The Central Bank of Brazil (BCB) published the financial stability report for the first half of 2022, issued new authorization rules for financial institutions, published a study on sustainable bond market, and announced the project execution of “LIFT Challenge—Real Digital” initiative.
The key highlights of the aforementioned updates follow:
- The financial stability report highlights that there is no relevant risk to financial stability. Capital stress tests demonstrated that the banking system has adequate resilience. The National Financial System has maintained provisions appropriate to the level of expected credit losses, and comfortable capitalization and liquidity. The report provides assessments of the international financial system and financial market infrastructure, and presents the results of the financial stability survey. The report focused on themes such as transition climate risk, physical climate risk, implementation of financial liquidity lines, prudential regulation of payment institutions, and the potential effects of a central bank digital currency on financial intermediation.
- BCB published a new authorization rule, which consolidates into a single standard all the requirements for authorizations related to the operation of an financial institution, to simplify and provide greater transparency for both incumbent institutions and potential entrants and standardize the requirements and conditions applicable to each type of authorization, depending on the type and size of the institution, business complexity, and risks involved. With the new rules, there will be a decrease in the cost of compliance and the authorization process will become faster. The new authorization rule will come in effect from September 01, 2022.
- BCB announced that the “LIFT Challenge—Real Digital” has started execution of the selected projects. These projects were focused on technologies related to delivery versus payment (DvP), payment versus payment (PvP), internet of things (IoT), decentralized finance (DeFi) and security solutions, and payments when both the payer and the receiver are without internet access (dual offline). The LIFT Challenge aims to identify the fundamental characteristics of an infrastructure for Real Digital and evaluate cases of use of a digital currency issued by the Central Bank.
- BCB published a study on sustainable bond market for the 2020-2021 period. The study highlights that Brazil's share in the sustainable bond market is still small, although the volume issued by Brazilian companies has grown significantly. Brazil has become the second largest issuer in Latin America, behind only Chile. The study revealed that a large part of these bonds are issued by non-financial companies and that they are responsible for 88% of the financial volume issued since 2017 in the foreign market and for 89% of the issuances in the domestic market. The study concluded that the growth in the issuance of sustainable bonds reveals the importance of these instruments in the context of sustainable finance for the climate transition, in addition to social and governance goals and actions to mitigate factors with a negative impact on the climate and environment.
Related Links (in Portuguese)
- Press Release on Financial Stability Report
- Financial Stability Report (PDF)
- Press Release on Authorization Rules
- News on LIFT Challenge
- Press Release on Sustainable Bond Market
Keywords: Americas, Brazil, Banking, Financial Stability Report, Basel, Regulatory Capital, Stress Testing, Credit Risk, Climate Change Risk, Physical Risk, Lift Challenge, Regtech, Decentralized Finance, Sustainable Bonds, Sustainable Finance, Transition Risk, CBDC, BCB
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