Since November 1993, Brazilian financial institutions have been allowed to acquire non-financial asset-backed securities (non-financial ABSs) issued by Brazilian Special Purposes Companies (SPCs). These domestic non-financial securitizations have been successfully done under the terms of the National Monetary Council's Resolution 2,026 of 1993. The non-financial assets have been transferred by Brazilian originators to the SPC and used to guarantee ABSs issued by the SPC. Even in cases where the Brazilian originators were subject to bankruptcy proceedings, the credit rights of the ABS holders were not affected.
Domestic securitization of financial assets should also become a reality. Until recently, financial assets could not be transferred to non-financial institutions (except in very specific liquidity crises). Under National Monetary Council Resolution 2,412 and Central Bank Circular 2,772 (both of August 1997), financial assets can now be transferred to non-financial institutions. The Central Bank's authorization is necessary in each case and in practice it is still difficult to complete transactions. However, the Central Bank is seriously considering some promising draft regulations in the area. A bill is also expected shortly on domestic securitization of real estate.
Cross-border securitizations in all those areas still require exchange hedging because of Brazil's exchange control regulations. However, it may be possible to apply for the Central Bank's prior exchange approval in certain cases.
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