The National Monetary Council (CMN), through Resolution 4797, temporarily prohibited financial institutions and other institutions authorized to operate by the Central Bank ("BACEN") from distributing dividends and increasing management compensation.
Such institutions, including payment institutions authorized to operate by BACEN, are prohibited from
I - pay interest on own capital and dividends above the mandatory minimum established in the bylaws on 04.06.2020 or established by law, when applicable;
II - to repurchase its own shares, except if authorized by BACEN;
III - reduce the capital stock, when permitted by law;
IV - increase the fixed or variable compensation of officers and members of the Board of Directors, including bonuses, profit sharing and any deferred compensation installments and other performance-related compensation incentives; and
V. - advance payment of any of the foregoing items.
The prohibitions apply to all payments, including payments in advance, based on results calculated between 06.04.2020 and 30.09.2020 or to be made between 06.04.2020 and 30.09.2020, except payments relating to fiscal year 2019.
According to the Central Bank, the objective is "toavoid the consumption of important resources for the maintenance of credit and for the eventual absorption of future losses", being certain that the " financial institutions present comfortable levels of capital and liquidity, above the minimum requirements established". "However, given the uncertainty of the magnitude of the shock caused by COVID-19, it considers it important to proactively adopt more conservative supplementary prudential requirements".
BTLAW's Financial Market([email protected]) and Means of Payment([email protected]) teams are available for any advice on the above matters.
