety:

a) To their directors and members of the advisory or administrative councils, auditors and similar, as well as to their respective spouses;

b) To relatives, up to the second degree, of the persons referred to in the preceding item;

c) To natural or legal persons who participate in its capital with more than 10% (ten percent), except for specific authorization by the Central Bank of Brazil, in each case, when it concerns operations backed by commercial instruments resulting from purchase and sale transactions or pledge of goods, within limits to be established by the National Monetary Council, in a general manner;

d) To legal entities in whose capital they participate with more than 10% (ten percent);

e) To legal entities in whose capital any of the directors or administrators of the financial institution itself, as well as their spouses and respective relatives, up to the second degree, participate with more than 10% (ten percent).

II - The provisions of item I, letter "d", do not apply to public financial institutions.

III - The granting of endorsement or surety, on instruments or contracts of any nature involving the liability of states, municipalities, and their respective autonomous entities, remains subject to prior approval by the National Monetary Council.

IV - The provisions of item I, letter "d", do not apply to the provision of guarantees to leasing companies.

V - Banks will inform the Central Bank of Brazil, within a maximum period of 60 (sixty) days, of the guarantees of the kind that they have granted and, if applicable, request a period for their compliance with these norms.

VI - The Central Bank of Brazil, when reviewing the request, will establish the appropriate conditions for the compliance of each establishment.

VII - The Central Bank of Brazil will adopt the measures deemed necessary for the implementation of this Resolution.

VIII - This Resolution will enter into force on the date of its publication.

Brasilia-DF, October 30, 1985

Fernão Carlos Botelho Bracher
President