BCB Amends Rules on Credit Risk Approach and Open Banking
The Central Bank of Brazil (BCB) published Resolution 121 to amends Circular No. 3,644, of March 4, 2013, regarding the procedure for calculating the capital requirement of exposures subject to credit risk under the standardized approach. BCB also published Resolution 114 and Resolution 117 on the implementation of open banking. All of these resolutions enter into force on the date of their publication, which is July 29, 2021 for Resolution 121, July 14, 2021 for Resolution 114 and July 21, 2021 for Resolution 117.
The change addressed in Resolution 121 on the capital requirements for the standardized approach to credit risk concerns the treatment of the risk-weighting factor applied to credits arising from temporary differences that may generate presumed credit under the Credit Incentive Program (PEC), created by Provisional Measure No. 1,057 dated July 06, 2021. The PEC aims to promote the performance of credit operations by BCB-authorized institutions, except credit cooperatives and consortium administrators, with micro entrepreneurs individuals, micro-enterprises, small businesses and rural producers, with annual gross revenue, calculated in the calendar year 2020, of up to BRL 4.8 million; in the case of a legal entity incorporated in 2020 or 2021, this limit will be proportional to the months in which it was active, respectively, in 2020 or 2021, or measured according to the criteria and policies of financial institutions, considering the invoicing equivalent to the period of twelve months. Provisional Measure No. 1,057, of 2021, determines that the aforementioned operations of credit must be contracted by December 31, 2021. It also clarifies that these operations will not be guaranteed by the federal government or by a public entity and that the credit risk is fully of the granting institutions (and that will not have any kind of contribution of public resources or interest rate equalization by the federal government). Financial institutions that adhere to the PEC as grantors of the credit operations may determine presumed credit, until December 31, 2026, in total amount limited to the lower of
- the gross book balance of credit operations granted under the PEC and the Working Capital Program for Business Preservation (CGPE), referred to in Provisional Measure No. 992, of July 16, 2020; and
- the accounting balance of credits arising from temporary differences. From this amount, the values of the Vote 168/2021–BCB, of July 27, 2021
Resolution 114 on open banking updates the timeline for implementation of open banking. The update relates to the postponement, to August 13, 2021 (from July 15, 2021), of the beginning of the implementation of the application programming interfaces (APIs) for sharing customer registration and transactional data as well as the mechanism for handling and resolving disputes between institutions participating in the scope of the governance structure of open banking. Resolution 114 amends Resolution 109 dated June 24, 2021, which updated the schedules of submission of convention and implementation of the sharing of data and services of the scope of open banking and replaced the terms defined in Articles 47 and 55 of the Joint Resolution No. 1 of May 04, 2020. BCB also published Resolution 117, which amends Resolution 32 establishing the technical requirements and operational procedures for the implementation of the "Open Financial System" in the country.
Related Links (in Portuguese)
- Press Release on Open Banking
- Resolution 114 on Open Banking
- Explanatory Memorandum on Resolution 114 (PDF)
- Resolution 117 on Open Banking
- Resolution 121 on Credit Risk Approach
- Explanatory Memorandum for Resolution 121 (PDF)
Keywords: Americas, Brazil, Banking, Basel, Regulatory Capital, Standardized Approach, Credit Risk, Resolution 121, Open Banking, API, BCB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
EBA Publishes Results of 2021 Stress Test Exercise for BanksRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.