Overview of the Brazilian Payments System (SPB)

The Brazilian Payments System (SPB) consists of the entities, systems and procedures related to the clearing and settlement of funds transfer, foreign currency operations, financial assets, and securities transactions. The SPB members are systems in charge of cheque clearing services; clearing and settlement of electronic debit and credit orders, funds transfers, and other financial assets; clearing and settlement of securities transactions; clearing and settlement of commodities and futures transactions; and others, collectively called Financial Market Infrastructures (FMI). From October 2013, with the enactment of Law 12,865, payment schemes1 and payment institutions2 also became part of the SPB.

Financial Market Infrastructures (FMI) play a key role in the financial system and in the economy in general. Financial markets shall have confidence in the quality and continuity of services provided by the FMIs. Their smooth functioning is essential to the financial stability and to safeguard the monetary policy transmission channels.

The page "Policy Statements" on this website brings the list of the payment systems, securities settlement systems, central counterparties, central securities depositories, and trade repositories that currently form the SPB.

For further information about each infrastructure, see page "FMI - Financial Market Infrastructures" on this website.

The SPB has a high degree of automation, with increasing use of electronic means for funds transfer and the settlement of other transactions, which replaces paper-based instruments.

Prior to the mid-1990s, changes in the Brazilian payment system were motivated by the need to cope with high inflation rates. During that time, the system achieved significant technological progress, especially aimed at enhancing the speed of financial transactions processing. In the reform carried out by the BCB in 2001 and 2002, the focus shifted to risk management. In this vein, the launch of the STR, on April 22, 2002, marked the beginning of a new phase of the SPB.

The STR, operated by BCB, is a real time gross settlement system, where all interbank funds transfers shall be settled. With this system, Brazil joined the group of countries where interbank funds transfers can be settled irrevocably and unconditionally, i.e. with finality, on a real-time basis.

An important change, in the scope of the reform, requires that the completion of funds transfers between reserves accounts now depends on the existence of sufficient balance in the account of the sending participant. In order to provide liquidity and improve the smooth functioning of the payment system in real time gross settlement, three mechanisms can be employed:
        • BCB grants to financial institutions holding Bank Reserves accounts intraday credit using repo transactions with government securities, free of charge;
        • as banks’ compliance with reserves requirements (compulsory reserves) are based on their balances at the end of the day, reserve requirements can be freely used throughout the day as a source of liquidity; and
        • the use of an optimization routine in the settlement of funds transfer orders held in messages queued at the STR.

These features reduce the settlement risk3 for interbank transactions and consequently the systemic risk, that is the risk that the bankruptcy of a bank causes the bankruptcy of other banks, also known as “domino effect”. Until April 2002, when it was necessary to contain those risks and avoid the contagion of a participant to another, BCB was often forced to bear overdraft balances in bank reserve accounts, which meant a risk of not receiving the resources in case of liquidation of a defaulting financial institution, therefore causing losses to the Brazilian society. With the procedures changes, BCB reduced significantly its credit exposures to market participants.

The 2002 reform, however, went beyond these changes. To reduce the systemic risk - the main goal of the reform - legal changes were also accomplished.

The legal framework applicable to the settlement systems was strengthened by Law 10,214, enacted in March 2001. Among other aspects, this law acknowledges multilateral netting in clearing and settlement system and enables the effective seize of collateral even in case of insolvency of a participant. If an entity operates some systemically important system4, it is required to act as a central counterparty5 and it shall ensure the settlement of all the transactions on the system, except in the case of issuer risk.

Systems acting as central counterparty should adopt appropriate protection mechanisms, depending on the type and nature of the operations, and must be authorized by the BCB. The principle of delivery versus payment (DvP) is observed in the clearing and settlement of securities. When transacting foreign currency through a clearinghouse, the principle of payment versus payment (PvP) is observed.

After the 2002 reforms, BCB has initiated an institutional project for retail payments modernization. Therefore, it published in 2005 the “Report on the Brazilian Retail Payment System”, and, in 2010, the "Report on the Brazilian Payment Card Industry", both pointing out existing inefficiencies and suggesting improvements in the retail payments market. The highpoint of such process was the edition of Law 12,865 in 2013. Upon the new powers granted by that norm, the National Monetary Council (CMN) and BCB published a new set of rules6 on payment schemes and payment institutions. This new regulatory framework sought to establish minimum requirements for the safe provision of payment services, encouraging competition and the entry of new players, increasing the emergence of more competitive and efficient models, consequently creating a more inclusive and innovative environment for retail payments.

The CMN has also established guidelines to be observed by the BCB in the regulation, supervision and oversight of payment schemes and payment institutions, in line with the goals set by Law 12,865/2013 which directs the actions of BCB towards promoting interoperability, innovation, soundness, efficiency, competition, non-discriminatory access to services and infrastructure, aiming the financial inclusion and the fulfillment of end user needs.

1 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.

2 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.

3 The settlement risks include credit and liquidity risks, which are respectively, the risk of permanent loss of total or partial value of an operation, and the risk of settlement occurring at a later date .

4 Systemically important system: a settlement system in which the volume or nature of the business, at the discretion of the BCB, shall offer risk to the smooth functioning of the National Financial System.

5 Central counterparty: an entity that acts as the buyer to every seller and the seller to every buyer for a series of specific contracts, i.e. for those settled on a clearinghouse.

6 Resolutions 4,282 and 4,283; Circulars 3,680, 3,681, 3,682 and 3,683, all of November 4, 2013; and Circulars 3,704 and 3,705, both of April 24, 2014.