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Explanatory Note on the Accounting Statements

 
Notes to the financial statements - June 30, 2003
(In thousands of Reais)
 
 
Note 1 - The Banco and its duties
 
The Banco Central do Brasil, a federal government agency which is part of the National Financial System, was established on December 31, 1964 under Law 4,595, and has the mission of ensuring the stability of the purchasing power of Brazilian currency and the soundness of the National Financial System.
 
 
Note 2 - Presentation
 
Accounting statements are prepared in accordance with the legislation applicable to the Banco Central do Brasil (BCB), especially Law 4,595/64 - which grants the National Monetary Council (CMN) powers to take decisions on BCB’s balance sheets, interim balance sheets and internal accounting system, without prejudice to the competence of the Federal Audit Court, Provisional Measure 2,179-36 (August 24, 2001) and Supplementary Law 101/2000 (Fiscal Responsibility Law), which define the form of distribution of BCB’s financial results. Such rules require that BCB presents half-yearly financial statements on July 30 and December 31.
 
In order to harmonize BCB’s accounting procedures with best international practices, the National Monetary Council determined a thorough revision of the Bank’s accounting policy, which began with the financial statements as of June 30, 2002, with implementation expected to be concluded by 2004.
 
In view of the exclusion from BCB’s interim balance sheet of assets recorded with 100% provision in the second half of 2002, some items of the interim balance sheet and income statement as of July 30, 2002, published for the purpose of comparison, were reclassified to present the information in a form coherent with the amounts of 2003.
Note 3 - Main accounting policies
 
a. Accounting system:
 
Revenues and expenses are recorded on an accrual basis.
 
b. Exchange rate restatement of assets and liabilities in foreign currency
 
Rights and obligations expressed in foreign currency are adjusted at the exchange rates prevailing on the balance sheet date, using the bid rate to restate assets and the sale offer rate to restate liabilities. The exchange rates of the Real against the main currencies are:
 
 
06/30/2003
06/30/2002
Buy
Sell
Buy
Sell
United States Dollar
2,8712
2,8720
2,8436
2,8444
Euro
3,3040
3,3111
2,8180
2,8245
Yen
0,0239
0,0240
0,0237
0,0238
SDR
4,0141
4,0313
3,7757
3,7919
Gold (gram)
31,6518
31,7963
29,2323
29,3658
 
SDR – Special Drawing Rights is the accounting unit used by the International Monetary Fund – IMF and its rate is related to a basket of currencies, which are freely usable in international transactions. Currently includes the euro (ECU), the Japanese yen (JPY), the sterling pound (GBP), and the United States dollar (USD).
 
c. Assessment of operations with securities determined in foreign currencies and with gold
 
Such assets are recorded, at the moment of their purchase, by the cost value and are valued daily based on quotations disclosed by the main international information providers.
 
d. Assessment of federal government securities
 
The Banco Central do Brasil (BCB) security portfolio is classified under “securities for trading” and “securities held to maturity”. Securities held to maturity are valued at adjusted historical cost and securities for trading are valued at market value according to the following criteria:
 
National Treasury Bills – LTN, National Treasury Notes Series D – NTN-D and Treasury Financial Bills – LFT: assessed considering secondary market prices and published by the National Open Market Institutions – ANDIMA;
 
Securitized Credits – CVS: valued by the average of CVSA traded in the period from December 2000 to November 2002, excluding operations performed near privatization auctions, due to the distortion in the trading price of such securities caused by abnormal demand.
 
Central Bank Notes – NBC are recorded at their inflation-adjusted cost.
 
e. Assessment of derivatives
 
Swap operations are valued at market value, according to prices published by the Futures and Commodities Exchange - BM&F. Forward operations are valued according to rates published by BCB (Ptax).
 
f.  Assessment of other assets
 
Financial assets without adequate liquidity are valued by their cash flow adjusted to present value. Those that are indexed to price indexes or to the Referential Rate - TR are discounted at the secondary market rates applicable to National Treasury securities with similar characteristics, weighted by the quantities traded.
 
 
g. Allowance for doubtful debtors
 
The criteria for recording and adjusting the allowance are as follows:
 
- When a credit is considered difficult to receive, the allowance is recorded at the amount corresponding to the difference between the carrying amount and the amount likely to be received;
 
- When a supervening fact lowers the debt’s market value, the allowance is recorded at the amount corresponding to the difference between the carrying amount and the market value.
 
Therefore, allowances related to credits with institutions under extra-judicial liquidation are recorded based on the difference between the value of the operation and the value of total assets of such institutions, valued, whenever possible, at market value, taking into consideration the preferred liabilities in relation to BCB’s position.
 
h. Depreciation
 
Property, plant and equipment is recorded at cost of acquisition, with a revaluation of real estate in 1994, when a corresponding reserve was recorded. Depreciation is provided using the straight-line method in accordance with the following criteria:
 
I - Fixtures and fittings:
 
·      Data processing equipment, vehicles and tools - 20% p.a.;
·      Other equipment, facilities and permanent materials - 10% p.a.;
·      Library and museum collections and works of art are not depreciated;
 
II - Property (except land), 100% depreciated in 62.5 years at an annual depreciation rate calculated according to the remaining useful life of the property.
 
 
Note 4 - Compliance with international rules
 
According to Note 2, Banco Central do Brasil (BCB) has been harmonizing its accounting rules with best international practices. The main change occurring in the period from June 30, 2002 to June 30, 2003, was the recognition of an actuarial liability with Fundação Banco Central de Previdência Privada - CENTRUS, BCB’s private pension fund, resulting from employer’s contributions for retired employees up to December 1990 (Note 8.c).
 
 
Note 5 - Foreign sector operations
 
Banco Central do Brasil (BCB), as the depositary of gold, foreign currency and Special Drawing Rights comprising the Brazilian official reserves, operates to secure regular operation of the foreign exchange market, relative stability of foreign exchange rates, and equilibrium of the balance of payment, and for such purposes BCB may buy and sell gold and foreign currency, as well as realize loans abroad. In managing such reserves, BCB aims at minimizing the exposure of the Brazilian Government to exchange rate fluctuations by allocating its portfolio in such a way as to hedge the short-term external sovereign debt. The allocation of currencies is variable and its current configuration is, approximately: 58% in US dollars, 31% in euros, and 11% in Japanese yens.
 
Reflecting a conservative profile, typical of a central bank, the Brazilian international reserves are invested in a low maturity portfolio, with a duration of about one year. Money-market investments (fixed-term and very short term deposits) are made with maturities of up to six months and operations with securities have an average duration of 1.8 years.
 
Forward operations – future purchase of foreign currency with a term of more than two days - are used by BCB to adjust its hedge position between currencies, while line operations with United States Dollars – sale of foreign currency with repurchase agreements – are used as an instrument of foreign exchange policy.
 
Repurchase operations - Sale of securities with a commitment to repurchase (repo) and purchase of securities with a commitment to resale (reverse repo) - are performed to obtain gains with rate differentials on papers demanded by the market.
 
Brazilian foreign debt securities are traded by BCB as an alternative investment to international reserves and as an instrument to manage the Republic’s foreign liabilities.
 
The risk management of such operations is concentrated on the assessment and control of the following segments:
 
a. Market risk - active management of international reserves is monitored on a daily basis using the Value at Risk (V@R) method. The model used to calculate V@R is based on RiskMetrics, originally developed by JPMorgan, with a level of confidence of 95%. The Board of Governors authorizes deviations from the reference portfolio within the defined V@R limit, so as to take advantage of market opportunities as they arise. Quarterly backtestings are performed upon presentation of the Bank’s results to the Board of Governors in order to assess the model’s adequateness;
 
b. Credit risks - investments in money market and securities should obey the risk rating limits for institutions and for maximum concentration by counterpart. The minimum  currently authorized rating is “A” in accordance with the rating by Moody’s, and the maximum limit by counterpart varies according to the size of the institution, limited to an amount predetermined by the Board of Governors. Operations with institutions featuring a risk rating lower than “A” are made based on specific authorization by the Board of Governors;
 
c. Liquidity risk - there are limits to the total amount that may be acquired of a given issue, as well as to the maximum amount of each issue in the total portfolio, in such a way so as to assure that the papers acquired may be traded in the secondary market with low cost.
 
In order to manage the international reserves, BCB relies on computerized systems that enable control of all steps of each operation, from contracting to recording, control and financial settlement. In addition, operating limits are controlled on a daily basis and the Board of Governors is automatically informed in the event an authorized limit is exceeded.
 
Since BCB maintains relationships with international organizations and other central banks, the following are recorded in the Bank’s accounting books:
 
a. Obligations with the IMF arising from withdrawals made by the Brazilian Government in the context of the Financial Assistance Program, from the deposits that the Fund keeps in the country according to its investment policies and allocations of SDR which are loans linked to the quotas paid-in in foreign currency;
 
b. Deposits of other international financial organizations corresponding to available cash maintained in Brazil by multilateral organizations (especially IBRD and IDB) to cover their administrative and operating expenses in Brazil;
 
c. The Brazilian Financing Plan - PBF, corresponding to the portion of the Brazilian foreign debt renegotiated with private international banks (1988 MYDFA Agreement) and to deposits pending bilateral agreement in the Paris Club;
 
d. Operations in foreign currency related to the Reciprocal Payment Netting Agreement – CCR, executed by the BCB and the central banks of the member countries (Argentina, Bolivia, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Dominican Republic, Uruguay and Venezuela) and the Brazil-Hungary Adjustment. The interest rates are the same for asset and liability operations: four-month LIBOR for CCR and three-month LIBOR for the Brazil-Hungary Adjustment.
 
Amounts reported in excess of the long position are related to deposits made by banks for the amount above the ceiling authorized for contracting foreign exchange operations, and amounts recorded under the item “Contracted Operations - to be Settled” relate to operations to be settled two days after their contracting date.
 
In the semester, the result of foreign operations was negative by R$ 5,183,477, mostly due to foreign exchange fluctuations in the period (positive by R$ 13,062,937 in the first half of 2002).
 
The following tables show foreign assets and liabilities grouped according to maturity terms, currencies, risk rating, country or geographic area and counterpart. We point out that the data was taken from accounting and managerial information.
 
 
a. Operations broken down by maturity
 
On June 30
Foreign Assets
Maturity Term (Days)
Total
0 to 7
8 to 30
31 to 60
61 to 90
91 to 180
> 180
2003
2002
Available Cash
3.148.683
    -
    -
    -
    -
    -
3.148.683
113.991
Monetary Gold
437.003
    -
    -
    -
    -
    -
437.003
418.889
Deposits
18.492.580
17.034.049
12.816.731
8.346.034
5.637.539
180.939
62.507.872
57.104.045
- Very Short Term
5.349.524
    -
    -
    -
    -
    -
5.349.524
9.513.752
- Fixed Term
12.955.673
16.953.304
12.626.102
8.178.239
5.637.539
180.939
56.531.796
47.010.252
- Gold
187.383
80.745
190.629
167.795
    -
    -
626.552
580.041
Securities
3.768.459
    -
1.206.930
    -
    -
72.041.068
77.016.457
63.714.818
- Bills
    -
    -
    -
    -
    -
    -
    -
568.199
      Cost
    -
    -
    -
    -
    -
    -
    -
568.243
      Adjustment to Market Value
    -
    -
    -
    -
    -
    -
    -
(44)
- Notes
    -
    -
    -
    -
    -
57.015.615
57.015.615
52.471.444
      Cost
    -
    -
    -
    -
    -
56.473.538
56.473.538
51.840.517
      Adjustment to Market Value
    -
    -
    -
    -
    -
542.077
542.077
630.927
- Bonds
    -
    -
    -
    -
    -
    -
    -
254.030
      Cost
    -
    -
    -
    -
    -
    -
    -
252.696
      Adjustment to Market Value
    -
    -
    -
    -
    -
    -
    -
1.334
- Brazilian Foreign Debt
    -
    -
1.206.930
    -
    -
10.605.860
11.812.790
6.440.629
      Cost
    -
    -
1.206.159
    -
    -
10.306.766
11.512.925
6.807.741
      Adjustment to Market Value
    -
    -
771
    -
    -
299.094
299.865
(367.112)
- Under Foreign Management
    -
    -
    -
    -
    -
4.419.593
4.419.593
3.980.516
- Repurchase Operations
3.768.459
    -
    -
    -
    -
    -
3.768.459
    -
Agreements in Foreign Currencies
    -
    -
13.148
82.049
    -
    -
95.197
122.106
Forward Operations
284.874
4.892.543
4.558.961
608.869
    -
    -
10.345.247
1.171.952
Sale of Foreign Currency Linked to Repurchase
    -
    -
    -
    -
    -
    -
    -
2.146.918
Contracted Operations - to be Settled
7.837.827
    -
    -
    -
    -
    -
7.837.827
5.188.237
Other
53.851
    -
    -
    -
    -
12
53.863
92.724
 
 
Total Foreign Assets
34.023.277
21.926.592
18.595.770
9.036.952
5.637.539
72.222.019
161.442.149
130.073.680
 
On June 30
Foreign Liabilities
Maturity Term (Days)
Total
0 to 7
8 to 30
31 to 60
61 to 90
91 to 180
> 180
2003
2002
International Monetary Fund - IMF
    -
    -
486.649
3.805.460
3.805.460
91.766.775
99.864.344
54.327.106
- Financial Assistance Program
    -
    -
483.875
3.805.460
3.805.460
78.078.978
86.173.773
41.448.380
- Deposits
    -
    -
    -
    -
    -
12.241.887
12.241.887
11.514.624
- SDR Allocations
    -
    -
2.774
    -
    -
1.445.910
1.448.684
1.364.102
International Financial Agencies' Deposits
    -
    -
    -
    -
    -
271.616
271.616
307.547
Brazilian Financing Plan
    -
    -
    -
192.866
    -
1.565.467
1.758.333
2.099.451
Agreements in Foreign Currencies
3.931
    -
12.651
53.441
    -
80.040
150.063
157.642
Forward Operations
294.891
4.962.324
4.602.792
609.461
    -
    -
10.469.468
1.164.111
Excess Long Positions
1.456.976
    -
    -
    -
    -
    -
1.456.976
1.895.813
Repurchase Operations
3.769.392
    -
    -
    -
    -
    -
3.769.392
    -
Contracted Operations - to be Settled
7.841.923
    -
    -
    -
    -
    -
7.841.923
5.188.636
Other
19.702
    -
    -
3.517
    -
101.933
125.152
128.531
 
Total Foreign Liabilities
13.386.815
4.962.324
5.102.092
4.664.745
3.805.460
93.785.831
125.707.267
65.268.837
 
 
b. Operations broken down by currency
 
On June 30
Foreign Assets
Currency
Total
US Dollar
Euro
Yen
SDR
Gold
Other (*)
2003
2002
Available Cash
46.786
858
2.027.040
1.070.638
    -
3.361
3.148.683
113.991
Monetary Gold
    -
    -
    -
    -
437.003
    -
437.003
418.889
Deposits
40.539.398
15.999.563
5.342.359
    -
626.552
    -
62.507.872
57.104.045
- Very Short Term
4.265.167
1.084.357
    -
    -
    -
    -
5.349.524
9.513.752
- Fixed Term
36.274.231
14.915.206
5.342.359
    -
    -
    -
56.531.796
47.010.252
- Gold
    -
    -
    -
    -
626.552
    -
626.552
580.041
Securities
60.733.365
15.071.791
1.211.301
    -
    -
    -
77.016.457
63.714.818
- Bills
    -
    -
    -
    -
    -
    -
    -
568.199
- Notes
43.324.796
13.690.819
    -
    -
    -
    -
57.015.615
52.471.444
- Bonds
    -
    -
    -
    -
    -
    -
    -
254.030
- Brazilian Foreign Debt
9.220.517
1.380.972
1.211.301
    -
    -
    -
11.812.790
6.440.629
- Under Foreign Management
4.419.593
    -
    -
    -
    -
    -
4.419.593
3.980.516
- Repurchase Operations
3.768.459
    -
    -
    -
    -
    -
3.768.459
    -
Agreements in Foreign Currencies
95.197
    -
    -
    -
    -
    -
95.197
122.106
Forward Operations
1.026.877
1.028.306
6.207.691
    -
    -
2.082.373
10.345.247
1.171.952
Sale of Foreign Currency Linked to Repurchase
    -
    -
    -
    -
    -
    -
    -
2.146.918
Contracted Operations - to be Settled
3.218.101
4.619.726
    -
    -
    -
    -
7.837.827
5.188.237
Other
17.513
    -
    -
    -
10.887
25.463
53.863
92.724
 
 
Total Foreign Assets
105.677.237
36.720.244
14.788.391
1.070.638
1.074.442
2.111.197
161.442.149
130.073.680
(*) Includes mostly Swiss Francs, Sweden Crowns, Canadian Dollars and Sterling Pounds.
 
On June 30
Foreign Liabilities
Currency
Total
US Dollar
Euro
Yen
SDR
Gold
Other (*)
2003
2002
International Monetary Fund - IMF
    -
    -
    -
99.861.917
    -
2.427
99.864.344
54.327.106
- Financial Assistance Program
    -
    -
    -
86.173.773
    -
    -
86.173.773
41.448.380
- Deposits
    -
    -
    -
12.239.460
    -
2.427
12.241.887
11.514.624
- SDR Allocations
    -
    -
    -
1.448.684
    -
    -
1.448.684
1.364.102
International Financial Agencies' Deposits
271.544
    -
    -
    -
    -
72
271.616
307.547
Brazilian Financing Plan
1.743.446
5.024
    -
    -
    -
9.863
1.758.333
2.099.451
Agreements in Foreign Currencies
150.063
    -
    -
    -
    -
    -
150.063
157.642
Forward Operations
5.902.113
2.164.753
317.732
    -
    -
2.084.870
10.469.468
1.164.111
Excess Long Positions
1.456.976
    -
    -
    -
    -
    -
1.456.976
1.895.813
Repurchase Operations
3.769.392
    -
    -
    -
    -
    -
3.769.392
    -
Contracted Operations - to be Settled
4.344.627
3.497.296
    -
    -
    -
    -
7.841.923
5.188.636
Other
125.152
    -
    -
    -
    -
    -
125.152
128.531
 
 
Total Foreign Liabilities
17.763.313
5.667.073
317.732
99.861.917
    -
2.097.232
125.707.267
65.268.837
(*) Includes mostly Swiss Francs, Sweden Crowns, Canadian Dollars and Sterling Pounds.
 
 
c. Operations broken down by currency and maturity
 
On June 30
Assets
Maturity Term (Days)
Total
0 to 7
8 to 30
31 to 60
61 to 90
91 to 180
> 180
2003
2002
US Dollar
21.745.380
11.616.448
6.340.441
5.963.674
2.931.516
57.079.778
105.677.237
105.791.343
Euro
7.821.402
4.164.392
5.471.630
2.190.504
1.934.447
15.137.869
36.720.244
15.152.456
Yen
2.721.760
4.912.169
5.923.665
454.849
771.576
4.372
14.788.391
7.817.087
SDR
1.070.638
    -
    -
    -
    -
    -
1.070.638
39.142
Gold
635.274
80.745
190.629
167.794
    -
    -
1.074.442
998.930
Other (*)
28.823
1.152.838
669.405
260.131
    -
    -
2.111.197
274.722
 
 
Total Foreign Assets
34.023.277
21.926.592
18.595.770
9.036.952
5.637.539
72.222.019
161.442.149
130.073.680
(*) Includes mostly Swiss Francs, Sweden Crowns, Canadian Dollars and Sterling Pounds.
 
On June 30
Liabilities
Maturity Term (Days)
Total
0 to 7
8 to 30
31 to 60
61 to 90
91 to 180
> 180
2003
2002
US Dollar
9.655.200
2.487.179
3.117.330
499.501
    -
2.004.103
17.763.313
10.288.667
Euro
3.731.615
1.094.596
736.505
99.339
    -
5.018
5.667.073
644.564
Yen
    -
226.094
91.638
    -
    -
    -
317.732
    -
SDR
    -
    -
486.649
3.805.460
3.805.460
91.764.348
99.861.917
54.325.161
Other (*)
    -
1.154.455
669.970
260.445
    -
12.362
2.097.232
10.445
 
 
Total Foreign Liabilities
13.386.815
4.962.324
5.102.092
4.664.745
3.805.460
93.785.831
125.707.267
65.268.837
(*) Includes mostly Swiss Francs, Sweden Crowns, Canadian Dollars and Sterling Pounds.
 
 
d. Operations broken down by risk rate
 
On June 30
Foreign Assets
Risk Rate
Total
Aaa
Aa1
Aa2
Aa3
A1
A2
Other (*)
2003
2002
Available Cash
1.090.772
1.525.644
27.220
169
108
    -
504.770
3.148.683
113.991
Monetary Gold
331.122
    -
    -
    -
5.661
    -
100.220
437.003
418.889
Deposits
5.331.521
8.220.912
7.563.484
17.106.990
8.749.925
14.880.084
654.956
62.507.872
57.104.045
- Very Short Term
287.120
1.945.716
    -
775.224
    -
2.197.904
143.560
5.349.524
9.513.752
- Fixed Term
5.044.401
5.898.809
7.563.484
16.331.766
8.499.760
12.682.180
511.396
56.531.796
47.010.252
- Gold
    -
376.387
    -
    -
250.165
    -
    -
626.552
580.041
Securities
53.296.450
2.509.548
5.572.410
735.404
3.089.855
    -
11.812.790
77.016.457
63.714.818
- Bills
    -
    -
    -
    -
    -
    -
    -
    -
568.199
- Notes
52.555.552
180.031
4.095.547
    -
184.485
    -
    -
57.015.615
52.471.444
- Bonds
    -
    -
    -
    -
    -
    -
    -
    -
254.030
- Brazilian Foreign Debt
    -
    -
    -
    -
    -
    -
11.812.790
11.812.790
6.440.629
- Under Foreign Management
740.898
732.050
1.476.863
735.404
734.378
    -
    -
4.419.593
3.980.516
- Repurchase Operations
    -
1.597.467
    -
    -
2.170.992
    -
    -
3.768.459
    -
Agreements in Foreign Currencies
    -
    -
    -
    -
    -
    -
95.197
95.197
122.106
Forward Operations
798.387
4.590.634
2.856.718
126.728
1.511.386
461.394
    -
10.345.247
1.171.952
Sale of Foreign Currency Linked to Repurchase
    -
    -
    -
    -
    -
    -
    -
    -
2.146.918
Contracted Operations - to be Settled
967.119
2.478.481
947.010
1.391.145
1.416.747
574.240
63.085
7.837.827
5.188.237
Other
4.604
    -
    -
    -
    -
    -
49.259
53.863
92.724
 
Total Foreign Assets
61.819.975
19.325.219
16.966.842
19.360.436
14.773.682
15.915.718
13.280.277
161.442.149
130.073.680
(*) The item “Others” includes, besides Brazilian Government securities, Available Cash with Banco do Brasil
and Fixed Term Deposits with Bladex and Banco do Brasil.
 
 
e. Operations broken down by country or geographic area
 
On June 30
Foreign Assets
Country or Geographic Area
Total
USA and Canada
European Union
United Kingdom
Brazil
Other (*)
2003
2002
Available Cash
1.098.488
51
3.119
3.478
2.043.547
3.148.683
113.991
Monetary Gold
    -
    -
5.661
431.342
    -
437.003
418.889
Deposits
23.238.144
20.557.584
10.880.190
    -
7.831.954
62.507.872
57.104.045
- Very Short Term
1.730.209
574.240
2.269.851
    -
775.224
5.349.524
9.513.752
- Fixed Term
20.881.383
19.983.344
8.610.339
    -
7.056.730
56.531.796
47.010.252
- Gold
626.552
    -
    -
    -
    -
626.552
580.041
Securities
46.910.821
15.742.914
1.809.034
11.812.790
740.898
77.016.457
63.714.818
- Bills
    -
    -
    -
    -
    -
    -
568.199
- Notes
42.407.984
14.266.151
341.480
    -
    -
57.015.615
52.471.444
- Bonds
    -
    -
    -
    -
    -
    -
254.030
- Brazilian Foreign Debt
    -
    -
    -
11.812.790
    -
11.812.790
6.440.629
- Under Foreign Management
734.378
1.476.763
1.467.554
    -
740.898
4.419.593
3.980.516
- Repurchase Operations
3.768.459
    -
    -
    -
    -
3.768.459
    -
Agreements in Foreign Currencies
    -
    -
    -
    -
95.197
95.197
122.106
Forward Operations
5.582.265
1.373.763
3.066.042
    -
323.177
10.345.247
1.171.952
Sale of Foreign Currency Linked to Repurchase
    -
    -
    -
    -
    -
    -
2.146.918
Contracted Operations - to be Settled
3.081.797
2.033.245
934.694
59.781
1.728.310
7.837.827
5.188.237
Other
    -
    -
    -
30.210
23.653
53.863
92.724
 
Total Foreign Assets
79.911.515
39.707.557
16.698.740
12.337.601
12.786.736
161.442.149
130.073.680
(*) The item “Others” includes Available Cash in Japan; Fixed Term Deposits in Denmark, Sweden and
Switzerland; and Contracted Operations to be Settled in Denmark.
 
On June 30
Foreign Liabilities
Country or Geographic Area
Total
USA and Canada
European Union
United Kingdom
Brazil
Other (*)
2003
2002
International Monetary Fund - IMF
99.864.344
    -
    -
    -
    -
99.864.344
54.327.106
- Financial Assistance Program
86.173.773
    -
    -
    -
    -
86.173.773
41.448.380
- Deposits
12.241.887
    -
    -
    -
    -
12.241.887
11.514.624
- SDR Allocations
1.448.684
    -
    -
    -
    -
1.448.684
1.364.102
International Financial Agencies' Deposits
271.616
    -
    -
    -
    -
271.616
307.547
Brazilian Financing Plan
1.743.446
5.024
2
    -
9.861
1.758.333
2.099.451
Agreements in Foreign Currencies
    -
    -
    -
    -
150.063
150.063
157.642
Forward Operations
5.625.700
1.128.174
3.111.943
    -
603.651
10.469.468
1.164.111
Excess Long Positions
    -
    -
    -
1.456.976
    -
1.456.976
1.895.813
Repurchase Operations
3.769.392
    -
    -
    -
    -
3.769.392
    -
Contracted Operations - to be Settled
3.081.415
2.035.753
934.000
59.798
1.730.957
7.841.923
5.188.636
Other
67.481
260
693
865
55.853
125.152
128.531
 
 
Total Foreign Liabilities
114.423.394
3.169.211
4.046.638
1.517.639
2.550.385
125.707.267
65.268.837
(*) The item “Others” includes Forward Operations in Switzerland and Contracted Operations to be Settled in Denmark.
 
 
 
f. Operations broken down by counterpart
 
On June 30
Foreign Assets
Counterparts
Total
Financial Institutions
Countries
Supranational Institutions
Other
2003
2002
Treasury
Agencies
Available Cash
2.058.239
3.733
    -
1.086.711
    -
3.148.683
113.991
Monetary Gold
105.881
    -
    -
    -
331.122
437.003
418.889
Deposits
61.072.071
287.120
    -
1.148.681
    -
62.507.872
57.104.045
- Very Short Term
5.062.404
287.120
    -
    -
    -
5.349.524
9.513.752
- Fixed Term
55.383.115
    -
    -
1.148.681
    -
56.531.796
47.010.252
- Gold
626.552
    -
    -
    -
    -
626.552
580.041
Securities
7.447.154
65.324.441
1.976.488
2.268.374
    -
77.016.457
63.714.818
- Bills
    -
    -
    -
    -
    -
    -
568.199
- Notes
    -
53.511.651
1.976.488
1.527.476
    -
57.015.615
52.471.444
- Bonds
    -
    -
    -
    -
    -
    -
254.030
- Brazilian Foreign Debt
    -
11.812.790
    -
    -
    -
11.812.790
6.440.629
- Under Foreign Management
3.678.695
    -
    -
740.898
    -
4.419.593
3.980.516
- Repurchase Operations
3.768.459
    -
    -
    -
    -
3.768.459
    -
Agreements in Foreign Currencies
    -
    -
    -
    -
95.197
95.197
122.106
Forward Operations
10.022.070
    -
    -
323.177
    -
10.345.247
1.171.952
Sale of Foreign Currency Linked to Repurchase
    -
    -
    -
    -
    -
    -
2.146.918
Contracted Operations - to be Settled
6.693.877
1.143.950
    -
    -
    -
7.837.827
5.188.237
Other
17.501
4.603
    -
    -
31.759
53.863
92.724
 
 
Total Foreign Assets
87.416.793
66.763.847
1.976.488
4.826.943
458.078
161.442.149
130.073.680
 
Em 30 de junho
Foreign Liabilities
Counterparts
Total
Financial Institutions
Countries
Supranational Institutions
Other
2003
2002
Treasury
Agencies
International Monetary Fund - IMF
    -
    -
    -
99.864.344
    -
99.864.344
54.327.106
- Financial Assistance Program
    -
    -
    -
86.173.773
    -
86.173.773
41.448.380
- Deposits
    -
    -
    -
12.241.887
    -
12.241.887
11.514.624
- SDR Allocations
    -
    -
    -
1.448.684
    -
1.448.684
1.364.102
International Financial Agencies' Deposits
    -
    -
    -
271.616
    -
271.616
307.547
Brazilian Financing Plan
1.743.492
    -
14.841
    -
    -
1.758.333
2.099.451
Agreements in Foreign Currencies
    -
    -
    -
    -
150.063
150.063
157.642
Forward Operations
10.141.891
    -
    -
327.577
    -
10.469.468
1.164.111
Excess Long Positions
1.456.976
    -
    -
    -
    -
1.456.976
1.895.813
Repurchase Operations
3.769.392
    -
    -
    -
    -
3.769.392
    -
Contracted Operations - to be Settled
6.695.619
1.146.304
    -
    -
    -
7.841.923
5.188.636
Other
18.724
    -
    -
67.507
38.921
125.152
128.531
 
 
Total Foreign Liabilities
23.826.094
1.146.304
14.841
100.531.044
188.984
125.707.267
65.268.837
 
 
Note 6 - Federal government securities
 
In the execution of its monetary policy, Banco Central do Brasil (BCB) uses federal government securities issued by the National Treasury and by itself. Since May 5, 2002, in compliance with the Law  of Fiscal Responsibility, BCB ceased to issue securities. The main securities are:
 
a. National Treasury Bills - LTN, prefixed yield defined by a discount on the price of purchase;
 
b. Financial Treasury Bills - LFT, post-fixed yield defined by the average adjusted rate of daily financing determined in the Special System of Clearance and Custody – SELIC (SELIC rate);
 
c. Financial Treasury Bills Series B – LFT-B: SELIC rate;
 
d. National Treasury Notes Series D - NTN-D: Adjusted by the selling rate of the United States Dollar and interest, which is payable on a half-yearly basis;
 
e. BCB Notes – Special Series and Floating Series (NBC-E and NBC-F): Adjusted by the selling rate of the United States Dollar plus interest, which is payable on a half-yearly basis.
 
In addition to securities used in the execution of its monetary policy, at June 30 the Banco Central has the following securities:
 
a. National Treasury Notes Series P - NTN-P: nominative and non-negotiable security, updated by the TR plus 6% interest p.a. payable upon redemption and a minimum term of fifteen years from the date of the financial settlement of its sale in the context of the National Privatization Program – PND;
 
b. Securitized Credits - CVS, divided into CVSA, CVSB, CVSC and CVSD; where CVSA and CVSC are adjusted by TR plus 6.17% p.a., and CVSB and CVSD by TR + 3.12% p.a., capitalized on a monthly basis, with interest paid on a monthly basis as from January 01, 2005, and amortization paid as from January 1, 2009, with final maturity on January 1, 2027.
 
The following is a description of the portfolio broken down by maturity term and form of valuation.
 
a. Securities broken down by term maturity
 
On June 30
Term to Maturity (months)
Total
up to 6
7 to 18
19 to 30
31 to 42
> 42
2003
2002
Free
70.008.145
62.189.120
31.190.176
18.831.670
27.508.981
209.728.092
170.839.139
LTN
11.587.614
28.974.001
    -
    -
    -
40.561.615
43.193.188
LFT
52.015.252
15.882.694
9.487.554
11.164.366
2.701.288
91.251.154
41.916.676
LFT-B
1.484.652
1.965.661
1.001.028
232.153
23.943
4.707.437
    -
NTN-D
4.920.627
15.366.764
20.701.594
7.435.151
23.893.981
72.318.117
84.120.166
NTN-P
    -
    -
    -
    -
5.261
5.261
4.761
CVS
    -
    -
    -
    -
884.508
884.508
1.604.348
 
 
Linked to Repurchase
11.682.553
35.732.055
    -
13.297.715
    -
60.712.323
34.179.841
LTN
9.348.791
18.072.103
    -
    -
    -
27.420.894
10.016.586
LFT
2.333.762
17.659.952
    -
13.297.715
    -
33.291.429
10.945.180
NTN-D
    -
    -
    -
    -
    -
    -
13.218.075
 
 
Guarantees for Swap Operations
10.078.468
11.598.911
3.425.050
3.615.049
    -
28.717.478
4.059.997
LFT
10.078.468
11.598.911
3.425.050
3.615.049
    -
28.717.478
4.059.997
 
 
Total Assets
91.769.166
109.520.086
34.615.226
35.744.434
27.508.981
299.157.893
209.078.977
 
 
NBC-F
    -
    -
    -
    -
    -
    -
1.908.104
NBC-E
6.431.817
15.750.036
6.360.480
8.358.167
    -
36.900.500
112.326.468
 
 
Total Liabilities
6.431.817
15.750.036
6.360.480
8.358.167
    -
36.900.500
114.234.572
 
 
b. Securities broken down by method of assessment
 
On June 30
2003
2002
Cost
Adjustment
Market
Cost
Adjustment
Market
Securities for trading
255.249.333
3.098.131
258.347.464
175.788.442
(9.170.984)
166.617.458
LTN
67.942.498
40.011
67.982.509
57.034.563
(3.824.789)
53.209.774
LFT
151.021.161
2.238.900
153.260.061
57.322.407
(400.554)
56.921.853
LFT-B
4.621.849
85.588
4.707.437
    -
    -
    -
NTN-D
29.894.345
1.618.604
31.512.949
61.431.472
(4.945.641)
56.485.831
CVS
1.769.480
(884.972)
884.508
    -
    -
    -
 
Securities held to maturity
40.810.429
    -
    -
42.461.519
    -
    -
NTN-D
40.805.168
    -
    -
40.852.410
    -
    -
CVS
    -
    -
    -
1.604.348
    -
    -
NTN-P
5.261
    -
    -
4.761
    -
    -
 
 
The portfolio of Treasury issued securities is classified as “for trading” (mark-to-market) and as “held to maturity” (carried at amortized cost) (Note 3.d). The CVS portfolio, which was entirely classified as “held to maturity”, on December 31, 2002 was transferred to “for trading”, due to the possibility of trading of such securities.
 
The result of operations with securities in the first half of the year, considering mark-to-market adjustments, was positive by R$23,236,393 (negative by R$7,921,371 in the first half of 2002).
 
c. Swap operations
 
BCB performs swap operations indexed to interest rates and foreign exchange changes as an additional instrument of its monetary and foreign exchange policies.
 
The operations are recorded with the Futures and Commodities Exchange – BM&F, where, in long positions, BCB is on the asset side with respect to interest rates, represented by Interfinancial Deposits – DI, and on the liability side with respect to exchange rate variation plus interest rate, representing a foreign exchange coupon. Conversely, in positions where BCB is short, it is on the asset side in foreign exchange variations plus foreign exchange coupon, and on the liability side in interest rates (DI).
 
BCB trades three kinds of contracts:
 
- SCC, with daily financial adjustments bearing a Unit Price (PU) of US$50 thousand;
- SC2, with financial adjustments performed on the settlement date, and PU of US$1 thousand;
- SC3, with daily financial adjustments and PU of US$1 thousand.
 
The following tables show the notional values of such operations, broken down by type of contract and maturity term:
 
On June 30
Term to Maturity
Purchased
Total
(days)
SCC
SC2
SC3
2003
2002
0 - 180
 
 
 
 
 
Notional Value
30.723.622
4.043.836
5.399.922
40.167.380
3.503.271
Adjustment to Market Value
    -
(152.009)
    -
(152.009)
    -
181 - 360
 
 
 
 
 
Notional Value
27.180.989
2.178.726
1.943.203
31.302.918
11.640.517
Adjustment to Market Value
    -
44.129
    -
44.129
    -
361 - 720
 
 
 
 
 
Notional Value
18.118.739
2.652.308
985.849
21.756.896
7.037.881
Adjustment to Market Value
    -
244.010
    -
244.010
    -
> 720
 
 
 
 
 
Notional Value
12.584.876
1.551.551
828.628
14.965.055
7.971.523
Adjustment to Market Value
    -
243.275
    -
243.275
    -
 
Total
88.608.226
10.805.826
9.157.602
108.571.654
30.153.192
 
On June 30
Term to Maturity
Sold
Total
(days)
SCC
2003
2002
0 - 180
 
 
 
Notional Value
238.220
238.220
    -
Adjustment to Market Value
    -
    -
    -
181 - 360
 
 
 
Notional Value
    -
    -
    -
Adjustment to Market Value
    -
    -
    -
361 - 720
 
 
 
Notional Value
4.129.474
4.129.474
3.020.456
Adjustment to Market Value
    -
    -
    -
> 720
 
 
 
Notional Value
    -
    -
5.667.747
Adjustment to Market Value
    -
    -
    -
 
Total
4.367.694
4.367.694
8.688.203
 
In the first half of the year the result of swap operations was positive by R$15,550,311 (negative by R$1,097,011 in the first half of 2002).
 
Note 7 - Credits and securities receivable
 
a. Credits receivable
 
 
06.30.2003
06.30.2002
1) Institutions under Liquidation
Balance
Provision
Balance
Provision
Banco Nacional - Extrajudicial Liquidation
14.155.800
(5.282.391)
14.067.800
(3.258.885)
Banco Econômico - Extrajudicial Liquidation
6.997.636
    -
8.867.588
(2.397.118)
Banco Bamerindus - Extrajudicial Liquidation
2.546.183
(967.956)
2.442.234
(1.129.459)
Banco Pontual - Extrajudicial Liquidation
752.005
(752.005)
721.304
(721.304)
Banco Mercantil - Extrajudicial Liquidation
405.046
    -
486.536
    -
Banco Banorte - Extrajudicial Liquidation
581.672
(302.454)
557.925
(284.185)
Banco do Estado de Alagoas - Extrajudicial Liquidation
    -
    -
331.438
(266.551)
Banco Crefisul - Bankruptcy
90.012
(90.012)
86.337
(71.060)
Banco Banfort - Bankruptcy
117.832
(117.832)
113.022
(86.675)
Other
22.130
(22.130)
100.599
(88.194)
 
SUMMATION 1
25.668.316
(7.534.780)
27.774.783
(8.303.431)
 
2) Other Credits
FCVS
827.364
    -
923.702
    -
- Cost
1.662.476
    -
1.507.833
    -
- Adjustment to market value
(835.112)
    -
(584.131)
    -
States
    -
    -
4.287.260
    -
- Cost
    -
    -
6.226.920
    -
- Adjustment to market value
    -
    -
(1.939.660)
    -
Other Operations
15.411
(7.607)
10.074
(5.763)
 
SUMMATION 2
842.775
(7.607)
5.221.036
(5.763)
 
TOTAL ( 1 + 2 )
26.511.091
(7.542.387)
32.995.819
(8.309.194)
 
With respect specifically to the institutions under extrajudicial liquidation, in compliance with the provisioning criteria described in Note 3 g above, BCB monitors on a permanent basis the quality of the assets held by such institutions, as well as the negotiations to enable the completion of the extrajudicial liquidation procedures. Thus, the balances of receivables and other credits, net of provisions made, represent the best estimate for the realization of such assets.
 
Changes in the provision account result from the appreciation of assets maintained by such institutions, as in the case of Banco Econômico, where the appreciation was largely due to Dollar-linked securities in its portfolio. With respect to Banco Nacional, the increase in the provisions, in relation to June 2002, were due to the change in the criteria for evaluation of the Salary Variation Compensation Fund - FCVS, which represent the larger part of this institution’s assets.
 
During the half-year, the following was received:
 
- Banco do Estado de Alagoas - Under Extrajudicial Liquidation - Full payment of the debt on October 21, 2002 closed the extrajudicial liquidation;
 
- Banco Mercantil - Under Extrajudicial Liquidation - R$100,000;
 
- Banco Nacional - Under Extrajudicial Liquidation - R$500,000;
 
- Banco Econômico - Under Extrajudicial Liquidation - R$2,200,000.
 
With respect to the remaining credits, the following applies:
 
- The decrease in the amount of the FCVS arises from the change in the discount rate used to calculate its present value (Note 3 f);
 
- Credits with Brazilian federative units were negotiated with the National Treasury in August 2002.
 
b. Securities receivable
 
Comprised, mainly, of promissory notes received as collateral for operations with financial institutions, remunerated according to the TR, with monthly amortizations and maturing by the end of 2004, assessed at present value as described in Note 3 f.
 
 
06.30.2003
06.30.2002
Balance
Provision
Balance
Provision
Promissory Notes
743.167
    -
1.156.893
    -
- Cost
794.380
    -
1.299.627
    -
- Adjustment to present value
(51.213)
    -
(142.734)
    -
Other
170.194
(160.745)
152.680
(143.204)
 
Total
913.361
(160.745)
1.309.573
(143.204)
 
c. Result
 
The result of operations with credits and securities receivable was positive by R$797,806 (R$631,496 in the first half of 2002), an amount which, added to the net revenue from reversal of provisions, gave a total positive result of R$2,222,251 (negative result of R$130,865 in the first half of 2002).
 
 
Note 8 - Operations with CENTRUS
 
As the result of the final court decision on the Direct Action of Unconstitutionality (ADIN) 449, of November 22, 1996 (Note 9 d)  BCB’s employees were included under the Single Juridical Regime – RJU, retroactive as from December 11, 1990. Law 9,650, which implemented and regulated the court decision, and determined that:
 
a. CENTRUS shall manage the funds arising from the employer’s contributions to the private pension fund, made by BCB until December 1990, for those employees under RJU. The funds are adjusted by the average yield rate of the assets of CENTRUS (8.70% in the first half of 2003 and 2.97% in the first half of 2002) and recognized in the assets  of BCB as “Funds Managed by CENTRUS”.
 
b. BCB shall contribute to mathematical reserves in order to enable CENTRUS to assume in full the retirement pensions effective before December 1990, under the General Social Security Regime – RGPS. This amount, recognized in the liabilities of BCB as “Amounts Payable – CENTRUS”, is being updated by IGP-M plus 6% p.a. and is being paid in consecutive, annual installments of, at least, one tenth of the updated original balance, authorized in the Yearly Budget.
 
c. BCB shall continue to make the employer’s contributions related to retired employees under the RGPS, recorded as “Provision for Actuarial Liabilities”. At June 30, 2003 this provision showed a balance of R$184,409, calculated under the following premises:
 
Interest rate:
6% a.a.
Rate of contribution for retired employees:
15% a.a.
Rate of contribution for the sponsor:
15% a.a.
Actuarial tables:
GAM - 71, IAPC and Álvaro Vindas
Number of retired employees:
1,117
 
 
Note 9 - Operations with the national treasury
a. Compulsory federal government deposits
Pursuant to Article 164, Paragraph 3, of the Federal Constitution, the Federal Government’s cash supplies must be deposited with Banco Central do Brasil (BCB) and remunerated, in accordance with Article 1 of Provisional Measure 2,179, by the weighted arithmetic average rate of the intrinsic yield of federal domestic public debt securities issued by the National Treasury held by BCB. This remuneration is calculated on a daily basis and capitalized on the last day of the subsequent ten-day period. The half-yearly remuneration aggregated 3.95% (18.61% in the first half of 2002).
b. Remuneration of federal government deposits to be transferred
The balance in this account refers to that part of the remuneration, accounted for in the last ten-day period of June to be transferred to “Compulsory Federal Government Deposits” on the last day of the subsequent ten-day period.
 
c. Credit to be Covered by the National Treasury/Result Transferable to the National Treasury
Under the Law of Fiscal Responsibility and Provisional Measure 2,179, any positive result determined by BCB after formation or reversal of reserves, constitutes an obligation of the Bank before the Government, and should be transferred no later than the tenth working day after the financial statements have been approved by the National Monetary Council – CMN. Conversely, a negative result constitutes a credit of BCB before the Government and should be paid up no later than the tenth working day of the year subsequent to the year in which the statements are approved. In either case, the amounts shall be restated by the same indices as applied to “Compulsory Federal Government Deposits”.
At June 30, 2003, the balance to be transferred to the National Treasury in the amount of R$24,185,980 originated in BCB’s positive results for the first half of the year, including the realization of the revaluation reserve. The credit to be covered by the National Treasury (R$6,533,445) is related to the negative result of the second half of 2002, less the realization of the Revaluation Reserve and its respective remuneration. The amount recorded as Credit to be Covered by the National Treasury in 2002, adjusted for inflation until the date of transfer date, was repassed to BCB in January 2003, through the transfer of R$12,678,522 in securities.
 
d. Settlement of Contributions -  Law 9,650
 
Also as a consequence of ADIN 449 (Note 8), all payments and withholdings between December 11, 1990 and the date of the decision on ADIN, owed by BCB to the National Institute of Social Security (INSS) and to the department of Federal Revenue (SRF) had to be reviewed.
 
Law 9,650, of May 27, 1998, as amended by Provisional Measure 45/2002, of June 25, 2002, sought to regularize the situation and determined, among other provisions, that a settlement of accounts should be made between BCB, INSS, SRF and BCB’s employees, regarding contributions to the Employee Social Security Plan, to INSS and to the balances of the Government Severance Indemnity Fund for Employees - FGTS. This settlement included the refunding foreseen in rescissory action 8/94 – Regional Labor Court, 10th Region and resulted in receivables and payables between the parties, which are recorded under “Settlement of Contributions - Law 9,650”.
 
With the rejection of Provisional Measure 45 by the National Congress and expiration of the term stipulated by Article 62, paragraph 11, of the Brazilian Constitution, the indexes for readjustment used in the agreement and amounts recorded as assets and liabilities of BCB were ratified and administrative and legal procedures for its settlement were initiated.
 
e. Financial Relationship with the National Treasury
 
 
Notes
06.30.2003
06.30.2002
Debt Balances
304.815.200
231.184.121
National Treasury Notes - NTN
70.704.774
102.288.643
National Treasury Financing Bills - LFT
155.643.010
57.322.407
National Treasury Bills - LTN
67.942.498
57.034.563
Securitized Credits - CVS
1.769.480
1.604.348
Salary Variation Compensation Fund - FCVS
1.662.476
1.507.833
Credit to be Covered by the National Treasury
6.533.445
10.904.617
Judicial Deposits in the name of the National Treasury
3.701
3.701
Settlement of Contributions - Law 9,650
523.482
489.318
PND - State Banks
7.727
4.310
Credits Subject to Reimbursement
24.575
24.338
Taxes and Contributions to be recovered
32
43
 
Credit Balances
154.893.036
104.831.358
Compulsory Federal Government Deposits
129.975.699
103.164.918
Result to be Transferred to the National Treasury
24.185.980
    -
Settlement of Contributions - Law 9,650
230.731
230.463
Remuneration of Federal Government Deposits, to be Transferred
452.107
1.389.319
Deposits in Foreign Currencies - Paris Club
9.861
8.423
Funds Linked to Administration of Foreign Debt Guarantees
14.360
14.222
Deposits Resulting from Court Decisions
9.661
9.263
Monetary Reserve Available
1
1
Taxes and Contributions to be Collected
14.636
14.749
 
Note: the above values do not consider adjustment to market and/or present values and provisions.
 
f. Financial Flow with the National Treasury
 
Federal Government Securities
1st half of 2003
1st half of 2002
(4.858.941)
5.474.927
Acquisition
(62.164.631)
(23.590.817)
Redemption
52.698.722
24.832.689
Interests
4.606.968
4.233.055
 
Other Values Collected
(4.744.203)
(20.254.498)
Remuneration of Available Cash
(4.744.203)
(14.748.773)
Transference of the Result - 2nd half of 2001
    -
(5.505.725)
 
 
 
Transfer
262.758
    -
 
Net Financial Flow
(9.340.386)
(14.779.571)
Note: Includes only transactions of the account Deposits to the Federal Government Order,
resulting from Banco Central asset and liability operations.
 
 
The remuneration of National Treasury accounts (available cash and result to be compensated) was negative by R$4,557,524 in the first half of 2003 (R$16,091,109 in the first half of 2002).
 
 
Note 10 - Deposits of financial institutions
 
Deposits of financial institutions with Banco Central do Brasil (BCB) comprise mainly mandatory reserve deposits used to limit the lending capacity of these institutions.
 
Those institutions may be required to make such deposits in cash or in federal public securities. In the case of federal public securities, the deposit is registered in a rectifying account, since such securities remain registered in the Special System of Clearance and Custody - SELIC in the name of the depositing institution, but subject to compliance with the deposit requirements. The main deposits currently required are:
 
a. On demand deposits – deposited in cash and without remuneration. The rate was changed from 45% to 60% in February 2003;
 
b. On savings deposits – deposited in cash. The rate changed from 15% to 20%, in July 2002. It is remunerated by TR + 6.17% p.a. for free, specific and rural savings categories, and TR + 3.00% p.a. for earmarked savings;
 
c. On judicial deposits – deposited in public securities registered at SELIC, valued at the lower of 60% of the current balance or 100% of the additions to the balance of judicial deposits at June 30, 1994, duly corrected for inflation;
 
d. On term deposits – deposited in public securities registered at SELIC, at a rate of 15%;
 
e. Additional requirements - Additional reserve requirements on the total demand deposits (rate of 8%), term deposits (rate of 8%) and savings deposits (rate of 10%) in excess of R$100,000, to be deposited in cash and remunerated at the SELIC rate, introduced in August 2002.
 
Expenses with remuneration of deposits of financial institutions totaled R$4,459,023 (R$747.285 in the first half-year of 2002).
 
 
Note 11 - Deposits earmarked to guarantee operations
 
The account refers to funds of financial institutions under extrajudicial liquidation, resulting from guarantees received from operations prior to the decreeing of the liquidation. The funds remain deposited with the Banco Central do Brasil and are invested in public securities to safeguard the value of the guarantee, which leads to their recording in a rectifying account. The variation over the period was the result of the use, by the institutions, of part of such funds in amortization of debts with BCB (Note 7 a).
 
 
Note 12 - Provisions for lawsuits in progress and court order debts to be paid
 
In accordance with Article 100, Paragraph 1 of the Federal Constitution, public law entities shall include in their respective budgets amounts necessary to cover court order debts submitted up to July 1 of each year, for payment not later than the end of the subsequent fiscal year.
 
With the publication of Constitutional Amendment 30, of September 13, 2000, the court order debts resulting from actions filed in courts before December 31,1999 shall be settled at their actual value in cash, plus legal interest, in successive, equal yearly installments over a maximum period of ten years, except for credits related to alimony and credits of small amounts.
 
In January 2003, pursuant to Article 28 of Law 10,524/2002 (Law on Budget Policies), the budget available in Banco Central do Brasil of R$48,316 was transferred to the courts to comply with court orders debts to be paid in 2003, including portions of suspended court order debts. After confirmation of payment of such court order debts on the part of the courts, BCB will write off the liabilities.
 
The court order debts to be paid as authorized in the budget are described in the table below:
 
Year
Quantity
Value
2003
213
30.690
2004
131
20.271
2005
93
19.548
2006
75
19.237
2007
60
18.900
2008
49
18.660
2009
45
18.470
2010
36
18.296
2011
22
6.744
2012
12
1.210
Subtotal
172.026
 
Suspended Judicial Requests
5
296.343
 
Total
468.369
 
As of June 30, 2003, BCB was a party to 54,893 lawsuits, being the defendant in 48,104 and the plaintiff in 6,789, as listed below according to the nature of the claim and cause:
 
Nature of Claim
Quantity
 
Nature of Cause
Quantity
Ordinary Action
36.686
Collor Plan
39.942
Provisional Remedy
2.953
S F H / FGTS
2.275
Interlocutory Appeal
4.901
Wage Policy/Civil Servant/Social Security
1.215
Writ of Mandamus
1.755
Institutions under special regime / Indemnification
1.065
Declaratory Action
2.161
Administrative Agreement
664
Tax Foreclosure Action
1.777
Rural Credit - Proagro
642
Labor Claim
923
CADIN - CADIP - SERASA
408
Stay of Execution
1.582
Foreign Exchange Contracts
639
Summary Action
211
Financial Charges
306
Public Civil Action
237
Recorded Credit
1.936
Court Payment Action
106
Service Rendering
592
Rescissory Action
108
Taxes
279
Suspension of Mandamus
61
Public Debt Securities
244
Extraordinary occurrence in legal suits
148
Other
4.686
Judge's Award
26
Total
54.893
Action of Detinue
55
 
Popular Action
88
Habeas Data
49
Bankruptcy Action
540
Other
526
  Total
54.893
 
Given the possible impact of such legal suits on the net assets of the institution, BCB is proceeding with an evaluation so as to permit the recording of a provision for possible losses in legal suits, based on its expectations. As a result of such evaluation, on June 30, the balance of such provisions was R$631,564, related to 980 legal suits with decisions of merit unfavorable to the Bank and transited in rem judicatam, for which judicial deposits of R$406,063 had been made. With respect to the other court actions brought against the Bank, the following remarks apply:
 
a. Court actions related to the Collor Plan refer to the indexer to be used for the restating of  cruzados novos, and in view of a decision favorable to BCB issued by the Higher Court of Justice (REsp 124.864, published in the Court Journal of September 28, 1998) and by the Supreme Court of Brazil (RE 206.048, Court Journal of October 19, 2001), it is considered that the resulting financial effect will be  residual and will depend on a case-by-case assessment for provision purposes;
 
b. Provisional remedies, interlocutory appeals, writs of mandamus, public civil actions, payments into court, suspensions of mandamus, rejections of values being disputed, judge's awards, actions of detinue, popular actions, habeas data, bankruptcy actions and extraordinary occurrences in legal suits normally do not result in any economic or financial repercussion against BCB, which is why such occurrences still have not been evaluated.
 
 
Note 13 - Money supply
 
Money Supply represents the balance of paper money and coins in circulation, held by the public and financial institutions, recorded at the value of issue.
 
The breakdown of bank bills and coins by denomination, in circulation at June 30 was as follows:
 
 
06.30.2003
06.30.2002
Quantity (Units)
Value
Quantity (Units)
Value
Bank Notes
2.297.879.928
37.670.084
2.244.666.046
32.940.667
R$1,00
714.172.727
714.173
851.397.950
851.398
R$2,00
158.471.568
316.943
76.373.947
152.748
R$5,00
194.670.339
973.352
196.705.966
983.530
R$10,00
612.782.868
6.127.829
641.722.043
6.417.221
R$20,00
72.998.679
1.459.973
839.768
16.795
R$50,00
528.011.210
26.400.560
464.873.238
23.243.662
R$100,00
16.772.537
1.677.254
12.753.134
1.275.313
 
Coins
8.322.866.816
1.127.915
7.552.259.286
958.505
R$0,01
2.833.729.485
28.337
2.664.814.607
26.648
R$0,05
1.853.135.213
92.657
1.696.549.657
84.827
R$0,10
1.933.950.110
193.395
1.755.338.776
175.534
R$0,25
739.632.802
184.908
660.118.977
165.030
R$0,50
667.603.166
333.802
537.942.360
268.971
R$1,00
294.816.040
294.816
237.494.909
237.495
 
Commemorative Coins
576
 
457
 
TOTAL
 
38.798.575
 
33.899.629
 
The money supply in June 2003 showed nominal growth of 14.4% in comparison with the same date of the previous year. Discounting the inflation of 16.5% as measured by the IPCA, there was a negative real variation of 1.8%. These figures reflect the return to standard behavior of the money supply, following the atypical expansion verified in the second half of 2002, caused by sets of factors of a transitory nature such as a disbursement of amounts from FGTS accounts of low value and the payments made to meet election expenses and the uncertainties arising from the elections.
 
 
Note 14 - Net equity
 
Net equity is composed of:
 
a. Equity, corresponding to the balance recorded on the act of the establishment of Banco Central do Brasil (BCB) and the Bank’s results up to the 1987 fiscal year, corrected up to December 1995 by inflation indexes;
 
b. Contingency Reserve, constituted under Article 2, Paragraph 3, of Provisional Measure 2,179, in the amount of R$2,193,946, for the purpose of reducing redemption of securities in the Bank’s portfolio and, consequently, maintaining adequate conditions to execute the monetary policy;
 
c. Revaluation Reserve, the variation of which during the period was due to realization.
 
 
Note 15 - Law of fiscal responsibility - Information required
 
a. Impact and fiscal cost of the operations - Supplementary Law 101, Article 7, paragraph 2
 
The sole paragraph of Article 8 of Law 4,595/64, as amended by Decree-Law 2,376/87, stipulates that “results obtained by Banco Central do Brasil, considering the revenues and expenses of all its operations, shall be, effective from January 1, 1988, determined on an accrual basis and transferred to the National Treasury, after offsetting any losses from prior fiscal years”.
 
This provision was partially changed by the Law of Fiscal Responsibility:
 
“Article 7. The positive result of Banco Central, assessed after constitution or reversal of reserves, is recorded as revenue of the National Treasury and shall be transferred not later than the tenth working day subsequent to approval of the half-year balance sheets.
 
Paragraph 1. The negative results will constitute a Treasury liability to the Banco Central do Brasil and will be consigned to a specific budget allocation account.”
 
In accordance with item II of Article 2 of Provisional Measure 2,179/2001, this negative result shall be paid not later than the tenth working day of the fiscal year subsequent to the year of approval of the balance sheet by the National Monetary Council.
 
Therefore:
 
I - The result of Banco Central do Brasil (BCB) considers revenues and expenses related to all its operations;
 
II - Positive results are transferred as revenues and negative results are charged as expenses to the National Treasury;
 
III - Such results are included in the Fiscal Budget in the National Treasury account.
 
The Bank recorded a surplus of R$8,189,020 in the first quarter, and R$15,992,774 in the second quarter of 2003, totaling a positive result of R$24,181,794, in the half year, which, after realization of the revaluation reserve, will be transferred to the National Treasury not later than the tenth working day after its approval by the National Monetary Council. In conformity with Article 9, Paragraph 5 of Supplementary Law 101, within ninety days after the closing of the half-year, BCB shall submit, at a joint meeting of the pertinent thematic commissions of the National Congress, an evaluation of the fulfillment of objectives and targets of the monetary, credit and foreign exchange policies, clearly showing the impact and fiscal cost of its operations and results shown in the balance sheets.
 
b. Cost of remunerating the available cash of the National Treasury- Supplementary Law 101, Article 7, Paragraph 3
 
The cost corresponding to the remuneration of the National Treasury deposits amounted to R$3,235,627 in the first quarter of 2003, and R$1,372,261 in the second quarter of 2003 (R$4,607,888 during the half-year).
 
c. Cost of maintaining foreign exchange reserves – Supplementary Law 101, Article 7, Paragraph 3
 
The cost of maintaining foreign exchange reserves is calculated as the difference between the rate of yield of the reserves and the average rate of obtaining such reserves, as calculated in BCB’s liabilities.
 
In the second quarter, with an average daily balance of R$132,237,365, the international reserves recorded a negative yield of 12.6%, due mainly to the appreciation of the Real during the period (14.4%). Excluding the average cost of liabilities of 1.7%, the net result of reserves was negative by 14.3% (R$18,891,694). Added to the result of the first quarter, the yield of international reserves over the half-year was negative by 15.2%, corresponding to R$28,898,140.
 
d. Yield of BCB’s securities portfolio, with an emphasis on Government issued securities - Supplementary Law 101, Article 7, Paragraph 3:
 
2003
Revenues
Expenses
Result
First Quarter
27.466.166
(8.973.715)
18.492.451
Government Securities
23.650.555
(6.688.973)
16.961.582
Banco Central Securities
3.815.611
(2.284.742)
1.530.869
 
Second Quarter
28.923.737
(15.806.461)
13.117.276
Government Securities
20.707.502
(13.812.053)
6.895.449
Banco Central Securities
8.216.235
(1.994.408)
6.221.827
 
Total
56.389.903
(24.780.176)
31.609.727
 
In the second quarter, the positive result was due, largely, to the following factors:
 
I - Government Securities – the result of operations was positive by R$6,895,449 due mainly to adjustments to market value;
 
II - BCB Securities - the net result from its own securities was positive by R$6,221,827 and arose, basically, from net revenues with foreign exchange indexing.
In the semester, the result of the securities portfolio was positive by R$31,609,727, of which R$23.857.031 was derived from Government Securities and R$7,752,696 from BCB securities. The result obtained from Government securities was due, for the most part, to revenue from monetary restatement and mark-to-market adjustments. The result obtained from BCB securities was mainly due to appreciation of the Real in the period.
 
 
Note 16 - Other information
 
a. Financial and actuarial situation
 
Law 8,112/90 determines, in Article 185, Paragraph 1, that retirement and pension payments shall be granted and maintained by the agencies or entities where the employee worked. However, the Law of Fiscal Responsibility establishes that the Law of Budget Policies  – LDO shall include a schedule containing an evaluation of the financial and actuarial situation of the civil servant employment regime (Article 4, Paragraph 2 item IV a).
 
Banco Central do Brasil, in the context of the project of adapting its accounting to international accounting practices, is studying more appropriate accounting treatment to be given to this matter. In the meantime, the specific values related to its employees – still not completely assessed - are not being accounted, consistent with the practice adopted by the other entities of the Federal Public Administration.
 
b. Disclosure
 
The financial statements of Banco Central do Brasil are available on the Internet at www.bcb.gov.br.
 
 
President of the Banco Central do Brasil
Henrique de Campos Meirelles
           
Directors
Afonso Sant’Anna Bevilaqua
Antonio Gustavo Matos do Vale
Beny Parnes
Ilan Goldfajn
João Antônio Fleury Teixeira
Luiz Augusto de Oliveira Candiota
Paulo Sérgio Cavalheiro
Sérgio Darcy da Silva Alves
 
Head of the Department of Financial Administration
JEFFERSON MOREIRA
Accountant, CRC-DF 7.333
 
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