On 26 September 2019 the president issued Decree 10,029, authorising the Central Bank of Brazil to recognise the government's interest in establishing branches of foreign financial institutions in Brazil and increasing foreign equity participation in Brazilian financial institutions without the need for further presidential authorisation.
Prior to the decree's enactment, these matters required the express approval of international treaties or the issuance of presidential decrees recognising that investments were in the government's interest, pursuant to Article 52 of the Transitory Constitutional Provisions Act of the Constitution 1988 (ADCT).
New ancillary rules are expected to be issued in the near future, as the decree also provides that the Central Bank of Brazil will issue the relevant rules to ensure its enforcement.
The government hinted that it aims to provide regulatory parity to Brazilian and foreign parties in the financial sector by the start of 2020. The new rule is expected to move the Brazilian financial sector closer to international organisations that view the disparity in treatment of Brazilian and foreign parties unfavourably (eg, the Organisation for Economic Cooperation and Development, which Brazil is trying to join).
Further, the decree is in line with Agenda BC+, the Central Bank of Brazil's plan to:
- broaden the financial market's accessibility to new (Brazilian and foreign) players, investors and borrowers;
- pursue the correct pricing of assets and services by ensuring competitive access to the markets;
- improve price formation and market information processes; and
- raise citizens' awareness of saving schemes and market participation.
Some sources have reported that the authorisation process for financial institutions (which can take up to two years) may now take just six months, as a presidential decree specific to each case is no longer required. It remains to be seen how accurate this estimate will be.
Alongside the abovementioned decree, the government has undertaken several other measures to increase competition and accessibility in the financial sector.
In April 2018 the National Monetary Council issued Resolution 4,656, which regulates financial technology (fintech) firms and recognises two new types of entity as financial institutions that can conduct loan and financial operations through electronic platforms:
- direct credit companies; and
- peer-to-peer lending companies.
Presidential Decree 9,544, which was enacted on 29 October 2018 in anticipation of the opening up of Brazil's financial sector to foreign parties, recognised the government's interest in allowing foreign investment in Brazilian through such fintech firms. The new decree extends this recognition to all types of financial institution.
Further, in a joint announcement with the Ministry of the Economy, the Securities Commission (CVM) and the Insurance Authority (SUSEP), the Central Bank of Brazil recently expressed its aim to create regulatory sandboxes (ie, special regulatory environments with more flexible compliance requirements intended to expand market accessibility). CVM and SUSEP have submitted proposals for public consultation.
The government's recent initiatives are notable because of the strict requirements applicable to financial institutions in Brazil, which have historically made the entrance of new players into the financial markets more difficult and contributed to a high level of concentration in this sector.
Besides improving the financial market's accessibility to foreign players, these norms have the potential to increase competition in the Brazilian financial sector and foster more affordable financial services.
Some financial sectors have expressed their approval of the decree and it is expected that the market will welcome the regulations that arise out of the government's will to open up the banking sector.
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