CMN Resolution No. 4193

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the National Monetary Council, in an extraordinary session held on March 1, 2013, based on Articles 4, items VIII and XI, of the aforementioned Law, Article 20, § 1, of Law No. 4,864 of November 29, 1965, Law No. 6,099 of September 12, 1974, and Articles 1 and 12 of Complementary Law No. 130 of April 17, 2009,

RESOLVES:

CHAPTER I

OBJECT AND SCOPE OF APPLICATION

Article 1. This Resolution regulates the minimum requirements for Reference Equity (RE), Tier 1, and Core Capital, as defined in Resolution No. 4,192 of March 1, 2013, and establishes the Core Capital Add-on, which must be calculated by financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Sole Paragraph. The provisions of the main text do not apply to institutions exempt from calculating RE in accordance with Resolution No. 4,192 of 2013, nor to credit cooperatives that opt for the simplified calculation of Risk-Weighted Assets (RWARPS), as provided in Resolution No. 4,194 of March 1, 2013.

CHAPTER II

GENERAL PROVISIONS

Article 2. The institutions mentioned in Article 1 must permanently maintain amounts of RE, Tier 1, and Core Capital in values higher than the minimum requirements established in this Resolution.

Sole Paragraph. The minimum requirements mentioned in the main text must be calculated on a consolidated basis, observing the following schedule:

I - until December 31, 2013, the calculation applies to institutions part of a financial conglomerate, in accordance with the Accounting Plan of Institutions of the National Financial System (Cosif); and

II - from January 1, 2014, the calculation applies to institutions part of a prudential conglomerate, in accordance with Cosif.

CHAPTER III

CALCULATION OF RISK-WEIGHTED ASSETS (RWA)

Article 3. For the purposes of calculating the minimum requirements and the Core Capital Add-on mentioned, respectively, in Articles 4 to 6 and 8, the amount of Risk-Weighted Assets (RWA) must be calculated, which corresponds to the sum of the following components:

I - RWACPAD, relating to credit risk exposures subject to capital requirement calculation using the standardized approach;

II - RWACIRB, relating to credit risk exposures subject to capital requirement calculation using internal credit risk classification systems (IRB approaches) authorized by the Central Bank of Brazil;

III - RWAMPAD, relating to market risk exposures subject to capital requirement calculation using the standardized approach;

IV - RWAMINT, relating to market risk exposures subject to capital requirement calculation using an internal model authorized by the Central Bank of Brazil;

V - RWAOPAD, relating to the calculation of capital required for operational risk using the standardized approach; and

VI - RWAOAMA, relating to the calculation of capital required for operational risk using an internal model authorized by the Central Bank of Brazil.

§ 1. The RWAMPAD component mentioned in item III of the main text consists of the sum of the following components:

I - RWAJUR1, relating to exposures subject to the variation of fixed interest rates denominated in reais, for which capital requirements are calculated using the standardized approach;

II - RWAJUR2, relating to exposures subject to the variation of foreign currency coupon rates, for which capital requirements are calculated using the standardized approach;

III - RWAJUR3, relating to exposures subject to the variation of price index coupon rates, for which capital requirements are calculated using the standardized approach;

IV - RWAJUR4, relating to exposures subject to the variation of interest rate coupons, for which capital requirements are calculated using the standardized approach;

V - RWAACS, relating to exposures subject to the variation of stock prices, for which capital requirements are calculated using the standardized approach;

VI - RWACOM, relating to exposures subject to the variation of commodity prices, for which capital requirements are calculated using the standardized approach; and

VII - RWACAM, relating to exposures in gold, foreign currency, and assets subject to exchange rate variation, for which capital requirements are calculated using the standardized approach.

§ 2. The procedures and parameters for calculating the components and sub-components mentioned in items I to VI of the main text will be established by the Central Bank of Brazil.

§ 3. For the institutions mentioned in Article 1 that do not use IRB approaches authorized by the Central Bank of Brazil in calculating the capital requirement to cover credit risk, the calculation of the RWA amount must disregard the RWACIRB component.

§ 4. For the institutions mentioned in Article 1 that use an internal model authorized by the Central Bank of Brazil in calculating the capital requirement to cover market risks, the calculation of the RWA amount must disregard the RWAMPAD component.

§ 5. For the institutions mentioned in Article 1 that use an internal model authorized by the Central Bank of Brazil in calculating the capital requirement to cover operational risk, the calculation of the RWA amount must disregard the RWAOPAD component.

CHAPTER IV

MINIMUM REQUIREMENT FOR REFERENCE EQUITY (RE)

Article 4. The minimum requirement for RE corresponds to the application of factor "F" to the RWA amount, where "F" is equal to:

I - 11% (eleven percent), from October 1, 2013, to December 31, 2015;

II - 9.875% (nine and eight hundred seventy-five thousandths percent), from January 1, 2016, to December 31, 2016;

III - 9.25% (nine and twenty-five hundredths percent), from January 1, 2017, to December 31, 2017;

IV - 8.625% (eight and six hundred twenty-five thousandths percent), from January 1, 2018, to December 31, 2018; and

V - 8% (eight percent), from January 1, 2019.

CHAPTER V

MINIMUM REQUIREMENT FOR TIER 1

Article 5. The minimum requirement for Tier 1 corresponds to the application of the following factors to the RWA amount:

I - 5.5% (five and five tenths percent), from October 1, 2013, to December 31, 2014; and

II - 6% (six percent), from January 1, 2015.

CHAPTER VI

MINIMUM REQUIREMENT FOR CORE CAPITAL

Article 6. The minimum requirement for Core Capital corresponds to the application of the 4.5% (four and five tenths percent) factor to the RWA amount, from October 1, 2013.

CHAPTER VII

MINIMUM REQUIREMENTS FOR CREDIT COOPERATIVES

Article 7. For single credit cooperatives not affiliated with central credit cooperatives that do not opt for the calculation of the RWARPS amount, as provided in Resolution No. 4,194 of 2013, the minimum requirements for RE, Tier 1, and Core Capital mentioned in Articles 4, 5, and 6 of this Resolution are increased by four percentage points.

CHAPTER VIII

CORE CAPITAL ADD-ON

Article 8. The Core Capital Add-on is established, the value of which will be fixed by the Central Bank of Brazil, observing the following limits:

I - lower limit equal to 0.625% (six hundred twenty-five thousandths percent) and upper limit equal to 1.25% (one and twenty-five hundredths percent) of the RWA amount, from January 1, 2016, to December 31, 2016;

II - lower limit equal to 1.25% (one and twenty-five hundredths percent) and upper limit equal to 2.5% (two and five tenths percent) of the RWA amount, from January 1, 2017, to December 31, 2017;

III - lower limit equal to 1.875% (one and eight hundred seventy-five thousandths percent) and upper limit equal to 3.75% (three and seventy-five hundredths percent) of the RWA amount, from January 1, 2018, to December 31, 2018; and

IV - lower limit equal to 2.5% (two and five tenths percent) and upper limit equal to 5% (five percent) of the RWA amount, from January 1, 2019.

§ 1. Institutions referred to in Article 1 are subject to compliance with the Core Capital Add-on.

§ 2. The Core Capital Add-on must be calculated on a consolidated basis, observing the provisions of the sole paragraph of Article 2.

§ 3. In the event of an increase in the Core Capital Add-on, the respective percentage must be disclosed by the Central Bank of Brazil at least twelve months in advance of the start of its validity.

Article 9. Failure to comply with the Core Capital Add-on according to the percentage fixed by the Central Bank of Brazil results in restrictions:

I - on payments as variable remuneration to directors and members of the board of directors, in the case of corporations, and to administrators of limited liability companies;

II - on the payment of dividends and interest on equity;

III - on the payment of net profits accrued and annual remuneration to capital quotas and on the redemption of capital quotas, in the case of credit cooperatives;

IV - on the repurchase of own shares in any amount; and

V - on the reduction of share capital, when legally possible.

§ 1. The restrictions referred to in the main text must be imposed as long as the insufficiency of the Core Capital Add-on persists.

§ 2. The variable remuneration referred to in item I of the main text includes bonuses, profit sharing, and any deferred remuneration components and other incentive payments associated with performance.

§ 3. If the excess value of Core Capital relative to the minimum requirement set forth in Article 6 is used to meet the minimum requirements set forth in Articles 4 or 5, such value cannot be considered for verifying the sufficiency of the Core Capital Add-on.

§ 4. The restrictions referred to in items I to III of the main text correspond to the following percentages of the amount to be paid or distributed:

I - 100% (one hundred percent), in the case where the value considered for verifying the sufficiency of the Core Capital Add-on is less than 25% (twenty-five percent) of that fixed in accordance with Article 8;

II - 80% (eighty percent), in the case where the value considered for verifying the sufficiency of the Core Capital Add-on is greater than or equal to 25% (twenty-five percent) and less than 50% (fifty percent) of that fixed in accordance with Article 8;

III - 60% (sixty percent), in the case where the value considered for verifying the sufficiency of the Core Capital Add-on is greater than or equal to 50% (fifty percent) and less than 75% (seventy-five percent) of that fixed in accordance with Article 8; and

IV - 40% (forty percent), in the case where the value considered for verifying the sufficiency of the Core Capital Add-on is greater than or equal to 75% (seventy-five percent) and less than 100% (one hundred percent) of that fixed in accordance with Article 8.

§ 5. The percentages referred to in § 4 apply to each item mentioned in items I to III of the main text.

§ 6. Net profits distributed and unpaid in the social year due to insufficiency in complying with the Core Capital Add-on will be incorporated into the cooperative's reserves or, alternatively, into its capital, if so decided by the members' assembly.

§ 7. Amounts retained due to insufficiency of the Core Capital Add-on cannot be subject to future obligations.

§ 8. The restrictions mentioned in the main text apply to insufficiencies observed when calculating the amounts to be distributed, including those eventually advanced.

CHAPTER IX

DEDUCTION OF EXCESS FIXED ASSETS AND CAPITAL ALLOCATION

Article 10. For the purposes of verifying compliance with the minimum requirements referred to in Articles 4, 5, and 6, as well as the Core Capital Add-on referred to in Article 8, the eventual excess of resources applied in Fixed Assets relative to the percentages established in Articles 3 and 4 of Resolution No. 2,283 of June 5, 1996, must be deducted from RE, Tier 1, and Core Capital.

Article 11. An institution that opts for the allocation of RE in accordance with Article 3 of Resolution No. 2,827 of March 30, 2001, must deduct the allocated value of RE from RE, Tier 1, and Core Capital for the purposes of verifying compliance with the minimum requirements referred to, respectively, in Articles 4, 5, and 6 and the Core Capital Add-on referred to in Article 8.

CHAPTER X

FINAL PROVISIONS

Article 12. The institutions mentioned in Article 1 must disclose, in the manner established by the Central Bank of Brazil, the minimum information related to the calculation of the RWA amount defined in Article 3.

Article 13. The financial institutions mentioned in Article 1 must also maintain sufficient RE to cover the interest rate risk of operations not included in the trading portfolio, in accordance with Resolution No. 3,464 of June 26, 2007.

Article 14. The institutions mentioned in Article 1 must indicate to the Central Bank of Brazil a director responsible for the processes and controls related to the calculation of the RWA amount, the calculation of the minimum requirements for RE, Tier 1, and Core Capital, and the compliance with the Core Capital Add-on.

Sole Paragraph. For the purposes of the responsibility referred to in the main text, it is admitted that the indicated director performs other functions in the institution, except those related to the administration of third-party funds or others that may imply conflicts of interest or represent a deficiency in the segregation of functions.

Article 15. The Central Bank of Brazil will issue the necessary regulations for the execution of this Resolution, including provisions on:

I - the assessment and management of risks by financial institutions and other institutions authorized by it to operate, including the procedures and controls used for this purpose;

II - the requirements and procedures related to the Central Bank of Brazil's authorization for the use of internal risk management models by financial institutions and other institutions authorized by it to operate;

III - the storage and public disclosure of information related to risk management by financial institutions and other institutions authorized by it to operate.

Article 16. Citations and the basis for the validity of normative acts issued based on Resolution No. 3,490 of August 29, 2007, and the norms and resolutions revoked by it, now refer to this Resolution.

Article 17. Any citation to Required Equity (PLE) or Required Reference Equity (PRE) in normative instruments published by the Central Bank of Brazil now refers to the minimum requirements established in this Resolution.

Article 18. This Resolution enters into force on October 1, 2013.

Article 19. Resolutions Nos. 2,772 of August 30, 2000, and 3,490 of August 29, 2007, are revoked, effective from October 1, 2013.

Alexandre Antonio Tombini
President of the Central Bank of Brazil