CMN Resolution No. 5,177 — Governs the Remuneration Policy for Administrators of Financial Institutions and Other Institutions Authorized by the Central Bank of Brazil

01 Res CMN - Remuneration of Administrators

CMN RESOLUTION NO. 5,177,
OF SEPTEMBER 26, 2024

Governs the remuneration policy for administrators of 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 September 26, 2024, based on Arts. 4, caput, item VIII, of the aforementioned law, 20, § 1º, of Law No. 4,864, of November 29, 1965, 1º of Decree-Law No. 70, of November 21, 1966, 7º and 23, caput, item “a”, of Law No. 6,099, of September 12, 1974, 1º, caput, item II, of Law No. 10,194, of February 14, 2001, 1º, § 2º, of Provisional Measure No. 2,192-70, of August 24, 2001, and 1º, § 1º, of Complementary Law No. 130, of April 17, 2009,

R E S O L V E S:

CHAPTER I
OBJECT AND SCOPE OF APPLICATION

Art. 1º This Resolution governs the remuneration policy for administrators of financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Sole paragraph. The provisions of this Resolution do not apply to consortium administrators, payment institutions, securities brokerage firms, currency brokerage firms, and securities distribution firms, which must observe the regulations issued by the Central Bank of Brazil in the exercise of their legal attributes.

CHAPTER II
DEFINITIONS

Art. 2º For the purposes of this Resolution, consider:

I - administrators:

a) directors and members of the board of directors of joint-stock companies, credit cooperatives, and service confederations constituted by central credit cooperatives; and

b) administrators of limited liability companies;

II - realized recurring profit: the accounting net profit of the period adjusted for unrealized results and free from the effects of non-recurring events controllable by the institution; and

III - remuneration: the payment made in cash, shares, share-based instruments, and other assets, in consideration for the work performed for the institution by administrators, comprising fixed remuneration, represented by salaries, fees, and commissions, and variable remuneration, consisting of bonuses, profit sharing in the form of Art. 152, § 1º, of Law No. 6,404, of December 15, 1976, and other performance-linked incentives.

CHAPTER III
REMUNERATION POLICY

Section I
General Criteria

Art. 3º The institutions mentioned in Art. 1º must implement and maintain an administrator remuneration policy compatible with the nature, size, complexity, structure, risk profile, and business model of the institution, so as not to incentivize behaviors that increase risk exposure above levels considered prudent in the short, medium, and long-term strategies adopted by the institution.

§ 1º The administrator remuneration policy referred to in the caput must be implemented based on transparent criteria that prevent any form of discrimination, particularly those based on sex, sexual orientation, gender identity, ethnicity, race, color, age, or religion, among others.

§ 2º In credit cooperatives and service confederations constituted by central credit cooperatives, the administrator remuneration policy referred to in the caput:

I - must not incentivize the generation of surpluses; and

II - may be unique for the cooperative system.

Art. 4º The remuneration of administrators in internal control and risk management areas, those responsible for activities related to the compliance function, and members of the internal audit team must be:

I - adequate to attract qualified and experienced professionals; and

II - determined independently of the performance of business units, so as not to generate conflicts of interest.

Sole paragraph. The performance measures of administrators in internal control and risk management areas, those responsible for activities related to the compliance function, and members of the internal audit team must be based on the achievement of the objectives of their own functions and not on the performance of the units they control or evaluate.

Art. 5º The remuneration policy must be approved:

I - by the general assembly, in credit cooperatives and service confederations constituted by central credit cooperatives; and

II - by the board of directors, in the other institutions mentioned in Art. 1º.

Art. 6º The board of directors is responsible for the administrator remuneration policy, and must supervise the planning, operation, control, and review of the said policy.

Section II
Variable Remuneration

Art. 7º Payment by way of variable remuneration to administrators may be made in cash, shares, share-based instruments, or other assets, in proportion to the level of responsibility and the administrator's activity.

Art. 8º The institutions mentioned in Art. 1º that make payments by way of variable remuneration must implement the remuneration policy so that the proportion between fixed remuneration and variable remuneration is balanced.

Sole paragraph. The proportion referred to in the caput must be defined in a way that allows for the reduction, including total, of the variable remuneration portion.

Art. 9º The institutions mentioned in Art. 1º that make payments by way of variable remuneration to their administrators must consider, at a minimum, the following factors:

I - in the definition of the global amount and allocation of remuneration:

a) current and potential risks, as defined in current regulations;

b) the overall result of the institution, particularly the realized recurring profit;

c) the performance of the institution as a whole;

d) the institution's cash flow generation capacity;

e) the economic environment in which the institution is inserted and its trends; and

f) sustainable long-term financial bases and adjustments in future payments based on assumed risks, fluctuations in the cost of capital, and liquidity projections; and

II - in the payment of variable remuneration to each administrator:

a) their individual performance;

b) the performance of the business unit in which they operate;

c) the performance of the institution as a whole; and

d) the relationship between the performances mentioned in items “a”, “b”, and “c” and the assumed risks.

§ 1º For the application of the provisions in the caput, the performance of the considered factor must comprise economic-financial and qualitative metrics.

§ 2º The provisions of item I, items “b” and “f”, of the caput, do not apply to credit cooperatives and service confederations constituted by central credit cooperatives.

Art. 10. At least 50% (fifty percent) of the variable remuneration must be paid in shares, share-based instruments, or other assets, compatible with long-term value creation and with the risk time horizon.

§ 1º For institutions that do not have shares traded on the market and do not issue share-based instruments, the payments referred to in the caput must be based on the variation in the book value of their net equity, free from the effects of transactions carried out with owners.

§ 2º For the purposes of the provisions in the caput, the institution must evaluate the shares, share-based instruments, or other assets used for payment of variable remuneration at fair value.

§ 3º The provisions of this article do not apply:

I - to credit cooperatives and service confederations constituted by central credit cooperatives; and

II - to administrators whose variable remuneration is less than 10% (ten percent) of their total remuneration.

Art. 11. At least 40% (forty percent) of the variable remuneration must be deferred for future payment, and this percentage must increase according to the administrator's level of responsibility.

§ 1º The deferral period must be at least three years and established based on the risks and the administrator's activity.

§ 2º Payments must be made in a staggered manner in installments proportional to the deferral period.

§ 3º In the event of a significant reduction in realized recurring profit or the occurrence of a negative result for the institution or business unit during the deferral period, the deferred installments not yet paid must be reversed proportionally to the reduction in the result.

§ 4º For credit cooperatives and service confederations constituted by central credit cooperatives, the reversal referred to in § 3º must occur in the event of a significant reduction in the performance of the factors considered for payment of variable remuneration.

§ 5º The provisions of this article do not apply to administrators whose variable remuneration is less than 10% (ten percent) of their total remuneration.

Art. 12. The institutions mentioned in Art. 1º registered as publicly held companies must take the necessary measures to ensure that administrators covered by this Resolution do not use protection or personal compensation mechanisms to mitigate the risks embedded in their variable remuneration.

Section
III
Extraordinary Payments

Art. 13. Contracts with clauses for payments exceeding those provided in current legislation, linked to the dismissal of administrators, must be compatible with value creation and long-term risk management.

Sole paragraph. The payments referred to in the caput must be related to the performance obtained over time.

Art. 14. The guarantee of payment of a minimum value of bonus or other incentives to administrators may only occur on an exceptional basis, upon the hiring or transfer of administrators to another area, city, or company within the same conglomerate, limited to the first year after the event that gave rise to the guarantee.

CHAPTER IV
REMUNERATION COMMITTEE

Section I
Obligation

Art. 15. The institutions mentioned in Art. 1º that:

I - are registered as publicly held companies;

II - are leaders of a prudential conglomerate classified in Segment 1 (S1), Segment 2 (S2), or Segment 3 (S3), according to specific regulation; or

III - meet the criteria provided in the regulation for classification in S1, S2, and S3,

must constitute a statutory body called the "remuneration committee".

§ 1º The provisions in the caput also apply to the institutions mentioned in Art. 1º not registered as publicly held companies that are leaders of a prudential conglomerate integrated by an institution registered as a publicly held company that does not have a remuneration committee constituted in accordance with this Resolution.

§ 2º The remuneration committee of the institutions mentioned in item II of the caput and in § 1º is responsible for complying with the attributes and responsibilities provided in this Resolution regarding the other institutions authorized to operate by the Central Bank of Brazil that are part of the prudential conglomerate.

§ 3º The responsibility mentioned in § 2º does not apply to institutions in the prudential conglomerate that, voluntarily or by virtue of legal, regulatory, statutory, or contractual provisions, constitute a remuneration committee in accordance with this Resolution.

§ 4º The institutions mentioned in the caput that are part of a prudential conglomerate whose leading institution constitutes a remuneration committee in accordance with this Resolution are exempt from constituting their own remuneration committee.

§ 5º The provisions in the caput also apply to:

I - service confederations constituted by central credit cooperatives that are part of a cooperative system composed of credit cooperatives classified in S1, S2, or S3; and

II - credit cooperatives that are part of a two-level or three-level cooperative system composed of credit cooperatives classified in S1, S2, or S3.

§ 6º The remuneration committee referred to in § 5º must be:

I - constituted as a body of the central cooperative, in the case of a two-level system, or of the confederation, in the case of a three-level system; and

II - responsible for complying with the attributes and responsibilities provided in this Resolution regarding credit cooperatives and service confederations constituted by central credit cooperatives that are part of the system.

§ 7º The responsibility mentioned in item II of § 6º does not extend to credit cooperatives and service confederations constituted by central credit cooperatives that, voluntarily or by virtue of legal, regulatory, statutory, or contractual provisions, constitute a remuneration committee in the manner provided in this Resolution.

§ 8º The institutions mentioned in the caput and in §§ 1º and 5º must have the remuneration committee fully operational by March 31 of the fiscal year following the one in which they meet the criteria that imply the obligation to constitute that statutory body.

Section II
Composition and Term

Art. 16. The remuneration committee must:

I - be composed of at least three members;

II - have, in its composition, at least one non-administrator member; and

III - have, in its composition, members with the qualifications and experience necessary to exercise competent and independent judgment on the institution's administrator remuneration policy, including on the repercussions of this policy on risk management.

Art. 17. The term of office of the members of the remuneration committee must be up to ten years.

§ 1º A term of less than ten years may be extended up to the limit provided in the caput.

§ 2º Upon completion of the maximum term provided in the caput, the member of the remuneration committee may only return to integrate such body in the same institution after at least three years have elapsed from the end of their previous term.

Section
III
Attributes

Art. 18. The attributes of the remuneration committee, in addition to those established in the institution's bylaws or articles of association, include:

I - to propose to the board of directors:

a) the administrator remuneration policy of the institution, providing for the various forms of fixed and variable remuneration, as well as benefits and special recruitment and dismissal programs; and

b) the amount of global remuneration of administrators to be submitted to the general assembly, in accordance with current legislation;

II - supervise the implementation and operation of the institution's administrator remuneration policy;

III - annually review the institution's administrator remuneration policy, recommending to the board of directors its correction or improvement;

IV - evaluate future internal and external scenarios and their possible impacts on the administrator remuneration policy;

V - analyze the institution's administrator remuneration policy in relation to market practices, with a view to identifying significant discrepancies compared to similar companies, proposing necessary adjustments; and

VI - ensure that the administrator remuneration policy is permanently compatible with the risk management policy, with the institution's current and expected goals and financial situation, and with the provisions of this Resolution.

Art. 19. The remuneration committee must work jointly with the institution's risk committee or, in its absence, with the director responsible for risk management activities, according to specific regulation, in the evaluation of incentives created by the administrator remuneration policy.

Section IV
Remuneration Committee Report

Art. 20. The remuneration committee must prepare, annually, within a period of up to ninety days, relative to the base date of December 31, a document called the "remuneration committee report", containing, at a minimum, the following information:

I - description of the composition and attributes of the remuneration committee;

II - activities carried out within the scope of its attributes during the period;

III - description of the decision-making process adopted to establish the administrator remuneration policy;

IV - main characteristics of the administrator remuneration policy, covering the criteria used for performance measurement and risk adjustment, the relationship between remuneration and performance, the remuneration deferral policy, and the parameters used to determine the percentage of remuneration in cash and in other forms of remuneration;

V - description of modifications in the administrator remuneration policy carried out during the period and their implications on the institution's risk profile and on the administrators' behavior regarding risk assumption; and

VI - consolidated quantitative information on the remuneration structure of administrators, indicating:

a) the amount of remuneration for the year, separated into fixed and variable remuneration, and the number of beneficiaries;

b) the amount of benefits granted and the number of beneficiaries;

c) the amount and form of variable remuneration, separated into cash remuneration, shares, share-based instruments, and others;

d) the amount of remuneration that was deferred for payment in the year, separated into paid remuneration and remuneration reduced due to adjustments in the institution's performance;

e) the amount of payments related to the recruitment of new administrators and the number of beneficiaries;

f) the amount of payments related to dismissals carried out during the year, the number of beneficiaries, and the largest payment made to a single person;

g) the percentages of fixed remuneration, variable remuneration, and benefits granted, calculated in relation to the period's profit; and

h) the percentages of fixed remuneration, variable remuneration, and benefits granted, calculated in relation to net equity.

§ 1º The provisions of item VI, item “g”, of the caput, do not apply to credit cooperatives and service confederations constituted by central credit cooperatives.

§ 2º The document mentioned in the caput must present the information defined in this article for each of the institutions under the responsibility of the respective remuneration committee.

Section V
Dissolution

Art. 21. The institutions mentioned in Art. 15 may only dissolve the remuneration committee when:

I - the institution ceases to present the conditions contained in Art. 15; and

II - the remuneration committee has fulfilled its attributes regarding the fiscal years in which its operation was required.

Sole paragraph. The Central Bank of Brazil may determine the reconstitution of the remuneration committee in exceptional situations, provided they are duly justified.

Section VI
General Provisions

Art. 22. The institutions mentioned in Art. 1º must guarantee adequate conditions for the operation of the remuneration committee.

Art. 23. The number of members, the criteria for appointment, dismissal, and remuneration, the term of office, and the attributes of the remuneration committee must be stated in the institution's bylaws or articles of association.

Art. 24. The remuneration committee must report directly to the board of directors.

Sole paragraph.
It is the responsibility of the institution's board of directors to ensure that the members of the remuneration committee meet the requirements established by this Resolution.

CHAPTER V
GENERAL PROVISIONS

Art. 25. The institutions mentioned in Art. 1º that are not obliged to constitute a remuneration committee must prepare an annual report, within a period of up to ninety days, relative to the base date of December 31, containing, at a minimum, the information indicated in Art. 20, caput, items III and IV.

Art. 26. For the institutions mentioned in Art. 1º that do not have a remuneration committee, the attributes of this statutory body provided in this Resolution must be attributed to the board of directors.

Art. 27. For the institutions mentioned in Art. 1º that do not have a board of directors, the attributes and competencies provided in this Resolution must be attributed to the institution's executive management.

Art. 28. The responsibilities, attributes, and competencies of the board of directors, the remuneration committee, and the institution's executive management defined in this Resolution cannot be delegated.

Art. 29. The institutions mentioned in Art. 1º must keep the reports referred to in this Resolution available to the Central Bank of Brazil for a minimum period of five years.

Art. 30. The Central Bank of Brazil may:

I - request, at any time, additional information beyond that provided in the reports referred to in this Resolution;

II - request, at any time, that the institutions mentioned in Art. 1º demonstrate that the incentives provided within their administrator remuneration system adequately consider risk management aspects, capital adequacy, and liquidity; and

III - determine the necessary measures to compensate for any additional risk resulting from the inadequacy of the administrator remuneration policy implemented by the institution, including the review of said policy or the expansion of capital requirements.

CHAPTER VI
TRANSITIONAL AND FINAL PROVISIONS

Art. 31. The institutions mentioned in Art. 1º that, on the effective date of this Resolution, were not obliged to implement the administrator remuneration policy must carry out the necessary procedures to comply with the provisions of this Resolution by December 31, 2025.

Sole paragraph. The remuneration policy approved in the form of the caput must be applied starting from the 2026 fiscal year.

Art. 32. The institutions mentioned in Art. 15 that, on the effective date of this Resolution, were not obliged to constitute a remuneration committee must have it fully operational by December 31, 2025.

Art. 33. The institutions mentioned in Art. 1º with a remuneration committee already constituted must make the necessary adaptations to the bylaws for operation in the manner provided in this Resolution by July 1, 2025.

Art.
34. The institutions mentioned in Art. 1º that, on the date prior to the start of the effectiveness of this Resolution, were not obliged to implement the administrator remuneration policy must apply the provisions of Arts. 10 and 11 of this Resolution in a phased manner, according to the following schedule:

I - 50% (fifty percent) of the limits, starting from January 1, 2026;

II - 75% (seventy-five percent) of the limits, starting from January 1, 2027; and

III - 100% (one hundred percent) of the limits, starting from January 1, 2028.

Art. 35. The Central Bank of Brazil will adopt, within the scope of its legal attributes, the necessary measures for the execution of the provisions of this Resolution.

Art. 36. CMN Resolution No. 4,879, of December 23, 2020, published in the Official Gazette of the Union on December 24, 2020, shall enter into force with the following alterations:

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Art. 16. ....................................................................................................................

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IV - the attributes and prohibitions applicable to the members of the audit team, as defined in Section III of Chapter II of this Resolution;

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(NR)

Art. 37. The following are revoked:

I - Article 8 of Resolution No. 4,595, of August 28, 2017, published in the Official Gazette of the Union on August 30, 2017;

II - Article 10 of CMN Resolution No. 4,879, of December 23, 2020, published in the Official Gazette of the Union on December 24, 2020;

III - Resolution No. 3,921, of November 25, 2010, published in the Official Gazette of the Union on November 29, 2010; and

IV - Resolution No. 4,656, of April 26, 2018, published in the Official Gazette of the Union on April 30, 2018.

Art. 38. This Resolution enters into force on January 1, 2025.

ROBERTO DE OLIVEIRA
CAMPOS NETO
President of the Central Bank of Brazil