BCB proposed two resolutions related to structured finance and credit derivative operations of financial institutions and finalized two resolutions on calculations under the standardized approach for credit risk and on reporting of certain risk data by banks. The final Resolution No. 83 amends Circular No. 3.809 on procedures for recognition of credit risk mitigation instruments in the calculation of risk-weighted assets under the standardized approach for credit risk; this resolution enters into force on May 01, 2021. Additionally, the final Resolution No. 84, which enters into force on May 03, 2021, relates to the reporting of exposures to market risk and interest rate risk in the banking book (IRRBB).
According to the Resolution No. 84, financial institutions and other institutions authorized to operate by BCB under Segments 1, 2, 3 or 4 (S1/S2/S3/S4) must prepare and send to BCB the information related to these exposures. This information related to exposures must be calculated using the base date of the last working day of each month and must be sent monthly by the leading institution of each conglomerate, on a consolidated basis, and by the other BCB-authorized institutions that do not belong to conglomerates
Out of the two proposals issued recently by BCB, one contains the draft the National Monetary Council (CMN) resolution that provides for credit derivative operations in the country by institutions authorized to operate by BCB. The second proposal is for a CMN resolution that provides for conditions for the issuance of the Structured Transactions Certificate by the specified financial institutions. The two proposals are aimed to update the regulatory requirements and remove barriers to the realization of credit derivatives and the issuance of Structured Transactions Certificate referenced to credit risk, to improve the credit risk management tools available to the domestic financial market. The comment period for both the consultations ends on May 10, 2021.
Related Links (in Portuguese)
- Resolution on Credit Risk Approach
- Circular on Credit Risk Approach
- Resolution on Reporting
- News on Proposed Regulations
- Consultation Papers
Comment Due Date: May 10, 2021
Effective Date: May 01, 2021/May 03, 2021
Keywords: Americas, Brazil, Banking, Credit Risk, Market Risk, IRRBB, Basel, Derivatives, Standardized Approach, Regulatory Capital, Reporting, BCB
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