The Brazilian financial system is structured under a segmented institutional model, distinguishing between rule-making bodies, supervisory authorities and entities vested with resolution powers. In the banking sphere, the principal authorities are the National Monetary Council (Conselho Monetário Nacional – CMN), the Central Bank of Brazil (Banco Central do Brasil – BCB) and, with respect to capital markets, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM).

The CMN acts as the highest normative authority within the National Financial System (Sistema Financeiro Nacional – SFN), formulating monetary and credit policy and issuing general regulatory guidelines applicable to financial institutions.

The BCB acts as the prudential regulator and supervisor of financial and payment institutions. Its functions include licensing, ongoing supervision, issuance of secondary regulation, enforcement of administrative sanctions and monitoring of systemic risk. The BCB also acts as the resolution authority and may impose special regimes, including intervention and extrajudicial liquidation, to preserve financial stability.

CVM supervises securities market activities and exercises concurrent oversight over financial institutions when they engage in the issuance, distribution or intermediation of securities.

Brazil adopts a proportional supervisory framework, calibrating regulatory requirements according to the size, complexity and systemic relevance of institutions.

The incorporation and operation of financial institutions in Brazil require prior authorization from the BCB pursuant to Law No. 4,595/1964. Where foreign control is involved, a presidential decree is also required.

Brazilian legislation does not provide a closed definition of “banking business.” Instead, a functional approach is adopted. A financial institution is defined as a legal entity whose main or ancillary activity consists of raising, intermediating or investing financial resources, whether its own or those of third parties, or in custody of third-party assets.

Deposit-taking from the public, professional credit granting, or habitual financial intermediation are activities reserved to licensed financial institutions. The classification depends on the nature, regularity and structure of the activity, rather than on its formal denomination.

Unauthorized performance of reserved financial activities may result in administrative, civil and criminal liability.

Yes. The Brazilian regulatory framework is segmented and provides for distinct institutional categories depending on the nature of the activities performed.

Brazil recognizes a variety of financial institutions, including:

• commercial banks;
• multiple banks;
• investment banks;
• development banks;
• exchange banks;
• savings and loan associations;
• mortgage companies;
• credit cooperatives;
• leasing companies;
• securities brokerage firms;
• securities distribution firms;
• direct credit companies (SCD);
• peer-to-peer lending companies (SEP);
• real estate credit companies;
• microcredit companies; and
• other specialized entities.

Each category is subject to a specific regulatory framework and may only perform activities expressly authorized for that institutional type. The scope of permitted activities derives from the license granted by the BCB and cannot be expanded without prior regulatory approval.

The Brazilian regime does not provide for a universal banking license in the sense of automatic authorization to conduct all regulated financial activities. Rather, the license reflects the institutional category and corresponding regulatory perimeter.

No. The Brazilian framework does not adopt an automatic or expansive licensing model.

Although multiple banks may accumulate different portfolios (e.g., commercial and investment activities) within the same legal entity, regulated activities subject to specific legal regimes (such as securities intermediation, payment services or issuance of electronic money) may require additional authorization.

Activities involving securities distribution and brokerage are subject to CVM regulation. Payment services and issuance of electronic money are regulated by the BCB under a specific framework applicable to payment institutions.

Accordingly, the scope of activities permitted to a licensed bank depends on its institutional classification and any additional regulatory authorizations obtained. There is no automatic extension of a banking license to other regulated financial services.

Brazil has implemented a Regulatory Sandbox within the Central Bank’s framework, established under CMN Resolution No. 4,865/2020.

The Sandbox provides a controlled testing environment for innovative financial and payment projects, allowing selected entities to operate under specific regulatory conditions and temporary authorization.

Participation does not constitute a permanent license. At the conclusion of the testing cycle, the BCB may grant full authorization, require structural adjustments, or determine that the activity does not comply with the applicable regulatory framework.

The Sandbox has been particularly relevant in the context of fintech innovation, digital banking models and technology-driven financial services.

Brazil has enacted a specific regulatory framework for virtual asset services pursuant to Law No. 14,478/2022 and BCB Resolutions No. 519 and 520.

Entities providing virtual asset services (including intermediation, custody, brokerage and transfer of crypto-assets) are subject to prior authorization by the BCB.

Banks may engage in crypto-asset services, provided that the activity is compatible with their institutional scope and that prudential requirements are satisfied. Such activities require appropriate governance, operational risk controls, segregation of client assets and compliance with anti-money laundering and cybersecurity obligations.

Crypto-assets do not automatically fall within the traditional banking regulatory perimeter. Where a token qualifies as a security under Brazilian law, CVM supervision may also apply.

The prudential impact depends on the nature of the exposure (whether proprietary holdings or client custody) and may entail enhanced capital and risk management requirements.

Under the current Brazilian legal framework, crypto-assets are not classified as bank deposits nor as typical claims against licensed financial institutions.

In Brazil, the legal concept of a deposit is intrinsically linked to financial intermediation activities conducted by institutions authorized by the Central Bank of Brazil (BCB), whereby the customer becomes a creditor of the institution. The Credit Guarantee Fund (Fundo Garantidor de Créditos – FGC) protects certain claims arising from such operations including demand deposits, savings accounts, time deposits (CDBs) and other instruments expressly covered by its regulation up to the statutory limits.

As of the present regulatory framework, crypto-assets do not fall within the list of instruments protected by the FGC and do not qualify as guaranteed bank liabilities. They constitute digital assets whose ownership remains with the holder and do not, in principle, represent a deposit-taking obligation subject to deposit insurance.

That said, the regulatory regime applicable to Virtual Asset Service Providers (VASPs) imposes specific safeguarding mechanisms. BCB Resolution No. 520 establishes mandatory asset segregation between proprietary assets and client assets, individualized ownership records, robust internal controls, independent audit requirements and cybersecurity policies consistent with the technological risks involved.

This segregation has a proprietary nature and is intended to prevent commingling of assets in insolvency scenarios. Unlike bank deposits — which create a credit claim against the institution — crypto-assets held in custody remain, in principle, the property of the client and do not integrate the custodian’s balance sheet.

Furthermore, custodians are civilly liable for losses arising from negligence, operational failures or breach of statutory and contractual duties, reinforcing the protective framework through liability and supervisory oversight.

Where a token qualifies as a security under Brazilian law, CVM rules on custody and investor protection apply. Even in such cases, however, these instruments do not constitute insured bank deposits.

Accordingly, under the current legal regime, crypto-assets do not benefit from depositor protection mechanisms equivalent to deposit insurance schemes. Their protection derives from asset segregation rules, governance standards and supervisory oversight rather than institutional guarantee funds.

Licensed institutions in Brazil are subject to the prudential framework implemented under Basel III standards, including requirements relating to regulatory capital, capital buffers, leverage ratio and risk-weighted assets (RWA).

Joint CMN/BCB Resolution No. 14/2025 establishes the methodology for calculating regulatory capital, taking into account credit risk, market risk, operational risk and other relevant exposures. Capital requirements are not fixed as static amounts; rather, they are calculated proportionally to the institution’s risk profile and exposure structure.

With respect to crypto-assets, the prudential treatment depends on the nature of the exposure:

(i) Custody or intermediation without proprietary exposure: Where the institution acts solely as custodian or intermediary and client assets are properly segregated, there is generally no direct market exposure. In such cases, the prudential impact primarily relates to operational risk, technological risk and custody risk, which must be incorporated into capital calculations under the applicable operational risk framework.

(ii) Proprietary holdings (on-balance-sheet exposure) If the institution holds crypto-assets on its own account, such assets become subject to market risk and, depending on their structure, potentially credit risk treatment. Given the inherent volatility and liquidity characteristics of many digital assets, the BCB may require conservative prudential treatment, potentially resulting in higher capital consumption.

Although Brazil is still consolidating detailed prudential rules specifically addressing crypto-assets, the BCB has signaled alignment with international standards recommending conservative risk treatment for non-backed or highly volatile digital assets.

In addition to ongoing prudential capital requirements, the institution must meet minimum paid-in capital thresholds applicable to its regulatory category. However, minimum share capital does not replace compliance with ongoing capital adequacy ratios, which are continuously recalculated based on risk exposure.

There is currently no uniform or fixed risk weight applicable to all crypto-assets. The capital impact depends on the type of activity (custody, intermediation or proprietary exposure), materiality of exposure and the prudential assessment conducted by the BCB.

The incorporation and operation of financial institutions in Brazil require prior authorization from the Central Bank of Brazil (BCB), pursuant to Law No. 4,595/1964, CMN Resolution No. 4,970/2021, BCB Resolution No. 108/2021 (Annex I) and BCB Normative Instruction No. 299/2022.

The licensing process is structured in stages and involves comprehensive prudential assessment. The BCB evaluates the suitability of controlling shareholders, financial capacity, governance structure and operational readiness of the proposed institution.

CMN Resolution No. 4,970/2021 establishes substantive requirements for authorization, including:

• financial capacity of controlling shareholders compatible with the capital required for establishment and ongoing operations.
• lawful origin of funds used for capital subscription and acquisition of qualified shareholdings.
• economic and financial feasibility of the business plan.
• adequacy of technological infrastructure.
• unblemished reputation and technical qualification of managers.
• governance, internal controls and risk management structures proportionate to the institution’s size and activities.
  • compliance with minimum regulatory capital requirements.

BCB Resolution No. 108/2021 (Annex I) details procedural aspects, documentation requirements and formal stages of review by the Department of Financial System Organization (DEORF).

The BCB may request additional information, impose requirements or conduct technical meetings during the review process. Where foreign control is involved, an additional presidential decree is required.

BCB Resolution No. 317/2023 establishes a maximum statutory decision period of 360 days for authorization of incorporation and operation. This is a legal maximum timeframe. In practice, processing time varies depending on complexity, ownership structure, origin of capital and completeness of documentation.

The Brazilian model adopts a rigorous prudential approach to entry into the financial system, ensuring that only entities with adequate capital, governance and operational capacity are authorized to operate.

Foreign banks may establish operations in Brazil through a locally incorporated subsidiary or branch, subject to prior authorization by presidential decree and BCB approval.

Regarding cross-border activities without local presence, Brazilian law is guided by the principle of regulatory territoriality. As a general rule, deposit-taking, habitual credit granting or financial intermediation directed at Brazilian residents requires local authorization.

Foreign banks may not actively market or offer banking products in Brazil without authorization. Maintaining commercial representatives or organized marketing efforts in Brazil may characterize unauthorized financial activity.

However, Brazilian residents may contract services directly abroad on their own initiative, provided there is no active solicitation directed at the Brazilian market. While Brazilian law does not expressly codify the concept of “reverse solicitation,” factual analysis focuses on the absence of structured commercial targeting of Brazilian residents.

Cross-border financial operations remain subject to foreign exchange rules and reporting obligations before the BCB, including registration of foreign loans and capital inflows.

If the foreign bank belongs to a financial conglomerate with a licensed Brazilian entity, the BCB may exercise consolidated supervision and assess intragroup risks.

Banks in Brazil (including commercial, multiple and investment banks) must be incorporated as corporations (sociedade por ações – S.A.), pursuant to Law No. 6,404/1976 and BCB regulation.

Banks may operate as publicly held or closely held corporations. Public companies are subject to additional disclosure and governance requirements under CVM supervision, in addition to BCB prudential oversight. Closely held corporations remain subject exclusively to prudential banking regulation.

Foreign banks may operate through a locally incorporated subsidiary structured as an S.A. or through a branch, both requiring presidential and BCB authorization.

Certain non-bank financial institutions (e.g., direct credit companies and peer-to-peer lending companies) may be incorporated as limited liability companies, subject to specific regulatory requirements.

The corporate form affects governance, capital structure and disclosure obligations but does not exempt the institution from prudential supervision.

Brazil does not adopt a classic ring-fencing model separating retail banking from investment banking activities.

Multiple banks may combine different portfolios (commercial, investment, real estate credit, leasing) within the same legal entity.

However, the absence of formal structural separation is balanced by consolidated prudential supervision. The BCB requires capital adequacy and risk management assessment at the level of the prudential conglomerate, including intragroup exposures and related-party transactions.

Certain regulated activities, such as fund administration, securities intermediation and payment services, are typically conducted through separate legal entities within the group due to regulatory specialization requirements.

In addition, fiduciary and custody activities are subject to strict asset segregation rules.

While Brazil does not impose structural ring-fencing, financial groups face practical challenges relating to:

• capital allocation across entities.
• intragroup exposure limits.
• governance independence.
• conflict-of-interest management.
•  supervisory coordination between BCB and CVM.
• contagion risk mitigation.

The Brazilian model therefore relies on consolidated supervision and intragroup controls rather than mandatory structural separation.

Brazilian regulation requires financial institutions to maintain governance structures commensurate with their size, complexity and risk profile, pursuant to Law No. 4,595/1964 and, in particular, CMN Resolution No. 4,557/2017.

Banks must implement a formal and integrated risk and capital management framework covering, at a minimum, credit risk, market risk, liquidity risk, operational risk, socio-environmental and climate risk, and other risks relevant to the business model. Institutions are required to define and formally approve a Risk Appetite Statement (RAS), including monitoring mechanisms and escalation procedures.

The board of directors, where applicable, is responsible for setting strategic guidelines, approving risk policies and overseeing executive management. Appointment of senior managers is subject to prior approval by the Central Bank of Brazil (BCB), which assesses reputation, technical qualification and professional suitability.

Institutions must maintain independent compliance and internal audit functions with sufficient autonomy and direct access to senior management. The compliance function must ensure adherence to regulatory requirements, internal policies, anti-money laundering obligations and conflict-of-interest management.

Larger or systemically relevant institutions are subject to additional governance requirements, including statutory audit committees and formalized risk committees. Within financial conglomerates, governance arrangements must ensure consolidated risk oversight and effective intragroup coordination.

The BCB has increasingly emphasized organizational culture and conduct, reinforcing the responsibility of senior management for the effective functioning of internal controls and prudent risk management.

Operational resilience obligations are embedded within the Brazilian prudential framework, particularly under CMN Resolution No. 4,557/2017 (risk management) and CMN Resolution No. 4,893/2021 (cybersecurity policy).

Banks must identify critical functions and essential services whose disruption could materially affect the institution, its clients or the financial system. Based on this mapping, institutions are required to implement monitoring mechanisms, contingency plans and formal incident response procedures.

Institutions must maintain business continuity and disaster recovery frameworks proportionate to their size and operational complexity. These plans must address technological failures, cyber incidents, systemic outages and disruptions affecting critical service providers.

Cybersecurity governance is a core component of operational resilience. Institutions must implement formal information security policies, preventive controls, detection mechanisms and incident reporting procedures, including communication to the BCB where relevant.

The expansion of digital infrastructure — particularly the central role of the PIX instant payment system — has increased supervisory attention on real-time settlement resilience, third-party technology concentration risk and operational continuity under stress scenarios.

Although Brazilian regulation does not formally adopt the terminology of “impact tolerance” used in certain jurisdictions, institutions are required to define acceptable risk exposure levels and ensure the continuity of critical functions under severe but plausible scenarios.

Operational resilience is therefore treated as an integral element of prudential risk management.

Brazilian regulation permits outsourcing, including technology and cloud computing services, but does not allow transfer of regulatory responsibility. The licensed institution remains fully accountable before the BCB for outsourced activities.

Prior to contracting a third-party provider, the institution must conduct a formal risk assessment, evaluate the provider’s technical and financial capacity and ensure operational continuity safeguards are in place.

Contracts must guarantee supervisory access to information by the BCB, including audit rights where necessary. Institutions must implement contingency plans and exit strategies to mitigate excessive dependence on critical providers.

For cloud computing arrangements, institutions must ensure adequate data protection, cybersecurity controls, access management and incident response mechanisms. Subcontracting chains are permitted but do not relieve the institution of ultimate responsibility.

The Brazilian framework balances operational flexibility with governance robustness, supervisory transparency and risk mitigation in critical outsourcing arrangements.

The Central Bank has formally incorporated socio-environmental and climate risks into the prudential framework, requiring financial institutions to integrate such risks into governance and risk management processes.

Banks must maintain a Social, Environmental and Climate Responsibility Policy approved by senior management and must identify, assess and monitor risks arising from physical climate events and transition risks affecting borrowers and sectors.

Climate-related risks must be incorporated into credit assessment, portfolio monitoring and collateral valuation processes. Larger institutions may be subject to enhanced disclosure and reporting obligations.

While there is no mandatory green lending quota, supervisory expectations require that climate-related risks be considered in capital adequacy and risk management decisions. The prudential dialogue increasingly integrates ESG considerations into supervisory assessments.

Financial institutions must adopt formal remuneration policies consistent with prudent risk management and long-term sustainability.

Variable remuneration must be aligned with risk-adjusted performance and avoid incentives for excessive risk-taking. For larger or systemically relevant institutions, a significant portion of variable remuneration must be deferred and linked to sustained performance outcomes.

Mechanisms allowing reduction, retention or recovery of variable compensation (malus and clawback) must be available in cases of adverse results, regulatory breaches or misconduct.

There is no fixed statutory cap on bonuses; however, remuneration structures must be compatible with the institution’s risk appetite and subject to supervisory scrutiny by the BCB.

Senior management bears responsibility for ensuring that remuneration policies are effectively implemented and aligned with prudential objectives.

Brazil has implemented the Basel III framework through comprehensive prudential regulation, including requirements relating to Common Equity Tier 1, Tier 1 and Total Capital, capital conservation buffers, leverage ratio and liquidity standards.

Capital requirements are calibrated according to risk-weighted assets (RWA) and supplemented by capital buffers applicable to systemically relevant institutions.

The implementation follows a proportional approach based on the prudential segmentation framework (S1–S5), with larger and more complex institutions subject to more stringent requirements.

There are no material structural deviations from Basel III standards. The Brazilian regime is generally regarded as conservative, with active supervisory oversight and continuous monitoring of capital adequacy.

Yes. Brazil incorporated the leverage ratio into its prudential framework as part of the implementation of Basel III.

The leverage ratio operates as a complementary measure to risk-based capital requirements. It is calculated as the ratio of Tier 1 Capital to total exposure, without risk weighting. Its primary objective is to limit excessive leverage and strengthen institutions’ loss-absorbing capacity irrespective of internal risk models.

The requirement applies proportionally according to the institution’s prudential segmentation, with more stringent monitoring for larger or systemically relevant banks. The leverage ratio functions as a regulatory backstop, ensuring that capital adequacy is not solely dependent on risk-weighted asset calculations.

Brazil has implemented the principal liquidity metrics established under Basel III, notably the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR).

The LCR requires institutions to maintain a sufficient stock of high-quality liquid assets to withstand a 30-day stressed funding scenario, ensuring short-term resilience to liquidity shocks.

The NSFR requires institutions to maintain a stable funding structure consistent with the maturity profile of their assets, thereby reducing structural mismatches between short-term liabilities and long-term exposures.

These requirements are applied proportionally in accordance with the prudential segmentation framework. Larger and more complex institutions are subject to more intensive reporting and supervisory monitoring.

In Brazil, the Central Bank provides liquidity to financial institutions primarily through rediscount operations, repurchase agreements (open market operations), specific liquidity facilities established by regulation and adjustments to reserve requirements.

Rediscount and repurchase operations allow short-term liquidity access against eligible collateral. In periods of systemic stress, the BCB may establish extraordinary liquidity lines with extended maturities or differentiated conditions.

Reserve requirement adjustments serve as an important liquidity management tool, enabling the release of funds into the financial system when warranted by monetary or systemic conditions.

Although not a monetary authority, the Brazilian Development Bank (BNDES) is also a relevant source of long-term funding through on-lending structures intermediated by commercial banks, particularly in strategic economic sectors.

Yes. Financial institutions must prepare and publish annual financial statements audited by an independent auditor, as well as semiannual financial statements, in accordance with BCB regulation.

In addition to public disclosure, banks are subject to periodic regulatory reporting obligations, including prudential and accounting information submitted to the Central Bank.

If the bank is a publicly held corporation, it is also subject to CVM requirements, including annual financial reports (DFP), quarterly reports (ITR), material event disclosures and other transparency obligations under securities regulations.

Yes. The Central Bank of Brazil exercises consolidated prudential supervision over financial conglomerates.

Supervisory assessment extends beyond the individual licensed entity to encompass the broader economic group under common control, including intragroup exposures, cross-shareholdings and operational interdependencies.

Capital adequacy, risk management and certain prudential limits may be assessed on a consolidated basis. This allows the regulator to evaluate systemic risk within the group structure and to adopt corrective measures when necessary.

Although special resolution regimes are formally imposed on individual legal entities, the financial and operational interdependence within a conglomerate may result in coordinated supervisory or resolution measures affecting other group entities when required to safeguard financial stability.

Any material corporate change involving a licensed financial institution requires prior approval from the Central Bank of Brazil (BCB).

This includes the acquisition of qualified shareholdings, transfer of control, corporate reorganizations, capital increases or reductions and other structural modifications deemed relevant from a prudential perspective.

In the case of acquisition of a qualified shareholding or control, the BCB assesses, among other factors:

• the financial capacity of the acquirer.
• the lawful origin of funds.
• the reputation and suitability of the individuals involved.
• the prudential impact of the transaction.
• the compatibility of the transaction with the institution’s governance and capital structure.

The transaction becomes legally effective only upon regulatory approval. Where foreign control is involved, a presidential decree issued by the Federal Executive Branch is also required.

Yes. The acquisition of a qualified shareholding or the exercise of control in a bank is subject to prior authorization by the BCB.

A qualified shareholding generally refers to ownership reaching a significant threshold of the institution’s capital (typically 15% of voting capital or 10% of total capital, depending on the case), even if control is not obtained.

Controlling shareholders and qualified investors must demonstrate:

• sufficient financial capacity.
• lawful origin of funds.
• unblemished reputation.
• absence of regulatory impediments.

The BCB may impose conditions or deny approval if it determines that the proposed change may adversely affect the soundness of the institution or the stability of the financial system.

There is no general prohibition on foreign ownership or control of banks in Brazil.

However, the incorporation or operation of a bank under foreign control requires authorization from both the Federal Executive Branch (by presidential decree) and the BCB.

The supervisory assessment includes evaluation of the foreign controller’s financial standing, home-country regulatory oversight and capacity to comply with Brazilian prudential requirements.

Once approved, foreign controllers are subject to the same regulatory standards and prudential obligations applicable to domestic controllers.

Yes. The Central Bank applies a prudential segmentation framework (S1 to S5), classifying institutions according to size, complexity and degree of interconnectedness within the financial system.

Institutions classified in higher segments, particularly those with domestic systemic relevance, are subject to enhanced prudential requirements, including:

• additional capital buffers.
• strengthened governance and risk management frameworks.
• more intensive supervisory monitoring.

The objective is to mitigate systemic risk and reduce the potential for contagion in the event of financial distress.

Brazil does not formally designate global systemically important banks (G-SIBs) within its jurisdiction but applies proportional supervisory intensity based on domestic systemic relevance.

The Central Bank may impose administrative sanctions proportionate to the severity of the violation, including:

• warnings.
• monetary fines.
• suspension or disqualification of managers.
• revocation of the institution’s operating license.

In more severe cases, the BCB may impose special regimes such as intervention or extrajudicial liquidation.

Sanctions may apply to the institution as well as to individual managers and controlling shareholders. Where the institution is publicly listed or engaged in securities offerings, the CVM may also initiate enforcement proceedings within its jurisdiction.

The BCB conducts ongoing risk-based supervision, combining continuous monitoring of prudential indicators, periodic reporting requirements and targeted inspections.

Recent supervisory trends include heightened scrutiny of governance, risk management, cybersecurity, anti-money laundering controls and conduct-related issues.

The regulatory approach emphasizes preventive and corrective measures, often implemented before resorting to more severe sanctions. However, administrative proceedings and personal liability of managers remain significant enforcement tools.

Supervisory coordination between the BCB and CVM has also intensified where activities intersect banking and capital markets regulation.

Protection mechanisms vary according to the nature of the asset.

Securities held through regulated intermediaries remain registered in the name of the investor and are subject to asset segregation rules. They do not form part of the intermediary’s estate in insolvency proceedings.

Bank deposits and certain bank-issued instruments, such as certificates of deposit (CDBs), constitute liabilities of the issuing institution. In such cases, protection is provided by the Credit Guarantee Fund (FGC), up to the limits established by its regulation.

With respect to crypto-assets, the recent regulatory framework requires segregation between proprietary assets and client assets, individualized recordkeeping and specific custody controls. However, crypto-assets are not covered by deposit insurance mechanisms equivalent to the FGC.

Additionally, self-custody of crypto-assets (self-custody wallets or cold storage) is permitted. In such cases, the holder retains direct control over private keys and assumes full responsibility for safekeeping, without institutional guarantee or regulatory intermediation.

Brazil has developed a recovery and resolution planning framework primarily applicable to larger or systemically relevant institutions.

Certain banks are required to maintain formal recovery and orderly exit plans, designed to ensure business continuity under stress and facilitate resolution where recovery is not viable. These plans typically include identification of stress scenarios, recovery triggers, capital and liquidity restoration measures, asset disposal strategies and assessment of resolvability.

The Central Bank of Brazil (BCB) reviews these plans as part of the supervisory cycle. The BCB may require amendments, impose additional safeguards or expand planning obligations depending on the institution’s systemic relevance and risk profile.

The framework reflects a preventive approach: governance structures and execution mechanisms must be in place prior to a stress event, rather than being developed reactively.

Brazil does not currently provide for a formal statutory bail-in regime comparable to those implemented in certain European jurisdictions.

Loss absorption in resolution scenarios generally follows the traditional creditor hierarchy, beginning with equity and subordinated instruments. Certain instruments may contain contractual loss-absorption features; however, there is no broad statutory power authorizing mandatory write-down or conversion of ordinary senior debt as a standard resolution tool.

Legislative discussions have addressed modernization of the resolution framework, including potential bail-in mechanisms, but no comprehensive statutory regime has yet been implemented.

In any event, such tools would be intended for situations of non-viability or insolvency. They do not apply to mere liquidity stress or temporary non-compliance with prudential liquidity ratios, which are addressed through supervisory measures and liquidity management instruments.

Brazil does not currently impose a formal Total Loss-Absorbing Capacity (TLAC) requirement comparable to the framework applicable to global systemically important banks in certain jurisdictions.

The Brazilian regime is centered on regulatory capital requirements — including Common Equity Tier 1, Tier 1 and Tier 2 capital — and capital buffers designed primarily for going-concern loss absorption.

The prudential segmentation framework (S1–S5) differentiates supervisory intensity and capital expectations according to size and systemic relevance. However, this proportional differentiation does not amount to a formal TLAC regime for gone-concern scenarios.

Loss absorption in resolution continues to rely primarily on equity and subordinated instruments in accordance with creditor hierarchy rules.

Brazil does not have a statutory regime equivalent to the UK’s Senior Managers and Certification Regime (SMCR).

Nonetheless, senior managers of financial institutions are subject to strict fiduciary duties under corporate law and to specific prudential obligations under banking regulation.

Appointment of senior officers requires prior approval by the BCB, which assesses technical qualification, reputation and regulatory suitability. The BCB may impose sanctions directly on individuals, including monetary penalties and disqualification from management positions within the financial system.

Where the institution is publicly held or engaged in securities market activities, the CVM may also initiate administrative proceedings against managers for breaches of disclosure or governance obligations.

Individual accountability is therefore a central feature of the Brazilian prudential framework, even in the absence of a formally structured senior managers regime.

Three primary vectors are expected to shape the Brazilian financial sector in the near term: (i) consolidation of the virtual asset regulatory framework, (ii) ongoing prudential tightening and (iii) enhanced capital requirements for payment institutions.

The regulatory framework for virtual assets, particularly in relation to stablecoins, custody standards and integration with traditional financial institutions, is expected to evolve. Banks increasingly engaging in digital asset services will face heightened expectations regarding segregation, governance, capital treatment and AML compliance.

From a prudential perspective, the CMN and BCB have recently introduced adjustments reinforcing the quality of regulatory capital, with particular emphasis on core capital requirements. There is a clear trend toward progressive alignment and strengthening of capital expectations, including institutions previously subject to lighter regimes.

Notably, recent regulatory developments have increased capital and governance requirements applicable to payment institutions. The rapid expansion of the PIX instant payment system and the growing systemic relevance of payment institutions have prompted a gradual prudential convergence between certain large payment institutions and traditional financial institutions. Enhanced own funds requirements, risk management structures and supervisory scrutiny reflect this evolution.

The BCB’s innovation agenda — encompassing PIX, Open Finance and digital financial infrastructure — will continue to drive operational transformation, requiring strengthened operational resilience, cybersecurity safeguards and third-party risk management.

Additionally, supervisory integration of climate-related and ESG risks is expected to deepen, with increasing incorporation of such factors into capital planning, governance assessments and supervisory dialogue.

Overall, the Brazilian financial sector is moving toward a more complex regulatory environment characterized by the simultaneous advancement of innovation, capital reinforcement and risk-based supervision.