Resolution CMN No. 2686 — Establishes Conditions for the Assignment of Credits to Exclusive-Object Joint-Stock Companies and Real Estate Credit Securitization Companies

RESOLUTION NO. 2686

Establishes conditions for the assignment of credits to joint-stock companies with exclusive objects and to real estate credit securitization companies.

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 January 26, 2000, based on Article 4, items VI and VIII, of the aforementioned Law, on Article 23 of Law No. 6.099 of September 12, 1974, as amended by Law No. 7.132 of October 26, 1983, and on Law No. 9.514 of November 20, 1997,

RESOLVES:

Article 1. Authorize the assignment of credits arising from operations carried out by multiple banks, commercial banks, investment banks, credit, financing and investment companies, real estate credit companies, mortgage companies, savings and loan associations, and by the Federal Savings Bank to joint-stock companies that have as their exclusive object the acquisition of such credits.

Sole Paragraph 1. The assignment referred to in this article may only be carried out to a joint-stock company that:

I - contains in its name the expression "Financial Credit Securitization Company";

II - raises resources exclusively:

a) in the country, through the issuance of shares, non-convertible debentures for public distribution, or subordinate non-convertible debentures for public or private distribution, with subscription or acquisition permitted in the latter case exclusively by the assigning institution itself;

b) abroad, through the issuance of securities and financial instruments, observing the legislation and regulations in force;

III - has in its bylaws and in the instruments of issuance of securities and financial instruments that, until the full payment of obligations represented by the issued securities and financial instruments, the following acts are prohibited:

a) transfer of control;

b) reduction of capital, incorporation, merger, spin-off, or dissolution;

c) assignment of the credits, or attribution of any rights over them, to the controller or to any person linked to it, under conditions different from those provided in the instruments of issuance of the securities or financial instruments.

Sole Paragraph 2. In the event of the alienation of debentures acquired in private distribution, the rules established by the Securities and Exchange Commission (Comissão de Valores Mobiliários) for the secondary distribution of securities must be observed.

Sole Paragraph 3. The provisions of item III of Paragraph 1 do not apply in case of prior authorization by holders of 50% (fifty percent) or more of the nominal value of the said securities and financial instruments, excluding from such calculation those eventually held by the controller, affiliated company, or company under common control, in a general meeting specifically convened and held according to the rules applicable to meetings of debenture holders of open companies.

Sole Paragraph 4. Regardless of the content of the preceding paragraph, the assignment referred to in item III, letter "c" of Paragraph 1, may occur if carried out for a value equal to or greater than the nominal value of the credits, minus the interest not yet incurred and the financial charges incorporated into their nominal value in the form of discount, calculated proportionally to the number of days remaining until the maturity date of such credits.

Sole Paragraph 5. Credit assignment contracts, which will be available to the Central Bank of Brazil at the assigning institution, must contain the list of assigned credits, their respective borrowers, and the specific characteristics of the operation.

Article 2. The assignment referred to in Article 1:

I - is not subject to the restrictions provided in Resolution No. 2.561 of November 5, 1998, including credits arising from operations that are fully or partially provisioned, under conditions freely agreed upon by the parties;

II - may be carried out with or without co-obligation of the assignor or a linked institution;

III - implies the transfer, to the assignee, of the contracts, titles, instruments, and guarantees necessary for their execution.

Sole Paragraph. Information regarding assignments of credits to a securitization company controlled or affiliated with the assignor, directly or indirectly, and with co-obligation or other forms of risk retention, must be regularly reported to the Credit Risk Central, in accordance with Resolution No. 2.390 of May 22, 1997, and complementary norms.

Article 3. In the case of assignment of credits with co-obligation or other forms of risk retention, an amount equivalent to the lesser of the following values must be added to the net equity required of the assigning institution, calculated in accordance with current regulations:

I - 100% (one hundred percent) of the updated value of the co-obligation or other form of risk retention agreed upon;

II - the positive difference between the value corresponding to the assumed co-obligation and the net book value of provisions, subject to assignment, plus 11% (eleven percent) of the book value of the assigned credit, net of provisions.

Sole Paragraph 1. From the value subject to assignment, amortizations made after the assignment will be deducted, and values referring to incurred charges will be added.

Sole Paragraph 2. After the assignment, to the value determined in accordance with item II of this article, the values corresponding to regulatory provisions that would be required if the credits subject to assignment remained accounted for in the assets of the assignor will be added, with the assignor remaining equally responsible for monitoring these credits.

Sole Paragraph 3. The provisions of this article do not apply in the case of acquisition of debentures by the assignor, which must be subject to provisioning, according to the risk they represent, considering the quality of the credits linked to them and their position in the order of preference for payment in relation to other securities, financial instruments, and obligations of the assignee.

Sole Paragraph 4. For the purpose of the provisioning referred to in the previous paragraph, the criteria established in Resolution No. 2.682 of December 21, 1999, must be adopted, as if the respective credits were accounted for in the assets of the institution holding the debentures in question.

Article 4. The following are prohibited:

I - the time-based repurchase of previously assigned credits, with spot repurchase being admitted, as well as the substitution of the same, provided it is stipulated in the bylaws of the assignee;

II - the assignment of credits on time to a securitization company with which the assignor maintains a linked relationship, in accordance with Articles 34 of Law No. 4.595 of December 31, 1964, and 17 of Law No. 7.492 of June 16, 1986.

Sole Paragraph. In the event that the assignment covers credits subject to contingency to the public sector, the same must remain computed by the assigning institution within the limits established in specific regulation for the granting of credit to the public sector, until the corresponding settlement.

Article 5. The payment of yields, amortization, and redemption of the securities and financial instruments referred to in Article 1, Paragraph 1, item II, are conditioned on the realization of credits specified in the corresponding issuance instrument, observing the possibility of providing additional guarantees to the said securities and financial instruments.

Sole Paragraph. The issuance instrument of securities and financial instruments must provide:

I - the possibility that the corresponding redemption be carried out, totally or partially, through the delivery of the credits specified in the corresponding issuance instrument that were not realized at their respective maturity;

II - the treatment to be given in the case of credits that come to be paid totally or partially through the delivery of assets or in the case of their debtors having bankruptcy or insolvency decreed or entering liquidation.

Article 6. The provisions of Paragraph 5 of Article 1 and of Articles 2, 3, and 4 of this Resolution apply to the assignments of real estate credits carried out by financial institutions to real estate credit securitization companies, constituted in accordance with Law No. 9.514 of November 20, 1997.

Article 7. The Central Bank of Brazil and the Securities and Exchange Commission (Comissão de Valores Mobiliários), within their respective areas of competence, are authorized to adopt the measures and issue the norms necessary for the execution of the provisions of this Resolution, with the Central Bank of Brazil being able to determine the treatment to be given to credits of institutions in the process of extrajudicial liquidation.

Article 8. This Resolution enters into force on the date of its publication.

Article 9. Resolutions Nos. 2.493 of May 7, 1998, and 2.573 of December 17, 1998, are hereby revoked.

Brasília, January 26, 2000

Arminio Fraga Neto
President