The Brazilian Monetary Council (Conselho Monetário Nacional – CMN) issued CMN Resolution No. 4379, of October 30, 2014 (CMN Res. 4379/2014) changing the exposure limits per customer governed by CMN Resolution No. 2844, of June 29, 2001.
The maximum limit of exposure per customer in the hiring of credit and leasing operations and in the provision of guarantees, as well as in respect of credits arising from derivative transactions, is 25% of the Regulatory Capital (Patrimônio de Referência - PR) of the financial institution, comprising multi-service banks, commercial banks, investment banks, development banks, the Federal Savings Bank (Caixa Econômica Federal – CEF), credit, finance and investment companies, leasing companies, real estate credit companies, savings and loan associations, development agencies and mortgage companies.
CMN Res. 4379/2014 adjusts the concept of costumer in relation to the Federal Government. The entities directly or indirectly controlled by the Union will be treated as a single customer only when presenting economic dependency relationship among themselves. Likewise, the Union will be treated as a costumer regardless of the entities it controls.
This new resolution aligns the public costumer concept adopted in Brazil to the one internationally prescribed in the document entitled Supervisory framework for measuring and controlling large exposures, released in April of 2014 by the Basel Committee on Banking Supervision. Recognizing that public entities controlled by the Union that operate in different economic sectors may not present relevant dependency, the standard allows for greater convergence between the prudential limits and actual risks of operations with such counterparties.
As regards the public sector, are considered separate customers: (i) the Union; (ii) the entity directly or indirectly controlled by the Union that does not hold economic dependency relationship with another entity directly or indirectly controlled by the Union; (iii) the set of entities directly or indirectly controlled by the Union that maintain economic dependency relationship among themselves; (iv) the State of the Federation or the Federal District, in conjunction with the entities controlled directly or indirectly by this State or the Federal District; and (v) the Municipality, together with the entities controlled directly or indirectly by this Municipality.
For the purposes of the CMN Res. 4379/2014, it is considered that two entities maintain dependency ratio when economic difficulties to raise or pay obligations in an entity tend to result in similar difficulties in another.
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