February 09, 2018

The Central Bank of Brazil issued a consultation (Notice 59/2018) on a resolution that improves the rules applicable to maximum exposure limits per customer and the maximum limit of concentrated exposures within the scope of the National Financial System. Notice 59/2018 incorporates recommendations from the supervisory framework for measuring and controlling large exposures, which BCBS published in 2014. Comments are invited by March 20, 2018. The new rule is expected to take effect on January 01, 2019, in line the BCBS recommendation.

In case of institutions included in Segment 1, Segment 2, Segment 3, or Segment 4, the proposal states the new individual limit of 25% of Level I of the referential equity for the total exposures to the same client and the limit of 600% of Level I of referential equity for the total of concentrated exposures. An exposure to the same customer is considered concentrated if its value is equal to or greater than 10% of Level I of the referential equity. For  institutions that are included in Segment 5, that is, institutions with a simplified risk profile, the proposal establishes the Total Simplified Reference Equity as the basis for calculating the limits and establishes less complex criteria for their calculation. The new rule also establishes criteria for measurement of exposures, definition of connected counterparties, recognition of credit risk mitigators, and reporting compliance with limits.


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Comment Due Date: March 20, 2018

Effective Date: January 01, 2019

Keywords: Americas, Brazil, Banking, Large Exposures, Exposure Limits, Concentrated Exposures, Central Bank of Brazil, Proportionality

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