Resolution CMN No. 2675 — Amends and Consolidates Norms Governing Operations and Commitments Involving Fixed-Rate Securities

RESOLUTION NO. 2675

Amends and consolidates the norms that govern operations and commitments involving fixed-rate securities.

The CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the MONETARY NATIONAL COUNCIL, in a session held on December 21, 1999, based on Article 4, items VI, VIII, IX, and XXI, of the aforementioned Law and on Articles 9, 10, 14, and 29 of Law No. 4,728 of July 14, 1965,

RESOLVES:

Article 1. To amend and consolidate, in accordance with the attached Regulation, the norms that govern operations and commitments involving fixed-rate securities.

Article 2. The Central Bank of Brazil is authorized to adopt measures and issue norms deemed necessary for the execution of the provisions of this Resolution.

Article 3. This Resolution enters into force on the date of its publication.

Article 4. The following are revoked:

I - Resolutions Nos. 1,088 of January 30, 1986, 1,251 of January 28, 1987, 1,728 of July 10, 1990, 1,833 of June 26, 1991, and 1,943 of July 29, 1992;

II - Circulars Nos. 1,218 of August 13, 1987, 1,337 of July 28, 1988, 1,430 of January 20, 1989, 1,529 of August 25, 1989, 1,530 of August 30, 1989, 1,701 of April 30, 1990, 1,773 of July 10, 1990, 1,876 of December 27, 1990, 2,084 of November 8, 1991, 2,203 of July 23, 1992, 2,837 of September 16, 1998, and 2,904 of June 30, 1999;

III - Article 6 of Resolution No. 1,693 of March 26, 1990, Article 3 of Resolution No. 1,750 of September 20, 1990, Article 6 of Resolution No. 2,077 of June 6, 1994, Article 8 of Resolution No. 2,081 of June 24, 1994, Article 3 of Resolution No. 2,552 of September 24, 1998, Article 3 of Resolution No. 2,571 of December 17, 1998, and Articles 1 and 2 of Resolution No. 2,613 of June 30, 1999, item "b" of the sole paragraph of Article 3 of Resolution No. 1,757 of October 29, 1990, item 1 of Circular No. 1,138 of March 9, 1984, and Article 4 of Circular No. 1,937 of April 15, 1991.

Brasília, December 21, 1999

Arminio Fraga Neto
President

Attached Regulation to Resolution No. 2,675 of December 21, 1999, which Disciplines Operations and Commitments Involving Fixed-Rate Securities.

CHAPTER I
Of Operations and Securities

Article 1. The following types of operations and commitments involving fixed-rate securities are subject to the norms of this Regulation:

I - operations with a repurchase commitment maturing on a future date, prior to or equal to the maturity of the securities subject to the operation:

a) sale of securities with a repurchase commitment assumed by the seller, conjugated with a resale commitment assumed by the buyer, for settlement on a predetermined date;

b) sale of securities with a repurchase commitment assumed by the seller, conjugated with a resale commitment assumed by the buyer, for settlement at any time during a certain period, at the discretion of either party, as previously agreed between them;

c) sale of securities with a repurchase commitment assumed by the seller, settleable at the exclusive discretion of the buyer, on a determined date or within a set period;

II - operations with a resale commitment maturing on a future date, prior to or equal to the maturity of the securities subject to the operation:

a) purchase of securities with a resale commitment assumed by the buyer, conjugated with a repurchase commitment assumed by the seller, for settlement on a predetermined date;

b) purchase of securities with a resale commitment assumed by the buyer, conjugated with a repurchase commitment assumed by the seller, for settlement at any time during a certain period, at the discretion of either party, as previously agreed between them;

c) purchase of securities with a resale commitment assumed by the buyer, settleable at the exclusive discretion of the seller, on a determined date or within a set period;

III - commitment to buy or sell forward, conjugated with a commitment to sell or buy by the other party in the operation, whereby the committing seller, at the time of assuming the commitment, has ownership of the negotiated security or certainty of such ownership until the settlement date of the forward sale committed, in this case based on effective repurchase or forward purchase commitment(s) that have a settlement date equal to or prior to that of the committed forward sale;

IV - commitment to buy or sell forward, conjugated with a commitment to sell or buy by the other party of the operation, without the committing seller having, at the time of assuming the commitment, ownership of the negotiated security or certainty of such ownership until the settlement date of the committed forward sale.

Sole Paragraph 1. For the purposes of this Regulation, committed operations are designated as the operations and commitments defined in this article.

Sole Paragraph 2. Committed operations must be registered in the Special System of Settlement and Custody (SELIC) or in a registration and financial settlement system administered by the Custody and Financial Settlement Center for Securities - CETIP.

Sole Paragraph 3. The committed operations referred to in the caput, items I and II, must be carried out with defined profitability or with a remuneration parameter established.

Sole Paragraph 4. The committed operations referred to in the caput, item II, when carried out with clients who are not financial institutions nor other institutions authorized to operate by the Central Bank of Brazil, may only have as their object securities of definitive ownership by the seller.

Sole Paragraph 5. The commitments to buy and sell forward provided for in the caput, item IV, may only be assumed with financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Article 2. Committed operations may have exclusively the following securities as their object, duly registered in SELIC or in a registration and financial settlement system administered by CETIP:

I - securities issued by the National Treasury and/or the Central Bank of Brazil;

II - Agrarian Debt Securities issued by the National Institute for Colonization and Agrarian Reform (Incra);

III - state and municipal securities;

IV - bank deposit certificates;

V - bills of exchange accepted by financial institutions;

VI - debentures;

VII - debenture receipts;

VIII - mortgage notes;

IX - promissory notes issued by joint-stock companies, intended for public offering;

X - Real Estate Receivable Certificates - CRI, as provided for in Law No. 9,514 of November 20, 1997;

XI - Bank Credit Notes, as provided for in Provisional Measure No. 1,925-2 of December 9, 1999;

XII - other securities that may be authorized by the Central Bank of Brazil.

Sole Paragraph 1. The committed operations referred to in Article 1, item II, when carried out with clients who are not financial institutions nor other institutions authorized to operate by the Central Bank of Brazil, as well as the commitments to buy and sell forward provided for in item IV of that article, may only have as their object securities issued by the National Treasury and/or the Central Bank of Brazil.

Sole Paragraph 2. Free movement of securities issued by the National Treasury and/or the Central Bank of Brazil subject to the committed operations referred to in Article 1, item II, is admitted, provided that this possibility is expressly agreed upon between the parties.

Article 3. The commitments to buy and sell forward provided for in Article 1, item IV, may be assumed having as their object securities issued by the National Treasury and/or the Central Bank of Brazil linked to public offering, regardless of the existence of securities of the same species (type, issuer, and maturity) in the market, provided that the following conditions are met cumulatively:

I - the public offering of the securities has been previously disclosed by act of the Secretariat of the National Treasury of the Ministry of Finance or the Central Bank of Brazil, depending on whether they are securities issued by the National Treasury or the Central Bank of Brazil, respectively;

II - the Central Bank of Brazil has made available the registration of the commitments in SELIC;

III - the settlement of the commitments is conditioned on the sale, in the public offering, of 51% (fifty-one percent), at minimum, of the total volume of securities previously announced in the manner provided for in item I;

IV - the settlement date of the commitments is equal to that of the public offering settlement.

Sole Paragraph 1. The commitments referred to in the caput must be registered exclusively in SELIC.

Sole Paragraph 2. The Central Bank of Brazil, at its discretion, may interrupt the registration of the commitments referred to in the caput when the total registered volume reaches an amount incompatible with the total volume of securities previously announced in the manner provided for in item I.

Article 4. Securities subject to resale commitments may only serve as collateral in repurchase operations that have a settlement date equal to or prior to that of the committed resale.

CHAPTER II
Of Eligibility

Article 5. Committed operations may only be carried out with the participation of a multiple bank, commercial bank, investment bank, development bank, credit, financing, and investment company, securities brokerage company, securities distribution company, and Caixa Econômica Federal, duly eligible for this purpose.

Sole Paragraph 1. An institution is considered eligible if, having satisfied the conditions established in the current regulation, it sends written communication to the component of the Central Bank of Brazil/Department of Organization of the Financial System (DEORF) to which it is subject, at least five days prior to the start of its activity in the modality, informing said intention, the start date of the operations, and the name of the administrator responsible for them.

Sole Paragraph 2. In the event of substitution of the administrator responsible for the operations, the fact must also be communicated to the component of the Central Bank of Brazil/DEORF to which the institution is subject, within a maximum period of five days of its occurrence.

CHAPTER III
Of Limits and Operational Norms

Article 6. In carrying out committed operations, the calculation base for the operational limits of the institution shall be its respective net worth, adjusted in the manner of the current regulation.

Article 7. Institutions eligible to carry out committed operations are subject to the following operational limits:

I - thirty times the calculation base, for operations, individually or cumulatively, with:

a) Treasury Financial Notes and Central Bank of Brazil Notes, regardless of their remuneration and term conditions;

b) securities issued by the National Treasury and/or the Central Bank of Brazil with remuneration contracted based on exchange rate variation, regardless of their term conditions, limited to fifteen times the calculation base;

c) other securities issued by the National Treasury and/or the Central Bank of Brazil, limited to eight times the calculation base, observing also a maximum of five times the calculation base for operations with securities with a remaining term equal to or greater than 180 days on the date of assuming the commitments;

d) securities and financial assets issued by states, the Federal District, or municipalities, as well as by public sector bodies and entities referred to in Article 1, sole paragraph 1, item III, of Resolution No. 2,653 of September 23, 1999, with the wording given by Resolution No. 2,668 of November 25, 1999, observing the limits and conditions established in that regulation;

e) private securities, limited to two times the calculation base;

II - the updated amount of securities in circulation issued by the respective states and/or municipalities, in the case of institutions that administer state and/or municipal public debt funds.

Sole Paragraph 1. The commitments to buy and sell forward provided for in Article 1, items III and IV, must be computed for the purposes of the operational limits established in the caput, item I.

Sole Paragraph 2. The operational limits established in the caput, item I, do not apply to securities issued by the Central Bank of Brazil, issued for the purposes of the provisions of Resolution No. 2,081 of June 24, 1994.

Sole Paragraph 3. Institutions that administer state and/or municipal public debt funds, in carrying out committed operations with securities other than those issued by the respective states and/or municipalities, must observe the operational limits established in the caput, item I.

Sole Paragraph 4. The risk diversification limit provided for in Article 2 of Resolution No. 2,474 of March 26, 1998, does not apply to state and municipal public securities subject to committed operations under the caput, item II.

Article 8. In the event of eligibility of more than one institution by a financial conglomerate, the operational limits established in Article 7 must be calculated on a consolidated basis, observing the conditions provided for in the current regulation.

Sole Paragraph. The provisions of this article do not apply to the operational limit provided for in Article 7, item II.

Article 9. For the purpose of verifying compliance with the operational limits established in Article 7, the following procedures must be observed:

I - if the repurchase or resale term and profitability are defined, committed operations must be computed by their respective settlement values;

II - if the repurchase or resale term is open, or stipulated for any time during a certain period, and profitability is defined, committed operations must be computed, respectively, by the redemption value of the securities or by the settlement value provided for at the end of the agreed period;

III - committed operations without a defined repurchase or resale price, having as their object securities with remuneration contracted based on a fixed rate, must be computed by the redemption value of the securities;

IV - committed operations without a defined repurchase or resale price, having as their object securities with remuneration contracted based on post-fixed rates, must be computed by the value of the securities, updated by the pro rata temporis criterion, according to the last known value of the corresponding index;

V - commitments to buy and sell forward, having as their object securities with remuneration contracted based on a fixed rate, must be computed by their respective settlement values;

VI - commitments to buy and sell forward, having as their object securities with remuneration contracted based on post-fixed rates, must be computed by estimates of their settlement values, by updating the securities by the pro rata temporis criterion until the settlement date of the commitments, according to the last known value of the corresponding index.

Sole Paragraph. In the event that the update referred to in item VI results in a value for the security subject to the commitment to buy or sell forward lower than the last value effectively known on the date of assuming the commitment, the estimate of the settlement value of the commitment must be based on the last value effectively known.

Article 10. For the purpose of operational limits, the following are not computed:

I - repurchase or resale commitments of securities that have served as collateral (securities of the same type, issuer, maturity, quantity, and remuneration base) for resale or repurchase commitments assumed by the same institution, provided that they meet, cumulatively, the following conditions:

a) both the repurchase or resale commitment and the resale or repurchase commitment have the same future settlement date;

b) the financial settlement of the purchase operations with resale commitment and the sale operations with repurchase commitment is processed by SELIC or CETIP;

II - repurchase or resale commitments of securities subject to committed operations with own clients that have served as collateral (securities of the same type, issuer, maturity, quantity, and remuneration base) for resale or repurchase commitments assumed by the same institution, for the same future settlement date, as defined in item I, item "a", observing also that:

a) the use of the option is limited to the total financial value of the corresponding resale or repurchase commitments;

b) the total financial values of the purchase operations with resale commitment and the sale operations with repurchase commitment must appear in the transfer documents processed by SELIC or CETIP;

III - forward sale commitments referred to in Article 1, item III, provided that the ownership or certainty of ownership under the conditions established therein refers to securities of the same type, issuer, maturity, quantity, and remuneration base.

Sole Paragraph. For the purpose of the provisions of this article, it is admitted that the securities subject to a certain resale, repurchase, or forward sale commitment may serve as collateral in more than one committed operation.

Article 11. In carrying out committed operations with securities issued or accepted by the institution itself or by affiliated institutions, the provisions of Resolution No. 2,107 of August 31, 1994, and subsequent regulation must be observed.

CHAPTER IV
Of Intermediation

Article 12. Regardless of eligibility under Article 5, the institutions referred to therein may intermediate committed operations, assuming repurchase, resale, and forward buy and sell commitments, observing the following conditions:

I - repurchase, resale, and forward buy and sell commitments must be related to resale, repurchase, and forward sell and buy commitments of the same securities (type, issuer, maturity, quantity, and remuneration base), celebrated on the same day, with the same future settlement date, and registered simultaneously in SELIC or CETIP;

II - repurchase, resale, and forward buy and sell commitments must be related to resale, repurchase, and forward sell and buy commitments assumed with institutions eligible to carry out committed operations;

III - the financial settlement of the resale, repurchase, and forward sell and buy commitments assumed with institutions eligible to carry out committed operations must be processed by SELIC or CETIP;

IV - the financial values of the repurchase and forward buy operations must be lower than those of the resale and forward sell operations.

Sole Paragraph. For the purpose of the provisions of this article, it is admitted that the securities subject to a certain resale, repurchase, and forward sell and buy commitment may serve as collateral in more than one committed operation.

CHAPTER V
Of Disclosure of Information and Submission of Documents

Article 13. The Central Bank of Brazil is authorized to regulate the conditions for providing and disclosing information about fixed-rate securities operations carried out by financial institutions and other institutions authorized to operate by said Autarchy.

CHAPTER VI
Of General Provisions

Article 14. At the discretion of the Central Bank of Brazil, operations of purchasing securities that have been subject to final sale by the buyer, carried out at prices other than market prices or that configure, in any way, the payment of defined profitability or established based on a remuneration parameter, may be characterized as committed operations, therefore subject to the norms of this Regulation.

Article 15. The institutions referred to in Article 5 that do not have an individualized account in SELIC and CETIP may only carry out committed operations under the terms of Article 12.

Article 16. Non-compliance with the norms embodied in this Regulation and, in particular, the occurrence of any of the situations listed below, regardless of the characteristics they may have in practice, will subject the institution and its administrators to the sanctions provided for in the legislation and regulation in force:

I - carrying out committed operations having as their object securities other than those referred to in Article 2;

II - sale of securities without the seller having ownership of the negotiated securities at the time, except for the committed operations referred to in Article 1, items II and IV, observing the provisions of Article 2, sole paragraph 2;

III - negotiation of securities at a unit price notably different from that practiced in the market or, in the absence of publication informing the market price, at a price notably different from the updated nominal value;

IV - creation of artificial trading conditions or manipulation of prices of securities subject to committed operations;

V - non-compliance with the operational limits established in this Regulation;

VI - failure to comply with the obligation to remit, on the dates established in the current regulation, information related to committed operations;

VII - adoption of a practice that, deliberately, implies the presentation of inaccurate information.

Art. 17. The Central Bank of Brazil may:

I - suspend the carrying out of any of the types of committed operations, as well as render such suspension void;

II - prohibit the carrying out of committed operations having as their object any of the securities provided for in art. 2º;

III - regulate the movement of securities that are the object of committed operations;

IV - alter the conditions relating to the commitments of purchase and sale forward linked to a public offering of securities issued by the National Treasury and/or the Central Bank of Brazil, as provided for in art. 3º;

V - review the operational limits, as well as the respective calculation base, for the carrying out of committed operations;

VI - at any time, determine the suspension of the carrying out of committed operations by an institution that does not meet or fails to observe the conditions established in this Regulation.