Brazilian Monetary Council lifts ban on lending and exchange of assets

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On March 24, 2022, the Brazilian Monetary Council (CMN) published CMN Resolution No. 5,010/22, revoking CMN Resolution No. 3,914/10 as of May 2, 2022.

Originally published as part of a movement toward increasing the tax rate applicable to financial transactions (IOF), CMN Resolution No. 3,914/10 prohibited financial institutions (and other institutions authorized to operate by the Brazilian Central Bank) to engage in lending or exchange transactions in instruments (títulos), securities and gold as a financial asset with non-resident investors who borrowed such assets to carry out transactions in the derivatives market.

A CMN resolution from 2013 had already revoked two other resolutions the CMN also enacted in 2010 (No. 3,912/10 and No. 3,915/10), with only CMN Resolution No. 3,914/10 remaining in effect.

Given these earlier revocations – as well as a shift away from the scenario that gave rise to the resolution’s enactment – the CMN decided to revoke CMN Resolution No. 3,914/10, holding the view that it no longer served the purpose it was initially intended for. Moreover, revoking the resolution was also seen as a way of reducing regulatory costs, and while it is still in effect, non-resident investors remain subject to stricter regulations than resident investors.

Furthermore, provided certain requirements are complied with, other regulations applicable to securities broker-dealers in Brazil have allowed them to lend proprietary instruments and securities to their clients since 2019.

For further information on this subject, please contact Mattos Filho’s Banking & Finance practice area.

*With the collaboration of Pedro Henrique Marques da Cunha.