Resolution CMN No. 1775 — Establishes criteria for risk diversification limits under Resolution No. 1,559 and prohibits acquisition of securities issued by affiliated companies

RESOLUTION NO. 001775

ESTABLISHES CRITERIA FOR COMPLIANCE
WITHIN THE RISK DIVERSIFICATION LIMITS
GOVERNED BY RESOLUTION NO. 1,559, OF
22.12.88, AND PROHIBITS THE ACQUISITION OF SECURITIES ISSUED BY AFFILIATED COMPANIES.

THE CENTRAL BANK OF BRAZIL, IN ACCORDANCE WITH ART. 9 OF LAW NO. 4,595, OF 31.12.64, MAKES PUBLIC THAT THE PRESIDENT OF THE MONETARY NATIONAL COUNCIL, BY ACT OF 06.12.90, BASED ON PARAGRAPH 2 OF ART. 2 OF LAW NO. 8,056, OF 28.06.90, "AD REFERENDUM" OF THAT COL- LEGIAL BODY, AND TAKING INTO ACCOUNT THE PROVISIONS OF ART. 4, ITEMS VI, VIII, X AND XI, OF SAID LAW, IN ARTS. 14, ITEM II, AND 29, ITEM VII, OF LAW NO. 4,728, OF 14.07.65, IN LAW NO. 6,099, OF 12.09.74, WITH THE MODI- FICATIONS INTRODUCED BY LAW NO. 7,132, OF 26.10.83, AND IN ART. 3, ITEM I, OF LAW NO. 6,385, OF 07.12.76,

RESOLVES:

ART. 1. TO AUTHORIZE PUBLIC FINANCIAL INSTITUTIONS to eliminate, by December 31, 1994, the excesses identified as a result of the application of the limits established in Resolution No. 1,559, of December 22, 1988, with respect to operations carried out with the Public Sector and with State Public Securities, observing the following:

I - THE CONDUCT OF OPERATIONS THAT
RESULT IN AN INCREASE IN THE IDENTIFIED EXCESS IS PROHIBITED;

II - THE RENEWAL, WITHOUT PRIOR AUTHORIZATION FROM THE CENTRAL BANK OF BRAZIL, ON A CASE-BY-CASE BASIS, OF OPERATIONS THAT PRE- SENT EXCESSES AGAINST THE LIMITS IS PROHIBITED;

III - IF THE OPERATION, AT ITS MATURITY, IS NOT SETTLED, IT MUST, WITHIN A MAXIMUM PERIOD OF 60 (SIXTY) DAYS AFTER THE MATURITY DATE, BE TRANSFERRED TO THE "CREDITS IN LIQUIDATION" ACCOUNT, INDEPENDENTLY OF THE PROCEDURES PROVIDED FOR IN RESOLUTION NO. 1,748, OF AUGUST 30, 1990;

IV - OPERATIONS MATURING ON THE DATE OF PUBLICATION OF THIS RESOLUTION MUST BE CLASSIFIED IN ACCORDANCE WITH THE PROVISIONS OF RESOLUTION NO. 1,748, OF AUGUST 30, 1990, THEIR RENEWAL BEING PROHIBITED WHILE THE EXCESSES PERSIST.

ART. 2. TO GRANT A PERIOD OF 6 (SIX) MONTHS, COU- NTED FROM THE DATE OF PUBLICATION OF THE APPROVING DISPATCH IN THE OFFICIAL GAZETTE (DOU), FOR NEW INSTITUTIONS, THUS CONSIDERED THOSE ORGAN- IZED FROM THE DATE OF PUBLICATION OF THIS RESOLUTION, TO COMPLY WITH THE RISK DIVERSIFICATION LIMIT GOVERNED BY ITEM II OF RESOLUTION NO. 1,559, OF DECEMBER 22, 1988.

ART. 3. THE LIMIT FIXED IN
ITEM III OF RESOLUTION NO. 1,559, OF DECEMBER 22, 1988, DOES NOT APPLY TO FEDERAL PUBLIC SECURITIES.

ART. 4. THE CENTRAL BANK OF BRAZIL WILL REQUIRE IMMEDIATE COMPLIANCE WITH THE LIMITS GOVERNED BY RESOLUTIONS NOS. 1,556, 1,558 AND 1,559, ALL OF DECEMBER 22, 1988, IN THE FOLLOWING CASES:

I - TRANSFER OF CONTROL;

II - ALTERATION OF THE CORPORATE OBJECT;

III - SUSPENSION OF EXTRAJUDICIAL LIQUIDATION.

ART. 5. TAKING INTO ACCOUNT THE PROHIBITION, UNDER THE TERMS OF ART. 34 OF LAW NO. 4,595, OF DECEMBER 31, 1964, OF CONTRACTING, BY FINANCIAL INSTITUTIONS, LOANS AND ADVANCES WITH THEIR SHARE- HOLDERS, STATE BANKS MUST OBSERVE THE FOLLOWING:

I - OPERATIONS EVENTUALLY CONTRACTED MUST BE SETTLED AT MATURITY OR BY DECEMBER 31, 1994, WHICHEVER OCCURS FIRST;

II - THE RENEWAL, WITHOUT PRIOR AUTHORI- ZATION FROM THE CENTRAL BANK OF BRAZIL, ON A CASE-BY-CASE BASIS, OF OPERATIONS OF THIS SPECIES IS PROHIBITED;

III - THE CREDIT CLASSIFICATION CRITERIA CONTAINED IN ITEMS III AND IV OF ART. 1 OF THIS RESOLUTION APPLY TO THESE OPERATIONS.

ART. 6. TO FINANCIAL INSTITUTIONS AND OTHER INSTITUTIONS AUTHORIZED TO OPERATE BY THE CENTRAL BANK OF BRAZIL IS PROHIBITED THE ACQUISITION OF DEBENTURES AND OTHER SECURITIES, EX- CEPT SHARES, UNDER THE TERMS OF CURRENT LEGISLATION, ISSUED BY AN AFFILIATED COMPANY.

PARAGRAPH 1. THE PROHIBITION GOVERNED BY THIS ARTICLE DOES NOT APPLY TO DEBENTURES ISSUED BY LEASING COMPANIES.

PARAGRAPH 2. FOR THE PURPOSES OF THE PROVISIONS OF THIS ARTI- CLE, AN AFFILIATED COMPANY IS CONSIDERED:

I - IN WHICH THE INSTITUTION PARTICIPATES WITH 10% (TEN PERCENT) OR MORE OF THE CAPITAL, DIRECTLY OR INDIRECTLY;

II - IN WHICH ADMINISTRATORS OF THE INSTITUTION AND THEIR RESPECTIVE RELATIVES UP TO THE SECOND DEGREE PARTICIPATE, JOINTLY OR ISO- LATEDLY, WITH 10% (TEN PERCENT) OR MORE OF THE CAPITAL, DIRECTLY OR IN- DIRECTLY;

III - IN WHICH SHAREHOLDERS OF THE INSTITUTION, WITH 10% (TEN PERCENT) OR MORE OF THE CAPITAL, PARTICIPATE WITH 10% (TEN PER- CENT) OR MORE OF THE CAPITAL, DIRECTLY OR INDIRECTLY;

IV - WHICH PARTICIPATES WITH 10% (TEN PERCENT) OR MORE OF THE CAPITAL OF THE INSTITUTION, DIRECTLY OR INDIRECTLY;

V - WHOSE ADMINISTRATORS AND THEIR RESPECTIVE RELATIVES UP TO THE SECOND DEGREE PARTICIPATE, JOINTLY OR ISOLATEDLY, WITH 10% (TEN PERCENT) OR MORE OF THE CAPITAL OF THE INSTITUTION, DIRECTLY OR INDIRE- CTLY;

VI - WHOSE SHAREHOLDERS, WITH 10% (TEN PERCENT) OR MORE OF THE CAPITAL, PARTICIPATE WITH 10% (TEN PERCENT) OR MORE OF THE CAPI- ITAL OF THE INSTITUTION, DIRECTLY OR INDIRECTLY;

VII - WHICH HAS A COMMON ADMINISTRATOR WITH THE INSTITU- TION.

ART. 7. NON-COMPLIANCE WITH THE NORMS CONSOLIDATED IN THIS RESOLUTION WILL BE CONSIDERED A SERIOUS OFFENSE, SUBJECTING THE INSTITUTIONS AND THEIR ADMINISTRATORS TO THE PENALTIES PROVIDED FOR IN THE CURRENT LEGISLATION, ESPECIALLY THOSE OF ART. 44 OF LAW NO. 4,595, OF DECEMBER 31, 1964.

ART. 8. THE CENTRAL BANK OF BRAZIL IS AUTHORI- ZED TO ISSUE NORMS AND ADOPT MEASURES DEEMED NECESSARY FOR THE EXECUTION OF THE PROVISIONS OF THIS RESOLUTION.

ART. 9. THIS RESOLUTION ENTERS INTO FORCE ON THE DATE OF ITS PUBLICATION.

ART. 10. RESOLUTIONS NOS. 345 AND
346, OF NOVEMBER 13, 1975, 397, OF NOVEMBER 17, 1976, AND 1,366, OF JULY 30, 1987, AS WELL AS ART. 3 OF RESOLUTION NO. 1,687, OF FEBRUARY 21, 1990, ARE REPEALED.

BRASÍLIA (DF), DECEMBER 6, 1990

IBRAHIM ERIS
PRESIDENT