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Brazil’s Structured Operations Certificates

Alexei BonaminMarcus Vinicius Fonseca
On September 5 2013, the Brazilian National Monetary Council enacted Resolution 4,263, which finally regulated structured operations certificates (certificado de operações estruturadas) or COEs. Similar to a structured note, COEs are already used by banks in other countries, which allows the combination of different investment structures, such as fixed-income and variable-income, in one instrument.

The COE was created in 2010 together with financial bills (letras financeiras) by the Provisional Measure (Medida Provisória) of December 15 2009, (converted into Law 12,249 of June 11 2010), to be a fundraising alternative for banks established in Brazil.

With the enactment of Resolution 4,263, multiple banks, commercial banks, investment banks and savings banks will be able to issue COEs, which can be referenced by price indexation, bond indexation, securities indexation, interest rates, exchange rates, securities, debentures, private bonds issued abroad, government bonds issued both in Brazil and abroad and other underlying assets. The COE, however, cannot be backed by credit transactions, negotiable instruments, securitisation or credit derivatives transactions.

COEs can also be offered publically in accordance with Brazilian regulations. In addition, all documentation, information and the methodology of any COE transaction must be made available to the Brazilian Central Bank for at least 10 years as of the maturity date of the COE.

Finally, Resolution 4,263 will enter into full effect as of January 2014.

Alexei Bonamin and Marcus Vinicius Fonseca

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