CMN Resolution No. 5,167 — Amends Resolution CMN No. 5,070 of April 20, 2023, Regarding Credit Derivative Operations

RESOLUTION
CMN NO. 5,167, OF AUGUST 22, 2024

Amends
Resolution CMN No. 5,070, of April 20, 2023, which provides for the carrying out of credit derivative operations in the country by financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

The Central Bank of Brazil, in accordance with art. 9 of Law No. 4,595, of December 31, 1964, makes public that the National Monetary Council, in a session held on August 22, 2024, based on the provisions of arts. 3, caput, items V and VI, and 4, caput, items VI and VIII, of the aforementioned law, 20, § 1, of Law No. 4,864, of November 29, 1965, 7 and 23, caput, item "a", of Law No. 6,099, of September 12, 1974, 1, § 1, and 12, caput, item III, of the Complementary Law No. 130, of April 17, 2009, 1 of Decree-Law No. 70, of November 21, 1966, 1, caput, item II, of Law No. 10,194, of February 14, 2001, and 1, § 2, of Provisional Measure No. 2,192-70, of August 24, 2001,

RESOLVES:

Art. 1 The Resolution CMN No. 5,070, of April 20, 2023, published in the Official Gazette of the Union on April 24, 2023, shall enter into force with the following amendments:

"Art.
7. .....................................................................................................................

...................................................................................................................................

II

• provide the risk-receiving counterparty with the data requested by it for the
  estimation of the credit risk of the reference obligation;

........................................................................................................................." (NR)

"Art.
10.
....................................................................................................................

...................................................................................................................................

IV

• the credit events covered by the contract, including the specification of the
  necessary elements for their objective characterization, and the persons responsible for determining their occurrence;

........................................................................................................................." (NR)

"Art.
11. Credit derivative operations contracted by the institutions referred to in
art. 1 are only admitted for the following types of credit events:

I

• failure to pay (failure to pay): non-payment of obligations in
  accordance with the terms agreed upon by the reference entities, for periods and in amounts sufficient to characterize the occurrence of the credit event;

II

• bankruptcy or similar (bankruptcy): a situation that implies the temporary
  or permanent suspension of the payment of obligations in accordance with the terms agreed upon by the reference entities or that indicates the inability of these entities to honor their obligations, such as:

...................................................................................................................................

b) declaration of bankruptcy or civil insolvency or its petition by the reference entities;

c) petition for judicial or extrajudicial reorganization;

d) declaration of intervention or extrajudicial liquidation;

e) recognition of a state of insolvency in a judicial, regulatory, or administrative process; or

f) dissolution, liquidation, or extinction, other than as a result of consolidation, merger, or incorporation;

III

• restructuring (restructuring): renegotiation of the terms of obligations
  of the reference entities in an aggregate value sufficient to characterize the occurrence of the credit event, resulting from a relevant deterioration in their credit quality, which affects the rights of all creditors of their obligations, such as:

a) reduction of the interest rate or the value of agreed interest;

b) reduction of the principal value or of any other remuneration;

c) deferral of one or more scheduled dates or extension of the term for payment or addition of interest, or for the payment of principal or of any other remuneration;

d) change in the order of priority of payment of obligations; or

e) change in the currency or composition of payment of the principal, interest, or of any other remuneration;

IV

• acceleration of obligations (obligation acceleration):
  declaration of the early maturity of one or more obligations of the reference entities, in an aggregate value sufficient to characterize the occurrence of the credit event, as a consequence of default or any other condition agreed upon;

V

• default on obligations (obligation default): possibility of
  being declared the early maturity of one or more obligations of the reference entities, in an aggregate value sufficient to characterize the occurrence of the credit event, as a consequence of default or any other condition agreed upon;

VI

• repudiation or moratorium (repudiation/moratorium): characterized by the occurrence
  of the following events:

a) potential repudiation or potential moratorium (potential repudiation/moratorium):
characterized when authorized representatives of the reference entities or state authority:

1. repudiate, question, do not recognize, reject, or contest the validity, in whole or in part, of one or more obligations of these entities, in an aggregate value sufficient to characterize the occurrence of the credit event; or

2. declare or impose a moratorium, suspension, deferral, or extension of the term for fulfillment of one or more obligations of these entities, in an aggregate value sufficient to characterize the occurrence of the credit event; and

b) failure to pay (failure to pay) or restructuring (restructuring) of any of the obligations referred to in item "a", determined within the period established in the credit derivative contract, from the date of the potential repudiation or potential moratorium, as referred to in item "a", regardless of the aggregate value of the unpaid or renegotiated obligations;

VII

• governmental intervention (governmental intervention): occurrence of one or
  more of the following events, resulting from action adopted by a state authority through law, decree, regulation, decision, or resolution or restructuring act, or similar instrument, which applies compulsorily to one or more obligations of the reference entities, in an aggregate value sufficient to characterize the occurrence of the credit event:

a) reduction of the interest rate, or of the value of agreed interest or of any other remuneration;

b) reduction of the principal value or other installments to be paid at redemption;

c) deferral of one or more scheduled dates or extension of the term for payment or addition of interest, or for the payment of principal or of any other remuneration;

d) change in the order of priority of payment of obligations;

e) expropriation, change of control, or other event that alters the ownership of obligations;

f) cancellation, conversion, or compulsory exchange of obligations; or

g) any event that has an effect analogous to those specified in items "a" to "f"; or

VIII

• other types of credit events, provided they are provided for in regulations of a self-regulatory
  entity formalized in a convention previously approved by the Central Bank of Brazil.

§

1. ...........................................................................................................................

§
2. The obligations referred to in items I to VII of the caput comprise
all species of obligations of the reference entities established in the derivative contract for the purpose of characterizing the credit event, including the reference obligations.

§
3. For the purposes of the provisions of items VI and VII of the caput, a state authority is considered any body or entity of the public administration,
direct or indirect, body of the judiciary, or entity responsible for the regulation or supervision of the financial markets in the country of constitution or operation of the reference entity.

§
4. The convention mentioned in item VIII of the caput must:

I

• detail the credit events and their types, in consonance with the standards
  internationally recognized and practiced by the credit derivatives market;

II

• be prepared by a market representative entity that includes the
  institutions referred to in art. 1; and

III

• have its first version and subsequent amendments submitted for approval by the
  Central Bank of Brazil." (NR)

Art. 2 The art. 11, caput, item II, item "a", of Resolution CMN No. 5,070, of April 20, 2023, published in the Official Gazette of the Union on April 24, 2023, is repealed.

Art. 3 This
Resolution enters into force on September 2, 2024.

OTÁVIO RIBEIRO DAMASO
President of the Central Bank of Brazil substitute