CMN Resolution No. 4553 — Establishes Segmentation of Financial Institutions for Proportional Prudential Regulation

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 a session held on January 26, 2017, based on Articles 3, item VI, and 4, items VIII and XI, of the aforementioned Law, and on Article 1, paragraph 1, of Complementary Law No. 130 of April 17, 2009,

R E S O L V E S:

CHAPTER I

OF THE OBJECT AND SCOPE OF APPLICATION

Art. 1. This Resolution establishes the segmentation of the set of financial institutions and other institutions authorized to operate by the Central Bank of Brazil for the purposes of applying proportional prudential regulation, considering the size and international activity of the institutions that make up each segment.

Sole Paragraph. The application of proportional prudential regulation must consider the segment in which the institution is classified and its risk profile.

CHAPTER II

OF THE SEGMENTS

Art. 2. The institutions referred to in Art. 1 must be classified into one of the following segments:

I - Segment 1 (S1);

II - Segment 2 (S2);

III - Segment 3 (S3);

IV - Segment 4 (S4); or

V - Segment 5 (S5).

§ 1º S1 is composed of multiple banks, commercial banks, investment banks, exchange banks, and savings banks that:

I - have a size equal to or greater than 10% (ten percent) of the Gross Domestic Product (GDP); or

II - exercise relevant international activity, regardless of the size of the institution.

§ 2º S2 is composed:

I - by multiple banks, commercial banks, investment banks, exchange banks, and savings banks, with a size lower than 10% (ten percent) and equal to or greater than 1% (one percent) of GDP; and

II - by other institutions with a size equal to or greater than 1% (one percent) of GDP.

§ 3º S3 is composed of institutions with a size lower than 1% (one percent) and equal to or greater than 0.1% (one-tenth percent) of GDP.

§ 4º S4 is composed of institutions with a size lower than 0.1% (one-tenth percent) of GDP.

§ 5º S5 is composed:

I - by institutions with a size lower than 0.1% (one-tenth percent) of GDP that use the optional simplified methodology for calculating the minimum requirements for Reference Equity (PR), Tier 1, and Core Capital, excluding multiple banks, commercial banks, investment banks, exchange banks, and savings banks; and

II - by institutions not subject to the calculation of PR.

§ 6º For institutions that are part of a prudential conglomerate, in accordance with the Accounting Plan of the Institutions of the National Financial System (Cosif), the classification referred to in this article must be carried out based on consolidated information.

§ 7º For institutions authorized to operate by the Central Bank of Brazil after the entry into force of this Resolution, the initial classification must be calculated considering the estimated size and relevance of international activity based on the information contained in the business plan submitted to the Central Bank of Brazil.

CHAPTER III

OF DEFINITIONS

Art. 3. For the purposes of this Resolution, size is defined based on the ratio between the value of the institution's Total Exposure and the value of Brazil's GDP.

§ 1º For the purposes of the caput, the following must be considered:

I - Total Exposure, according to the methodology defined by the Central Bank of Brazil; and

II - Brazil's GDP at market prices and current values published by the Brazilian Institute of Geography and Statistics (IBGE), accumulated for the period of four consecutive quarters ending on each base date mentioned in Art. 5.

§ 2º An institution not subject to the calculation of Total Exposure must substitute, for the purpose of defining its size, the value of Total Exposure with the value of Total Assets calculated according to the criteria established in Cosif.

Art. 4. For the purposes of this Resolution, international activity is considered relevant in cases where the consolidated total of assets abroad of the institution is equal to or greater than US$10,000,000,000.00 (ten billion United States dollars).

Sole Paragraph. The consolidated total of assets abroad must be calculated according to the criteria established in Cosif and converted into United States dollars based on the selling exchange rate informed by the Central Bank of Brazil for the purpose of the balance sheet or financial statements.

Art. 5. For the purposes of Articles 3 and 4, values related to the base dates of June 30 and December 31 of each year must be considered, calculated within ninety days after the base date to which they refer, with no subsequent revision allowed.

CHAPTER IV

OF THE CHANGE OF CLASSIFICATION

Art. 6. The change of classification referred to in Art. 2 must occur:

I - to S1, when the institution meets the provisions of § 1º of Art. 2 for three consecutive semesters;

II - to S2, when the institution meets the provisions of § 2º of Art. 2:

a) for three consecutive semesters, if coming from S3, S4, or S5;

b) for five consecutive semesters, if coming from S1;

III - to S3, when the institution meets the provisions of § 3º of Art. 2:

a) for three consecutive semesters, if coming from S4 or S5;

b) for five consecutive semesters, if coming from S1 or S2;

IV - to S4:

a) when the institution meets the provisions of § 4º of Art. 2 for five consecutive semesters, if coming from S1, S2, or S3;

b) immediately, if coming from S5, upon ceasing to use the optional simplified methodology for calculating the minimum requirements for PR, Tier 1, and Core Capital;

V - to S5, immediately, when the institution meets the requirements mentioned in § 5º of Art. 2.

Art. 7. The Central Bank of Brazil may determine a change in the classification of the institution:

I - before the deadlines mentioned in Art. 6 have elapsed, provided that its discretionary assessment indicates:

a) absence of perspective of return to meeting the requirements for classification in the segment of origin; and

b) capacity to meet the prudential regulation applicable to the segment of destination;

II - between S2, S3, S4, and S5, based on supervisory actions that demonstrate the best alignment between the activities developed by the institution and the prudential regulation of the segment of destination;

III - in the case of change of corporate purpose, creation or cancellation of operational portfolio, merger, spin-off, incorporation, or changes in control, as well as significant change of the business model at any time, considering the perspectives for the size and relevance of the international activity of the institution.

§ 1º The date of the change of classification referred to in items II and III must be fixed by the Central Bank of Brazil according to the particularities of each case.

§ 2º An institution whose classification was changed from S5 to other segments in accordance with item II may only be reclassified into S5 by determination of the Central Bank of Brazil.

Art. 8. Changes in classification take effect after the end of the semester following the date of the respective change.

Sole Paragraph. The provisions of the caput do not apply to the cases set forth in Art. 6, item IV, letter "b", and item V, when the effects are immediate.

CHAPTER V

OF TRANSPARENCY

Art. 9. The Central Bank of Brazil must disclose at least semi-annually information regarding the classification of the institutions referred to in this Resolution.

CHAPTER VI

OF TRANSITIONAL AND FINAL PROVISIONS

Art. 10. The Central Bank of Brazil must disclose on the date of publication of this Resolution the initial classification of each operating institution, considering:

I - for S1, S2, S3, or S4, the values of the calculation parameters related to the base date of June 30, 2016, for the definition of size and relevance of international activity;

II - for S5, the use of the optional simplified methodology for calculating the minimum requirements for PR, Tier 1, and Core Capital or the non-obligation to calculate PR, both on the date of publication of this Resolution.

Art. 11. This Resolution enters into force on the date of its publication.

Ilan Goldfajn
President of the Central Bank of Brazil