The Central Bank published, this Friday, the improvement of prudential rules for IPs, which will have rules proportional to their size and complexity.
The new rules take effect in January 2023 and full implementation will take place in January 2025, to ensure time for IPs to adjust their internal controls and adjust their equity structure.
The objective is to extend to financial conglomerates led by IPs the proportionality of the existing regulatory requirements for FI conglomerates, while still preserving the easy entry for new competitors.
The prudential rules follow six main axes:
- Conglomeration: consolidated prudential requirements – The new rule establishes that the prudential requirements for IPs will be applied in aggregate form to the entire prudential conglomerate, as is already done for FIs. In the new rule, prudential conglomerates are classified into three types:
- Type 1: prudential conglomerate led by FI;
- Type 2: prudential conglomerate led by IP and not integrated by FI or by another institution authorized to operate by the BCB; and
- Type 3: prudential conglomerate led by IP and integrated by FI or another institution authorized to operate by the BCB.
- Improvement of the quality of capital required: the concept applicable to IPs is improved in order to guarantee greater capacity to absorb unexpected losses.
- Prevalence of capital requirement regulation by activity and risks incurred: the new rules adjust the minimum capital requirement according to the intrinsic risks of each type of activity (payment or financial activity) for Type 3 conglomerate, recognizing the peculiarities of payments and their differentiated legal status, and the specific prudential treatment of the risks arising from them.
- Extension of regulatory proportionality for IP-led conglomerates: the prudential segmentation already applicable to Type 1 conglomerates is now also applied to Type 3 conglomerates. Based on size and complexity, Type 3 conglomerates are now classified between S2 and S5 and the comply with the prudential rules of the respective segment.
- Facilitating the entry of new competitors: to encourage the entry of new participants and, consequently, innovation and competition, the new rules facilitate compliance with the capital requirement for new entrants in the first years of operation.
- Gradual implementation: new requirements will be enforceable according to an implementation schedule.