The Financial Stability Committee of the Central Bank of Brazil (BCB) decided to maintain the countercyclical capital buffer (CCyB) for banks at 0%. Additionally, BCB published a consultation on calculating the risk-weighted assets for operational risk using the standardized methodology, issued normative instructions on accounting of sustainability assets and reporting templates for the Internal Capital Adequacy Assessment Process (ICAAP), and postponed the entry into force of capital requirements for credit risk.
The key highlights of the aforementioned updates follow:
- BCB published a consultation on the proposed regulations that implement the minimum standard of the Basel Committee for Banking Supervision (BCBS) for the calculation of the capital requirements related to operational risk. The proposed new standardized methodology for calculating the risk-weighted assets for operational risk replaces the three calculation methodologies provided for in the regulations in force by a single standardized model, with a view to increasing the robustness and risk-sensitivity of the capital requirements for operational risk. The proposal is aimed at financial institutions classified in Segment 1 (S1) to Segment 4 (S4), in accordance with the definitions of CMN Resolution No. 4,553, of January 30, 2017. The comment period for the consultation ends on February 04, 2023 and the BCB Resolution and the Normative Instruction will enter into force on January 01, 2024.
- BCB published a Normative Instruction No. 322 on disclosing the report templates for the Internal Capital Adequacy Assessment Process (ICAAP) and the Simplified Internal Capital Adequacy Assessment Process, in accordance with Circular No. 3,846, of September 13, 2017. ICAAP comprises the identification, management, and measurement of risks, including the measurement of the need for capital to face losses in a severe crisis scenario. This Normative Instruction comes into force on December 01, 2022.
- BCB published a Normative Instruction No. 325 on accounting of sustainability assets, which are intended for the registration of investments in assets related to socio-environmental and climate sustainability mechanisms, including Carbon Credit and Decarbonization Credit (CBIO) certificates. The purpose of the measure is to provide greater transparency to the use of sustainability assets by financial institutions, as well as to resolve any uncertainties and standardize their accounting records. BCB aims to monitor the sustainability assets held by financial institutions in their investment portfolios, monitor the evolution of the market and, when necessary, adopt measures in a timely manner. The criteria for accounting registration and measurement of sustainability assets and liabilities defined by the Central Bank are in line with the best international practices, and were issued in the process of reducing asymmetries between BCB and the international accounting standards issued by the International Accounting Standards Board (IASB). The Normative Instruction will come into effect on January 01, 2023 and requires the reclassification of any amounts related to sustainability assets recorded in other accounting items.
- BCB published Resolution No. 258 that postpones the entry into force of the new prudential framework applicable to payment institutions and their respective prudential conglomerates with respect to the new model for calculating the portion of risk-weighted assets referring to exposures to credit risk subject to the capital requirement calculation using the standardized approach. With this amendment, the aforementioned rules will come into force on July 01, 2023.
Related Links (in Portuguese)
- Announcement on CCyB
- Consultation on Operational Risk
- ICAAP Guidance
- Accounting of Sustainability Assets
- Revised Capital Rules for Credit Risk
Keywords: Americas, Brazil, Banking, Basel, CCyB, Regulatory Capital, Risk-Weighted Assets, Credit Risk, Operational Risk, ICAAP, Standardized Approach, Climate Change Risk, Carbon Credit, ESG, BCB
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