By Luciano Fantin – This article complements the previous ones that I wrote about the payment card industry as of January 24 and February 24 2014.
The Brazilian Central Bank (BCB) published two important Circular Letters that deepen and modify some relevant regulatory aspects, affecting primordially Circular Letters 3,681, 3,682 and 3,683, all of them as of November 4 2013. They are the Circular Letters 3,704 and 3,705. This article will focus on the latter. Circular Letter 3,704 rules settlements of cash assets maintained at the BCB and the participation of payment institutions in the Brazilian Payment System (SPB). Its content is, therefore, eminently technical and operational.
As every new embracing regulatory landmark, Federal Law 12,865/13 and its regulation in the National Financial System brought a wide debate to the payment card industry. There is a vast spectrum of roles in this industry, with various actors and natures of services rendered as well as many operational peculiarities. It is thus natural that after hearing the market the BCB ends up promoting adjustments so that the implementations of the new rules happen in the smoothest way possible.
As for Circular Letter 3,705/14, I highlight here some of its main new aspects, with no intention to be an exhaustive paper. It is pivotal that every payment institution, owner of payment schemes and financial institutions that render payment services carefully study this Circular Letter in order to verify the potential impacts for themselves.
Circular Letter 3.681/13
- The institutions, which issue ‘electronic money’, have now a schedule for the deposit of the cash assets at the BCB, representative of the balances of pre-paid accounts maintained by them, as follows:
- 20% from May 5 2014 on;
- 40% from January 1st 2016 on;
- 60% from January 1st 2017 on;
- 80% from January 1st 2018 on and
- 100% from January 1st 2019 on
- The payment institutions will have also to observe Circular Letter 3,289/05, on the “Sistema de Registro e Denúncias, Reclamações e Pedidos de Informações – RDR (a kind of public feedback system for complaints and information requests), from May 4th 2014 on;
- The deadline for compliance to Resolution 3.894/10, which deals with the set-up of an ombudsman function, has been postponed 1 year, to April 4 2015;
Circular Letter 3.682/13
- The BCB has expanded and redefined the nature of the limited purpose payment schemes, which do not take part in the SPB:
- As for the nature of the payment schemes, two items received new definitions, and relate to payment instruments accepted only by the establishments of the same company’s network and those accepted only in a network with the same visual identity;
- As for the minimum volumes for payment schemes to take part in the SPB, the BCB promoted a relevant increase, however determining that they will be reduced to 50% on January 1 2016 and to 10% on January 1 2017, as follows:
- BRL 500 million of total transactions value, accumulated in the last 12 months;
- 25 million transactions, accumulated in the last 12 months;
- 2,5 million final active users in 30 days in the last 12 months.
- The nature of a ‘closed payment scheme’ has been rewritten, being now defined as the one which the management of the electronic money or cumulatively, the payment account management, the issuance of the payment instrument and its acquiring are executed (i) by only one payment institution or financial institution which is the same company as the owner of the payment scheme or (ii) by a payment institution or financial institution that controls or is controlled by the owner of the payment scheme;
- As for the exemption of the authorization request, there has been also an important change. The owners of payment schemes, which happen to be run by governmental bodies are still exempt, but those that were before defined as “financial institutions of a banking nature” have now been replaced, for exemption matters, by closed payment schemes managed by a commercial bank, multiple bank with commercial license portfolio, Brazilian government type of saving bank (caixa econômica”), singular credit cooperatives and specific credit, financing and investing societies (Brazilian “sociedades de crédito, financiamento e investimento”), in the case they are as well exempt of authorization as payment institutions as per Article 43 of Circular Letter 3.683/13;
- The previously existing intermediate limits, for exemption of authorization of the participants of SPB, have been suppressed (annual value of transactions below BRL 100 million and quantity of annual transactions below 5 million). One can conclude that the payment scheme, which surpasses the newly established minimum limits will be subject to an authorization request, as well as its integration to SPB (except for governmental bodies and closed arrangements, as previously defined).
Circular Letter 3.683/13
- Article 2 deepened definitions of the nature of payment institutions. It is worth noting that the definition of an acquirer now includes its participation in the settlement of payment transactions by the issuer to the creditor, according to the payment scheme rules;
- The deadline for the realization of inspections by the BCB has been extended to 90 days as from the request date on;
- The initial capitalization by payment institutions has also been altered. The payment institution that takes part exclusively in closed payment schemes has still to capitalize BRL 2 million for the first payment institution nature, but only BRL1 million for each additional nature, instead of the same BRL 2 million previously required;
- Article 43, which concerns the authorization for rendering of payment services by financial institutions, brought changes. Commercial banks, multiple banks with commercial license portfolio, Brazilian government type of saving bank (caixa econômica”) are still exempt from authorization. Specific credit, financing and investing societies (Brazilian “sociedades de crédito, financiamento e investimento”) are exempt of authorization, when issuing credit cards. On the other hand, singular credit cooperatives are exempt from authorization when issuing credit cards and electronic money exclusively to its associates. Another aspect of this Article is that the rest of the financial institutions must request authorization in the case the payment scheme participates in the SPB;
- The deadline for the authorization request has been extended. What before was 90 days became now 180 days from the date on the Circular Letter 3.683/13 is put into force. It is worth noting that this is applicable to payment institutions or financial institutions that render payment services in payment schemes that participate or will participate in SPB. One can conclude thus that if the payment scheme is out of SPB, the authorization is not required;
- BCB has added 4 articles in its original text: 3A, 12A, 66A and 66B. In this small article, I would like to focus on only two of them, which I considered more relevant due to its novelties:
- 3A: It defines the cases in which an authorization for the constitution and functioning of a payment institution should be requested. It is worth highlighting that BCB refers only to payment schemes that participate or will participate in SPB;
- 66A: It defines the deadline of 90 days for payment institutions or financial institutions that render payment services, to request authorization from the moment on when they know that at least one of the payment schemes which they take part on, started to participate in SPB.