March 07, 2019

BCBS published reports assessing implementation of the net stable funding ratio (NSFR) and the large exposures (LE) framework in Brazil. Overall, the NSFR and the large exposures framework in Brazil were found to be compliant with the global standards of BCBS. This is the highest of the four possible assessment grades, with each component being assessed as compliant.

Brazil implemented the NSFR as a minimum standard as of October 01, 2018. The Brazilian NSFR regulation is applicable to large or internationally active banks on a consolidated basis. The NSFR minimum requirements were implemented via a resolution and a circular issued in November and December 2017, respectively. The Assessment Team recognizes the efforts made by BCB to improve the consistency of its NSFR regulation throughout the assessment process. These amendments, notably in the areas of available stable funding (ASF), required stable funding (RSF) and disclosure requirements, became effective prior to December 31, 2018 (Annex 4 of the report contains a complete list of the amendments), which was the cut-off date for the assessment. The NSFR regulation of the Central Bank of Brazil (BCB) is super-equivalent to the Basel NSFR standard with regard to the scope of high-quality liquid assets (HQLA). The stricter rule has not been taken into account as a mitigant for the overall or component-level assessment of compliance.

Additionally, Brazil implemented the large exposures framework as a minimum standard as of January 01, 2019. The Brazilian large exposures regulation is applicable to large or internationally active banks on a consolidated basis. The large exposures framework is applied to other banks proportionally, taking into account their size and complexity. The framework was implemented via a resolution issued by the National Monetary Council in July 2018. The Assessment Team recognizes the efforts made by BCB to improve the consistency of its large exposures regulation throughout the assessment process. These amendments, notably in the area of the value of exposures, became effective prior to December 31, 2018 (Annex 3 contains a complete list of the amendments), which was the cutoff date for the assessment. The Assessment Team believes it would be helpful if the Basel Committee provides further clarification on whether a 15% or a 25% limit should be applied in cases where one global systemically important bank (G-SIB) has a single exposure to the subsidiary of another G-SIB, without having any other exposures to the G-SIB or to any other entities belonging to that G-SIB. 

These publications form part of the Regulatory Consistency Assessment Program (RCAP), through which the Basel Committee monitors the timely adoption of regulations by its members, assesses the regulations' consistency with the Basel framework, and examines the consistency of banks' calculation of the prudential ratios across jurisdictions. The Basel Committee plans to complete its review of the implementation of the NSFR and the large exposures framework for all member jurisdictions by March 2021. 

 

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Keywords: Americas, Brazil, Banking, RCAP, NSFR, Large Exposures, Basel III, BCB, BCBS


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