Resolution CMN No. 4795 — Authorizes the Central Bank of Brazil to Grant Loan Operations via Special Temporary Liquidity Line for Acquisition of Financial Letters with Financial Asset or Securities Collateral (LTEL-LFG)

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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 an extraordinary session held on April 1, 2020, based on Article 4, item XVII, of Law No. 4.595 of 1964, Article 1 of Law No. 11.882 of December 23, 2008, in view of the provisions of Article 66-B of Law No. 4.728 of July 14, 1965, Articles 26, § 1, and 28, § 2, of Complementary Law No. 101 of May 4, 2000, and Articles 37 to 42 of Law No. 12.249 of June 11, 2010,

R E S O L V E D:

CHAPTER I

OBJECT AND SCOPE OF APPLICATION

Art. 1 This Resolution authorizes the Central Bank of Brazil to carry out loan operations, under specific conditions, through the Special Temporary Liquidity Line, by direct acquisition in the primary market of Financial Letters with guarantee in financial assets or securities (LTEL-LFG).

Art. 2 The loan operations referred to in this Resolution will be available until December 31, 2020, for contracting by multiple banks, commercial banks, investment banks, savings banks, and the National Bank for Economic and Social Development (BNDES), holders of Bank Reserve Accounts that adhere to the contractual conditions and operational procedures established by the Central Bank of Brazil for the formalization of the issuance of the Financial Letter and mobilization of the financial assets or securities guaranteeing them.

Sole Paragraph. The contracting of operations in the form of the caput is conditioned to the constitutive registration of the Financial Letter in a central depository of financial assets authorized to operate by the Central Bank of Brazil, combined with the linking of financial assets or securities guaranteeing them fiduciarily to the Central Bank of Brazil, in accordance with Article 66-B of Law No. 4.728 of July 14, 1965, at a moment prior to the issuance of the Financial Letter, for the purpose of calculating the financial limit of each operation.

Art. 3 The Financial Letters referred to in this Resolution may be issued, at the discretion of the Central Bank of Brazil, observing the minimum maturity period of 30 (thirty) and maximum of 359 (three hundred and fifty-nine) calendar days and the other conditions established by the Autarchy.

Art. 4 The issuances referred to in this Resolution must provide for a single redemption payment, on the maturity date of the instrument, aggregating, to the principal value of the issuance, interest corresponding to the application, on the unit value of the instrument on the previous day, of the rate obtained by the composition of the Selic Rate, defined according to the regulation in force, calculated for each business day of the operation period, with an addition fixed by the Central Bank of Brazil and valid on the date of issuance of the Financial Letter.

CHAPTER II

ELIGIBILITY CONDITIONS OF THE FINANCIAL ASSETS OR SECURITIES GUARANTEEING

Art. 5 The following financial assets or securities may be accepted as guarantee for the Financial Letter referred to in this Resolution, provided they integrate the asset of the issuing financial institution and are registered in a financial asset registering entity or deposited in central depositories of financial assets and securities:

I - credit operations;

II - leasing operations;

III - other operations with the characteristic of granting credit;

IV - debentures that do not have subordination or conversion into shares clauses and that are not issued by financial companies or by companies directly or indirectly controlled by financial institutions or holding companies of financial institutions; and

V - commercial notes that are not issued by financial companies or by companies directly or indirectly controlled by financial institutions or holding companies of financial institutions.

§ 1 The Central Bank of Brazil may establish the criteria, conditions, and characteristics of the financial assets or securities that will be eligible for the purposes provided in the caput, including fixing parameters more restrictive than those provided in this Resolution.

§ 2 The Central Bank of Brazil will provide for the methodology for pricing the financial assets or securities guaranteeing them, for the purpose of calculating the financial limit for the issuance of the Financial Letters referred to in this Resolution.

Art. 6 Financial assets or securities classified in the AA, A, and B risk levels, according to criteria established in the regulation in force, may be accepted, as guarantee for the LTEL-LFG, in the following proportion in relation to the value of the Financial Letter:

I - if they involve financial assets referred to in items I, II, and III of Article 5, whose debtor has operations reported to the Credit Information System (SCR) by more than one financial institution, credits resulting from payroll-deducted loans in the public sector, or credits with real or surety guarantees at the discretion of the Central Bank of Brazil:

a) 120% (one hundred and twenty percent), for credits classified in the AA risk category;

b) 130% (one hundred and thirty percent), for credits classified in the A risk category;

c) 140% (one hundred and forty percent), for credits classified in the B risk category;

II - if they involve financial assets referred to in items I, II, and III of Article 5 not included in item I of this article:

a) 150% (one hundred and fifty percent), for credits classified in the AA risk category;

b) 160% (one hundred and sixty percent), for credits classified in the A risk category; and

c) 170% (one hundred and seventy percent), for credits classified in the B risk category;

III - if they involve financial assets or securities referred to in items IV and V of Article 5:

a) 120% (one hundred and twenty percent), for financial assets or securities relating to credits classified in the AA risk category;

b) 130% (one hundred and thirty percent), for financial assets or securities relating to credits classified in the A risk category;

c) 140% (one hundred and forty percent), for financial assets or securities relating to credits classified in the B risk category.

§ 1 For the purposes of the provision in the caput, the value of the financial assets or securities corresponds to the net book value of the provision, according to the criteria established in the Accounting Plan of the Institutions of the National Financial System (Cosif).

§ 2 The issuing institution of the Financial Letter must update in the financial asset registering entity and in the central depository of financial assets and securities the information that may imply a change in the classification of the financial assets or securities guaranteeing them in the categories referred to in this article.

§ 3 The Central Bank of Brazil will define the methodology and equivalence criteria necessary for the classification of the financial assets or securities guaranteeing them in the hypotheses provided in the caput.

CHAPTER III

RELEASE, SUFFICIENCY, AND RECOMPOSITION OF GUARANTEE

Art. 7 The Central Bank of Brazil shall provide for the cancellation of the liens constituted on the financial assets or securities guaranteeing them, based on a request from the financial institution that linked them as guarantee, whenever:

I - there is no creditor balance of the Financial Letter linked to the corresponding financial assets or securities; or

II - the release of the financial assets or securities does not compromise the conditions of sufficiency of guarantees relative to the Financial Letters issued, as established in Article 8.

§ 1 The issuing institution may substitute the financial assets or securities guaranteeing them with other eligible financial assets or securities, provided that the substitution does not imply non-observance of the conditions of sufficiency of guarantees linked to the Financial Letters issued, as provided in Article 8.

§ 2 The substitution referred to in § 1 depends on the formal consent of the Central Bank of Brazil.

Art. 8 The issuer of the Financial Letter must maintain linked as guarantee, in favor of the Central Bank of Brazil, financial assets or securities that meet the criteria defined and in amounts sufficient to ensure that the total value of these financial assets or securities, according to the criteria defined by the Autarchy and in agreement with the regulation in this Resolution, is greater than the value of the Financial Letter issued.

§ 1 The total value of the financial assets or securities guaranteeing them considered for the computation of the sufficiency of the guarantees linked to the Financial Letter will be achieved by the sum of the value of each financial asset divided by the respective parameter defined in Article 6.

§ 2 The provision in the caput, regarding the sufficiency of the financial assets or securities guaranteeing them in relation to the value of the Financial Letter, must be observed throughout the entire term of the operation referred to in this Resolution.

§ 3 Whenever the total value of the financial assets or securities given as guarantee proves to be lower than the value of the Financial Letter, the issuer must promote the recomposition of the guarantees, through the constitution of additional guarantees or the substitution of financial assets or securities guaranteeing them.

§ 4 The Central Bank of Brazil may admit that the issuing institution of the Financial Letter uses federal public bonds to effect the recomposition of the guarantee, according to criteria defined by the Autarchy.

Art. 9 The contracting institution must promote the total early redemption of the Financial Letter when, showing that the financial assets or securities guaranteeing them are insufficient for the operations in force, it does not effect the recomposition of the guarantee.

CHAPTER IV

DEFAULT

Art. 10. The debtor institution that does not comply with the regularization of payments or the recomposition of guarantees may be declared in default by the Central Bank of Brazil and, in this condition, all maturities of Financial Letters issued by it under this Resolution will be accelerated to the date on which the default is declared by the Autarchy.

Art. 11. The declaration of default will be made by decision of the Central Bank of Brazil and may, at its discretion, entail the execution, total or partial, and the alienation of the financial assets or securities guaranteeing them.

§ 1 In the execution and alienation of financial assets or securities with guarantee, which will be constituted through fiduciary assignment of rights over movable property, as provided in Article 66-B of Law No. 4.728 of 1965, the result of any excess of guarantees will be returned to the contracting financial institution.

§ 2 The instruments that will formalize the issuances of Financial Letters must contain a clause providing for the possibility of the Central Bank of Brazil, at its discretion, receiving the financial assets or securities guaranteeing them in payment of the debt if their alienation does not materialize, without prejudice to the provision in § 3.

§ 3 If, after the excussion of the guarantees constituted on the financial assets or securities guaranteeing them, the resulting product is not sufficient to settle the debt arising from the Financial Letters issued, plus collection, judicial, and extrajudicial expenses, the issuing financial institution and the providers of personal guarantee will continue to be obligated for the remaining debtor balance, applying to them the provisions of Article 1-A of Law No. 11.882 of December 23, 2008.

CHAPTER V

GENERAL PROVISIONS

Art. 12. For the issuances within the scope of this Resolution, the fiscal regularity requirements provided in Article 62 of Decree-Law No. 147 of February 3, 1967, Article 1, § 1, of Decree-Law No. 1.715 of November 22, 1979, Article 27, item “b”, of Law No. 8.036 of May 11, 1990, and in Law No. 10.522 of July 19, 2002, are waived, for a period of one year, observed the provision in § 3 of Article 195 of the Constitution.

Art. 13 Resolution No. 4.733 of June 27, 2019, shall enter into force with the following alteration:

“Art. 5 ......................................................

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§ 7 In issuances intended exclusively for the realization of operations with the Central Bank of Brazil aimed at meeting the liquidity needs of the issuing institution, the minimum maturity period of the Financial Letter must observe the specific regulation of the operation, the prohibition referred to in the caput not applying.” (NR)

Art. 14. The Central Bank of Brazil is authorized to issue complementary norms for the execution of the provisions of this Resolution.

Art. 15. This Resolution enters into force on the date of its publication.

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