Resolution CMN No. 21 - Special System for Mobilization and Savings for Financing Working Capital and Sale of Durable Goods by Private Financial Institutions

RESOLUTION NO. 000021

THE CENTRAL BANK OF THE REPUBLIC OF BRAZIL, in accordance with the deliberation of the National Monetary Council, in a session held on 10.3.66, and considering the Agreement signed with the Ministry of Finance, under the terms of Article 1 of Law No. 4,357, of 16.7.64, and in conformity with Articles 1, item IV, and 9 of Law No. 4,595, of 31.12.64,

RESOLVES:

I - To institute a special system for the mobilization of savings, administered by the Central Bank and intended for the financing of working capital, sale of durable goods, and consumer credit, by private financial institutions in favor of companies that have adhered to the price stabilization program referred to in Decree No. 57,271, of 16.11.65.

II - The resources will come from the sale of Treasury Adjustable Obligations and bearer titles issued by the Central Bank, backed by convertible international reserves, with a monetary correction clause based on the exchange rate, at terms and interest rates to be established according to financial market conditions.

III - The sale of the titles referred to in this Resolution shall be carried out through credit and financing societies and mixed-type societies, through a commission fixed by the Central Bank, up to a maximum of 4%.

IV - For the purposes foreseen in items II and III, the titles may be delivered to the financial institutions referred to in item VIII up to the maximum rotating limit of their paid-in capital and reserves.

V - The Central Bank may employ the resources foreseen in item II in granting credit to financial institutions, up to the amount of titles in circulation that have been sold in the market.

VI - The operations referred to in the previous item shall be carried out with a maximum monetary correction of 12% a.a. (twelve percent per year), interest rates of 6% a.a. (six percent per year), and shall be guaranteed by the conditions fixed by the Central Bank.

VII - The maximum limit of 15 times the amount of paid-in capital and free reserves fixed for financing institutions shall be raised to 20 (twenty) times, in the event that the excess portion consists solely of operations carried out under the regime of this Resolution.

VIII - Only credit and financing companies and mixed-type companies that present the following characteristics may integrate the special financing system now instituted:

a) have paid-in capital and reserves in an amount not less than Cr$500 million (five hundred million cruzeiros);

b) have shown satisfactory behavior, determined in inspections conducted on them.

IX - The credit operations to be carried out by financial institutions with the resources provided by this Resolution shall be limited to an interest rate not exceeding 12% a.a. (twelve percent per year) and a variable commission corresponding to the maximum monetary correction of 12% a.a. (twelve percent per year).

When it concerns consumer credit through commercial companies, sellers of durable consumer goods, the interest and monetary correction shall be calculated on the factory price plus the commercialization margin agreed upon with CONEP.

X - Financial institutions shall make the loan at the value of the cash price, through the pass-through of interest received from buyers by the financed companies.

XI - The credit operations referred to in this Resolution shall be guaranteed by the pledge of bills of exchange or other guarantees that make the transaction self-liquidating.

XII - Credit and financing companies and mixed-type companies may, from July 1 of the following year, place in the market their own titles with a minimum term of 360 days, with a monetary correction clause, extendable to the period, in each series of issuance, according to the coefficients fixed for the previous quarter by the National Council of Economy, for the readjustment of Treasury Obligations.

XIII - The Central Bank shall adjust with the National Treasury, complying with the prevailing legal provisions, the transfer of profits or the coverage of losses determined in the financial statements of the special system instituted by this Resolution, as of December 31 of each year.

Rio de Janeiro-GB, March 15, 1966

CENTRAL BANK OF THE REPUBLIC OF BRAZIL

Dênio Nogueira
President

Note: the annex of this regulation is available to interested parties at the Headquarters of the Central Bank of Brazil.