Featured Product

    BCB Outlines ESG Focus and Prudential Rules for Payment Activities

    The Central Bank of Brazil (BCB) published the revised prudential rules for payment activities made by certain financial institutions, a report that sets out deliverables in the area of environmental, social, and governance (ESG), and a report that focuses on the implementation, projects undertaken, and achievements with respect to the regulatory sandbox initiative. The report notes that, in the first cycle of the central bank regulatory sandbox, 52 projects were registered and seven were selected, with report also explaining the selection rationale for these projects.

    Revised prudential rules for payment activities

    The National Monetary Council (CMN) recently approved Resolution 5049, which revises the prudential rules for payment activities. The Resolution addresses the calculation of the capital required for the risks associated with payment services (RWASP) for type 1 conglomerates falling within segments S2 to S5 (largely comprising of banks). The clusters classified in S1 (banks of systemic importance) are not subject to these rules and will continue to follow the Basel regulatory standard. The new regulation specifies that Type 1 and Type 3 conglomerates are subject to the same rules for the calculation of minimum capital requirements. This CMN Resolution exempts the subsidiary financial institutions of the capital requirement calculation payment institution in an individualized manner. 

    Continuing the improvement of the prudential framework applicable to payment institutions and their conglomerates, BCB also approved the Resolution 265 establishing the risk management structure, capital management structure, and policy for the disclosure of prudential conglomerate information classified as Type 3. Under the rules still in force, the conglomerate's leading payment institution is subject to the risk management requirements set forth in Circular No. 3681, while the subsidiary financial institution is subject to the commands of Resolution No. 4557. The new BCB Risk and Capital Management Resolution covers the requirements present in the two rules mentioned and will apply to the Type 3 conglomerate, bringing greater efficiency and security in the risk and capital management of this type of conglomerate. Finally, the circulars and resolutions that establish the methodology for calculating the risk-weighted portions of assets for credit, market, and operational risks for their application to Type 3 conglomerates were adjusted. BCB Resolution No. 200 already stated that these conglomerates were subject to such requirements, but it was necessary to adjust the wording of the circulars to explain that the regulations also apply to type 3 conglomerates. Specifically, the BCB Resolution 266 amends circular and BCB resolution establishing procedures for calculating the portions of the risk-weighted asset amount, the Additional Principal Capital Countercyclical (ACPCountercyclical), and capital to cover the risk of interest rate variation on instruments classified in the banking portfolio (IRRBB) for application to the conglomerate of the Type 3; it also amends the circulars that establish the simplified risk-weighted asset requirements for application to Type 2 and 3 conglomerates.

    Deliverables in area of ESG

    The ESG report sets out the activities undertaken toward improving supervision and data collection in financial sector of Brazil in 2022. The report also outlines the expected deliverables for 2023, including the following:

    • Establishment of the Green Bureau of Rural Credit and identification of social and environmental benefits with respect to the rural credit operations
    • Development of sustainability score system and improvement of control mechanisms using georeferencing tools
    • Improvements in the dissemination of information by financial institutions, based on recommendations from the Taskforce on Climate-related Financial Disclosures (TCFD)
    • Estimations of the effects of socio-environmental risks on the economy and the National Financial System (SFN)
    • Assessment of SFN exposure to transition risks and analysis of extreme drought risk-sensitivity
    • Structuring and expansion of information collection and improvement in social risk supervision process
    • Inclusion of sustainability criteria for selection of counterparties in the management of international reserves and for investment selection
    • Reduction of the environmental impact of specified aspects and promotion of the sustainability culture of sustainability by the Committee for Organizational Social and Environmental Responsibility (CRSO).


    Related Links (in Portugese)


    Keywords: Americas, Brazil, Banking, Basel, Regulatory Capital, ESG, Climate Change Risk, Sustainable Finance, Lending, BCB

    Featured Experts
    Related Articles

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806