30/09/2019 em Velloza News Legal and Banking

New BACEN Competence – Approval of Foreign Capital in Financial Institutions

On 9.27.2019, was published in the Official Gazette Decree No. 10,029 of 9.26.2019, (“Decree No. 10,029”), by means of which it is transferred to the Central Bank of Brazil the competence to authorize the incorporation of new branches of foreign financial institutions, as well as to authorize the increase of foreign participation percentage in the equity of financial institutions domiciled in Brazil.

In general terms, based on Article 52, and its sole paragraph, of the Transitional Constitutional Provisions Act, foreign participation in the equity of Brazilian financial institutions were depended on a specific authorization, granted by means of a Presidential Decree, in which the national interest in such participation would be formalized.

This requirement had already been overcome in relation to the so-called credit fintechs (direct credit companies – sociedade de crédito direto (SCD) and peer-to-peer lending companies – sociedade de empréstimos entre pessoas (SEP)), by means of the issuance of Decree No. 9,544, dated 10.29.2018, in which, the national interest in the participation of foreigners in the equity of these types of financial institutions was formalized in advance.

From now on, with the publication of said Decree No. 10,029, the incorporation of branches of foreign financial institutions and the enlargement of foreign participation in the equity of financial institutions domiciled the country, which were subject to a declaration of national interest by a Presidential Decree, become subject to the analysis of and authorization by the Central Bank of Brazil.

In other words, from the publication of Decree No. 10,029, the former prerogative of the President of the Republic is transferred to the Central Bank of Brazil, with the potential to expedite its granting, since the Central Bank is already responsible for the supervision and regulation (together with the CMN) of financial institutions in the country.

In order for the Central Bank of Brazil to recognize a national interest, which means the authorization to set up branches and / or expand foreign participation in local financial institutions, the requirements to be established by the Central Bank, as well as the National Monetary Council, must be duly observed. We highlight, however, that such regulation has not yet been issued, but it is expected that it shall occur soon.

Thus, the issuance of Decree No. 10,029 tends to be perceived as the lifting of another obstacle to the inflow of foreign investments in the country.

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