EXCLUSIVE Brazil’s central bank puts the brakes on tougher fintech rules, sources say


People walk in front of the headquarters of the Central Bank in Brasilia, Brazil on August 25, 2021. REUTERS / Amanda Perobelli

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BRASILIA / SAO PAULO, Dec.22 (Reuters) – Brazil’s central bank has put the brakes on tighter regulations for the burgeoning fintech sector, withdrawing a draft proposal that was due to be voted on last month by the the government’s highest governing body for financial policy, four sources familiar with the matter told Reuters.

On November 18, the central bank proposed that the regulations be discussed at an extraordinary meeting of the National Monetary Council (CMN), but the new rules – which aim to level the playing field between fintechs and traditional banks – do not ‘have never been voted on, the sources say.

The central bank declined to comment.

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It’s unclear why the central bank chose to delay the passage of regulatory changes, but it has left a multibillion-dollar industry hanging around.

The proposed changes would increase the minimum capital requirements for payment institutions based on their size, volume of transactions and risk-weighted assets.

They are expected by the sector in one form or another since a public consultation was opened on the subject at the end of 2020.

Two of the sources, both speaking on condition of anonymity, said the delay did not necessarily mean the rules would be watered down.

A third source said the central bank department responsible for regulatory adjustments has decided to conduct a review to ensure the new standards do not unnecessarily burden the industry.

It’s been nearly a decade since Brazil’s central bank disrupted the regulatory framework for payment institutions, bringing them under its oversight and paving the way for the burgeoning industry of financial start-ups using technology to simplify payments, transfers and loans.

The various regulations were designed to introduce more competition into an outdated banking sector dominated by a handful of traditional institutions and to break the dynamics of historically high lending rates in Brazil.

Today, in part because of these changes, Brazil’s fintech industry is booming. Credit card issuer Nubank (NU.N) has just been listed on the New York Stock Exchange with a rating that makes it Latin America’s most valuable financial institution.

Its debut last month came before any changes, but Nubank disclosed in its IPO prospectus that under the new rules – as set out in the central bank’s public consultation – it would be subject to capital. 60% higher minimum regulatory requirement of 2.1 billion reais ($ 367.55 million).

Nubank’s impressive IPO follows the rise of other players in Brazil like PagSeguro (PAGS.N), Stone (STNE.O) and PicPay who have all won millions of customers, raised funding in venture capitalists and have either listed their operations or are planning to do so. so.

Traditional banks are increasingly crying out loud and urging the regulator to align high-performing fintech rules with theirs.

But one of the complications of a regulatory measure like the one envisioned by the central bank is that fintechs – numbering more than a thousand in Brazil – have taken very different paths.

Using only customer size or financial volume criteria to define new requirements could create more problems than solutions, according to industry players.

“If the dose is wrong, the central bank can create barriers to entry and even make doing business unworkable,” said Fabiano Camperlingo, president of SumUp, which specializes in payment solutions for small and microenterprises.

($ 1 = 5.7135 reais)

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Reporting by Marcela Ayres and Aluisio Alves; Editing by Stephen Eisenhammer and Andrea Ricci

Our Standards: Thomson Reuters Trust Principles.


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