Explanatory Note on the Accounting Statements

 
EXPLANATORY NOTE ON ACCOUNTING STATEMENTS (SEPTEMBER 31, 2001)
 
FISCAL ACCOUNTABILITY ACT – REQUIRED INFORMATION
 
a) the fiscal impact and cost of its operations:
 
The paragraph of art. 8 of Law no. 4,595/1964, with the text provided in Decree Law no. 2,376/1987, states that the "Banco Central do Brasil (BCB) result, including the revenues and expenditures of all its operations, will be calculated on an accrual basis and transferred as of January 1, 1988 to the National Treasury, once possible losses of previous fiscal years have been duly offset".
 
This provision was partially altered by the heading and paragraph 1 of art. 7 of the Fiscal Accountability Act.
 
"Art. 7 – Calculated subsequent to the constitution or reversion of reserves, Banco Central do Brasil results constitute National Treasury revenues and are to be transferred by the tenth business day subsequent to approval of the half-year balance sheets.
 
§ 1 – The negative result will constitute a Treasury liability with Banco Central do Brasil and will be specified in a specific budget allocation."
 
According to the Art. 2º, II, of the Provisional Measure 2,179, this loss will have to be covered until the 10º working day of the fiscal year subsequent to the one of the approval of the financial statements by the National Monetary Council.
 
Observe furthermore that:
 
I. the Banco Central do Brasil result encompasses the revenues and expenditures of all its operations;
II. positive results are transferred as revenues and the negative results are covered as National Treasury expenditures;
III. these results are specified in the Fiscal Budget under the National Treasury account.
 
Therefore, the loss of the Central Bank’s operations represent its fiscal cost. In the third trimester of 2001, the BCB’s fiscal cost was R$4,202,444 thousand.
 
b) the cost of earnings on National Treasury cash amounts:
 
The available cash resources of the federal government are deposited at Banco Central and, according to the terms of article 1 of Provisional Measure no. 2,101, earn interest based on the weighted arithmetic average rate of the intrinsic profitability of internal Federal Public Debt securities issued by the National Treasury and held by Banco Central.
     
Outlays corresponding to earnings on National Treasury deposits came to R$4,848,571 thousand in the third quarter of 2001.
 
c) the cost of maintaining exchange reserves:
 
In the January/March 2001 quarter, exchange reserves deposited at Banco Central do Brasil were equivalent to R$95,759,419 thousand, according to the criterion of average daily balances. Earnings on these reserves in national currency came to 19.2% in the period. In contrast, average earnings on the liabilities of the institution came to 11.8% in the period, resulting in a difference of 7.4 percentage points. In monetary terms, net revenues of R$7,117,606 thousand were registered on the maintenance of exchange reserves in the period in question.
 
d) highlighting federal government issues, the profitability of its securities portfolio was as follows:

 
REVENUES
EXPENSES
RESULT
Treasury securities
12.309.977
(2.785.354)
9.524.623
Securities issued by the BCB
592.599
(24.862.377)
(24.269.778)
TOTAL
12.902.576
(27.647.731)
(14.745.155)
 

In the third trimester, the negative result in the BCB portfolio came to R$14,745,155 thousand and is, to a large extent, explained for the following factors:
 
I – Treasury Securities - the proceeds of Treasury Securities, amounting to R$9,524,623 thousand, are mainly due to:
- liquid revenues originated from price level adjustments of fixed earnings securities, as well as their interests and their discounts;
- liquid expenditures with Repos (Repurchase Agreements) and mark-to-market adjustments;
 
II - Securities issued by the BCB - the loss of R$24,269,778 thousand is mainly due to liquid expenditures resulting of rate of exchange adjustments of securities issued by the Banco Central do Brasil (NBC) and payment of their interests.
 
 
 
President: ARMINIO FRAGA NETO
 
Directors: CARLOS EDUARDO DE FREITAS, DANIEL LUIZ GLEIZER, EDISON BERNARDES DOS SANTOS, LUIZ FERNANDO FIGUEIREDO, SERGIO DARCY DA SILVA ALVES, ILAN GOLDFAJN and TEREZA CRISTINA GROSSI TOGNI
 
Head of the Financial Administration Department: JEFFERSON MOREIRA
Accountant: CRC-DF 7,333