Normative Instruction BCB No. 606 — Establishes guidelines for the preparation and submission of the convention governing credit events for credit derivatives and credit risk COEs

NORMATIVE INSTRUCTION BCB NO. 606, OF APRIL 3, 2025

Establishes guidelines on the process for preparing and submitting the convention that will govern the credit events to be used by institutions authorized to operate by the Central Bank of Brazil in credit derivative transactions contracted in the country or in the issuance of structured operation certificates (COEs) in the credit risk modality, as provided for in the specific regulation of these products.

The Head of the Financial System Regulation Department (Denor), using the powers conferred upon him by Art. 23, item I, letter "a", of the Internal Regulations of the Central Bank of Brazil, annexed to Ordinance No. 84,287, of February 27, 2015, based on Art. 11, caput, item VIII, and § 4, of CMN Resolution No. 5,070, of April 20, 2023, and on Art. 19, caput, item VIII, and § 4, of CMN Resolution No. 5,166, of August 22, 2024,

RESOLVES:

Art. 1 This Normative Instruction disseminates the guidelines for the preparation and submission of the convention that will govern the self-regulation norms applicable to the credit events to be used by institutions authorized to operate by the Central Bank of Brazil in credit derivative transactions contracted in the country or in the issuance of structured operation certificates (COEs) in the credit risk modality.

Art. 2 The convention referred to in this Normative Instruction must be prepared through an entity representing the national credit derivatives market, and must be signed by the institutions mentioned in Art. 1 that are counterparties in credit derivative transactions in the country or issuers of COEs in the credit risk modality.

Art. 3 The content of the convention referred to in this Normative Instruction must, at a minimum:

I - describe, in detail, all types of credit events eligible for use by the institutions mentioned in Art. 1, both in contracting credit derivative transactions in the country and in issuing COEs in the credit risk modality; and

II - provide for the treatment to be given to credit derivative contracts and COEs issued in the credit risk modality that use the definitions established therein, in the event of revocation, termination, or suspension, total or partial, of provisions of the convention applicable to these contracts and certificates.

Sole Paragraph. The description of the types of credit events referred to in item I of the caput must be in consonance with:

I - the definitions of the respective types of credit events already contained in the specific regulations applicable to the contracting of credit derivative transactions in the country by the institutions mentioned in Art. 1 and to the issuance of COEs in the credit risk modality; and

II - the international standards recognized and practiced by institutions operating in the credit derivatives market.

Art. 4 The draft of the convention must be submitted for approval by the Central Bank of Brazil by the entity referred to in Art. 2, through correspondence sent to the Financial System Regulation Department (Denor) via Digital Protocol, indicating the subject "Approval of Convention".

§ 1 The correspondence referred to in the caput must:

I - be signed by the representatives designated in the statutes or articles of association of each participating entity in the process of preparing the convention with legal powers to perform the act; and

II - contain, as an attachment, the draft of the convention, the minutes or equivalent document of the meeting in which the preparation and submission for approval by the Central Bank of Brazil were deliberated, as well as the other documents proving the powers of the respective representatives who sign it, referred to in item I.

§ 2 The draft of the convention must also be sent in Word format to the corporate mailbox of Denor, at the address denor@bcb.gov.br, on the same date as its submission via Digital Protocol.

Art. 5 Changes made to the content of the convention in force must be submitted for approval by the Central Bank of Brazil, by sending the new version subject to deliberation by the contracting entities, with a request for approval directed to Denor via Digital Protocol, in accordance with Art. 4 of this Normative Instruction.

Sole Paragraph. When filing a draft of a new version of the convention, the entity referred to in Art. 2 must register the modifications made to the text through change control and revision marks in Word format.

Art. 6 The Central Bank of Brazil may determine, at any time, adjustments to the convention referred to in Art. 2, observing the provisions of Art. 7.

Art. 7 The statements and requirements of the Central Bank of Brazil regarding the convention will be carried out through an official letter from this Autarchy addressed to the entity referred to in Art. 2.

Art. 8 Until the entry into force of the convention referred to in this Normative Instruction, the institutions mentioned in Art. 1 may only use, in contracting credit derivatives in the country and in issuing COEs in the credit risk modality, the types of credit events already defined in the specific regulation of the aforementioned financial instruments.

Art. 9 This Normative Instruction enters into force on the date of its publication.

MARDILSON FERNANDES QUEIRÓZ
Head of the Financial System Regulation Department

NOTE 208/2025 – BCB/DENOR, OF APRIL 3, 2025

Justifies the proposal for the issuance of a Normative Instruction that establishes guidelines on the process for preparing and submitting the convention that will govern the credit events to be used by institutions authorized to operate by the Central Bank of Brazil in credit derivative transactions contracted in the country or in the issuance of structured operation certificates (COEs) in the credit risk modality, as provided for in the specific regulation of these financial instruments.

Dear Head of Denor,

This Note justifies the proposal for the issuance of a Normative Instruction that establishes guidelines for the process of preparing and submitting a convention that formalizes self-regulation norms on the credit events to be used by institutions authorized to operate by the Central Bank of Brazil in credit derivative transactions in the country and in the issuance of structured operation certificates (COEs) in the credit risk modality, in accordance with Art. 11, caput, item VIII, and § 4, of CMN Resolution No. 5,070, of April 20, 2023, and Art. 19, caput, item VIII, and § 4, of CMN Resolution No. 5,166, of August 22, 2024. The issuance of the Normative Instruction is based on the competence of the Financial System Regulation Department (Denor) provided for in Art. 23, item I, letter "a", of the Internal Regulations of the Central Bank of Brazil, annexed to BCB Resolution No. 340, of September 21, 2023.

2. Art. 11 of CMN Resolution No. 5,070, of 2023, and Art. 19 of CMN Resolution No. 5,166, of 2024, specify the types of credit events eligible for use by institutions authorized to operate by this Autarchy, respectively, in contracting credit derivatives in the country and in issuing COEs in the credit risk modality, admitting, in item VIII of the caput of the aforementioned articles, the use of other credit events not listed, provided they are provided for in norms of a self-regulation entity, formalized in a convention previously approved by the Central Bank of Brazil.

3. As established in the aforementioned normative acts, the convention must be prepared by an entity representing the institutions subject to them, contain the detailing of credit events and their types, in consonance with the international standards recognized and practiced by the credit derivatives market, and its first version and subsequent changes must be submitted for approval by the Central Bank of Brazil.

4. With the aim of resolving possible doubts of participants in this market regarding the process of preparing and submitting the draft to be evaluated by this Central Bank, it is considered necessary to publish a Normative Instruction, clarifying:

I - the uniqueness of the self-regulation convention of credit events to be used in both financial instruments;

II - the formalities to be observed in the preparation and sending of the draft convention and its future changes; and

III - the sending channels and the recipient – the department responsible for evaluating and approving the document (Denor).

5. I remind you that, in compliance with the provisions of Art. 5 of Law No. 13,874, of September 20, 2019, Decree No. 10,411, of June 30, 2020, determines that proposals for normative acts of general interest of economic agents formulated by bodies and entities of the direct, autarchic, and foundation federal public administration, as well as by collegiate bodies, through the body or entity responsible for providing them with administrative support, must be preceded by a regulatory impact analysis (RIA).

6. However, as provided in Art. 4, item II, of that Decree, the obligation to prepare an RIA may be waived for a normative act intended to discipline rights or obligations defined in a hierarchically superior norm that does not allow, technically or legally, different regulatory alternatives. Thus, the proposed Normative Instruction, which disciplines the form of preparation and submission for approval by this Autarchy of the self-regulation convention provided for in CMN Resolutions No. 5,070, of 2023, and No. 5,166, of 2024, is exempt from the preparation of an RIA.

For your consideration.

FELIPE DE OLIVIO DERZI PINHEIRO
Deputy Head

Agreed.

MARDILSON FERNANDES QUEIRÓZ
Department Head