Resolution CMN No. 2653 — Consolidates and redefines rules for public sector credit contingency

RESOLUTION NO. 002653

Consolidates and redefines rules for the contingency of credit to the public sector.

THE CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595, of December 31, 1964, makes public that the MONETARY POLICY COUNCIL, in a session held on September 22, 1999, considering the provisions of Article 4, items VI and VIII, of the aforementioned Law, Laws No. 4,728, of July 14, 1965, and 6,385, of December 7, 1976, Decree-Laws No. 1,986, of December 28, 1982, and 2,285, of July 23, 1986, Article 28 of Decree-Law No. 73, of November 21, 1966, Article 4 of Decree-Law No. 261, of February 28, 1967, and Articles 15 and 40 of Law No. 6,435, of July 15, 1977,

RESOLVES:

Article 1. Limit the amount of credit operations of each institution of the National Financial System with bodies and entities of the public sector to 45% (forty-five percent) of net worth, adjusted in accordance with current regulations (PLA).

Sole Paragraph 1. For the purposes of this Resolution, bodies and entities of the public sector are understood to be:

I - direct administration of the Union, States, Federal District, and Municipalities;

II - autarchies and foundations established or maintained, directly or indirectly, by the Union, States, Federal District, and Municipalities;

III - non-financial public companies and mixed-economy societies, their subsidiaries and other controlled companies, directly or indirectly, by the Union, States, Federal District, and Municipalities, including companies with exclusive object; and,

IV - other bodies or entities of the powers of the Union, States, Federal District, and Municipalities.

Sole Paragraph 2. For the purposes of this Resolution, credit operations are understood to be:

I - loans and financing;

II - leasing operations;

III - the definitive acquisition or carried out through committed resale operations of securities issued by the States, Federal District, or Municipalities, as well as by the bodies and entities of the public sector mentioned in item III of paragraph 1 of this article; and,

IV - any and all operations that result, directly or indirectly, in the granting of credit and/or raising of resources of any nature, including the use of financial derivatives.

Article 2. Institutions of the National Financial System may only contract new credit operations with States, the Federal District, and Municipalities, as well as their autarchies and foundations, provided that these observe, cumulatively, the following limits and conditions:

I - the global amount of credit operations, as defined in Article 1, may not, in each financial year, exceed 18% (eighteen percent) of Real Net Revenue, observing the limit of 8% (eight percent) of Real Net Revenue for budget revenue anticipation operations - ARO;

II - the maximum annual expenditure with amortizations, interest, and other charges of all credit operations, already contracted and to be contracted, including those originating from renegotiated or installment debts, plus, additionally, the due, overdue, and unpaid amount, may not exceed 13% (thirteen percent) of Real Net Revenue;

III - the total debt balance may not exceed a value equivalent to one and nine-tenths of the annual Real Net Revenue for 1999, decreasing this percentage at a rate of one-tenth per year, until reaching a value equivalent to the annual Real Net Revenue; and,

IV - Positive Primary Result calculated over the previous twelve months.

Sole Paragraph. The Central Bank of Brazil is tasked with publishing the methodology to be used for calculating the Primary Result and Real Net Revenue.

Article 3. Institutions of the National Financial System may only contract new credit operations with non-financial public companies and mixed-economy societies, directly or indirectly controlled by States, the Federal District, and Municipalities, provided that the controlling entity observes the limits and conditions defined in the previous article.

Article 4. For the purpose of carrying out new credit operations, under the terms of this Resolution, institutions of the National Financial System must be within the operational limits established by current regulations.

Article 5. Institutions of the National Financial System are prohibited from:

I - carrying out credit operations with bodies and entities of the public sector that are in default with institutions of the National Financial System;

II - contracting new operations with bodies and entities of the public sector if they have pending registration in the System for Registration of Operations with the Public Sector - CADIP;

III - receiving, in any modality of credit operations, as principal or accessory guarantee, promissory notes, trade acceptances, bills of exchange, or other instruments of the kind, as well as letters of credit, guarantees, and sureties of direct or indirect responsibility of bodies and entities of the public sector, corresponding to commitments assumed with suppliers, construction contractors, or service providers; and,

IV - carrying out any type of operation that implies the transfer, under any title, of the direct or indirect responsibility for the payment of the debt to bodies or entities of the public sector.

Sole Paragraph. The prohibition provided for in item III does not apply to operations contracted by public companies or by mixed-economy societies directly or indirectly controlled by the Union, States, Federal District, and Municipalities.

Article 6. An institution of the National Financial System that presents, on the date of this Resolution, a ratio between the amount of credit operations and net worth, adjusted in accordance with current regulations (PLA), higher than 45% (forty-five percent):

I - may maintain current credit operations, provided that the accrual of charges does not imply, at any time, an increase in the ratio referred to in the main text;

II - may not carry out new credit operations with bodies and entities of the public sector until the ratio referred to in the main text reaches a percentage equal to or lower than 45% (forty-five percent);

III - may not acquire credit operations, with or without co-obligation, from other institutions of the National Financial System whose borrower is a body or entity of the public sector; and,

IV - may not assign credit operations with co-obligation whose borrower is a body or entity of the public sector.

Sole Paragraph. An institution of the National Financial System that fails to comply with the provisions of this article is subject to the penalties provided for in Article 8.

Article 7. The global value of new credit operations carried out under the auspices of this Resolution shall be up to R$600,000,000.00 (six hundred million reais).

Sole Paragraph. The following credit operations of institutions of the National Financial System contracted with bodies and entities mentioned in item III of paragraph 1 of Article 1 are not included in the global value:

I - those guaranteed formally and exclusively by trade or service provision invoices, issued by the beneficiary of the credit itself; and,

II - operations supporting exports.

Article 8. An institution of the National Financial System that contracts a credit operation in violation of this Resolution must deposit with the Central Bank of Brazil, by the fifth business day following notification of the irregularity, the value of the irregularly contracted credit, updated by the respective contractual rate until the date of deposit, regardless of other administrative measures.

Paragraph 1. In the case of new credit contracting or accrual of charges that infringes the limit established in Article 1, the excess value shall be deposited;

Paragraph 2. The value deposited into the Bank Reserves account shall not be subject to any remuneration, remaining unavailable and unchanged for a period equivalent to that during which the irregularity persists.

Paragraph 3. An institution of the National Financial System that does not possess a Bank Reserves account must enter into an agreement with a financial institution for this purpose, and such agreement may not be denounced by either party without prior authorization from the Central Bank of Brazil.

Article 9. The contracting of new credit operations, under the auspices of this Resolution, depends on prior authorization from the Central Bank of Brazil, which is responsible for disclosing the eligibility criteria.

Sole Paragraph. The Central Bank of Brazil will make available monthly, via the Central Bank Information System - SISBACEN, the accumulated value of the authorized credit operations referred to in Article 7.

Article 10. The System for Registration of Operations with the Public Sector - CADIP is maintained.

Article 11. For the purposes of this Resolution, institutions of the National Financial System must consolidate operations carried out through their directly or indirectly controlled companies.

Article 12. The Central Bank of Brazil may adopt the measures and issue the norms necessary for the compliance with the provisions of this Resolution.

Article 13. Resolutions No. 2,366, of March 17, 1997, 2,443, of November 14, 1997, 2,461, of December 26, 1997, 2,521, of July 8, 1998, 2,553, of September 24, 1998, 2,559 and 2,562, both of November 5, 1998, are revoked.

Article 14. This Resolution enters into force on the date of its publication.

Brasília, September 23, 1999

Arminio Fraga Neto
President

--------------------------------------------------------------------- Note: Re-transmitted due to inversion in the citation in item III of paragraph 2 of Article 1, which now reads as follows:
"... in item III of paragraph 1 of this article...").