The purchasing power stability of the Brazilian currency and the soundness of the financial system are the main BCB's institutional objectives.
Based on the guidelines issued by the National Monetary Council (CMN), BCB also has the role of the regulator, which is shared with the Brazilian Securities Commission (CVM) according to their respective areas of competence.
Financial Market Infrastructures (FMI) play a key role in the financial system and in the economy in general. Financial markets must have confidence in the quality and continuity of the services provided by the FMIs. Their smooth functioning is essential to the financial stability and to safeguard the monetary policy transmission channels. Thus, BCB should act to promote their strength, normal operation and continuous improvement.
Under CMN directive, BCB is responsible for authorizing and overseeing FMIs and clearing and settlement systems, including those that settle securities, foreign exchange and derivatives transactions1. Acting as supervisor and overseer, BCB shall ensure that FMIs operating in Brazil are administered consistently in line with the public interest objectives, aiming financial stability and the reduction of systemic risk.
According to Law 10,214/2001, BCB should define which settlement systems are systemically important2. Additionally, according to Law 12,865/2013, payment schemes3 and payment institutions4 are a part of the Brazilian Payment System (SPB). As a result of this new regulatory framework, these entities, such as those based on payment cards, are subject to similar procedures as of the FMIs, such as authorization and oversight.
BCB also operates the Reserves Transfer System (STR) and the Special System for Settlement and Custody (SELIC), respectively a funds transfer system and a government securities settlement system5.
As the manager and the operator of the STR, system where all the financial obligations are finally settled, BCB must:
• execute funds transfer orders;
• observe the requirements, including safety, applicable to situations of receiving and sending messages of funds transfer, in order to ensure the system continuous functioning, with a minimum availability ratio of 99.8%;
• comply with the legal provisions of confidentiality;
• supply participants with timely information on the system’s performance.
BCB also can, at its own discretion, suspend or exclude participants that pose risk to the smooth functioning of the national financial system or to the STR, or that do not operate in compliance with the STR’s rules or the national financial system regulation.
To ensure a smooth performance of the real-time settlement environment, the BCB offers collateralized, free of charge intraday credit facility to the reserves account holders.
1 Systems that settle securities are under the BCB and the Securities and Exchange Commission (CVM) joint supervision, but aspects related to systemic risk are exclusively assessed by the BCB. Systems that settle both government securities or bank issued securities are under exclusive supervision of the BCB.
2 Systemically important systems: settlement systems whose volume and nature, at BCB discretion, may create risks to the strength and to the smooth functioning of the Brazilian financial system.
3 Payment Schemes: set of rules and procedures that regulate the provision of certain payment service to the public, which are accepted by more than one recipient/payee, by means of direct access by end users, payers and recipients/payees.
4 Payment Institution: legal person, adhering to one or more payment schemes, having as main or ancillary activity the following: manage payment accounts; issue payment instrument; payment instrument acquiring; provide cash-in and cash-out services of the funds held on payment accounts; and other activities related to the provision of payment services, designated by the BCB.
5 For detailed information about each system, access FMI - Financial Market Infrastructures.