BRAZIL Law and Practice Contributed by: Thomas Gibello Gatti Magalhães, André Dágola Brostoline and Luisa Grespan Danhoni Neves, Magalhães & Zettel
and 15 circular letters issued by BCB, which established guidelines for their implementation in the national banking system. The adoption of these rules in Brazil occurred before the com - pletion of the Basel II implementation schedule, which was scheduled for the end of 2012. This anticipation resulted from the outbreak of the 2008 global financial crisis, which evidenced the inadequacy of the rules to mitigate systemic risk in force at the time. In this sense, CMN Resolution No 4,557/2017 aims to regulate the risk management structure and the capital management structure of the institutions authorised to operate by BCB, clas - sified in Segments S1, S2, S3 and S4. The rule obliges these institutions to implement a con - tinuous and integrated risk and capital manage - ment structure, as well as a policy for disclosing information on these topics. According to the rule, institutions shall also pre - pare a Risk Appetite Statement (RAS) and docu - ment risk appetite levels, considering: • the levels of risks that the institution is willing to assume, broken down by type of risk and, where applicable, by different time horizons; • the ability of the institution to manage risks effectively and prudently; • the strategic objectives of the institution; and • the conditions of competitiveness and the regulatory environment in which the institution operates. The risk management structure must identify, measure, assess, monitor, report, control and mitigate the following matters: • the credit risk to which the institution is sub - ject in a material manner;
• the market risk to which the institution is sub - ject in a material manner; • the risk of interest rate variations for instru- ments classified in the banking portfolio (IRRBB) to which the institution is subject in a material manner; • the operational risk; • the liquidity risk; • the social risk; • the environmental risk; • the climate risk; • the country risk and the transfer risk to which the institution is subject; and • other relevant risks, according to criteria defined by the institution, including those not covered in the calculation of the amount of risk-weighted assets. With regard to the capital amount requirement, CMN Resolution No 2,607/1999 determines the minimum limits of paid-up capital and sharehold - ers’ equity that must be permanently observed by the institutions authorised to operate by BCB, namely: • BRL17.5 million for commercial banks and commercial portfolios of multiple banks; • BRL12.5 million investment banks, devel - opment banks, corresponding portfolios of multiple banks and savings banks; • BRL7 million for credit, financing and invest - ment companies, real estate credit compa - nies, leasing companies and corresponding multiple bank portfolios; • BRL3 million for mortgage companies; • BRL1.5 million for bonds and securities brokerage companies and bonds and secu - rities distributing companies that manage investment funds in the modalities regulated by BCB (except investment funds in units of investment funds) or investment companies
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