At the meeting held on May 23, 2013, the Brazilian Monetary Council (Conselho Monetário Nacional - CMN) approved changes to the provisions that regulate the activity of Brazilian Credit Guarantee Fund (Fundo Garantidor de Crédito – FGC), which is a private institution responsible for the protection of checking/saving account holders and investors against financial institutions in case of intervention, liquidation or bankruptcy. These changes have been made by means of CMN Resolution No. 4222, of the same date, which deals with the by-laws and regulation of FGC.
The two main changes, already approved in the Assembly by the FGC, relate to: (i) the increase of the deposit guarantee for each deposit holder against institutions associated with FGC (ordinary guarantee) from R$ 70 thousand to R$ 250 thousand; and (ii) the inclusion among the guaranteed credits of the Agribusiness Credit Bill (Letra de Crédito do Agronegócio -LCA), which is a credit instrument issued by a public or private financial institution pegged to agribusiness credit rights.
The increase in the ordinary guarantee amount aims to provide greater security to deposit holders and other creditors of financial institutions, aligning this value to the limits practiced in similar economies of Brazil.
The LCA's inclusion among the guaranteed credits arises from its nature, which is mainly a retail instrument.
CMN also approved the assimilation of FGC to the financial institutions for banking secrecy purposes, to allow FGC to have access to the information of the Credit Risk System (SRC) of the Central Bank of Brazil for analysis of the credit operations received in guarantee of Time Deposits with Special Guarantee (Depósitos a Prazo com Garantia Especial – DPGE), which is one of the main funds´ raising instruments used by small and medium size banks in Brazil.
1 The public policy objective of FGC are: (i) to protect depositors and investors under the financial system up to the limits set forth by regulation; (ii) to contribute to maintenance of the stability of the Brazilian Financial System; and (iii) to contribute to the prevention of systemic banking crisis. The members of FGC are the financial institutions operating in the country that: (a) receive demand deposits, deposits in current account for investments, saving account deposits and time deposits; (b) accept bills of exchange; (c) raise funds by issuing and placing real estate bills, mortgage bills and real estate credit bills; and (d) raise funds by compromised operations linked to securities issued by associated companies. This comprises the following entities: multiple banks, commercial banks, investment banks development banks, the Federal Savings Bank (Caixa Econômica Federal – CEF), credit, financing and investment companies, real estate credit companies and savings and loan associations.
2 The banking secrecy is regulated by Complementary Law No. 105, of January 10, 2001, which addresses the confidentiality of transactions performed by financial institutions and other matters.
3 In the case of the DPGE, the guarantee of FGC is limited to R$ 20 million, including principal and interest amounts by investor in each institution (or group of entities belonging to the same financial conglomerate).
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