Brazilian Financial Regulations: Ensuring Safe and Efficient Operations

Risk Management and Capital Requirements

Financial institutions in Brazil are subject to strict guidelines to mitigate operational, liquidity, and credit risks. This includes:

Risk Management Structures

• Implementing operational, liquidity, and credit risk management structures that align with their activities and product/service complexity.
• Establishing robust cybersecurity measures to prevent breaches.

Capital Requirements for Different Types of Financial Institutions

The minimum capital requirements vary based on the type of license held:

Commercial Banks

• Minimum capital requirement: R$17.5 million

Investment Banks

• Minimum capital requirement: R$12.5 million

Credit, Finance, and Investment Companies

• Minimum capital requirement: R$7 million

Credit Unions

• Minimum capital requirement: R$10,000 to R$6 million

Broker-Dealer Companies

• Managing investment funds: R$1.5 million
• Otherwise: R$550,000

Foreign Exchange Broker Companies

• Minimum capital requirement: R$300,000

Basel III Implementation and Prudential Conglomerates

Brazil has adopted the Basel III rules through regulations issued by the Central Bank and CMN. This includes:

Capital Requirements for Prudential Conglomerates

• Minimum Basel index of 10.5% to 15%, depending on their risk profile (credit, market, or operational)

Rules Governing Banks’ Relationships with Customers and Third Parties

Financial institutions must comply with the Consumer Defence Code (CDC) and specific rules issued by the CMN and Central Bank when contracting transactions and providing services.

Key Regulations

• The CDC applies to transactions between financial institutions and customers.
• Financial institutions must follow specific rules when contracting transactions and providing services.