Last Friday (March 1), in an extraordinary meeting, the National Monetary Council ("CMN") amended CMN Resolution No. 5,118, of February 1, 2024, which provides for the ballast applicable to the issuance of real estate and agribusiness receivables certificates (CRI and CRA), through the publication of the new CMN Resolution No. 5,121.
Initially, the new resolution amended CMN Resolution 5.118 in order to exclude from the concept of "debt securities" "contracts and obligations of a commercial nature, such as bills of exchange and lease, purchase and sale, promise of purchase and sale and usufruct contracts related to real estate", even if such contracts have publicly traded companies or financial institutions as debtors or co-obligors, as the market is already accustomed to doing.
Another important change brought about by CMN Resolution 5,121 is the fact that the restriction on debt securities being used as backing for CRI and CRA does not apply to the mere issuer of the debt securities. The prohibition remains only for debtors, co-debtors or guarantors, which cannot be publicly traded companies or financial institutions.
Thus, Real Estate Credit Notes (CCI) or Bank Credit Notes (CCB) issued by publicly traded companies or financial institutions to represent a credit they hold with third parties can also constitute backing for CRI and CRA.
Finally, the CMN changed the rule that prevented the issuance of CRI and CRA backed by securities issued by publicly traded companies that were in any way "related parties" of financial institutions (even if their main sector of activity was agribusiness or real estate).
By introducing the concept of "prudential conglomerate" (level of risk capture and consolidation stipulated by the Central Bank), CMN Resolution 5,121 removes the prohibition on other entities that are not part of the prudential conglomerate from benefiting from CRI and CRA operations. The CMN also changed the restriction that covered all the "related parties" of the institutions mentioned above, to cover only their "respective subsidiaries".
To access CMN Resolution No. 5,118, as amended by CMN Resolution No. 5,121, click here.
The Capital Markets team at Barcellos Tucunduva Advogados is available to answer any questions you may have on the above subject at [email protected].