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5 Rules on prudential regulation
5.1 Introduction
In the wake of adoption of the Real Plan, significant improvements
were introduced into Brazilian prudential regulations. The reasons
underlying these measures were the restructuring and consolidation
of the banking industry, the need for introducing and developing
instruments for risk quantification and monitoring and efforts to
adjust to internationally accepted standards.
Up to that point in time, financial institutions had operated in a
framework of high inflation and had specialized in very short-term
operations (overnight), obtaining enormous gains on float operations
and arbitrage among different indexing factors. Banks developed
instruments that made it possible for them to obtain the benefits
consequent upon the inefficiencies generated by inflation, maximizing
gains by minimizing the time it took to transfer funding. In synthesis,
the revenues generated by the distortions that marked the period of
high inflation were so voluminous and so significant that the financial
result consequent upon the sector’s inherent activities was often
relegated to a position of secondary importance.
The Real Plan sharply reduced the gains generated by float
operations. In this context, national financial institutions had to adapt
to the new scenario by seeking the critical mass needed to operate
with reduced spreads, curtailing costs and producing economies of
scale. Parallel to the alterations that occurred on the internal
economic scenario, the SFN was subjected to a process of
globalization and internationalization. Since adoption of the Real
Plan, more than one hundred financial institutions were authorized
to initiate operations in the country or expand already existent
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operations. Many of these cases involved acquisitions of stock control
or participation in already existent institutions. The entry of new
institutions into the Brazilian market made a decisive contribution
to increasing competitiveness, diversifying products and services and
enhancing technological levels, with obvious advantages for their
clientele. The banks that did not have the structure or critical mass
required to cope with the new scenario were forced to seek new
alternatives. As a result, the process of financial system adjustment
was marked by innumerable mergers and takeovers, at the same time
in which various institutions were simply terminated
Under the impact of these changes, Banco Central adopted a series
of measures to adapt its supervisory structure to the new demands
of financial and capital market control and monitoring. The major
objective of these measures was to achieve enhanced efficiency in
the administration of the risks consequent upon financial institution
activities, while diminishing conflicts of interest in the management
of third party capital, defending client rights and defining principles
of corporate governance marked by transparency and good practices.
It should be stressed that the major rules issued in seeking these
objectives, which are analyzed below, had the purpose of not only
expanding the operational freedom of financial market, but above
all adopting the recommendations set down by the Basel Committee
on Banking Supervision, the IMF and World Bank and, in this way,
harmonize the supervisory procedures applied to SFN financial
institutions with internationally recommended standards. In short,
this is viewed as a question of the greatest importance to the
competitiveness of the Brazilian banking industry on the world’s
globalized markets.
5.2 Major decisions
Adoption of Basel Accord – Resolution 2,099/
1994
From the prudential point of view, this was a landmark decision since
the supervisory approach that utilized the net worth of institutions
as its fundamental reference (liability based approach) was substituted
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by definition of limits calculated according to the level of credit risk
generated by the institution’s operations (assets weighted by risk).
Resolution 2,099, dated August 17, 1994, incorporated the 1988
Basel Accord recommendations into the Brazilian supervisory
structure. In summary, these recommendations determined that
financial institutions operating in the country must maintain a
minimum capital level that is compatible with the degree of credit
risk inherent to their assets. These rules determined that risk
weighting factors – 0%, 20%, 50% and 100% - be attributed to
assets, in such a way that the minimum required capital is defined as
a percentage applied to the result of the weighting process – currently
11%, as determined by Circular 2,784, dated November 27, 1997.
Since this is a standardized methodology developed by the Basel
Committee on Banking Supervision for the entire international
market, the Accord adopted a rather conservative stance on
determining the different weighting factors, leaving the final
decision as to whether to adopt a percentage of more than the
original 8% to achieve the desired security level to the discretion
of the bank supervision authorities of each of the respective
countries. It is important to note that, since issue of Resolution
2,099/1994, several changes have been introduced at both the
national and international levels as a result of the evolution of both
the financial market itself and the instruments with which it
operates. These alterations were made either at the recommendation
of the Basel Committee or as a result of the need to adapt to
internationally accepted practices or even in light of the specific
criteria applied to the risks of the assessed assets.
From this point of view, emphasis should be given to the review of a
specific point that involves assets represented by tax credits, for
which Banco Central had originally determined a weighting factor
of 100%. Over the course of time, several factors arose that generated
considerable questioning as to the adequacy of this factor, particularly
in light of the real possibility of realizing the asset in question,
particularly when one considers that:
a) article 15 of Law 9,065, dated June 20, 1995, determines that the
offsetting of fiscal losses is limited to 30% of the real profits of
each fiscal year;
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b) article 31 of Law 9,249, dated December 26, 1995, states that a
non-operational fiscal loss can only be offset by profits of the same
nature.
In order to better adapt the weighting factor to the capacity for realizing
assets represented by tax credits and considering their importance to
the balance sheets of some institutions, the factor was raised to 300%,
to be implemented according to the following schedule: 150% as of
August 31, 1999; 200% as of December 31, 1999; 250% as of June
30, 2000 and 300% as of December 31, 2000.
Resolution 2,099/1994 also defined new rules covering access to
the SFN (constitution of new institutions, mergers, acquisitions and
transfers of stock control), as well as corrective measures and
penalties to be applied to institutions that do not comply with the
specified minimum capital standards.
Credit risk center – Resolution 2,390/1997
Another significant advance was creation of the Credit Risk Center,
a system that financial institutions utilize to identify and provide
information on their clients – including both individuals and legal
entities – that have debt balances equal to or greater than R$
5.000,0013. The objective of the Risk Center is to make information
available as to total debt, joint liabilities and credits written-off as
losses, itemized by individual borrowers and conglomerates.
The Risk Center has made it possible to more efficiently calculate a
client’s payment capacity and, consequently, analyze the overall credit
risk of each institution’s portfolio. Information from the Credit Risk
Center is utilized to reinforce supervisory activities by making it
possible to analyze risk concentration by debtor, measure risk and
assess the quality of a specific portfolio and judge the efficiency and
consistency of the classification and credit granting models used by
institutions on a comparative bases.
13/ The value of the operations notified to the Risk Center was initially specified at R$ 50 thousand
and has been gradually decreased to the current level.
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Currently, the Risk Center is in a process of renovation in order to
expand and improve its operations, creating a structure that will
meet the needs of Banco Central in terms of information (regulatory
function) and of the entire financial system in its efforts to reduce
default levels and, in this way, increase the volume of credit (credit
bureau function).
Swap operations – Capital requirements –
Resolution 2,399/1997
In 1997, new regulations were introduced determining capital
requirements for coverage of the credit risk involved in swap
operations. Two new components were added to calculation of the
PLE:
a) reposition cost, obtained by marking-to-market all contracts with
positive results in the process of valuation and evaluation;
b) potential future exposure, obtained on the basis of the remaining
term of the operation.
Swap operations are currently regulated by Resolution 2,873/2001.
Since these are highly versatile and low cost instruments, they have
been increasingly utilized by economic agents as an important source
of hedging. Permission to negotiate contracts using stocks and
commodities as well as the price indices of these assets as references
has created improved conditions for institutional investors, stock
issuing companies and investments funds to control their risk profiles
more effectively.
Exchange risk – Resolution 2,891/2001
The first rule on exposure in gold and foreign currency was set
down in Resolution 2,606/1999 which limited the total mismatching
of assets and liability exposures in foreign currency and specified
the criterion of PLE allocation for coverage of the market risk
consequent upon exposure to exchange rate and gold price
variations, thus introducing the concept of equity requirements
based on market risk.
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Consequently, exchange risk control is based on application of a
risk factor to the level of exposure (F, currently equivalent to 100%)
and the maximum exposure limit (30%) in relation to PR. This
calculation is applicable to all institutions that have net exposure in
gold and exchange greater than 5% of their capital. These criteria
have been progressively updated over the course of time in order to
adjust to the level of exchange volatility. The most recent update
was introduced by Circular 3,156 in 2002.
The criterion of accounting entries in contra accounts at the value
of the capital required to cover exchange rate risk and gold price
fluctuations has the objective of enhancing the transparency of the
information regarding the risks assumed by the institutions.
Investment funds – Resolutions 2,451/1997 and
2.486/1998
Insofar as investment funds are concerned, rules were adopted with
the objective of reducing conflicts of interest between management
of capital belonging to fund management institutions themselves and
that of the funds they manage.
In this context, Resolutions 2,451/1997 and 2,486/1998 determined
that institutions are obligated to erect the so-called Chinese wall
between their trust activities involving management of third party
resources and their commercial bank activities authorized by Banco
Central. The primary objective is to instill a sense of enhanced
professionalism and transparency in the management of investment
funds, portfolios and clubs by these institutions, including procedures
for designating directors or managing partners who will be exclusively
accountable for the management of such resources.
Another important alteration concerns the question of disclosure
and transparency as regards the risks and profile of the fund in
question. Later on, Banco Central reassessed the rating criterion
applied to financial investment funds and investment funds that
operate with investment fund quotas, emphasizing the credit and
market risks faced by these portfolios. This should be seen as part of
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the ongoing effort to increase the transparency of the risks involved
in this type of operation for the investing public.
Internal controls – Resolution 2,554/1998
The regulations on internal controls deal not only with compliance
with the laws and rules applicable to the institution in question, but
also with the entire structure of information disclosure, risk control,
definition of accountability, policies and procedures, with the aim of
preparing the different functional levels of these institutions to
perform their activities in an adequate manner.
With this, Resolution 2,554/1998 includes a definition of the functions
of all those ranging from the level of board of directors to upper
management personnel, including responsibility for approval and
periodic revision of global business strategies and policies relevant
to the financial institutions. These institutions should present the
system of monitoring and risk exposure limits to Banco Central, as
defined by the management staff through utilization of adequate
systems of internal controls. The Resolution in question also deals
with matters related to ethical standards, money laundering and
consumer defense, among others.
Qualification of managers – Resolution 2,645/
1999
The adaptation of regulations dealing with the administrators of
financial institutions and other institutions authorized by Banco
Central had the objective of updating the rules applied up to that
time to the dynamics of the transformation taking place within
the SFN.
Among the alterations introduced by Resolution 2,645, one of the
most important is the fact that it provides society with the conditions
needed to exert greater control and accountability over those whose
names are proposed for acceptance as investment fund managers,
since it obligates all new candidates to positions within the financial
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system to issue declarations of objectives. Aside from being in keeping
with internationally utilized procedures, the project was submitted
to a process of public hearings and several of the suggestions received
at the time from various financial institutions, professional
associations and the public in general were incorporated into the
text of the Resolution.
Credit operation ratings – Resolution 2,682/1999
The fundamental objective of Resolution 2,682/1999 was to define
more inclusive procedures for rating credit portfolios and determining
a technically more appropriate system for calculating the provisions
to be set aside to cover loan losses. This system is not based solely
on variables inherent to the operations itself, such as arrears, but
also takes a prospective view of credit operations by given due
consideration to the debtor’s cash flow generation capacity, the
economic segment within which the debtor operates, macroeconomic
and sectoral aspects and other considerations.
Once the credit analysis has been carried out on the basis of the
procedures described in the previous paragraph, the operation must
be rated in one of the nine levels defined in the regulations. The
possible ratings range from AA (very low risk) to H (high risk of
default), with each of the weighting brackets being associated to a
minimum provisioning level. For example, the minimum provision
for a credit rated at level D is 10%. In the same manner, credits in
arrears are subject to a differentiated rating process defined in
regulations. An example of how this is done would be that operations
in arrears over a period between 15 and 30 days would be rated no
higher than risk level B.
These rules made it possible to enhance the transparency level of
credit operations since institutions are obligated to include
explanatory notes in their financial statements with a breakdown of
the risk ratings of their credit operations. Aside from this, it is also
important to stress that, on the basis of information available in the
Credit Risk Center, Banco Central can require additional provisioning
in light of the responsibility of the debtor before the SFN.
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Credit assigns – Resolution 2,686/2000
Resolution 2,493/1998 authorized credit assigns to entities that do
not belong to the SFN and created conditions so that companies
constituted with specific characteristics could make securitization
of receivables feasible by acquiring such credit rights. In order to
expand securitization possibilities, Resolution 2,686/2000 was issued
permitting credit assigns with joint liability.
With issue of this Resolution, unreceived credits can return totally
or partially to the assignor institution. It also introduced alterations
into the criteria governing the capital requirements of the assignor
institutions. The criterion adopted is quite similar to that used
internationally and requires that the total or partial transfer of the
risk consequent upon the assigned credits be clearly identified. With
this, institutions should maintain sufficient capital to cover the joint
liability assumed or any other risk consequent upon the operation of
credit assigns.
The broadening of securitization possibilities has various positive
impacts on the financial market, particularly since it makes it possible
to spread risks more widely. The expected result is greater efficiency
in the allocation of credits and lesser loan costs for both companies
and individual borrowers.
Interest rate market risk – Resolution 2,692/
2000
Continuing the process of implementing criteria covering capital
requirements for risk coverage, Resolution 2,692/2000 was issued
dealing with interest rate market risk.
The rules set down in this Resolution are the result of extensive
studies on risk consequent upon the exposure of operations subject
to interest rate fluctuations and have the objective of summarizing
the major aspects of the different international approaches adopted
by the Basel Committee on Banking Supervision and the major Latin
American regulatory agencies.
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The methodology was developed on the basis of the sum of the
amounts representative of the Value-at-Risk of the operations
referenced to interest rates. The regulations incorporate dynamic
aspects into the process of PLE allocation and contrast sharply with
the standard static approach previously recommended by the Basel
Committee on Banking Supervision. The major drawback of the
previous system was the fact that, in scenarios of normality, it could
produce excessive capital requirements while, in times of stress,
capital requirements could sometimes be insufficient.
Stock participation and consolidation of financial
statements – Resolutions 2,723/2000 and 2,743/
2000
This regulation on the consolidation of financial statements includes
stock participation in the country and abroad. Resolutions 2,723
and 2,743, both of which were issued in 2000, required overall
consolidation of all the financial and nonfinancial companies in which
there is administrative, financial or stock control, together with
standardized accounting policies.
The regulators, market participants, stockholders, investors and other
users of information will only be capable of precisely assessing the
financial conditions of a given institution, its performance, business
affairs and risks related to its basic activities, if they are provided
with a satisfactory level of transparency, with reliable information,
based on good accounting principles and efficient systems of internal
controls.
This rule raises a subject that has been hotly discussed for many
years and that can be summarized as the segregation of activities
into two major blocs – financial and nonfinancial activities – and is
concerned, above all else, with the danger of cross-contamination
between these two groupings. With issue of the aforementioned
Resolutions, it became possible to evaluate the risk assumed by
financial institutions in their totality, since the risk incurred by
nonfinancial participation is perceived clearly at the moment of
consolidation. Aside from this, application of operational limits to
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consolidated bases has made it more difficult for financial institutions
to maintain participation in nonfinancial companies.
Complementary capital – Resolution 2,837/2001
The constant expansion of financial markets and systems has
demanded that financial institutions modernize and make use of
increasingly more dynamic and competitive instruments. In this
sense, Resolution 2,837/2001 was an important step forward in
broadening the opportunities and flexibility of financial institutions.
What this instrument did was to better characterize some of the
Reference Capital (PR) level II instruments – the so-called hybrid
capital instruments and subordinate debts – capable of increasing
the levels of capitalization and, therefore, the leverage of the
institutions in question.
Resolution 2,802/2000 had introduced the PR concept with the
aim of calculating the operational limits of financial institutions
and other institutions authorized to operate by Banco Central. Two
levels of capital were defined: level I, composed of net worth and
capital reserves and profit; level II, composed of subordinated
debts, hybrid capital instruments and debts, revaluation reserves,
contingency reserves and others. It should be noted that utilization
of level II capital in the composition of PR must comply with certain
limits: revaluation reserves are limited to 25% of PR; subordinate
debts and redeemable preferred shares are limited to 50% of level
I capital and the total value of level II capital is restricted to the
value of level I capital.
However, regulatory agents must systematically monitor these
instruments, seeking always to ensure the transparency and
solidity of the financial system as a whole. Thus, the rules seek
to determine conditions required for the instruments issued by
these institutions to be apt for utilization in the composition of
PR. It should be stressed, nonetheless, that they must be verified
beforehand by Banco Central.
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Liquidity risk – Resolution 2,804/2000
Completing the series of decisions taken in recent years with the
aim of leading financial institutions to adopt models capable of
perceiving the risks consequent upon financial and capital market
operations, Resolution 2,804 was issued in 2000 with the aim of
dealing with the question of liquidity risk.
In very brief terms, this instrument sets down procedures for
maintaining systems of control that make it possible to permanently
accompany the positions assumed on financial and capital markets,
in such a way as to highlight the liquidity risk involved in the
development of their activities.
The measure gave due consideration to a text published in February
2000 by the Basel Committee on Banking Supervision, with guidelines
for the correct management of this type of risk, as well as the
procedures adopted in countries with longer financial market traditions,
such as the United States, the United Kingdom and Canada.
Quarterly financial information (QFI) – Circular
2,990/2000
Circular 2,990/2000 required that financial institutions elaborate and
remit QFI documents to Banco Central, the financial system, market
analysts and the public in general. The information is available on
the Banco Central homepage on the Internet.
Elaboration of these documents is required in light of the importance
of providing the market with immediate access to transparent and
well-structured accounting information on the operations of financial
institutions, as well as information on the asset and liability structures
of these organizations. Thus, aside from accounting information, the
QFI incorporates financial, statistical and managerial information
and represents a significant step forward in the sense of establishing
standardized procedures for the disclosure of such information, fully
in line with the international effort to foster increased market
discipline based on constantly greater transparency.
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International banking statistics (IBS) – Circular
3,047/2001
The obligation of quarterly remittance of the IBS document, covering
the international assets and liabilities of banks located in Brazil, was
instituted by Circular 3,047/2001. The primary purpose of the
aggregate data is a response to the BIS request for two types of
information to be included in the statistics developed by that
institution with respect to international banking activities: Locational
and Consolidated International Bank Statistics, published regularly
in the Bis Quarterly Review – International Banking and Financial
Market Developments.
These data are also made available internally and include:
identification of the counterpart by residence and sector, composition
of operations by currencies, principal instruments, remaining terms,
and those that involve risk transfers between countries.
Internet banking – Resolution 2,817/2001
The steady dissemination of the use of the Internet for financial
operations has required that Banco Central evaluate the impact of
internet banking on the financial system and define the rule changes
necessary to regulate this activity.
In the framework of this objective, Resolution 2,817 was issued
defining conditions for opening and operating deposit accounts by
electronic means, as well as the minimum security considerations to
be followed in offering this type of relationship to an institution’s
clients. The rules have the objective of avoiding irregular electronic
operations by disciplining the systems to be used in opening accounts.
This demands that institutions observe minimum standards of
transparency and security in the systems utilized, coupled with full
identification of those responsible for the operations, including both
the administrators and the institution itself.
These rules determined that, within their internal control systems,
financial institutions were obligated to have specific sectors charged
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with information security systems. Aside from this, it was decided
that deposit accounts operated by electronic means could only receive
funding from conventional accounts in the name of the same person
or redemptions of investments in the name of the account holder at
the institution responsible for the electronic account.
Parallel to this, among other demands, financial institutions should
have externally certified systems of security and prevention designed
to combat money laundering, as well as telephone service centers
available to their clients. Finally, institutions are obligated to assume
responsibility for any losses that may be caused to clients as a result
of the inefficiency or fragility of the technology offered.
Risk diversification per client – Resolution 2,844/
2001
Resolution 2,474, dated 1998, defined risk diversification parameters
and set the limit per client at 25% of the PLA, which is to be observed
by institutions in contracting credit and leasing operations and
providing guaranties, as well as in relation to credits consequent
upon operations with derivatives.
Following issue of Resolution 2,802/2000, which introduced the
concept of PR to replace the PLA concept, for purposes of
verifying operational limits, it became necessary to carry out new
studies on the question.
These studies, which take due account of internationally adopted
procedures, concluded that, from the prudential point of view, more
precise monitoring of large exposures is desirable, particularly in
cases of individual exposures that, though they do not exceed the
level of 25%, do indicate a high degree of risk concentration.
Resolution 2,844 was issued in June 2001 and defined a limit of
600% of PR for the sum of Concentrated Exposures (CE), defined
as exposures per client or security issuing entity equivalent to 10%
or more of PR.
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Defense of client rights – Resolutions 2,878/2001
and 2,892/2001
Insofar as the international financial system is concerned, banking
regulations tend, to a great extent, to deal with questions involving
protection for the clients and users of financial services. Recent
legislation and rules recommend preservation of the interests of these
clients and users and specify certain procedures to be adopted in
their defense.
In Brazil, this question has taken on considerable importance in recent
years, making it necessary to incorporate the principles of the defense
of consumer rights as defined in current legislation into the
regulations for which the CMN and Banco Central are responsible.
Consequently, Resolutions 2,878 and 2,892 were issued in 2001
and deal with the procedures to be observed by financial
institutions in their relations with clients and users. The ultimate
purpose of these instruments is to issue regulations that ensure
equity in consumer relations in the framework of the National
Financial System.
Among the principal aspects cited by the norms in effect, one should
cite the guaranty of transparency in contractual relations involving
the rendering of services as well as the client’s right to rapid responses
to consultations, complaints and requests for information. At the
same time, specific rules are set down for the purpose of prohibiting
matched operations in which, to obtain one service, a client is forced
to contract another, and of guarantying that institutions will provide
for the needs of the desabled in offering their services.
Credit derivatives – Resolution 2,933/2002 and
Circular 3,106/2002
Credit derivatives are instruments that make it possible to transfer
credit risk to another party, without the effective transfer of the
underlying asset. These instruments are important to mitigating credit
risk, an element that is essential to efforts to reduce banking spreads.
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In Brazil, operations with credit derivatives were regulated by
Resolution 2,933/2002 and Circular 3,106/2002. These instruments
define which institutions can buy or sell hedge against credit risk
and make it possible to negotiate two types of credit derivatives:
credit default swaps (credit swaps) and total return swaps (total rate
of return swaps). Credit swap contracts require transfers of risk from
the transferring party to the receiving party which then assumes the
obligation of buying the referenced credits or, simply, paying a
specific amount should the credit involved deteriorate. In this process,
the total rate of return swap determined that, for a specific reference
asset, the entire flow of payments that originated in that asset will
be transferred from the transferring party to the receiving party, which
will then return to the first party the cost of obtaining the funding
invested in the reference asset. Should this asset not be honored, the
entire depreciation occurred will be paid by the receiving party to
the transferring party.
These rules also include other measures, such as that which limits
the contracting of these operations to those situations in which the
buyer of hedge holds the originating credit or when the underlying
asset is negotiated normally on organized markets or, in other words,
when its prices can be verified, at the same time in which they restrict
the volume of the risk transfer to the value of the underlying asset.
Accounting criteria – Marking-to-Market –
Circulars 3,068/2001 and 3,082/2002
In November 2001, Circular 3,068 was issued, followed by 3,082 in
January 2002, defining internationally recommended criteria for
financial institutions in general to be used in evaluating securities
and derivative financial instruments.
More precisely, these norms represented an effort to adapt to the
declaration made by the International Accounting Standards Board
(IASB), issued in December 1998, and by the FAS 115 and FAS
133, both of which were published by the Financial Accounting
Standards Board, the entity charged with issuing accounting norms.
In this framework, one should stress, among the principal measures
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adopted, the possibility of classifying different types of securities in
distinct categories, according to financial capacity and the intention
of negotiating them or not. These papers are to be evaluated at their
market value or maintained in portfolio until their maturity.
In summary, Circular 3,068 defined three possible categories for
classifying these securities: papers for negotiation, papers available
for sale and securities held to maturity. In an analogous way, Circular
3.082 incorporated the same procedures into derivative financial
instruments (hedging accounts).
5.3 Improvements in prudential
Regulations
Financial market dynamics have made it essential that the evolution
of the sector be closely monitored, so that supervisors and
regulators will be in a position to ensure that there will always be
an adequate regulatory and supervisory structure in place as needed
to respond adequately to the demands for financial system control
and monitoring, the defense of client rights, transparency and
market discipline. These are the principles that guide the work
carried out by Banco Central in recent years, as well as the projects
now under way.
Among the most important projects, one should cite the reform of
the rules governing access to the financial market, regulation of
offset agreements, the project aimed at improving the rules
governing the work of independent auditors, participation in the
studies leading to the New Basel Accord, as well as others related
to risk management, with particular emphasis on those that would
expand and improve the Credit Risk Center and incorporate capital
requirements as needed for covering the risks of the stock and
commodities markets.
The reform projects covering access rules and the regulating of offset
agreements have already been placed before public hearings and, once
the stage of analysis of the comments received during these hearings
is concluded, will be submitted to the appreciation of the CMN.
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Banco Central is also concerned with the question of participation
in the revision of the 1988 Capital Accord by the Basel Committee
on Banking Supervision. This process is expected to lead to the most
important changes in international standards on prudential regulations
since 1988. With this in mind, a specific work group was created to
monitor the discussions of the New Basel Accord, elaborate proposals
and evaluate the level of Brazilian adequacy, as well as the domestic
market consequences of its adoption.
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