Resolution CMN No. 3533 — Establishes Procedures for Classification, Accounting Recording, and Disclosure of Financial Asset Sale or Transfer Operations

RESOLUTION NO. 003533

Establishes procedures for classification, accounting recording, and disclosure of financial asset sale or transfer operations.

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, in a session held on January 31, 2008, based on Article 4, items XI and XII, of the aforementioned law,

RESOLVES:

Article 1. Financial institutions and other institutions authorized to operate by the Central Bank of Brazil must derecognize a financial asset when:

I - the contractual rights to the cash flow of the financial asset expire; or

II - the sale or transfer of the financial asset qualifies for derecognition under the terms of this resolution.

Article 2. The institutions referred to in Article 1 must classify the sale or transfer of financial assets, for accounting recording purposes, into the following categories:

I - operations with substantial transfer of risks and benefits;

II - operations with substantial retention of risks and benefits;

III - operations without substantial transfer or retention of risks and benefits.

Paragraph 1. Operations in which the seller or assignor substantially transfers all risks and benefits of ownership of the financial asset subject to the operation, such as:

I - unconditional sale of a financial asset;

II - sale of a financial asset together with a repurchase option at the fair value of that asset at the time of repurchase;

III - sale of a financial asset together with a purchase or sale option whose exercise is unlikely to occur, must be classified in the category of operations with substantial transfer of risks and benefits.

Paragraph 2. Operations in which the seller or assignor substantially retains all risks and benefits of ownership of the financial asset subject to the operation, such as:

I - sale of a financial asset together with an obligation to repurchase the same asset at a fixed price or the sale price plus any earnings;

II - securities lending contracts;

III - sale of a financial asset together with a total return swap that transfers the market risk exposure back to the seller or assignor;

IV - sale of a financial asset together with a purchase or sale option whose exercise is likely to occur;

V - sale of receivables for which the seller or assignor guarantees in any way to compensate the buyer or assignee for credit losses that may occur, or whose sale occurred together with the acquisition of subordinate shares of the Credit Rights Investment Fund (FIDC) buyer, subject to the provisions of Article 3, must be classified in the category of operations with substantial retention of risks and benefits.

Paragraph 3. Operations in which the seller or assignor does not substantially transfer or retain all risks and benefits of ownership of the financial asset subject to the operation must be classified in the category of operations without substantial transfer or retention of risks and benefits.

Article 3. The assessment regarding the transfer or retention of ownership risks and benefits of financial assets is the responsibility of the institution and must be carried out based on consistent and verifiable criteria, using as methodology, preferably, the comparison of the institution's exposure, before and after the sale or transfer, regarding the variation in the present value of the expected cash flow associated with the financial asset discounted by the appropriate market interest rate, noting that:

I - the selling or assigning institution substantially transfers all risks and benefits when its exposure to the variation in the present value of the expected future cash flow is significantly reduced;

II - the selling or assigning institution substantially retains all risks and benefits when its exposure to the variation in the present value of the expected future cash flow is not significantly altered.

Paragraph 1. The assessment defined in the main text is not necessary in cases where the transfer or retention of ownership risks and benefits of the financial asset is evident.

Paragraph 2. It is presumed that the risks and benefits of the financial asset were retained by the seller or assignor when the value of the guarantee provided, in any way, to compensate for credit losses, is greater than the probable loss, or when the value of the acquired FIDC subordinate shares is greater than the probable loss.

Paragraph 3. The assessment defined in the main text cannot diverge among the institutions referred to in Article 1 that are counterparties in the same operation.

Article 4. For the accounting recording of the sale or transfer of financial assets classified in the category of operations with substantial transfer of risks and benefits, the following procedures must be observed:

I - by the selling or assigning institution:

a) the financial asset subject to sale or transfer must be derecognized from the accounting title used to record the original operation;

b) the positive or negative result determined in the negotiation must be appropriated to the period's result in a segregated manner;

II - by the buying or assigning institution, the acquired financial asset must be recorded at the amount paid, in conformity with the nature of the original operation, maintaining extra-accounting analytical controls on the original contracted value of the operation.

Sole Paragraph. In the case of sale or transfer of a security or market asset classified by the seller or assignor in the category of securities available for sale, the provisions of Article 2, Paragraph 2, of Circular No. 3,068 of November 8, 2001, must be observed.

Article 5. For the accounting recording of the sale or transfer of financial assets classified in the category of operations with substantial retention of risks and benefits, the following procedures must be observed:

I - by the selling or assigning institution:

a) the financial asset subject to sale or transfer must remain, in its entirety, recorded in assets;

b) the values received in the operation must be recorded in assets with a corresponding liability regarding the obligation assumed;

c) revenues and expenses must be appropriated in a segregated manner to the period's result for the remaining term of the operation, at least monthly;

II - by the buying or assigning institution:

a) the values paid in the operation must be recorded in assets as a right to receive from the assigning institution;

b) revenues must be appropriated to the period's result for the remaining term of the operation, at least monthly.

Article 6. For the accounting recording of the sale or transfer of financial assets classified in the category of operations without substantial transfer or retention of risks and benefits, with transfer of control of the financial asset subject to the negotiation, the procedures defined in Article 4 must be observed, and additionally, any new rights or obligations arising from the sale or transfer must be recognized separately as assets or liabilities.

Article 7. For the accounting recording of the sale or transfer of financial assets classified in the category of operations without substantial transfer or retention of risks and benefits, with retention of control of the financial asset subject to the negotiation, the following procedures must be observed:

I - by the selling or assigning institution:

a) the asset remains recorded in proportion to its continued involvement, which is the value by which the institution remains exposed to variations in the value of the transferred asset;

b) the liability regarding the obligation assumed in the operation must be recognized;

c) the positive or negative result determined in the negotiation, regarding the portion whose risks and benefits were transferred, must be appropriated proportionally to the period's result in a segregated manner;

d) revenues and expenses must be appropriated in a segregated manner to the period's result for the remaining term of the operation, at least monthly;

II - by the buying or assigning institution:

a) the values paid in the operation must be recorded as follows:

1. the proportion corresponding to the financial asset, for which the buyer or assignee acquires the risks and benefits, must be recorded in assets in conformity with the nature of the original operation;

2. the proportion corresponding to the financial asset, for which the buyer or assignee does not acquire the risks and benefits, must be recorded in assets as a right to receive from the assigning institution;

b) revenues must be appropriated to the period's result for the remaining term of the operation, at least monthly.

Sole Paragraph. For the purposes of the provision in item I, letter "a", when continued involvement takes the form of a guarantee, of any nature, this value must be the lesser of the value of the financial asset itself and the guaranteed value.

Article 8. The financial asset sold or transferred and the respective liability generated in the operation, if any, as well as the resulting revenue and expense, must be recorded in a segregated manner, prohibiting the offsetting of assets and liabilities, as well as revenues and expenses.

Article 9. The sale or transfer operation of financial assets, whose collection remains under the responsibility of the seller or assignor, must be recorded as simple collection on behalf of third parties.

Sole Paragraph. Any benefits and obligations arising from the collection contract must be recorded as assets and liabilities at fair value.

Article 10. For the accounting recording of financial assets offered as collateral for sale or transfer operations, the following procedures must be observed:

I - by the selling or assigning institution:

a) reclassify the asset separately from other financial assets of the same nature, if the buying or assigning institution has the contractual right to sell it or to offer it as collateral in another operation;

b) derecognize the financial asset, if it becomes delinquent in the operation for which the financial asset was offered as collateral and no longer has the right to demand its return;

II - by the buying or assigning institution:

a) recognize the liability, at fair value, regarding the obligation to return the financial asset received as collateral to the selling or assigning institution, if it has been sold;

b) recognize the financial asset at fair value or derecognize the obligation cited in letter "a", as applicable, if the selling or assigning institution becomes delinquent in the operation for which the financial asset was offered as collateral and no longer has the right to demand its return.

Sole Paragraph. Except in the situation cited in item II, letter "b", the selling or assigning institution must continue to recognize the financial asset offered as collateral, and the buying or assigning institution must not recognize it as its asset.

Article 11. Information must be disclosed, when relevant, in explanatory notes to the financial statements containing, at minimum, the following aspects relative to each classification category:

I - operations with substantial transfer of risks and benefits and operations without substantial transfer or retention of risks and benefits, for which control was transferred: the positive or negative result determined in the negotiation, segregated by financial asset nature;

II - operations with substantial retention of risks and benefits:

a) the description of the nature of the risks and benefits to which the institution remains exposed, by financial asset category;

b) the book value of the financial asset and the obligation assumed, by financial asset category;

III - operations without substantial transfer or retention of risks and benefits, for which control was retained:

a) the description of the nature of the risks and benefits to which the institution remains exposed, by financial asset category;

b) the total value of the financial asset, the value that the institution continues to recognize from the financial asset, and the book value of the obligation assumed, by financial asset category.

Article 12. The provisions provided in this resolution:

I - also apply to operations of sale or transfer of a portion of a financial asset or a group of similar financial assets;

II - should only be applied to the portion of a financial asset if the object of the sale or transfer is a specifically identified part of the cash flow of the financial asset or a proportion of the cash flow of the financial asset;

III - should be applied to the financial asset in its entirety, in other cases.

Article 13. The institutions referred to in Article 1 must keep available to the Central Bank of Brazil, for a minimum period of five years, or for a longer period due to specific legislation or express determination, the documents that clearly and objectively evidence the criteria for classification and accounting recording of financial asset sale or transfer operations.

Article 14. If impropriety or inconsistency is found in the classification and accounting recording processes of the financial asset sale or transfer operation, the Central Bank of Brazil may determine its reclassification, recording, or derecognition, with the consequent recognition of the effects in the financial statements.

Article 15. This resolution enters into force on the date of its publication, producing effects from January 1, 2009.

Brasília, January 31, 2008.

Henrique de Campos Meirelles
President