Resolution CMN No. 4733 — Conditions for the Issuance of Financial Notes by Financial Institutions

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 June 27, 2019, based on Articles 4, items VI and VIII, of the aforementioned Law, Article 10 of Law No. 4,728 of July 14, 1965, and Article 41 of Law No. 12,249 of June 11, 2010,

R E S O L V E S:

Article 1. This Resolution regulates the conditions for the issuance of Financial Notes.

Article 2. Financial Notes may be issued by multiple banks, commercial banks, development banks, investment banks, credit, financing and investment companies, savings banks, mortgage companies, real estate credit companies, credit cooperatives, and by the National Bank for Economic and Social Development (BNDES).

§ 1. The issuance of Financial Notes by development banks must comply with the conditions set forth in this Resolution and in specific regulations.

§ 2. The issuance of Financial Notes by BNDES is subject to compliance with the limit corresponding to the value of Level I of Reference Equity (PR) of the institution, as defined in the terms of current regulations.

§ 3. Credit cooperatives may only issue Financial Notes for the purpose of composing Reference Equity.

Article 3. Financial Notes must be issued with a unit nominal value equal to or greater than:

I - R$300,000.00 (three hundred thousand reais), if it contains a subordination clause, pursuant to Article 40 of Law No. 12,249 of June 11, 2010; and

II - R$50,000.00 (fifty thousand reais), if it does not contain a subordination clause.

Article 4. The remuneration of Financial Notes may be based on fixed or floating interest rates, combined or not, as well as other rates, provided they are publicly known and regularly calculated.

§ 1. The issuance of Financial Notes is admitted with the following provisions:

I - periodic payment of earnings, provided that intervals are not less than 180 (one hundred and eighty) days; and

II - update of its nominal value based on a price index.

§ 2. The redemption value of Financial Notes may be lower than the issuance value, according to its remuneration criteria.

§ 3. The nominal value of Financial Notes cannot be updated based on exchange rate variation, except as provided in Article 6, item II, of this Resolution.

Article 5. The minimum maturity period for Financial Notes is 24 months, and redemption, total or partial, before the agreed term is prohibited.

§ 1. The prohibition set forth in the main text does not apply if the issuing institution performs early redemption for the purpose of immediately exchanging the instrument for another Financial Note issued by it.

§ 2. For the purposes of § 1, the following are prohibited:

I - the exchange of Financial Notes with a subordination clause for Financial Notes without a subordination clause; and

II - the exchange of Financial Notes issued less than twelve months ago.

§ 3. In the exchange of Financial Notes, early redemption must be carried out through an organized over-the-counter market.

§ 4. The Financial Notes placed in substitution for the redeemed instrument must observe the following characteristics:

I - unit nominal value equal to or greater than the market value of the redeemed instrument minus the tax obligations arising from the operation; and

II - maturity period greater than the remaining term of the redeemed instrument, observing the minimum term established in the main text.

§ 5. In compliance with § 4, item I, an exchange is admitted for Financial Notes whose sum of respective unit nominal values is equal to or greater than the market value of the redeemed instrument minus the tax obligations arising from the operation.

§ 6. The early redemption of Financial Notes with a subordination clause is not subject to the authorization of the Central Bank of Brazil provided for in Articles 17, item IX, and 20, item V, of Resolution No. 4,192 of March 1, 2013, provided that the Financial Notes placed in substitution for the redeemed instrument:

I - present an interest rate equal to or lower than that of the redeemed Financial Note; and

II - maintain the other characteristics of the redeemed Financial Note, respecting the requirements set forth in this article for its exchange.

Article 6. Exclusively when issued with a subordination clause, Financial Notes may provide:

I - maturity conditioned solely upon the occurrence of the dissolution of the issuing institution or the default of the obligation to pay the stipulated remuneration, in which case both conditions must be stated in the instrument; and

II - correction by exchange rate variation.

Article 7. Exclusively for the purpose of composing Reference Equity, it is admitted that the Financial Note referred to in Article 6 of this Resolution be issued with the following provisions:

I - suspension of the payment of the stipulated remuneration; and

II - permanent extinction of the credit right represented by it or, alternatively, conversion of this right into shares eligible for the Main Capital of the issuing institution.

§ 1. The effectiveness of the clauses mentioned in the main text must be conditioned upon the validity of the authorization referred to in Article 24 of Resolution No. 4,192 of 2013, a condition that must be stated in the instrument.

§ 2. In the event of liquidation or bankruptcy of the issuing institution, the payment of holders of Financial Notes issued with the characteristics established in current regulations for composing Level II of Reference Equity must take precedence over the payment of holders of Financial Notes issued with the characteristics of Supplementary Capital of Reference Equity.

Article 8. For the purposes of Article 24 of Resolution No. 4,192 of 2013, the Central Bank of Brazil may regulate authorization, in a general manner, for the use of resources captured through Financial Notes in the composition of Reference Equity.

Sole Paragraph. The general authorization referred to in the main text does not apply to Financial Notes issued with a clause converting the credit right represented by them into shares eligible for the Main Capital of the issuing institution.

Article 9. Financial Notes with maturity equal to or greater than 36 months may be issued with a clause for the issuing institution's option to repurchase or to resell to the issuing institution, combined or not with a clause modifying its remuneration if the option is not exercised.

§ 1. The first exercise date of the repurchase and resale options must observe the minimum term referred to in the main text of Article 5.

§ 2. The interval between the exercise dates of the options must be at least 180 days.

§ 3. The exercise of the repurchase option by the issuing institution of Financial Notes subject to public offering must observe equitable criteria, in accordance with current regulations.

§ 4. The exercise of the repurchase or resale option referred to in this article:

I - is not subject to compliance with the limits established in the main text of Article 10 of this Resolution;

II - implies the extinction of the Financial Note from the date of its respective exercise.

Article 10. Financial Notes may be repurchased by the issuing institution at any time, provided that through stock exchanges or an organized over-the-counter market, for retention in treasury and subsequent sale, up to the limit of:

I - 5% (five percent) of the book value of Financial Notes issued by it without a subordination clause; and

II - 3% (three percent) of the book value of Financial Notes issued by it with a subordination clause.

§ 1. For the purposes of the main text, the book value must be calculated on the date of repurchase without deduction of the balance of Financial Notes in treasury.

§ 2. For the purposes of verifying compliance with the limits referred to in the main text, Financial Notes acquired by the following must be considered:

I - entities belonging to the prudential conglomerate, pursuant to Resolution No. 4,280 of October 31, 2013; and

II - other entities subject to direct or indirect control of the issuing institution, characterized by:

a) shareholdings in companies located in the country or abroad in which the institution holds, directly or indirectly, alone or together with other partners, including due to the existence of voting agreements, partner rights that ensure predominance in social deliberations or power to elect or dismiss the majority of administrators; or

b) effective operational control, configured by common administration or management or by market activity under the same brand or trade name.

§ 3. The provisions of § 2 do not apply to Financial Notes acquired in primary placement.

§ 4. Up to the limit referred to in item II of the main text, the following requirements established by Resolution No. 4,192 of 2013 do not apply to the repurchase of Financial Notes with a subordination clause, including as a result of the exercise of the option referred to in Article 9 of this Resolution:

I - the authorizations of the Central Bank of Brazil referred to in Articles 17, item IX, and 20, item V;

II - compliance with the minimum term of five years between the issuance date and the first exercise date of the repurchase option, provided for in Articles 18, item I, and 21, item I;

III - compliance with the minimum term of five years between the relending date and the maturity date of the instrument, provided for in Article 22; and

IV - communications to the Central Bank of Brazil referred to in Articles 19 and 22.

Article 11. The issuing institution and institutions participating in the distribution, placement, or negotiation process of Financial Notes must adopt procedures that ensure:

I - the adequacy of the instrument to the investor's profile;

II - the investor's access to information necessary for investment decisions.

Sole Paragraph. For the purposes of the main text, the following information regarding Financial Notes must be provided to the investor at a minimum:

I - impossibility of redemption before the agreed maturity;

II - conditions for exercising the option to repurchase by the issuing institution or to resell to the issuing institution, if applicable;

III - criteria used for its exchange;

IV - conditions for repurchase by the issuing institution;

V - possibility of redemption lower than the issuance value, due to remuneration criteria; and

VI - conditions regarding coverage by the Credit Guarantee Fund (FGC).

Article 12. The following are repealed:

I - item II and § 1 of Article 29-A of the Regulation annexed to Resolution No. 394 of November 3, 1976;

II - Resolution No. 4,123 of August 23, 2012;

III - Resolution No. 4,330 of May 26, 2014; and

IV - Resolution No. 4,382 of November 18, 2014.

Article 13. This Resolution enters into force on October 1, 2019.

Roberto de Oliveira Campos Neto
President of the Central Bank of Brazil