Resolution CMN No. 2474 — Establishes risk diversification limits per client

RESOLUTION NO. 2474

Establishes risk diversification limits per client.

The CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the MONETARY COUNCIL NATIONAL, in a session held on March 26, 1998, in view of the provisions of Article 4, items VI, X, and XI, of the aforementioned Law, Articles 10, 14, item II, and 29, item VII, of Law No. 4,728 of July 14, 1965, and Article 23 of Law No. 6,099 of September 12, 1974, with the alterations introduced by Law No. 7,132 of October 26, 1983,

RESOLVES:

Article 1. Fix at 25% (twenty-five percent) of net equity, adjusted in accordance with current regulations (PLA), the risk diversification limit per client to be observed by multiple banks, commercial banks, investment banks, development banks, savings banks, credit, financing and investment societies, mercantile leasing societies, real estate credit societies, mortgage companies, and credit cooperatives in the contracting of credit and mercantile leasing operations and in the provision of guarantees, as well as with regard to credits arising from operations with derivatives.

Paragraph 1. For the purposes of this Resolution, a client is considered to be any person, natural or legal, or group of persons acting individually or jointly or representing a common economic interest.

Paragraph 2. Regarding the public sector, the Union, the State, the Federal District, and the Municipality are considered clients, each together with their directly or indirectly linked entities (public companies, mixed-economy societies, their subsidiaries and other affiliated companies; autarchies and foundations; other bodies or entities).

Paragraph 3. The limit referred to in this article does not include interfinancial transfer operations and credits arising from the renegotiation of debts authorized by Laws No. 8,727 of November 5, 1993, and No. 9,496 of September 11, 1997, as well as any supplementary credit lines destined for the payment of renegotiated debts under the auspices of the aforementioned Laws and Laws No. 7,614 of July 10, 1987, and No. 7,976 of December 27, 1989.

Article 2. Establish at 25% (twenty-five percent) of PLA the limit to be observed by the institutions cited in Article 1, by securities brokerage firms, and by securities distribution firms, in subscription operations for resale and guarantee of subscription of securities, as well as in applications in securities issued by the same company, affiliated companies, and holding company and its subsidiaries.

Paragraph 1. The limit referred to in this article does not apply to federal public securities, nor to debentures issued by linked mercantile leasing societies.

Paragraph 2. Regarding the participation of financial institutions and other institutions authorized to operate by the Central Bank of Brazil in the primary placement process of securities, compliance with this limit will only be required after the closing of the distribution period, with the elimination of any excess permitted in the following manner:

I - 50% (fifty percent), within a maximum period of 30 (thirty) days counted from the date of closing of the aforementioned period;

II - 100% (one hundred percent), within a maximum period of 60 (sixty) days counted from the date of closing of the aforementioned period.

Paragraph 3. The following are not subject to the limit referred to in this article:

I - securities and financial instruments subject to loan;

II - applications in quotas of mutual investment funds.

Article 3. In the event that the client and the company issuing securities or financial instruments are the same person, the sum of the operations referred to in Articles 1 and 2 may not exceed 25% (twenty-five percent) of the PLA of the institutions related therein.

Article 4. For the purpose of calculating the limits referred to in this Resolution, the amount of participations in the capital stock of financial institutions and other institutions authorized to operate by the Central Bank of Brazil will be deducted from PLA.

Article 5. Excesses verified in relation to the limits now fixed must be eliminated by December 31, 2001, in the proportion of, at least, 25% (twenty-five percent) of the excess each calendar year, with the contracting or renewal of operations that increase said limits being prohibited until their effective compliance.

Article 6. The Central Bank of Brazil is authorized to issue norms and adopt measures deemed necessary for the execution of the provisions of this Resolution.

Article 7. This Resolution enters into force on the date of its publication.

Article 8. Items XXIV of Resolution No. 20 of March 4, 1966, and I, III, and IX of Resolution No. 1,559 of December 22, 1988, Article 3 of Resolution No. 1,775 of December 6, 1990, Resolutions Nos. 1,948 of July 29, 1992, and 1,949 of July 29, 1992, Circulars Nos. 1,413 of December 30, 1988, 1,470 of April 12, 1989, and 2,240 of October 7, 1992, and Letters-Circulars Nos. 1,924 of May 15, 1989, 2,315 of September 2, 1992, 2,321 of September 29, 1992, and 2,434 of January 14, 1994, are repealed.

Brasília, March 26, 1998

Gustavo H. B. Franco
President

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Re-transmitted due to alteration in Article 5.