Explanatory Note on the Accounting Statements

 
EXPLANATORY NOTE TO THE FINANCIAL STATEMENTS - on September 30, 2003
(In thousand of Reais)
 
FISCAL RESPONSIBILITY LAW – INFORMATION REQUIRED
 
a. Impact and fiscal cost of the operations - Fiscal Responsibility Law 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 Fiscal Responsibility Law:
 
“Article 7. The 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 - CMN.
 
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 superavit of R$4,901,428 in the third quarter of 2003 and that, with the result of the fourth quarter, will compose the result of the second half-year to be transferred to or covered by the National Treasury. According to Article 9, Paragraph 5 of  the Fiscal Responsibility Law, within ninety days from the closing of the half-year, the Banco Central do Brasil shall submit, at a joint meeting of the National Congress thematic commissions, an assessment of fulfillment of objectives and targets of monetary, credit and foreign exchange policies, providing evidence  of the impact and fiscal cost of its operations and results shown in appropriate balance sheets.
 
 
b. Cost of remunerating the available cash of the National Treasury - Fiscal Responsibility Law, Article 7, Paragraph 3
 
The cost corresponding to the remuneration of the National Treasury deposits amounted to R$7,402,320 in the third quarter of 2003.
 
c. Cost of maintaining foreign exchange reserves – Fiscal Responsibility Law, 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 third quarter, with an average daily balance of R$145,811,674, the international reserves recorded a positive yield of 3.4%. Excluding the average cost of liabilities of 4.0%, the net result of reserves was negative by 0.6% (R$848,041), considering the effects in the same period, due to foreign exchange indexing.
 
d. Yield of BCB’s securities portfolio, with an emphasis on Government issued securities - Fiscal Responsibility Law, Article 7, Paragraph 3
 
  (In R$ thousand)
Items
  3rd Quarter/2003
REVENUES
21.327.070
Government Securities
20.791.145
Banco Central Securities
535.925
 
EXPENSES
(4.739.367)
Government Securities
(2.531.561)
Banco Central Securities
(2.207.806)
 
NET RESULT
16.587.703
 
In the third quarter, the positive result was due, largely, to the following factors:
 
I - Government Securities – the result of the Government Securities was positive by R$18,259,584 resulted from monetary restatement and foreign exchange indexing, revenues from adjustment to market value and interest on Government Securities;
 
II - Banco Central Securities - the result from its own securities was negative by R$1,671,881 due, mainly, from foreign exchanging indexing and NBC interest expenses.
 
 
President of the Banco Central do Brasil
Henrique de Campos Meirelles
 
Directors
Afonso Sant'Anna Bevilaqua
Antonio Gustavo Matos do Vale
Beny Parnes
Eduardo Henrique de Mello Motta Loyo
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