CMN Resolution No. 4636 — Establishes criteria and conditions for the disclosure, in explanatory notes, of information on related parties by financial institutions and other institutions authorized to operate by the Central Bank of Brazil

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 February 22, 2018, based on Article 4, items VIII and XII of the aforementioned Law, and considering the provisions of Article 61 of Law No. 11,941 of May 27, 2009,

R E S O L V E D:

Article 1. Financial institutions and other institutions authorized to operate by the Central Bank of Brazil must disclose, in the explanatory notes to their financial statements, information on related parties.

Sole Paragraph. The provisions of this Resolution do not apply to consortium administrators and payment institutions, which must observe the regulation issued by the Central Bank of Brazil, in the exercise of their legal powers.

Article 2. In the disclosure of the information referred to in Article 1, Technical Pronouncement CPC 05 (R1) – Disclosure on Related Parties –, approved by the Accounting Pronouncements Committee (CPC) on September 3, 2010, must be observed.

§ 1. The technical pronouncements cited in the text of CPC 05 (R1), while not received by a specific act of the National Monetary Council, cannot be applied.

§ 2. The references to other pronouncements in the text of CPC 05 (R1), for the purposes of this Resolution, must be interpreted as references to pronouncements of the CPC that have been received by the National Monetary Council, as well as to the pertinent provisions of the Accounting Plan of the Institutions of the National Financial System (Cosif).

§ 3. The references, in the text of CPC 05 (R1), to the terms "control", "joint control", "investment entity" and "significant influence" must be interpreted as references to the following concepts:

I - control: a situation in which the investing institution is exposed to or has rights to variable returns arising from its involvement with the investee entity and has the ability to affect those returns through its power over that entity;

II - joint control: a situation in which there is the contractual agreed sharing of control of an entity, in which decisions about relevant activities require the unanimous consent of the controlling parties;

III - investment entity: an entity that meets, cumulatively, the following conditions:

a) its business purpose is the investment of resources exclusively for the purposes of capital appreciation returns, investment income or both;

b) the raising of resources from investors has the objective of providing them with investment management services; and

c) the measurement and evaluation of the performance of a substantial portion of its investments must be made based on fair value; and

IV - significant influence: a situation in which the investing institution maintains, directly or indirectly, at least 20% (twenty percent) of the voting capital of the investee entity, without controlling it, or holds or exercises the power to participate in the decisions of the financial or operational policies of the investee, without controlling it, considering, at minimum, the following factors:

a) representation on the board of directors or executive board of the investee entity;

b) participation in the policy-making processes, including decisions on dividends and other distributions of the investee entity;

c) material transactions between the investing institution and the investee entity;

d) exchange of directors or other senior management members; and

e) provision by the investing institution of essential technical information for the activity of the investee entity.

Article 3. The Central Bank of Brazil will regulate the additional procedures to be observed in the preparation and disclosure of the information referred to in this Resolution.

Article 4. Resolution No. 3,750 of June 30, 2009 is hereby revoked.

Article 5. This Resolution enters into force on December 31, 2018.

Ilan Goldfajn
President of the Central Bank of Brazil