How To Do Crossborder Banking Operations In Brazil - Licensing Of Financial Institution

Any financial institution must be licensed by Bacen in order to operate in Brazil. Bacen considers applications to it under the rules made by the CMN and decides whether or not to grant its approval.

The granting of such approval is subject to any conditions which are deemed to be in the public interest by Bacen. A foreign financial institution is subject to the same requirements but, in addition to Bacen's approval, also needs a specific government authorization, evidenced by means of a decree issued by the President of the Republic, as a condition precedent to initiate its activities in Brazil.

The prior approval of the CMN is required for (I) Brazilian commercial banks authorised to deal in exchange to open agencies, branches or representative offices in other countries and for (ii) Brazilian commercial and investment banks to acquire an interest equity participation in the capital of foreign entities. The applicable regulations of Bacen that govern the opening of such agencies, branches or representative offices abroad do not determine what kind of business they can engage in. Such regulations, however, establish that if the foreign country has no limitation on the third-party funds that may be raised by means of sight and term deposits, with or without the issuance of certificates, or on the guarantees that may be granted, the agency, branch, representative office or foreign subsidiary must observe the limitations and proportions to which the bank is subject in Brazil.

The opening and operating of representative offices of foreign banks in Brazil are also subject to the prior approval of Bacen. This approval was formerly only granted to individuals. However, in certain cases, Bacen has authorised companies organized in Brazil for this specific purpose to operate as legal representative of a foreign bank in Brazil is severely restricted. At no time may the representative may, however, promote the services and facilities which the foreign bank has to offer, and thereby solicit clients for the bank. The representative may also obtain and supply the bank with information regarding a variety of matters, and act as a point of contact between the principal place of business and its clients. If the representative exceeds its limits, his approval may be cancelled by Bacen.

The content of this article is intended to provide a general guide to the subject matter. A specialist's advice should be sought in order to provide professional advice on a case to case basis which will meet specific circumstances.

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