The Central Bank of Brazil (Banco Central do Brasil – Bacen) has been duly authorized to perform currency swap transactions with central banks of other countries, within the limits and under the conditions set by the Brazilian Monetary Council (Conselho Monetário Nacional – CMN), pursuant to the provisions of article 6 of Law No. 11908, of March 3, 20091. Under the Brazilian Financial System, CMN is the body responsible for establishing exchange policy rules and guidelines for foreign currency transactions2.

Bacen is also authorized to maintain deposit accounts in Brazilian currency (Real) in the name of foreign central banks and institutions domiciled or headquartered abroad which provide clearing, settlement and custody services in the international market, in accordance with the CMN regulation3.

In the extraordinary meeting held on March 21, 2013, CMN decided to define the limits and conditions that apply to the bilateral currency swap agreement to be signed between the Central Bank and the People's Bank of China (the Chinese Central Bank), and issued CMN Resolution No. 4200, of March 26, 2013, establishing such limits and conditions4.

The open value of the transactions arising out of this bilateral currency swap agreement shall not exceed the amount of BRL 60 billion or CNY 190 billion, valid for three years and with the possibility to be extended by agreement between the two parties, and it aims at facilitating bilateral trade between Brazil and China.

The amounts in Brazilian currency received by the People´s Bank of China shall be credited to a special deposit account opened in its name at Bacen, without compensation or access to credit, the use of which is restricted to movements of resources linked to the performance of this bilateral currency swap agreement.

When contracting currency swap transactions under this agreement, Bacen must comply with the exchange rates for the two currencies (Real and Renmimbi) prevailing in the national and international exchange markets and the interest rates and risk premiums of sovereign bonds transacted at the national and international financial markets, so as to ensure that the conditions laid down and agreed between the parties will guarantee the economic-financial balance of the eventually assumed assets and/or obligations.

The opening and maintenance at Bacen of deposit accounts in Brazilian currency in the name of foreign central banks to perform swap transactions of local currencies was regulated by CMN Resolution No. 4202, of March 28, 2013 (CMN Res. 4202/20123). The funds deposited in these deposit accounts will not be remunerated and the granting of credit lined in such accounts in favor of the foreign central bank that signed the swap contract is not allowed. These accounts shall be opened and maintained exclusively for the benefit of foreign central banks that enter into currency swap agreements with Bacen and will be destined solely for the movement of resources needed to carry out the currency swap transactions. Bacen is authorized to adopt the measures and enact the supplementary rules necessary to the implementation of the provisions of CMN Res. 4202/2013, including to impose limits regarding the movement of values of these accounts.


1 Law 11908/2009 authorizes Banco do Brasil S.A and the Federal Savings Bank (Caixa Econômica Federal – CEF) to incorporate subsidiaries and acquire equity participation in financial institutions with head office in Brazil, and has a specific provision that enables Bacen to enter into currency swap agreements with central banks of other countries whenever authorized by CMN, among other matters.

2 According to item IV of article 4 of Law No. 4595, of December 31, 1964 (which deals with monetary, bank and credit institutions and policy, creates CMN and takes further measures), subject to guidelines set forth by the President of the Republic, it shall be the exclusive responsibility of CMN to establish exchange policy rules and guidelines including for the sale and purchase of gold and any Special Drawing Rights and foreign currency transactions.

3 This specific issue is governed by articles 7 and 10 of Law No. 11803, of November 5, 2008, that amends Law No. 10179, of February 6, 2001 (which rules on the Government bonds of responsibility of the National Treasury, consolidating the existing legislation on the subject) and deals with the use of financial surplus in December 31, 2007, among other matters.

4 The establishment of this currency swap agreement was demanded by the Brazilian and Chinese leaders in their joint statement during the Rio +20 meeting in June 2012 and it signals a higher level of cooperation between the monetary authorities of the two countries, reflecting the strategic importance of the bilateral economic relations between Brazil and China.

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