By a decision published in the Official Gazette on April 25 2001, the president of Brazil confirmed that the competition authority (CADE) is not the governmental body responsible for judging the cases of mergers, incorporations or acquisitions involving financial institutions authorized to operate by the Central Bank of Brazil.
CADE has authority to enforce the provisions of Law 8.884/94 throughout the whole of Brazil. Certain acts and agreements considered to be anti-competitive must be submitted to CADE for review and approval. In addition, acts such as mergers, acquisitions or joint ventures must be submitted to CADE for approval if they exceed certain market share or gross annual sales criteria.
In October 2000, CADE approved, without restriction, a transaction involving the purchase of 40.8% of Credibanco's shares by the BNY International Financial Corporation. This prompted the Central Bank to submit a consultation to the federal attorney general, who issued a legal opinion to the effect that Law 8.884/94 cannot supersede the provisions of complementary banking law 4.595/64, establishing that the governmental body responsible for the approval of the aforementioned operations in cases involving financial institutions, is the Central Bank.
The decision of the president of Brazil confirming this makes the Central Bank the exclusive body responsible for judging and approving cases of acts of concentration involving financial institutions.
Under Ruling 3032 of May 10 2001, the Central Bank established new rules regarding the new Brazilian Payment System (SPB), which will be in force from November 1 2001.
It is intended that, for transfers exceeding R$5,000 ($2,150), there will be a system for the settlement of a gross value in real time, consisting of transactions for the debiting and crediting of accounts in real time, by means of a reserve account maintained by the banks in the Central Bank.
Law No 10.214 of March 27 2001 established that, in systems where the value and nature of the transactions would offer a definite risk to the stability and normal operation of the financial system, clearing houses as well as any entity rendering clearing and settlement services, must assume the responsibilities of each client in relation to the settlement of operations that were carried out by them. To that end, clearing houses must make guarantees. Properties or goods that are the object of such guarantees will not be subject to a seizure order or any other judicial measure.
With Ruling 3032, the Central Bank should be able to monitor balances and financial settlements of obligations held in reserve accounts. Also, a mechanism for the transfer of resources, in real time, should be available to reduce the risk to financial transactions.
Over the last few years a sizeable growth in investment funds has been observed, with investments now exceeding R$300 billion.
It is in this context that the Brazilian Exchange Commission has established new rules to make investment funds more transparent and safe. In accordance with one recent provision, since 2000 performance fees are no longer charged in respect of retail trade funds, which are aimed at small investors. However, the performance fees will still be paid by qualified investors.
Finally, the non-applicability of the provisional contribution on financial trade and the daily liquidity of such investment funds since 1999 have made these investment funds a very attractive investment for small investors.
Eliana Maria Filippozzi