Resolution CMN No. 1690 — Permits Foreign Exchange Operations at Freely Agreed Rates, Modifies Exchange Position Limits and the Relationship Between Authorized Institutions and the Central Bank

RESOLUTION NO. 001690

PERMITS THE CONTRACTING OF FOREIGN EXCHANGE OPERATIONS AT FREELY AGREED RATES, MODIFIES EXCHANGE POSITION LIMITS AND THE FORM OF RELATIONSHIP BETWEEN AUTHORIZED INSTITUTIONS AND THE CENTRAL BANK.

THE CENTRAL BANK OF BRAZIL, IN ACCORDANCE WITH ARTICLE 9 OF LAW NO. 4,595, OF 12.31.64, MAKES PUBLIC THAT THE PRESIDENT OF THE MONETARY NATIONAL COUNCIL, BY ACT OF 03.18.90, BASED ON ARTICLE 2 OF DECREE NO. 94,303, OF 05.01.87, "AD REFERENDUM" OF THAT COUNCIL, HAVING REGARD TO THE PROVISIONS OF ARTICLE 21, ITEM VIII OF THE FEDERAL CONSTITUTION, OF ARTICLE 4, ITEMS V AND XXXI OF THE MENTIONED LAW NO. 4,595, AND OF ARTICLE 2, ITEM III OF DECREE NO. 99,179, OF 03.15.90,

RESOLVES:

ART. 1. THE EXCHANGE RATES AT WHICH OPERATIONS FOR THE PURCHASE AND SALE OF FOREIGN CURRENCY ARE CONTRACTED, FOR IMMEDIATE OR FUTURE DELIVERY, CELEBRATED BETWEEN BANKING ESTABLISHMENTS AUTHORIZED TO OPERATE IN FOREIGN EXCHANGE UNDER THE TERMS OF RESOLUTION NO. 1,620, OF 07.26.89, AND THEIR CUSTOMERS, SHALL BE FREELY AGREED UPON BETWEEN THE PARTIES.

§ 1. IN OPERATIONS FOR IMMEDIATE DELIVERY, THE EXCHANGE RATES MUST REFLECT THE EXACT VALUE OF THE TRANSACTION, ANY PAYMENTS AS COMPENSATION FOR FINANCIAL RESULTS BEING PROHIBITED.

§ 2. IN OPERATIONS FOR FUTURE DELIVERY, THE PAYMENT OF PREMIUMS BY AUTHORIZED BANKS IS PERMITTED, OBSERVING THE FOLLOWING:

A) WHEN PRE-SET, THE PREMIUM MUST BE EXPRESSED AS A PERCENTAGE PER MONTH;

B) THE PREMIUM MUST BE INDICATED IN THE APPROPRIATE FIELDS OF THE FOREIGN EXCHANGE CONTRACT, NOT THEREFORE BEING INCORPORATED INTO THE CONTRACTING RATES;

C) FOR THE CALCULATION OF THE PREMIUM VALUE, ONLY THE PERIOD COUNTED FROM THE DATE ON WHICH IT WAS FORMALLY AGREED UPON, UNTIL THE DETERMINANT DAY OF THE LEGAL MATURITY OF THE FOREIGN EXCHANGE CONTRACT, SHALL BE CONSIDERED.

ART. 2. AUTHORIZED BANKING ESTABLISHMENTS OPERATING IN FOREIGN EXCHANGE MUST CALCULATE THEIR FOREIGN EXCHANGE POSITION AT THE CLOSE OF THEIR DAILY PURCHASE AND SALE MOVEMENT, CONSIDERING GLOBALLY ALL CURRENCIES AND THE SET OF THEIR DEPENDENCIES IN THE COUNTRY, OBSERVING THE FOLLOWING:

A) THERE SHALL BE NO LIMIT FOR BOUGHT FOREIGN EXCHANGE POSITION;

B) THE LIMIT FOR SOLD FOREIGN EXCHANGE POSITION IS US$ 5,000,000.00 (FIVE MILLION UNITED STATES DOLLARS).

§ 1. THE CONVERSION OF OTHER CURRENCIES TO UNITED STATES DOLLARS, FOR THE PURPOSES OF CALCULATING THE FOREIGN EXCHANGE POSITION, MUST BE EFFECTED USING THE PARITIES PUBLISHED BY THE CENTRAL BANK ON THE PREVIOUS BUSINESS DAY, OBSERVING:

A) FOR CURRENCIES OF TYPE "A", THE SELLING PARITY SHALL BE USED;

B) FOR CURRENCIES OF TYPE "B", THE BUYING PARITY SHALL BE USED.

§ 2. AS A CONSEQUENCE OF THE PROVISIONS OF ARTICLE 1, A POSITION ADJUSTMENT MUST BE RECORDED DAILY, THE RESULT OF VARIATIONS ARISING FROM CHANGES IN THE PARITY CORRELATIONS USED IN THE CONVERSION TO UNITED STATES DOLLARS OF THE POSITIONS REGISTERED IN THE OTHER CURRENCIES.

§ 3. IT CONSTITUTES GOOD BANKING PRACTICE THE ADEQUATE MANAGEMENT OF THE RISK ARISING FROM THE CONCENTRATION OF THE FOREIGN EXCHANGE POSITION IN CURRENCIES OF DIFFICULT ARBITRAGE OR SUBJECT TO SIGNIFICANT FLUCTUATIONS, AS WELL AS THE MAINTENANCE OF FUTURE BOUGHT AND SOLD POSITIONS DISSOCIATED AS TO THE TIME OF SETTLEMENT.

ART. 3. EXCEPT WHEN SPECIFICALLY PROVIDED FOR IN REGULATIONS, THE CENTRAL BANK OF BRAZIL SHALL NOT PROVIDE COVERAGE FOR SALES MADE BY AUTHORIZED ESTABLISHMENTS, WHICH MUST BE LEVELLED BY PURCHASES MADE IN THE PRIMARY OR INTERBANK FOREIGN EXCHANGE MARKET.

§ 1. ESTABLISHMENTS MUST BE AWARE THAT AT THE CLOSE OF THE MOVEMENT OF EACH DAY, THEIR FOREIGN EXCHANGE POSITION DOES NOT EXCEED THE LIMITS ATTRIBUTED FOR THE SOLD POSITION.

§ 2. ANY EXCESS OF SOLD POSITION, VERIFIED AFTER THE CLOSE OF THE DAILY FOREIGN EXCHANGE MOVEMENT OF THE ESTABLISHMENT, WILL IMPLY THE DEPOSIT WITH THE CENTRAL BANK, BY DEBIT TO THE "BANKING RESERVES" ACCOUNT, OF AN AMOUNT EQUIVALENT TO THE COST OF FINANCIAL ASSISTANCE, CALCULATED BASED ON THE LOWEST RATE FOR LIQUIDITY LOANS CHARGED BY THIS AGENCY ON THE DATE, AND INCIDENT ON THE NATIONAL CURRENCY EQUIVALENT OF THE EXCESS, CALCULATED BASED ON THE WEIGHTED AVERAGE SELLING RATE PRACTICED BY THE MARKET ON THE BUSINESS DAY PRECEDING THE PAYMENT DATE, OR ON THE DATE OF THE IRREGULARITY, WHICHEVER IS HIGHER.

§ 3. THE PROVISIONS OF § 2 DO NOT APPLY WHEN THE EXCESS OF SOLD POSITION CALCULATED AT THE CLOSE OF THE DAILY MOVEMENT IS LESS THAN US$ 10,000.00 (TEN THOUSAND UNITED STATES DOLLARS).

ART. 4. THE CENTRAL BANK OF BRAZIL, WHEN IT DEEMS APPROPRIATE AND CONVENIENT, MAY CARRY OUT PURCHASE AND SALE OPERATIONS IN THE INTERBANK MARKET AT MARKET RATES, FOR SETTLEMENT ON THE 2ND SUBSEQUENT BUSINESS DAY AFTER ITS CONTRACTING, WITH THE SIMULTANEOUS EXCHANGE OF THE RESPECTIVE CURRENCIES.

ART. 5. THE PROVISIONS OF THIS RESOLUTION DO NOT APPLY TO OPERATIONS SUBORDINATED TO THE REGIME INSTITUTED BY RESOLUTION NO. 1,552, OF 12.22.88.

ART. 6. THE PROVISIONS THAT REGULATE THE CONTRACTING AND CONDUCT OF FOREIGN EXCHANGE OPERATIONS REMAIN IN FORCE, IN SO FAR AS THEY DO NOT COLLIDE WITH THOSE OF THIS RESOLUTION.

ART. 7. THE CONTRACTING OF FOREIGN EXCHANGE OPERATIONS AT RATES THAT, AT THE DISCRETION OF THE CENTRAL BANK, ARE AT LEVELS DEVIANT FROM THOSE PRACTICED BY THE MARKET ON THE DAY, AND WHICH MAY CONFIGURE CAPITAL FLIGHT, TAX EVASION, OR IN ANY WAY CAUSE DAMAGE TO PUBLIC PROPERTY, WILL BE SUBJECT TO PENALTIES AND OTHER SANCTIONS PROVIDED FOR IN THE LEGISLATION IN FORCE.

ART. 8. THE CENTRAL BANK MAY ESTABLISH CRITERIA FOR THE CARRYING OUT OF MANDATORY TRANSFERS ARISING FROM IRREGULARITIES IN FOREIGN EXCHANGE SALE OPERATIONS.

ART. 9. THE CENTRAL BANK WILL REGULATE THE PROVISIONS OF THIS RESOLUTION AND ISSUE THE NECESSARY NORMS FOR ITS COMPATIBILITY WITH THE CURRENT REGULATIONS.

ART. 10. OBSERVING THE ASPECTS OF CONVENIENCE AND OPPORTUNITY, THE CENTRAL BANK MAY ALTER THE POSITION LIMITS MENTIONED IN ART. 2 OF THIS RESOLUTION.

ART. 11. RESOLUTIONS NO. 83, OF 01.03.68, AND NO. 1,622, OF 07.27.89, ARE HEREBY REPEALED.

ART. 12. THIS RESOLUTION SHALL ENTER INTO FORCE ON THE DATE OF ITS PUBLICATION.

BRASÍLIA (DF), MARCH 18, 1990

IBRAHIM ERIS
PRESIDENT