Explanatory Notes on Accounting Statements

 
Explanatory notes to the accounting statements (December 31, 2001)
(In R$000)
 
1     Banco Central and its responsibilities
 
The Banco Central do Brasil is a semi-autonomous federal agency and component of the National Financial System. It was founded on 12.31.1964 with promulgation of Law 4,595, as the agent of Brazilian society charged with the task of fostering stability of both the National Financial System and the buying power of the nation's currency.
 
2     Presentation of the accounting statements
 
The accounting statements are prepared according to the terms of the legislation applicable to Banco Central, particularly Law 4,320/64, Law 4,595/64 (altered by Decree Law 2,376/87), Decree Law 278/67, Law 7,862/89, Provisional Measure 2,179/2001 and Complementary Law 101/2000 (Fiscal Responsibility Law). According to this legislation, the Banco Central calculates results and elaborates half-yearly balance sheets in June and December of each year, as well as balance sheets for each inividual month. As of July 1, 2000, the accounting statements have been audited by independent auditors.
 
Given the nature of Banco Central’s operations, there is no segregation between Current and Long-Term Assets and Liabilities. The classification "Foreign" and "Internal" is used to record rights and obligations in foreign currency and in national currency, respectively.
 
The accounting statements are released through publication in the "Diário Oficial da União" and on the Internet (www.bcb.gov.br).
 
3     Significant accounting policies
 
a.     Accounting basis
 
Revenues, expenditures, assets and liabilities are appropriated on an accrual basis as required by the single paragraph of article 8 of Law 4,595/64, with the text given in Decree Law 2,376/87, whilst at the same time considering the impact of specific legislation, particularly § 6 of art. 5 of the Fiscal Accountability Law, which includes Banco Central administrative expenses in the Federal Government Budget.
 
Based on the previous legal provision cited above, the expenditure covered by Budget Law only has an impact on the results when and if approved by the National Congress, on the basis of the financial and budget programming defined by the Executive Power. Thus, the main effects are as follows:
     
I.     Liabilities incurred and acknowledged, to be settled with resources drawn from the Budget Law, maturing in subsequent fiscal years, are registered as expenditure to be appropriated;
 
II.     Contingent liabilities resulting from judicial suits are acknowledged when the judicially mandated payments are effected and not on the basis of an evaluation of the probability of the outcome.
 
Rights and liabilities expressed in foreign currency are adjusted according to exchange rates in effect on the date of the balance sheet. Exchange buying rates are used for assets and selling rates for liabilities. Other rights and liabilities are updated according to contractually agreed indexing factors and legal and regulatory provisions.
 
Until 2.28.2001, exchange indexing on securities earmarked to the US dollar was appropriated daily based on the rate calculated on the preceding day. As of the balance sheet for March, these securities are corrected using the rate calculated on the same day, in accordance with the accruals principle.
 
b.     Asset evaluation criteria
 
The criteria for constituting and adjusting provisions are based on the following general rules:
 
I.     When the credit is deemed difficult to recover - for the difference between the accounting value and the amount considered recoverable;
 
II.     When an outside factor reduces the market value - for the difference between the accounting value and the market value.
 
Normal lending operations, for which no provisions are required, are stated at market value or present value, based on the following criteria:
 
I.     Those with adequate liquidity are recorded at market price;
 
II.     Those that do not have adequate liquidity are adjusted to their present value, observing the following when applicable:
 
- Internal credits indexed to the exchange variation - discounted using foreign exchange cupon rates published by Andima;
 
- Internal credits indexed to price indices or the Reference Rate (TR) - discounted using the negotiation rates for securities issued by the National Treasury and indexed to price indices or the TR; and
 
- External credits - discounted at the rate for earnings from external debt securities of debtor countries.
 
Permanent Assets - Investments are recorded at acquisition value and updated for variations in the rates of the original currencies. Fixed assets are recorded at acquisition cost, real estate was revalued in 1994 with the respective constitution of a revaluation reserve. Depreciation is charged based on the straight-line method, based on the following criteria:
 
I.     Fixtures and fittings:
 
- Computer equipment, vehicles and tools - annual rate of 20%;
- Other equipment, facilities and permanent materials - annual rate of 10%;
- Library, museum and art collections are not depreciated;
 
II.     Real estate (excluding land): depreciation of 80% of the value of the property over 50 years with the annual rate calculated on the basis of its remaining useful life.
 
4     Foreign sector operations

 
12.31.2001
12.31.2000
Foreign Assets
US$ (*)
R$
US$ (*)
R$
Cash
150.374
348.807
562.112
1.098.704
Very short-term deposits
2.920.500
6.774.392
3.375.509
6.597.770
Fixed term deposits
14.517.294
33.674.314
14.359.276
28.066.641
Securities
19.985.987
46.359.495
14.774.801
28.878.826
Credits to countries
40.038
92.873
2.662.605
5.204.327
Contracted operations - to be liquidated
183.101
424.721
1.181.150
2.308.676
Gold operations
180.512
418.715
57.378
112.152
Reciprocal Credit Agreements
78.420
181.904
150.012
293.213
Other
22.772
52.822
33.640
65.752
Provisions
(43.779)
(101.549)
(44.441)
(86.864)
 
TOTAL
38.035.219
88.226.494
37.112.042
72.539.197
(*) In equivalent dollars at the date of balance.

The variation under the heading Credits to Countries was due principally to National Treasury purchase of credits from the government of the Republic of Poland on 10.29.2001, as a result of Provisional Measure 2,179. This operation involved Banco Central reception of National Treasury Notes - Series D (NTN-D) in the amount of R$ 6,706,540, registered under the heading "Federal Public Securities".
 
The amounts presented in the item "Contracted operations – to be liquidated " refer to contracts for deposits and purchase of securities for which there is a normal time lag of two days between the contract and liquidation date.
 
5     Loans to financial institutions
 
The amount stated under this heading on 12.31.2000 refers to financing granted under the Program of Incentives for Restructuring and Strengthening the National Financial System - Proer. These credits were acquired by the National Treasury on 6.27.2001, according to the provisions of Provisional Measure 2,196/2001, which created the Program for Strengthening Federal Financial Institutions, through issues of NTN-D amounting to R$ 8,888,692 in the name of the Banco Central do Brasil.
 
6     Federal public securities

 
12.31.2001
12.31.2000
Quantity
Value
Quantity
Value
1) Free
LFT
29.862.525
37.583.516
26.897.611
30.362.322
LFT-A
38.303.521
63.392.310
32.563.225
50.141.854
LFT-B
480.370
607.197
554.266
599.662
LTN
28.844.806
27.372.424
35.406.430
33.380.452
NTN-D
30.658.862
42.363.420
    -
    -
 
SUM 1
128.150.084
171.318.867
95.421.532
114.484.290
 
2) Repurchase commitment
LTN
655.194
545.338
4.293.570
3.997.601
LFT
10.416.480
13.194.328
730.415
791.720
LFT-A
    -
    -
5.740.296
8.627.818
 
SUM 2
11.071.674
13.739.666
10.764.281
13.417.139
 
  SUBTOTAL (1+2)
139.221.758
185.058.533
106.185.813
127.901.429
 
3) Non-negotiable
NTN-A10
2.024.090
1.835.529
2.024.090
1.798.448
NTN-P
2.785.442
3.238
2.748.370
2.736
 
SUM 3
4.809.532
1.838.767
4.772.460
1.801.184
 
4) Securitized
CVS
894.420
956.948
    -
    -
 
SUM 4
894.420
956.948
    -
    -
 
TOTAL
144.925.710
187.854.248
110.958.273
129.702.613

7     Credits receivable

 
12.31.2001
12.31.2000
Balance
Provision
Balance
Provision
1) Institutions in Liquidation
Banco Nacional - In extrajudicial liquidation
13.905.984
(3.922.266)
15.537.192
(5.015.606)
Banco Econômico - In extrajudicial liquidation
8.765.588
(766.525)
9.863.513
(1.761.303)
Banco Bamerindus - In extrajudicial liquidation
2.414.142
(1.278.474)
2.360.322
(1.115.913)
Banco Pontual - In extrajudicial liquidation
777.560
(777.560)
760.226
(583.191)
Banco Mercantil - In extrajudicial liquidation
480.940
    -
721.571
    -
Banco Banorte - In extrajudicial liquidation
551.507
(295.551)
539.212
(288.011)
Banco do Estado de Alagoas - In extrajudicial liquidation
327.625
(262.582)
320.321
(160.161)
Banco Crefisul - In extrajudicial liquidation
171.663
(70.385)
167.836
(65.148)
Banco Banfort - In extrajudicial liquidation
111.722
(84.283)
223.629
(57.865)
Other institutions in liquidation
106.293
(90.772)
133.810
(80.380)
SUM 1
27.613.024
(7.548.398)
30.627.632
(9.127.578)
 
2) Sundry Credits
FCVS
895.273
    -
1.647.855
    -
States
4.329.186
    -
3.924.582
    -
Other Operations
30.174
(5.270)
5.065
(5.052)
SUM 2
5.254.633
(5.270)
5.577.502
(5.052)
 
TOTAL ( 1 + 2 )
32.867.657
(7.553.668)
36.205.134
(9.132.630)

Credits with institutions in extrajudicial liquidation reflect the debt situation on the date of the financial statements, including the adjustments, accruals and monetary corrections required under current legislation, including contingencies and external factors - for which, given their operational characteristics, there is some delay in registering the necessary information. These credits are accrued according to the legally determined indices and provisions are recorded for the difference between the value of the credits and the institution’s total assets, less labor and tax liabilities, since these have right of preference over Banco Central credits, considered equivalent to public finance, according to the bankruptcy legislation. In order to determine the provisions to be recorded for Banco Central credits to companies in liquidation, the assets of these institutions are, whenever possible, evaluated at market value or according to criteria appropriate for each type of asset. In addition to the procedures followed by Central Bank for purposes of certifying the consistency of the balance sheets of entities in liquidation, since 2001, these financial statements are also subject to auditing by independent auditors.
 
In more specific terms, it is worth noting the following with respect to the chart presented:
 
a.     Recovery, in 2001, of the following amounts:
 
- Banco Nacional: R$ 1,950,000;
- Banco Econômico: R$ 1,300,000;
- Banco Mercantil: R$ 250,000;
- Banco Banfort: R$ 115,000; and
- Other institutions in liquidation: R$ 30,000.
 
b.      The change in the provisions of Banco Pontual resulted from the reevaluation of its assets;
 
c.     The changes in the provisions of other institutions in extrajudicial liquidation resulted from the normal evolution of their asset situations; and;
 
d.     The change in the FCVS balance is, basically, a consequence of it adjusting for the information provided by the Fund’s managing entity with respect to the composition of the credit according to interest rates used and securitization through renewal of part of the credits with the FCVS from the introduction of other securities (Note 6).
 
8     Credits to be paid by the National Treasury/results to be transferred to National Treasury
 
In accordance with Fiscal Accountability Act and Provisional Measure 2,179, the positive result of Banco Central, after constitution or reversal of reserves, constitutes a liability between the Bank and the Federal Government, to be transferred by the 10th business day following approval of the accounting statements by the CMN. If this result is negative, it becomes a credit for the Bank from the Federal Government, to be paid by the 10th business day of the year subsequent to the date the financial statements are approved. In both situations, these amounts should be updated by the same indices applied to Deposits at Order of National Treasury (Note 17).
 
9     Resources managed by Centrus
 
In compliance with the provisions in Law 9,650/98, the Central Bank Pension Fund Foundation - Centrus manages resources originating from employer contributions to the private pension fund to December 1990 and refer to employees covered by the Single Juridical System - RJU. These resources bear earnings at the Foundation’s level of return on equity and are reimbursed to the Bank in monthly installments, equivalent to the retirement and pension benefits paid under the RJU system, which, according to Decree 2,842/98, are the responsibility of this government agency.
 
10     Securities receivable
 
Composed mainly of guaranties received from operations with financial institutions. These papers bear interest at the TR rate, with monthly payments, and mature in 2004.
 
11     Deposits earmarked to appeals
 
Refer to judicial suits for which the Banco Central is required to effect deposits in order to file appeals. Almost all of these credits are duly provisioned in light of the uncertainties as to the outcome of these suits.
 
12     Credits with Proagro
 
These refer, basicly, to the administration fee due to Banco Central under the Agricultural Activity Guarantee Program - Proagro, however, since the Program’s resources have been exhausted, and to avoid Central Banco having priority over other creditors, the Bank’s Board of Directors have suspended payment until the pending amounts due to other creditors have been settled. This fee is equivalent to 0.18% per month of Banco Central's total administrative expenditure and is to be used to reimburse expenditure incurred from managing the Program.
 
13     Prepaid expenditures or expenditures to be appropriated/amounts to be appropriated
 
Refers to expenditure incurred in connection with subsequent periods. The majority refers to the balance of Centrus’ mathematical reserves to be paid-in by Banco Central to enable this Foundation to fully assume retirement and pension payments, to December 1990, under the terms of the General Social Security System - RGPS, according to Law 9,650/98.
 
This amount is indexed to the IGP-M plus interest of 6% per annum and the corresponding entry is recorded to "Amounts to be Paid" under liabilities. Payments are being made in annual and consecutive installments of no less than one tenth of the original indexed balance and, any amounts transferred in excess of this minimum can be offset in future periods.
 
14     Capital quotas in international financial organizations

 
12.31.2001
12.31.2000
US$ (*)
R$
US$ (*)
R$
International Monetary Fund - IMF
3.804.562
8.825.062
3.947.846
7.716.461
Bank for International Settlements - BIS
35.878
83.222
35.878
70.127
 
TOTAL
3.840.440
8.908.284
3.983.724
7.786.588
(*) In equivalent dollars at the date of balance.

The country’s participation in the IMF and BIS, approved by the National Congress, is through capital shares paid-in by the Banco Central do Brasil. The negative variation in the IMF balance in equivalent dollars is a result of the difference between the valuation of the dollar compared to the Special Drawing Rights - SDR, the IMF’s accounting currency.
 
15     Foreign liabilities

 
12.31.2001
12.31.2000
US$ (*)
R$
US$ (*)
R$
Foreign Currency Liabilities
11.815.752
27.407.819
4.562.060
8.917.003
Brazilian Financing Plan
793.764
1.841.215
925.499
1.808.980
Paris Club
4.123
9.563
7.095
13.867
International Monetary Fund - IMF
8.411.359
19.510.988
1.779.823
3.478.842
Reciprocal Credits Agreements
76.924
178.433
166.926
326.274
Deposits earmarked to the exchange market
1.880.850
4.362.821
12.252
23.948
SDR allocations - IMF
453.092
1.050.992
470.183
919.020
Contracted operations - to be liquidated
183.276
425.126
1.182.190
2.310.709
Other Liabilities
12.364
28.681
18.092
35.363
 
International Financial Organizations Deposits
4.004.986
9.289.966
4.146.784
8.105.305
International Development Association - IDA
1.074
2.491
1.073
2.100
Multilateral Agency for Investment Guaranty - MIGA
1
2
1
1
Interamerican Development Bank - IDB
125.404
290.888
176.088
344.182
Interamerican Bank for Reconstruction and Dev. - IBRD
9.945
23.069
9.038
17.666
International Monetary Fund - IMF
3.868.548
8.973.484
3.960.401
7.741.000
African Development Fund - ADF
1
2
2
3
Fin. Fund for the Dev. Of the River Plate Basin - Fonplata
12
29
180
352
African Development Bank - ADB
1
1
1
1
 
Sundry Accounts
34.963
81.100
26.347
51.500
Funds Earmarked to Loans and Fin. in For. Currency
34.963
81.100
26.347
51.500
 
TOTAL
15.855.701
36.778.885
8.735.191
17.073.808
(*) In equivalent dollars at the date of the balance.

Foreign currency liabilities with the IMF increased, mainly as a result of the inflow of R$ 4,494,912 on June 28 and R$ 10,315,573 on September 29, 2001, referring to release of tranches of the loans granted by the IMF under the Brazil Stand-by Arrangement.
 
The balance for "Deposits Earmarked to Exchange Market" refers to deposits, with Banco Central, of excess foreign exchange long positions, by financial institutions, effected according to the terms of Circular BCB 2,566/95.
 
The balance for "Contracted Operations - to be Liquidated" refers to the corresponding entry for asset operations for which there is a normal lag of two days between the contracting and liquidation dates.
 
The balances for "International Financial Organizations Deposits" refer principally to these organizations’ cash deposits held with the Banco Central, resulting mainly from adjustments to wealth, income from internal sources, overseas remittances and expenditure incurred in Brazil, and payment of quotas in national currency, with the value being maintained.
 
16     Financial institutions’ deposits
 
The deposits made by these financial institutions are used by Banco Central mainly as a monetary policy instrument, since the lending capacity of the financial institutions is restricted since a compulsory reserve is required for part of these deposits.
 
These deposits may be required in cash or in federal public securities, in which case they are registered in a rectification account, since the securities continue registered in the Special System of Clearance and Custody in the name of the depositor institution, though they are earmarked to the operations in question. The major deposits currently required are as follows:
 
a.     Banking Reserves - Calculated based on demand deposits, banking reserves are deposited in cash and bear no earnings;
 
b.     Brazilian Savings and Loan System Deposits - Compulsory deposits on savings resources, deposited in cash and indexed according to the Reference Rate + 0.5% per month;
 
c.     Time Deposits - Required in public securities registered with Selic and do not generate earnings; and
 
d.     Judicial Deposits - Compliance is in the form of public securities registered with Selic and deposited without earnings.
 
17     Federal government deposits
 
Based on the provisions in paragraph 3 of article 164 of the Federal Constitution, Federal Government cash resources are deposited at Banco Central and earn interest according to the provisions of article 1 of Provisional Measure 2,179 at the weighted average rate for the intrinsic return on Federal Internal Public Securities Debt issued by the National Treasury and held by Banco Central. This interest is calculated daily and capitalized on the last day of the subsequent ten-day period.
 
The balance that exists under "Earnings on Federal Government Deposits, to be Transferred", refers to the share of earnings recorded at the end of the month and transferred to the National Treasury on the last day of the subsequent ten day period.
 
18     Deposits earmarked to guarantee operations
 
They refer to the resources of financial institutions in extrajudicial liquidation originating from the redemption of federal public securities received in guarantee of operations prior to liquidation being decreed and that remain deposited with Banco Central and invested in public securities as a way of guaranteeing their value, and are consequently recorded to a rectifying account.
 
19     Securities for which the institution is liable

 
Issued
In Portfolio
On Market
In 12.31.2001
Quantity
Quantity
Quantity
Value
NBCE
332.000.000
239.430.200
92.569.800
124.414.298
NBCF
1.600.000
800.000
800.000
1.494.139
 
TOTAL
333.600.000
240.230.200
93.369.800
125.908.437
 
In 12.31.2000
Quantity
Quantity
Quantity
Value
NBCA
4.000.000
4.000.000
    -
    -
NBCE
262.200.000
187.040.750
75.159.250
83.837.157
NBCF
2.400.000
1.100.000
1.300.000
1.944.724
 
TOTAL
268.600.000
192.140.750
76.459.250
85.781.881

Securities issued by Banco Central and used as monetary policy instruments are registered at their sale value and adjusted daily for charges incurred. As of March 2001, securities linked to the US dollar exchange rate have been registered at the rate in effect on the balance sheet date and no longer at the rate in effect on the previous day (Note 3).
 
According to the Fiscal Accountability Act, as of May 2002, Banco Central will no longer issue federal public debt securities. Thus, the Bank, is in the process of discussions with the National Treasury, aimed to assure, for the Banco Central, the instruments necessary for monetary policy purposes.
 
20     Currency
 
Currency is represented by the volume of bank notes and coins in circulation, held by the public and financial institutions and registered at their issue value.
 
The distribution of bank notes and coins according to denominations in circulation on December 31, was as follows:

 
2001
2000
 
Quantity
Value
Quantity
Value
Notes
2.240.098.164
36.732.768
2.039.465.496
31.750.629
R$1,00
754.589.199
754.589
733.762.367
733.762
R$2,00
16.455.532
32.911
    -
    -
R$5,00
211.522.722
1.057.614
202.614.981
1.013.075
R$10,00
716.895.464
7.168.955
644.156.340
6.441.563
R$50,00
526.896.501
26.344.825
446.619.049
22.330.953
R$100,00
13.738.746
1.373.874
12.312.759
1.231.276
 
Coins
7.286.411.433
935.622
6.671.648.003
882.081
R$0,01
2.570.139.868
25.701
2.368.386.610
23.684
R$0,05
1.624.920.747
81.246
1.456.634.851
72.832
R$0,10
1.708.505.650
170.851
1.561.996.934
156.200
R$0,25
609.234.304
152.309
526.633.396
131.658
R$0,50
536.191.468
268.096
520.577.551
260.289
R$1,00
237.419.396
237.419
237.418.661
237.418
 
Commemorative Coins
446
346
 
TOTAL
37.668.836
32.633.056

Growth of 15.43% in the volume of the money supply - a level higher than expansion under the nominal Gross Domestic Product - is a consequence of monetary stability, which, in turn, has stimulated monetization of the economy.
 
21     Net Worth
 
Net Worth is composed of:
 
a.     Assets registered at the time of creating the Central Bank and the Bank’s results to the 1987 fiscal year, monetary corrected to December 1995;
 
b.     Contingency Reserve constituted according to the terms of § 3 of Art. 2 of Provisional Measure 2,179, aimed to reduce redemptions of securities from the Bank’s portfolio and, consequently, maintaining the conditions required to implement monetary policy. A reserve of R$ 1,789,540 was constituted during the 2nd half of 2001; and
 
c.     Revaluation Reserve, the change in the period resulted from operations from previous years that were realized and regularized in 2001.
 
22     Result for the 2nd half of 2001
 
The positive result of R$ 7,158,161 calculated in the second half of 2001 resulted from the asset structure and behavior of the rates used as the basis of earnings on the Bank’s assets and liabilities. Approximately 58% of assets are updated according to internal indices as compared to 29% of liabilities updated according to the same indices. On the other hand, despite the difference between exchange assets and liabilities, exchange updating had no significant impact on the result since the change in the value of the dollar – the currency used to update most foreign currency operations – was quite small. The major items included under this result are as follows:
 
a.     Operations with securities

 
Revenues
Expenses
Result
Commited Operations
975.598
(829.509)
146.089
LFT and LTN
12.115.090
   -
12.115.090
NTN-D
6.807.638
(7.898.782)
(1.091.144)
CVS
64.248
   -
64.248
NBC
23.042.451
(30.768.879)
(7.726.428)
Other
392.193
(302.453)
89.740
Adjustment to Current/Market Value
5.103.586
(2.891.311)
2.212.275
 
TOTAL
48.500.804
(42.690.934)
5.809.870

When the value of the Brazilian real increases in relation to the American dollar during the month, papers in the Banco Central portfolio issued by the National Treasury and indexed to the dollar generate charges, while those issued by the institution itself and indexed to the same currency generate revenues.
 
b.     Foreign sector operations

 
Revenues
Expenses
Result
Operations earmarked to international reserves
23.115.555
(18.217.818)
4.897.737
Operations earmarked to external debt
3.957.651
(5.072.118)
(1.114.467)
International organizations and agreements
1.963.009
(2.115.333)
(152.324)
Loans and financing in foreign currency
1.078.500
(12.938)
1.065.562
Revaluations of assets in gold
110.285
(111.917)
(1.632)
Other operations
45.062
(37.567)
7.495
Adjustment to current/market value
5.295.145
(4.377.702)
917.443
 
TOTAL
35.565.207
(29.945.393)
5.619.814

 
Foreign sector operations include earnings on foreign assets and charges on foreign liabilities. The surplus registered from these operations was due mainly to the fact that, throughout the semester, the value of the assets was greater than the liabilities of the same nature and also due to valuation of the currencies in which income is earned from these operations.
 
It should be noted that in the months in which the real appreciates in value against the foreign currency, assets generate charges and liabilities generate exchange indexing revenues.
 
c.     Operations with the National Treasury

 
Revenues
Expenses
Result
Earnings on the Credit to be Paid by National Treasury
351.624
(62.341)
289.283
Earnings on Federal Government deposits
1.203.421
(6.079.558)
(4.876.137)
 
TOTAL
1.555.045
(6.141.899)
(4.586.854)

 
Revenues from Federal Government Deposits and expenses on Credits to be Covered by the National Treasury are a result of the appreciation of the real against the United States dollar. This appreciation generated a negative impact on the profitability of the Bank’s security portfolio and, consequently, on the indices used to generate earnings on Deposits at the Order of the Federal Government. The result was negative profitability in several months of the half-year period in question.
 
d.     Banking sector operations

 
Revenues
Expenses
Result
Financial Institutions' Deposits at Banco Central
   -
(757.727)
(757.727)
Past Accounting Period Revenues
780
   -
780
 
TOTAL
780
(757.727)
(756.947)

The charges refer to earnings on Brazilian Savings and Loan System deposits at Banco Central.
 
 
e.     Penalties applied

 
Revenues
Expenses
Result
Surveillance of Illegal Activities Area
1.418.107
   -
1.418.107
Exchange Operations Area
12.824
   -
12.824
Records and Informations Area
3.151
   -
3.151
Other Accounts
1.040
   -
1.040
 
TOTAL
1.435.122
   -
1.435.122

The revenues stated in this item have been fully provisioned and do not affect the result of the fiscal year.
 
f.     Credits and securities receivable

 
Revenues
Expenses
Result
Monetary Update and Interest
1.048.641
   -
1.048.641
Adjustment to Current Value
110.390
(89.499)
20.891
 
TOTAL
1.159.031
(89.499)
1.069.532

The revenues refer mainly to monetary updating and interest on special regime and States operations, and also adjustments to their present value.
 
g.     Allowances

 
Revenues
Expenses
Result
Reversion of Allowances
1.220.263
   -
1.220.263
Constitution of Allowances
   -
(2.126.559)
(2.126.559)
Monetary/Exchange Updating of Allowances
61.775
(70.413)
(8.638)
 
TOTAL
1.282.038
(2.196.972)
(914.934)

h.     Administrative expenditures
 
Refers to the operating expenses of the Institution, included in the General Federal Government Budget and approved by the National Congress, performed on the basis of financial and budget programming defined by the Executive Power.
 
i.     Non-operating result

 
Revenues
Expenses
Result
Exchange Updating of Financial Int. Org. Quotas
1.798.351
(1.669.247)
129.104
- FMI
1.783.921
(1.655.373)
128.548
- BIS
14.430
(13.874)
556
Earnings on the Credits Managed by Centrus
20.467
   -
20.467
Inscription/Cancellation in Debts in Execution
87
(1.992)
(1.905)
Depreciation
   -
(11.664)
(11.664)
Compensation for Cost of Use of Sisbacen
18.594
   -
18.594
Changes
42.867
(412)
42.455
Sundry Accounts
9.463
(4.997)
4.466
 
TOTAL
1.889.829
(1.688.312)
201.517

 
23     Fiscal accountability act - Required information
 
a.     The fiscal impact and cost of its operations - Complementary Law 101 § 2nd of art. 7
 
The Single paragraph of art. 8 of Law 4,595/1964, with the text provided in Decree Law 2,376/1987, states that the "results earned by the Banco Central do Brasil, including the revenues and expenditures from all its operations, will be calculated on an accrual basis and transferred, as of January 1, 1988, to the National Treasury, after possible losses of previous fiscal years have been duly offset". Furthermore, the accrual basis should be in accordance with Banco Central’s accounting peculiarities as described in Note 3.
 
This provision was partially altered by the heading and paragraph 1 of art. 7 of the Fiscal Accountability Act.
 
"Art. 7 - The positive results calculated by Banco Central do Brasil, after the constitution or reversion of reserves, constitute National Treasury revenues and shall 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 the federal budget."
 
According to indent II of Art. 2 of Provisional Measure 2,179/2001, this negative result is to be liquidated by the 10th business day of the fiscal year subsequent to that of National Monetary Council approval of the balance sheet. Aside from this, article 2, § 1 of the aforementioned provisional measure determines that the positive result transferred by the Central Bank will be used exclusively to pay the federal public securities debt, with priority given to amortization of that existent with Banco Central.
 
Observe furthermore that:
 
I.     Banco Central do Brasil’s result includes the revenues and expenditures from all of its operations;
 
II.     The positive results are transferred as revenues and the negative results are covered as National Treasury expenditure; and
 
III.     These results are specified in the Fiscal Budget under the National Treasury account.
 
Thus, after constitution and reversion of reserves, the result from the Central Bank’s operations represents a fiscal cost. In the 3rd quarter, the result was a negative amount of R$ 4,202,444 and, in the 4th quarter, a positive amount of R$ 11,360,605, after exclusion of the constitution and reversion of reserves of R$ 1,796,471, amounting to a total of R$ 5,361,690 in terms of the fiscal impact for the half-year period.
 
b.     The cost of remunerating National Treasury cash funds - Complementary Law 101 § 3 of art. 7
 
The federal government’s cash funds are deposited at Banco Central and, according to the terms of article 1 of Provisional Measure nº 2,179/2,001, earn interest based on the weighted arithmetic average rate of the intrinsic return on internal Federal Public Debt securities issued by the National Treasury and held by Banco Central.
 
The cost from remunerating National Treasury deposits was R$ 4,848,571 in the third quarter of 2001 and R$ 27,566 in the fourth quarter (R$ 4,876,137 in the half-year period).
 
c.     The cost of maintaining exchange reserves - Complementary Law 101 § 3 of art. 7
 
The cost of maintaining exchange reserves is calculated according to the difference between the average funding rate for the Central Bank’s liabilities and the rate of return for reserves.
 
In the October-December quarter, exchange reserves deposited at the Banco Central were equivalent to R$ 98,806,506 according to the criterion of daily average balances. Earnings on these reserves in national currency was a negative 12.9% during the period. When the average cost of the liabilities of this entity is excluded (6.0%), international reserves generated negative profitability of 6.9% or R$ 6,836,126, reversing the gain of R$ 7,117,559 earned in the quarter from July to September.
 
It should be noted that the negative rates, for both the return on reserves and funding costs, are a consequence of appreciation of the real against the United States dollar.
 
d.     The return on Banco Central’s securities portfolio, with emphasis on federal government issues, was as follows - Complementary Law 101 § 3 of art. 7

 
Revenues
Expenditures
Net Result
3rd Quarter
12.902.575
(27.647.720)
(14.745.145)
Federal Government Securities
12.309.976
(2.785.343)
9.524.633
Own Securities
592.599
(24.862.377)
(24.269.778)
 
4th Quarter
35.598.229
(15.043.214)
20.555.015
Federal Government Securities
12.838.542
(9.136.712)
3.701.830
Own Securities
22.759.687
(5.906.502)
16.853.185
 
2nd Half/2001
48.500.804
(42.690.934)
5.809.870
 
 

In the fourth quarter of the year, the positive results can be explained mainly by the following factors:
 
I.     Federal government securities - the positive result of federal government securities of R$ 3,701,830, is basically due to:
 
- Net revenues from interest, discounting of pre-fixed securities and adjustments to market/current value; and
 
- Net outlays from exchange indexing.
 
II.     Securities issued by the institution itself - the net positive result of R$ 16,853,185 refers mainly to net revenues from exchange updating and interest expense with NBC.
 
It should be noted that in the months in which the real appreciates in value against the foreign currency, assets generate charges and liabilities generate exchange-indexing revenues.
 
24     Other information
 
a.     Financial relationship with the National Treasury

 
12.31.2001
12.31.2000
Debt Balances
Notes
192.246.689
145.083.667
National Treasury Notes - NTN
44.202.187
1.801.184
National Treasury Financial Bills - LFT
114.777.351
90.523.376
National Treasury Bills - LTN
27.917.762
37.378.053
Securitized Credits - CVS
956.948
    -
Credit to be Paid by National Treasury
4.368.845
15.377.342
Judicial Deposits in Favor of National Treasury
3.701
3.701
Adjustment Concerning MP 2.179
    -
1
Credits to be Repaid
19.852
9
Taxes and Contributions, to Recover
43
1
 
Credits Balances
88.017.699
89.920.277
Deposits at Order of Federal Government
82.205.875
88.380.288
Result to be Transferred to National Treasury
5.361.690
1.083.872
Earnings on Federal Government Deposits - to be Transferred
125.222
209.269
Deposits in Foreign Currencies - Paris Club
5.767
5.884
Resources Earmarked to External Debt Management
11.602
9.777
Judicial Deposits Consequent upon Final Decision
9.156
8.960
Cash Reserve Availabilities
129
1
Taxes and Contributions, to be Paid
298.258
222.226

 
b.     Financial flow with National Treasury

 
2nd half/2001
2001
2000
Federal Public Securities
(2.024.630)
3.545.218
5.085.880
Acquisition
(33.304.111)
(55.609.179)
(93.929.459)
Redemption
27.978.573
54.298.566
92.310.875
Interest
3.300.908
4.855.831
6.704.464
 
 
Other Inflows
(4.435.764)
(13.361.348)
(12.874.972)
Earnings on Available Funds
(4.435.764)
(12.221.063)
(9.117.236)
Earnings on Applications with Reversion Agreement
    -
    -
(3.409.268)
1998 2nd Half Result Transfers
    -
    -
(4.060)
2000 1st Half Result Transfers
    -
    -
(239.393)
2000 2nd Half Result Transfers
    -
(1.137.615)
    -
Release of Guarantees of the Braziliam Financing Plan
    -
    -
(86.395)
External Debt Transfers - Res. 1,564/89
    -
(2.670)
(18.620)
 
 
Net Financial Flow
(6.460.394)
(9.816.130)
(7.789.092)

Includes only the movements on the account Federal Government Deposits, resulting from Banco Central funding and lending operations.
 
c.     Law 9,650/1998
 
With classification of Central Bank employees within the Single Juridical System - RJU, the institution carried out a survey of employer and employee contributions to the Social Security Plan of Central Bank Employees - PSS and to the Social Security System. Based on this information, the Federal Revenue Secretariat and the National Social Security Institute - INSS are analyzing the amounts calculated in order to reconcile these accounts as required by Law 9,650/98. With respect to deposits earmarked to the Employment Compensation Fund - FGTS between 1991 to 1996 which, according to Law 9,650, are to be returned to the Central Bank and CEF and by those employees who have already received such amounts, one should stress that this measure will only be effective under the hypothesis of the lifting of the embargo imposed as a result of a judicial demand. However, it is important to emphasize that Presidential Message 1, dated January 3, 2002, introduced a bill to National Congress dealing specifically with this matter.
 
d.     Judicially determined payments and claims
 
According to § 1 of article 100 of the Federal Constitution, public entities are obligated to include allocations in their budgets to cover judicially determined payments submitted by July 1 of each year, for payment by the close of the following fiscal year.
 
With publication of Constitutional Amendment nº 30, dated September 13, 2000, payments of claims judged up to 12.31.1999 are to be liquidated at their real value in current currency plus legal interest, in equal and successive annual installments over a maximum period of ten years, with the exception of credits such as meal supplements and small value items.
 
With implementation of this amendment, R$ 5,961 was approved for payment in the Federal Government Budget in the 2001 fiscal year, with the balance of R$ 27,118 to be paid over nine years. A payment of R$ 49,213 is forecast for 2002.
 
At 12.31.2001, Banco Central was cited in 56,291 legal suits as presented below and analyzed according to the nature of the suit and the underlying causes:

Nature of Suit
Quantity
Underlying Causes
Quantity
Temporary Injunction
3.380
Collor Plan
42.331
Execution
1.344
SFH
561
Declaratory
2.305
FGTS
1.358
Preventive Injunction
1.791
Extrajudicial Liquidation
689
Statutory Law
39.387
Bankruptcy
491
Labor Law
951
Rural Credit - Proagro
618
Interlocutory Appeal
3.792
Cadin, Cadip, Serasa
343
Bankruptcy
494
Exchange
483
Embargo to execution
1.483
Financial Charges
405
Others
1.364
Civil Servant
85
 
Debt Suject to Judicial Execution
1.446
Tender Processes
82
Services Provided
37
Group Buyer Associations
417
Public Debt Securities
192
Others
6.753
Total
56.291
Total
56.291

Once these cases have been settled, the impact on the Banco Central will depend on the amount the Bank is required to settle. It is not practical to estimate the possible financial impact prior to a definitive judgment since some cases involve simply reviewing previous decisions, while in other cases the amount claimed is incompatible with the value of the sentence.
 
e.     Financial and actuarial situation
 
Law 8,112/90, in § 1 of article 185, states that retirement and pension benefits will be granted and maintained by the organs and entities with which the employees are connected. Furthermore, the Fiscal Accountability Act determines that the budget guidelines law will contain an appendix with an evaluation of the financial and actuarial situation of the specific civil service system (art. 4, § 2, clause IV.a).
 
Thus, the specific values related to Banco Central employees has not been registered, considering that:
 
I.     The treatment of this information will be compatible with that of other public entities;
 
II.     As of 2002, Banco Central will be included in the information that will accompany future budget guidelines bills, implying that it will not be necessary to recalculate the subgrouping of Banco Central employees and, consequently, it will be impossible to present updating of isolated data in the future.
 
f.     Funds and programs managed by Banco Central
 
Under legal or regulatory provisions, Banco Central is required to manage the following:
 
I.     Reserve for Fostering Currency Stability and the Use of Checks (Recheque): aimed to promote and encourage the stability of the national currency, enhancing the importance of checks as a payment instrument, improvements in banking operations and covering expenses from preparing and publishing the register of Issuers of Checks without Sufficient Funding - CCF;
 
II.     Deposit and Security Guaranty Fund (FGDLI): the purpose of this fund was to guarantee savings deposits (except rural savings) and securities against the risks of insolvency of the contributing institutions that raise such deposits;
 
III.     Farm Activity Guaranty Program - Decree 175/91 (Proagro): the objective of this Program is to free the rural producer from financial liabilities related to rural credit expenditure operations, when settlement of these liabilities has become difficult as a result of natural phenomena, plagues and diseases that affect plantations and herds and to indemnity producers when they use their own funds and losses are incurred as a result of the factors mentioned above; and
 
IV.     Monetary Reserve: aims to ensure normal operations on the financial and capital markets.
 
Resolution 2,211/1995 regulates the Credit Guaranty Fund (FGC), a private nonprofit entity responsible for the mechanisms designed to protect holders of credits against financial institutions. According to CMN Resolution 2,197/1995, which authorized creation of this Fund, the assets of Recheque and the FGDLI were to be transferred to the FGC. However, this transfer was suspended as a result of an injunction issued by the Federal Supreme Court (STF) in a case that challenged the constitutionality of the operation (1,398/1996). The case is now awaiting a final decision by the Court.
 
Registration of the reserves, the fund and the program administered by Banco Central must comply with the same accounting guidelines applicable to the Bank. Consequently, half-yearly balance sheets are submitted to independent auditing and published on the Banco Central homepage in the Internet (www.bcb.gov.br).
 
Despite being managed by this Institution, it is important to note that these Funds do not receive resources from the Banco Central. The funds are classified as Bank liabilities and totaled R$ 134 thousand at 12.31.2001. On the other hand, the Banco Central is refunded for its costs through payment of an administrative fee, authorized by the CMN.
 
Presented below is a summary of the asset situation and of the results of Recheque, FGDLI, Proagro and the Monetary Reserve.

 
12.31.2001
12.31.2000
Assets/Liabilities
Net Worth
Assets/Liabilities
Net Worth
Recheque
911.212
911.212
791.239
791.239
FGDLI
1.497.631
1.478.665
1.336.861
1.319.129
Proagro
100.511
(100.500)
128.127
(127.332)
Monetary Reserve
1.148.621
1.148.621
967.043
967.043

Result
2nd half/2001
2001
2000
Recheque
61.640
119.973
(38.775)
FGDLI
166.277
159.536
22.414
Proagro
17.668
26.832
(16.404)
Monetary Reserve
107.842
181.578
(1.106.494)

 
 
President: Arminio Fraga Neto
 
Directors: Carlos Eduardo de Freitas, Daniel Luiz Gleizer, Edison Bernardes dos Santos, Ilan Goldfajn, Luiz Fernando Figueiredo, Sérgio Darcy da Silva Alves, Tereza Cristina Grossi Togni.
 
Head of the Financial Administration Department:      Jefferson Moreira
Accountant: CRC-DF 7,333