Resolution CMN No. 4677 — Establishes Maximum Exposure Limits per Client and Maximum Concentrated Exposures

The Central Bank of Brazil, pursuant to Article 9 of Law No. 4.595 of December 31, 1964, makes public that the National Monetary Council, in a session held on July 31, 2018, based on Articles 4 (items VIII and X), 9, and 10 of Law No. 4.728 of July 14, 1965, Article 20, § 1, of Law No. 4.864 of November 29, 1965, Articles 7 and 23 (item "a") of Law No. 6.099 of September 12, 1974, Article 1, § 1, and 12 of Complementary Law No. 130 of April 17, 2009, and Article 1, § 2 of Provisional Measure No. 2.192-70 of August 24, 2001,

R E S O L V E S:

TITLE I

ON THE OBJECT AND SCOPE

Art. 1 This Resolution establishes maximum exposure limits per client and maximum limits for concentrated exposures.

Art. 2 Financial institutions and other institutions authorized to operate by the Central Bank of Brazil must observe the maximum exposure limits per client and the maximum limit for concentrated exposures, in accordance with the following articles of this Resolution:

I - Articles 3 to 18, 24, and 25, for institutions classified in Segment 1 (S1), Segment 2 (S2), Segment 3 (S3), and Segment 4 (S4), as provided in Resolution No. 4.553 of January 30, 2017; or

II - Articles 19 to 25, for institutions classified in Segment 5 (S5), as provided in Resolution No. 4.553 of 2017.

§ 1 The following are not subject to the provisions of this Resolution:

I - institutions not subject to the calculation of Reference Equity (PR), as provided in Resolution No. 4.192 of March 1, 2013, or Simplified Reference Equity (PRS5), as provided in Resolution No. 4.606 of October 19, 2017; and

II - consortium administrators and payment institutions, which must observe the regulation issued by the Central Bank of Brazil, in the exercise of their legal powers.

§ 2 Compliance with the limits referred to in the main text must occur permanently.

§ 3 Compliance with the limits referred to in the main text must occur on a consolidated basis for institutions that are part of the same prudential conglomerate, in accordance with the Accounting Plan of Institutions of the National Financial System (Cosif).

TITLE II

ON THE REQUIREMENTS APPLICABLE TO INSTITUTIONS CLASSIFIED IN S1, S2, S3, AND S4

CHAPTER I

ON LIMITS

Art. 3 The institution mentioned in Article 2, item I, must limit the total of its exposures to the same client to a maximum amount of 25% (twenty-five percent) of Level I of its Reference Equity (PR).

§ 1 In the case of a credit cooperative not affiliated to a central cooperative, the maximum amount referred to in the main text must be 15% (fifteen percent) of Level I of the institution's PR.

§ 2 For a central credit cooperative that provides financial centralization services for the liquidity of its affiliated individual cooperatives as per Article 17, item VII, item "c", of Resolution No. 4.434 of August 5, 2015, by adopting a system of reciprocal guarantees among these affiliates, it is permitted to consider the maximum exposure limit per client of 10% (ten percent) of the sum of Level I of the total PR of the affiliates, limited to Level I of the PR of the central, for exposures associated with the following operations:

I - deposits and securities issued or guaranteed by the same financial institution, affiliated companies, holding company, and its subsidiaries, observing the provisions of Article 8, § 1, item VII; and

II - granting of credits and guarantees to affiliates, in operations previously approved by the board of directors or, in its absence, the executive board of the central cooperative, when the resources referred to in Article 8, § 1, item VI are not used.

§ 3 The board of directors or, in its absence, the executive board of the institution must deliberate on the assumption of exposure that results in total exposure to the same client exceeding:

I - 20% (twenty percent) of Level I of the PR, in the case of the institution mentioned in the main text; and

II - 10% (ten percent) of Level I of the PR, in the case of the cooperative mentioned in § 1.

Art. 4 The institution mentioned in Article 2, item I, listed as globally systemically important by the Financial Stability Board (FSB) must limit its exposures to another institution also listed as globally systemically important to a maximum amount of 15% (fifteen percent) of Level I of its PR.

§ 1 The provisions of the main text apply to a globally systemically important institution from the twelfth month following its inclusion in the list published annually by the FSB.

§ 2 The limit referred to in the main text does not apply to a Brazilian subsidiary or agency of a foreign institution listed as globally systemically important by the FSB.

§ 3 The board of directors or, in its absence, the executive board of an institution listed as globally systemically important by the FSB must deliberate on the assumption of exposure that results in total exposure to another institution also listed as globally systemically important exceeding 10% (ten percent) of Level I of the PR.

Art. 5 The institution mentioned in Article 2, item I, must limit the total of its concentrated exposures to a maximum amount of 600% (six hundred percent) of Level I of its PR.

Sole Paragraph. Concentrated exposure is considered to be the total exposure to the same client with a value equal to or greater than 10% (ten percent) of Level I of the PR.

CHAPTER II

ON THE DEFINITION OF CLIENT

Art. 6 A natural or legal person who is a counterparty in the institution's exposure must be considered as a client.

Sole Paragraph. The following are considered distinct clients:

I - The Union, including the Central Bank of Brazil;

II - each entity whose voting capital is held directly by the Union in more than 50% (fifty percent) together with the legal entities controlled by that entity or that maintain an economic dependence relationship with it, as per Article 7;

III - each State of the Federative Republic of Brazil or the Federal District, together with:

a) the legal entities controlled by it or that maintain an economic dependence relationship with it, as per Article 7; and

b) the legal entities that maintain an economic dependence relationship, as per Article 7, with an entity controlled by it;

IV - each Brazilian Municipality, together with:

a) the legal entities controlled by it or that maintain an economic dependence relationship with it, as per Article 7; and

b) the legal entities that maintain an economic dependence relationship, as per Article 7, with an entity controlled by it;

V - each central government of a foreign jurisdiction;

VI - each central bank of a foreign jurisdiction, when not classified under item V;

VII - each entity whose voting capital is held directly by a central government of a foreign jurisdiction in more than 50% (fifty percent) together with the legal entities controlled by that entity or that maintain an economic dependence relationship with it, as per Article 7; and

VIII - each non-central government entity in a foreign jurisdiction, together with:

a) the legal entities controlled by that government entity or that maintain an economic dependence relationship with it, as per Article 7; and

b) the legal entities that maintain an economic dependence relationship, as per Article 7, with an entity controlled by it.

Art. 7 Counterparties that share credit risk with the institution must be considered as a single client, as per Article 22 of Resolution No. 4.557 of February 23, 2017.

§ 1 In addition to the provisions of the main text, for an individual counterparty with an exposure amount equal to or greater than 5% (five percent) of Level I of the institution's PR, the sharing of credit risk must be presumed in the event of an economic dependence relationship with other counterparties.

§ 2 It is considered that two counterparties maintain an economic dependence relationship when financial difficulties in one counterparty tend to result in similar difficulties in the other, including those related to funding, payment of obligations, or insolvency.

§ 3 Indicators of an economic dependence relationship include the following occurrences:

I - a relevant portion of the gross annual revenues or expenses of one counterparty derives from transactions with the other counterparty;

II - the honoring of partial or full guarantees given by one counterparty for a significant exposure of the other has a high probability of causing the guarantor's failure to meet its obligations to the institution;

III - the production of one counterparty is mainly sold to the other counterparty and cannot be easily replaced as a buyer;

IV - the insolvency of one counterparty has a high probability of causing the insolvency of the other counterparty; or

V - the main source of resources for both counterparties is the same and they do not have an alternative source.

§ 4 In exceptional cases, the institution may not consider as a single client the counterparties connected by a control or economic dependence relationship, provided that the absence of sharing of credit risk is duly demonstrated and documented.

§ 5 The frequency of verification of compliance with the requirement established in § 1 must be documented and subject to evaluation regarding its adequacy.

§ 6 The Central Bank of Brazil may determine, at its discretion:

I - the consideration of two or more counterparties as a single client, if it verifies the existence of sharing of credit risk with the institution; and

II - the alteration of the frequency mentioned in § 5.

§ 7 Exposures mentioned in Article 8, § 1, item II, items "a" to "c" must not be considered for the purpose of verifying the sharing of credit risk, regardless of whether the counterparty is characterized as a Qualified Central Counterparty (QCCP) as per the regulation issued by the Central Bank of Brazil.

CHAPTER III

ON EXPOSURES CONSIDERED FOR LIMIT PURPOSES

Art. 8 The limits referred to in Articles 3 to 5 apply:

I - to exposures considered in the calculation of the RWACPAD and RWACIRB components, as provided in Resolution No. 4.193 of March 1, 2013, that have a natural or legal person as counterparty; and

II - to exposures related to securities classified in the trading portfolio, as per Resolution No. 4.557 of 2017, and not considered in the calculation of the RWACPAD and RWACIRB components.

§ 1 For the purpose of observing the limits mentioned in the main text, the following must not be considered:

I - exposures to the client mentioned in Article 6, Sole Paragraph, items I, V, and VI, including those arising from the provisions of Law No. 9.703 of November 17, 1998;

II - the following exposures to QCCP related to clearing and settlement activities:

a) operations to be settled in that entity;

b) assets provided as collateral; and

c) commitments to a mutualized guarantee fund;

III - exposures of savings and loan associations arising from agreements authorized by the Central Bank of Brazil, within the Housing Financial System;

IV - intraday interbank exposures;

V - interfinancial transfers made by an institution classified in S2, S3, or S4, except between institutions that are part of the same cooperative credit system subject to the provisions of item VI, in cases where there is a legal provision that it automatically subrogates, by right, in the credits and guarantees constituted in favor of the financial agent subject to bankruptcy, extrajudicial liquidation, or intervention;

VI - interfinancial transfers made between institutions that are part of the same cooperative credit system intended for granting financing to members, involving resources captured under the norms of rural credit and interest rate equalization and other credit lines, provided that the condition established in § 3 is met;

VII - deposits and applications made by a credit cooperative in the central cooperative, the confederation of central cooperatives, or the cooperative bank belonging to the respective cooperative system;

VIII - exposures deducted for the purpose of calculating Level I of the PR, as per Resolution No. 4.192 of 2013;

IX - exposures related to operations carried out by an institution classified in S2, S3, or S4 based on a portion of Level I of the PR, as per Resolution No. 4.589 of June 29, 2017;

X - the exposure, to the issuer of securities, of an institution classified in S2, S3, or S4 responsible for the respective primary placement, during the period of sixty days after the end of the distribution period;

XI - the exposure, to the issuer of securities, of an institution classified in S2, S3, or S4 responsible for the respective public acquisition offer, during the period of sixty days after the settlement date of the offer;

XII - exposures related to judicial deposits made by an institution classified in S2, S3, or S4; and

XIII - exposures related to applications with a maturity of up to one year made in the respective headquarters by a subsidiary or agency of a foreign institution classified in S2, S3, or S4.

§ 2 After the periods mentioned in § 1, items X and XI have elapsed, exposures to the issuer of securities must be considered for the purpose of observing the limits mentioned in the main text.

§ 3 It is a condition for exercising the provision of § 1, item VI, that the contracts signed between the transferring institution and the receiving institution, and between the receiving institution and the borrowing member, contain clauses establishing a prerogative in favor of the transferring institution, which can be invoked at any time and independently, allowing the collection, directly from the member, of the future installments of the individual financing, in the form of endorsement of the credit instrument or another legal act whose effects allow such collection.

CHAPTER IV

ON THE VALUE OF EXPOSURES SUBJECT TO GENERAL TREATMENT

Art. 9 Unless otherwise provided for exposures subject to specific treatment, the value of the exposure must correspond:

I - to the respective value subject to the application of the Risk Weighting Factor (RWF) for the purpose of calculating the RWACPAD component mentioned in Resolution No. 4.193 of 2013, in the case of exposure considered in the calculation of the capital requirement using the standardized approach;

II - to the respective value of the exposure risk indicator parameter used in calculating the RWACIRB component mentioned in Resolution No. 4.193 of 2013, in the case of exposure considered in the calculation of the capital requirement using internal credit risk classification systems (IRB approaches) authorized by the Central Bank of Brazil; and

III - to the accounting value of the exposure related to a security or financial instrument classified in the trading portfolio and not considered in the calculation of the RWACPAD and RWACIRB components.

Sole Paragraph. The Credit Conversion Factor (CCF) considered for the purpose of the provisions of the main text must be the same used in calculating the RWACPAD component, limited to a minimum of 10% (ten percent).

CHAPTER V

ON THE VALUE OF EXPOSURES SUBJECT TO SPECIFIC TREATMENT

Section I

On exposures associated with derivatives classified in the trading portfolio, except credit derivatives

Art. 10. For a financial derivative instrument classified in the trading portfolio, except options and credit derivatives, the following must be recognized distinctly:

I - the counterparty associated with counterparty credit risk; and

II - the counterparty associated with the underlying asset, if issued by a natural or legal person, in the case of a position configured as long.

§ 1 For the purpose of the provisions of the main text, item I, the value of the exposure to the counterparty must be calculated in accordance with Article 9.

§ 2 For the purpose of the provisions of the main text, item II, the value of the exposure to the counterparty must correspond to the market value of the position configured as long in the breakdown of said instrument.

Art. 11. For a financial derivative instrument in the form of an option classified in the trading portfolio, the following must be recognized distinctly:

I - the counterparty associated with counterparty credit risk; and

II - the counterparty associated with the underlying asset, if issued by a natural or legal person, in the case of a long position in a call option or a short position in a put option.

§ 1 For the purpose of the provisions of the main text, item I, the value of the exposure to the counterparty must be calculated in accordance with Article 9, except as provided in § 4.

§ 2 For the purpose of the provisions of the main text, item II, the value of the exposure to the counterparty must correspond:

I - to the replacement value of the derivative, in the case of a long position in a call option; or

II - to the total exercise value of the rights conferred by the derivative minus its replacement value, in the case of a short position in a put option.

§ 3 In the case of exposure associated with a short position in a call option or a long position in a put option, it is permitted to deduct the following values from the amount of exposure to other financial instruments classified in the trading portfolio whose counterparty is the same associated with the underlying asset of the respective option:

I - the replacement value of the derivative, in the case of a short position in a call option; or

II - the total exercise value of the rights conferred by the derivative, in the case of a long position in a put option.

§ 4 If the option provided for in § 3, item II, is exercised, the value of the exposure to the counterparty mentioned in the main text, item I, must correspond to the value of the deducted portion.

Section II

On exposures associated with credit derivatives

Art. 12. The exposure associated with a credit derivative, regardless of the portfolio in which it is classified, must observe the treatment established in Article 9.

Section III

On exposures associated with bonds with specific characteristics (covered bonds)

Art. 13. The value of the exposure related to the acquisition of a bond that permanently meets the requirements listed below must correspond to 20% (twenty percent) of its respective accounting value:

I - when in Brazil, issued by multiple banks, commercial banks, investment banks, credit, financing, and investment companies, savings banks, mortgage companies, or savings and loan associations;

II - when abroad, issued by banks or entities that perform mortgage credits;

III - be legally subject to specific regulation intended to protect its holders;

IV - have as underlying assets for its issuance, exclusively:

a) exposures to:

1. entities mentioned in Article 6, Sole Paragraph, items I, V, and VI;

2. national or foreign non-central government entity; or

3. multilateral development entities (MDEs), as per current regulation;

b) exposures guaranteed by the entities mentioned in items 1 to 3;

c) exposures to which an RWF of 35% (thirty-five percent) is applied for the purpose of calculating capital requirements; or

d) exposures related to non-residential real estate financing where the outstanding balance of the financing is less than or equal to 60% (sixty percent) of the original value of the property and to which an RWF less than or equal to 100% (one hundred percent) is applied;

V - the total value of the underlying assets of the respective bond be, proven and permanently, greater than, at least, 10% (ten percent) of the total value of the bond guaranteed by them;

VI - the rights associated with the bond be fully covered by the underlying assets, in accordance with current regulation; and

VII - in the event of discontinuation of the issuing institution, the underlying assets of the bond be primarily used to pay its charges and amortization.

Section IV

On exposures associated with investment fund shares or securitization bonds

Art. 14. In the case of exposure related to the acquisition of investment fund shares or securitization bonds, the respective underlying assets must be identified.

§ 1 For the purpose of the provisions of the main text, the following must be recognized as counterparty:

I - the respective investment fund or the issuer of the securitization bond, for the underlying assets whose participation in the fund or in the securitization structure, proportionally to the amount of shares or bonds, is less than 0.25% (twenty-five hundredths percent) of Level I of the institution's PR; or

II - the issuer of the underlying asset included in the portfolio of the respective investment fund or in the respective securitization structure, for the underlying assets issued by it whose participation in the fund or in the structure, proportionally to the amount of shares or bonds, is equal to or greater than 0.25% (twenty-five hundredths percent) of Level I of the institution's PR.

§ 2 For the purpose of the provisions of § 1, item I, the value of the exposure to the counterparty must correspond to the percentage of participation, in the fund's portfolio or in the securitization structure, of the amount of underlying assets with values less than 0.25% (twenty-five hundredths percent) of Level I of the institution's PR, multiplied by the value of the respective shares or bonds.

§ 3 For the purpose of the provisions of § 1, item II, the exposure to the counterparty must correspond to the percentage of participation, in the fund's portfolio or in the securitization structure, of the underlying assets issued by that counterparty with an amount equal to or greater than 0.25% (twenty-five hundredths percent) of Level I of the institution's PR, multiplied by the value of the respective shares or bonds.

§ 4 In the event that it is not possible to identify the underlying assets of the investment fund's portfolio or the securitization structure, the value of the exposure must correspond to the amount of fund shares or bonds acquired, recognizing as counterparty:

I - the respective investment fund or issuer of the securitization bond, if the amount of shares or bonds is less than 0.25% (twenty-five hundredths percent) of Level I of the institution's PR; or

II - the undefined client, if the amount of shares or bonds is equal to or greater than 0.25% (twenty-five hundredths percent) of Level I of the institution's PR.

§ 5 The impossibility of identifying the underlying assets of the investment fund's portfolio or the securitization bond must be duly documented and subject to verification.

§ 6 Each institution may recognize only one undefined client, to which the limits referred to in Articles 3 to 5 apply.

§ 7 The treatment established in this article must be extended to underlying assets that are investment fund shares.

§ 8 The provisions of this article apply to any other issuing structure of bonds or securities whose remuneration is associated with the flow of receipts of credit rights, other bonds or securities, or credit derivatives.

Art. 15. It must also be recognized as a distinct counterparty from those mentioned in the terms of Art. 14 the agent that entails additional risk inherent to the acquisition of shares in investment funds or securitization notes.

§ 1º The additional risk mentioned in the caput may be associated with the following agents related to the investment fund or securitization note:

I - its issuer, its administrator, or its manager; and

II - the liquidity provider or the credit risk protection provider.

§ 2º For the purposes of the provision in the caput, the exposure to the counterparty is the amount invested in the respective fund or securitization note.

§ 3º The criteria for verifying the sharing of credit risk referred to in Art. 7º apply to the exposure to the agent mentioned in the caput.

§ 4º The absence of additional risk inherent to the acquisition of shares in investment funds or securitization notes must be adequately documented and subject to verification.

CHAPTER VI

OF NETTING BETWEEN POSITIONS

Art. 16. Netting between the long position and the short position is admitted for instruments classified in the trading portfolio, in accordance with Resolution No. 4.557 of 2017, originating from the same issuer, provided the following conditions are met:

I - the long and short positions refer to instruments with the same remuneration form, same reference currency, and same maturity date; or

II - the long and short positions refer to instruments with different remuneration forms or reference currencies, provided the long position has a payment priority greater than or equal to that of the short position, including positions protected by a credit derivative.

§ 1º The exercise of the option referred to in the caput, item II, is conditioned on the segregation of the respective instruments according to their payment priority.

§ 2º In the case of positions protected by a credit derivative, the provisions of Art. 17 must also be applied.

§ 3º The limits referred to in Arts. 3º to 5º do not apply to the net value resulting from netting that results in a short position against the same issuer.

CHAPTER VII

OF CREDIT RISK MITIGATION

Art. 17. The mitigation of credit risk through a mitigating instrument used for the purposes of calculating the RWACPAD portion mentioned in Resolution No. 4.193 of 2013 must also be recognized for the purposes of this Resolution.

§ 1º The recognition of credit risk mitigation relative to the original counterparty in accordance with the caput implies the simultaneous recognition of exposure to the provider of the respective mitigating instrument, except in the following cases:

I - the mitigating instrument takes the form of:

a) bilateral agreement for netting and settlement of obligations;

b) deposits held in the institution itself and credit-linked notes; and

c) instruments of own issuance held in the institution itself or custodied in its favor by third parties; and

II - the provider of the instrument is one of the clients mentioned in Art. 6º, sole paragraph, items I, V, or VI.

§ 2º The value of the exposure to the provider of the credit risk mitigation instrument, in accordance with § 1º, must correspond to:

I - the portion covered by the respective instrument, in the case of suretyship guarantee or credit derivative;

II - the portion covered by the market value of the financial collateral, in the case of its recognition through the simple approach for the purposes of calculating the capital requirement;

III - the value of the financial collaterals, in the case of its recognition in the calculation of the capital requirement for counterparty credit risk;

IV - the value of the financial collateral, considering the adjustment factors, in the case of its recognition through the comprehensive approach for the purposes of calculating the capital requirement; and

V - the value of the exposure to counterparty credit risk calculated in the calculation of the RWACPAD portion mentioned in Resolution No. 4.193 of 2013, in the case where the provider of the instrument is a non-financial entity issuing a credit derivative in the form of a credit swap.

§ 3º In the case of credit risk mitigation in the form of a bilateral agreement for netting and settlement of obligations, the credit result of the netting must be recognized as exposure to the respective counterparty.

§ 4º In the case of exposure referred to in Art. 8º, § 1º, protected by a credit derivative, the value corresponding to the portion covered by the mitigator must be recognized to the provider of the respective mitigating instrument.

§ 5º The unmitigated portion of the exposure must be considered as exposure to the original client.

CHAPTER VIII

OF THE TRANSMISSION OF INFORMATION

Art. 18. Information must be forwarded to the Central Bank of Brazil, in the manner established by it, regarding:

I - compliance with the limits referred to in Arts. 3º to 5º;

II - concentrated exposures and respective counterparties, in accordance with Art. 5º;

III - total exposures and respective counterparties mentioned in Art. 8º, § 1º, except intraday interbank exposures, whose values are equal to or greater than 10% (ten percent) of Tier I of the PR; and

IV - the twenty largest total exposures and respective counterparties included in the scope of application of the exposure limits referred to in Arts. 3º to 5º.

§ 1º The information referred to in the caput must refer to both the original values of the exposures and the respective values considering the effect of a credit risk mitigation instrument, if used.

§ 2º The Central Bank of Brazil may request additional information to that established in the caput when considered necessary for the verification of compliance with the provisions of this Resolution.

TITLE III

OF THE REQUIREMENTS APPLICABLE TO INSTITUTIONS CLASSIFIED IN S5

Art. 19. The institution mentioned in Art. 2º, item II, must limit the total of its exposures to the same client to a maximum amount of 25% (twenty-five percent) of its PRS5.

§ 1º In the case of a credit cooperative not affiliated with a central cooperative, the maximum amount referred to in the caput must be 15% (fifteen percent) of PRS5.

§ 2º The board of directors or, in its absence, the executive board of the institution must deliberate on the assumption of exposure that results in total exposure to the same client exceeding:

I - 20% (twenty percent) of PRS5, in the case of the institution mentioned in the caput; and

II - 10% (ten percent) of PRS5, in the case of the cooperative mentioned in § 1º.

Art. 20. The institution mentioned in Art. 2º, item II, must limit the total of its concentrated exposures to a maximum amount of 600% (six hundred percent) of its PRS5.

Sole paragraph. Concentrated exposure is considered to be the total exposure to the same client whose value is equal to or greater than 10% (ten percent) of PRS5.

Art. 21. A natural or legal person who is a counterparty in the institution's exposure must be considered as a client.

§ 1º The following are considered distinct clients:

I - the Union, including the Central Bank of Brazil;

II - each entity whose voting capital is held directly by the Union in more than 50% (fifty percent) together with the legal entities controlled by that entity;

III - each State of the Federative Republic of Brazil or the Federal District, together with the legal entities controlled by it;

IV - each Brazilian Municipality, together with the legal entities controlled by it;

V - each central government of a foreign jurisdiction;

VI - each central bank of a foreign jurisdiction, when not classified under item V;

VII - each entity whose voting capital is held directly by a central government of a foreign jurisdiction in more than 50% (fifty percent) together with the legal entities controlled by that entity; and

VIII - each non-central government entity in a foreign jurisdiction, together with the legal entities controlled by that government entity.

§ 2º The counterparties between which a relationship of control exists, in accordance with Resolution No. 4.606 of 2017, must be considered as a single client.

§ 3º The Central Bank of Brazil may determine, at its discretion, the consideration of two or more counterparties as a single client, if it verifies the existence of sharing of credit risk to the institution.

Art. 22. The limits referred to in Arts. 19 and 20 apply to exposures to credit risk considered in the calculation of the RWARCSimp portion, referred to in Resolution No. 4.606 of 2017, which have a natural or legal person as counterparty.

§ 1º For the purposes of observing the limits mentioned in the caput, the following must not be considered:

I - exposures to the clients mentioned in Art. 21, § 1º, items I, V, and VI, including those arising from the provisions of Law No. 9.703 of 1998;

II - interfinancial transfers, except those made between institutions belonging to the same cooperative credit system subject to the provisions of item III, where there is a legal provision that the institution is automatically subrogated, by operation of law, in the credits and guarantees constituted in favor of the financial agent subject to bankruptcy, extrajudicial liquidation, or intervention;

III - interfinancial transfers made between institutions belonging to the same cooperative credit system involving resources captured under the norms of rural credit and interest rate equalization and other credit lines, intended for the granting of financing to members, provided the condition established in the sole paragraph is met;

IV - deposits and applications made by a credit cooperative in the central cooperative, in the confederation of central cooperatives, or in the cooperative bank belonging to the respective cooperative system;

V - exposures deducted for the purposes of calculating PRS5, in accordance with Resolution No. 4.606 of 2017; and

VI - exposures related to judicial deposits.

§ 2º It is a condition for the exercise of the provision in § 1º, item III, that the contracts entered into between the transferring institution and the receiving institution and between the receiving institution and the borrowing member contain clauses establishing a prerogative in favor of the transferring institution, which can be invoked at any time and independently, allowing the collection, directly from the member, of the future installments of individual financing, in the form of endorsement of the credit instrument or another legal act whose effects allow such collection.

Art. 23. The value of the exposures mentioned in Art. 21 must correspond to the respective value subject to the application of the FPR for the purposes of calculating the RWARCSimp portion, referred to in Resolution No. 4.606 of 2017.

TITLE IV

OF FINAL PROVISIONS

Art. 24. The occurrence of excess in relation to the limits referred to in this Resolution implies:

I - the prohibition of contracting new operations that entail the expansion of the verified excesses;

II - immediate communication of this occurrence to the Central Bank of Brazil, in the manner defined by it, for institutions classified in S1, S2, S3, or S4;

III - the preparation of a plan to reduce the excess occurred, for institutions classified in S1, S2, or S3; and

IV - the preparation, when deemed necessary by the Central Bank of Brazil, of a plan to reduce the excess occurred, for institutions classified in S4 or S5.

Sole paragraph. The reduction of the excess mentioned in the caput, items III and IV, must occur within an adequate timeframe.

Art. 25. The institution mentioned in Art. 2º or the prudential conglomerate must indicate a director responsible for compliance with the provisions of this Resolution.

Art. 26. The provisions of this Resolution must be observed:

I - from January 1, 2019, for institutions classified in S1 or S2; and

II - from January 1, 2020, for institutions classified in S3, S4, and S5.

Sole paragraph. From January 1, 2019, the institutions mentioned in the caput, item I, must cease to observe Resolution No. 2.844 of June 29, 2001.

Art. 27. The following are revoked on January 1, 2020:

I - Art. 1º, item II, of Resolution No. 2.283 of June 5, 1996;

II - Resolution No. 2.844 of 2001; and

III - Arts. 23 to 25 of Resolution No. 4.434 of 2015.

Sole paragraph. From January 1, 2020, citations to Resolution No. 2.844 of 2001 shall refer to this Resolution.

Art. 28. This Resolution enters into force on the date of its publication.

Ilan Goldfajn
President of the Central Bank of Brazil