Regulatory Alerts2020-06-29 | Circular 4034Central Bank of Brazil Circular No. 4034 Amending Circular No. 3.809 Regarding Risk Mitigating Instruments for Credit Risk RWA
The Central Bank of Brazil issued Circular No. 4034 to amend Circular No. 3.809/2016, specifically modifying Article 30 to exclude payroll-deducted credit card exposures from certain guarantees effective September 1, 2018. The amendment mandates that for credit operations guaranteed by the Investment Guarantee Fund (FGI) under the Emergency Credit Access Program (PEAC), the original risk weight must be applied if the fund's stop-loss coverage is insufficient to cover overdue amounts exceeding 90 days. This regulation supersedes the sole paragraph of Article 30 of the previous circular and entered into force upon publication.
The Collegiate Board of Directors of the Central Bank of Brazil, in an extraordinary session held on June 29, 2020, based on the provisions of Articles 9, 10, item IX, and 11, item VII, of Law No. 4.595 of December 31, 1964, and Articles 3, paragraph 2, and 15 of Resolution No. 4.193 of March 1, 2013,
R E S O L V E S:
Art. 1. Circular No. 3.809 of August 25, 2016, shall be amended as follows:
“Art. 30. ......................................................
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§ 1. From September 1, 2018, the guarantee referred to in item III of the main text shall not apply to exposures arising from payroll-deducted credit card operations.
§ 2. For credit operations guaranteed by the Investment Guarantee Fund (FGI) belonging to the portfolio contracted within the framework of the Emergency Credit Access Program (PEAC), the original Risk Weight (FPR) of each borrower must be applied if the coverage limit for default supported by the fund (stop-loss) of the creditor institution's portfolio is lower than the volume of operations overdue by more than 90 (ninety) days in the portfolio.” (NEW)
Art. 2. The sole paragraph of Article 30 of Circular No. 3.809 of 2016 is hereby repealed.
Art. 3. This Circular enters into force on the date of its publication.
Otávio Ribeiro Damaso Director of Regulation