Resolution No. 4645 - Defines methodology for calculating the Long-Term Interest Rate (TJLP)

RESOLUTION NO. 4,645, OF MARCH 16, 2018
Defines the methodology for calculating the Long-Term Interest Rate (TJLP).

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 March 16, 2018, based on Article 2 of Law No. 9,365 of December 16, 1996,

HAS RESOLVED:

Article 1. The Long-Term Interest Rate (TJLP), referred to in Article 2 of Law No. 9,365 of December 16, 1996, which will be in effect from April 1, 2018, shall be calculated according to the methodology established in this Resolution.

Article 2. The TJLP, which will be in effect during each calendar quarter, shall be determined according to the following formula, expressed in percentage form with two decimal places:

TJLP = [(1 + M/100) * (1 + P/100) - 1] * 100, where:

I - "M" corresponds to the 12-month inflation target mentioned in item I of Article 1 of Law No. 9,365 of 1996, expressed in percentage form with two decimal places; and

II - "P" corresponds to the risk premium mentioned in item II of Article 1 of Law No. 9,365 of 1996, expressed in percentage form with two decimal places.

Sole Paragraph. The TJLP value shall have as its upper limit the value of the Selic Rate target defined by the Monetary Policy Committee (Copom), referred to in Circular No. 3,868 of December 19, 2017, in effect on the date of TJLP publication, expressed in percentage form with two decimal places, when the value of this target is equal to or greater than 8.50% (eight and a half percent).

Article 3. The inflation target "M" mentioned in item I of Article 2 of this Resolution shall be calculated pro rata for the twelve months following the first month of the TJLP's effectiveness, inclusive, based on the annual targets set by the National Monetary Council.

Article 4. The risk premium "P" mentioned in item II of Article 2 of this Resolution shall be determined according to the following formulas:

I - In the case of NTNm ≥ 4:
P = NTNm - 2; and

II - In the case of NTNm < 4:
P = 0.5 * NTNm.

Sole Paragraph. The rate "NTNm" mentioned in the main text corresponds to the simple arithmetic mean of the rates determined on each business day of the six months immediately preceding the date of its determination, counted from date to date, relative to the three-year vertices of the term structure of interest rates of the National Treasury Notes, Series B (NTN-B), and shall be expressed in percentage terms, with two decimal places, in annual form, considering the convention of 252 (two hundred and fifty-two) business days.

Resolution No. 4,645, of March 16, 2018 Page 2 of 2

Article 5. The term structure of interest rates referred to in the sole paragraph of Article 4 shall be estimated daily, through a parametric model that uses an error minimization methodology regarding market prices of NTN-B.

§ 1. The database for the determination of the market prices mentioned in the main text shall be composed of definitive operations carried out in the secondary market, registered in the Special Settlement and Custody System (Selic), for all available NTN-B maturities.

§ 2. The following shall be excluded from the database, according to criteria of the Central Bank of Brazil:

I - NTN-B of a specific maturity date that are systematically not traded in the secondary market; and

II - operations carried out with prices that deviate unreasonably from the average market price.

§ 3. If it is not possible to adequately estimate the price of the NTN-B of one or more maturities, due to insufficient trades in the secondary market, at the discretion of the Central Bank of Brazil, indicative prices that have broad acceptance as price references in the national financial market shall be used.

§ 4. In the event of impossibility of the estimation mentioned in the main text, including due to insufficient information on trades in the secondary market and, simultaneously, the absence of the indicative prices mentioned in § 3, estimated parameters based on the data of the immediately preceding business day may be adopted.

Article 6. The Central Bank of Brazil shall determine and publish the TJLP on the last business day of each quarter immediately preceding the period of its effectiveness.

Article 7. The Central Bank of Brazil is authorized to issue norms and adopt measures deemed necessary for the execution of the provisions of this Resolution.

Article 8. This Resolution enters into force on the date of its publication.

Ilan Goldfajn
President of the Central Bank of Brazil

This text does not replace the published in the DOU of 3/19/2018, Section 1, p. 40, and in Sisbacen.