Brazilian Monetary Council lifts ban on lending and exchange of assets
New resolution provides non-resident investors greater flexibility when posting margin in the local derivatives market
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.
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.