Resolution CMN No. 4415

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4,595, of December 31, 1964, makes public that the National Monetary Council, in a session held on May 28, 2015, considering the provisions of Article 4, item VI, of the aforementioned law, Articles 4, 15, item I, and 21 of Law No. 4,829, of November 5, 1965, Article 49 of Law No. 8,171, of January 17, 1991, and Article 23, sole paragraph, Articles 32 and 49 of Law No. 11,076, of December 30, 2004,

RESOLVES:

Article 1. The direction of resources raised through the issuance of Agribusiness Credit Letters (LCA) backed by credit rights originating from operations subject to the directions set forth in Sections 6-2 and 6-4 of the Rural Credit Manual (MCR), or contracted with resources governed by MCR 6-1-2, is hereby established for application in rural credit operations under the conditions of MCR 6-3, at the following percentages:

I - at least 50% (fifty percent) of the daily average balance of LCAs issued in the period from June 2, 2015, to May 31, 2016; and

II - 100% (one hundred percent) of the daily average balance of LCAs issued from June 1, 2016, onward.

§ 1. The application of up to 50% (fifty percent) of the resources referred to in items I and II in financing operations referred to in §§ 1 and 2 of Article 49 of Law No. 8,171, of January 17, 1991, is permitted.

§ 2. In the case of an LCA with partial backing in the credit rights referred to in the caput, the participation of said credit rights in the total backing of the LCA shall be considered for the purpose of applying the provisions of this Article.

§ 3. The provisions of the caput do not apply to the replenishment of backing for an LCA issued prior to June 2, 2015, until the date of its original maturity.

Article 2. The issuance of an LCA backed by credit rights over which there is a right of subrogation by third parties or other forms of guarantee in favor of third parties, including the pledge right referred to in Article 32 of Law No. 11,076, of 2004, is prohibited, as is the use of said credit rights to replenish the backing of an LCA.

Article 3. A financial institution that fails to direct the resources referred to in Article 1 shall be subject to the provisions of MCR 6-4-11 to 6-4-15.

Article 4. Section 7 (Agribusiness Credit Letter) of Chapter 6 (Resources) of the MCR is hereby established, which sets forth the rules for compliance with the direction instituted by this Resolution, as per the annex.

Article 5. MCR 6-1-13-“a” shall be amended to read as follows:

“13 - ............................................................

a) control and monitoring of applications supported by the resources referred to in Sections 6-2, 6-4, and 6-7 and of the balances of applications in rural credit;

............................................................” (NR)

Article 6. This Resolution enters into force on the date of its publication.

Alexandre Antonio Tombini
President of the Central Bank of Brazil

----------------------------------------------------------------------------- TITLE: RURAL CREDIT
CHAPTER: Resources - 6
SECTION: Agribusiness Credit Letter - 7

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1 - Financial institutions that raise resources through the issuance of Agribusiness Credit Letters (LCA) must observe the provisions of this Section.

2 - Resources raised through the issuance of LCA backed by credit rights originating from operations subject to the directions set forth in MCR 6-2 and 6-4, or contracted with resources governed by MCR 6-1-2, must be directed for application in rural credit operations under the conditions of MCR 6-3, at the following percentages:

a) at least 50% (fifty percent) of the daily average balance of LCAs issued in the period from June 2, 2015, to May 31, 2016; and

b) 100% (one hundred percent) of the daily average balance of LCAs issued from June 1, 2016, onward.

3 - In the case of an LCA with partial backing in the credit rights referred to in item 2, the participation of said credit rights in the total backing of the LCA shall be considered for the purpose of applying the provisions of that item.

4 - The provisions of item 2 do not apply to the replenishment of backing for an LCA issued prior to June 2, 2015, until the date of its original maturity.

5 - As a permitted option, up to 50% (fifty percent) of the resources referred to in items “a” and “b” of item 2 may be applied in financing operations referred to in §§ 1 and 2 of Article 49 of Law No. 8,171, of January 17, 1991.

6 - For the purpose of the direction established in this Section, the following must be observed:

a) the calculation period begins on the first business day of the month of June and ends on the last business day of the month of May of the following year, when the daily average balances relative to the business days of the LCAs referred to in items “a” and “b” of item 2 must be determined;

b) the compliance period is the period in which the resources determined in accordance with item “a” must be applied, beginning on the first business day of the month of July and ending on the last business day of the month of June of the following year;

c) compliance with the direction is effected based on the daily average balances of the credit operations referred to in this Section, relative to business days;

d) deficiency is understood as the total or partial failure to apply resources under the conditions established in this Section;

e) monthly, financial institutions must provide information to the Central Bank of Brazil regarding the resources governed by this Section, by submitting MCR - Document 24, by the 20th day of the month following the month of the reported position, under the responsibility of the director in charge of the rural credit area, whose data must be registered in the Information System on Entities of Interest of the Central Bank (Unicad), in the specific location; and

f) the verification of compliance, under the responsibility of the Central Bank of Brazil, must be effected from July 20 of each year, without prejudice to actions emanating from the supervision area, with the financial institution observing the provisions of item 7, insofar as applicable.

7 - Upon the conclusion of the compliance period, a financial institution that incurs a deficiency in complying with the directions established in this Section shall be subject to the provisions of MCR 6-4-11 to 6-4-15 (Resolution No. 4,348).

8 - The general rules of rural credit that do not conflict with the special provisions contained in this Section apply to operations carried out based on resources raised through the issuance of LCA, governed by this Section.