BRZ CB Instrument Hedge Accounting


On Nov. 25, BRZ CB updated accounting for financial instruments.


  • BRZ CB issued Resolution 4.966 to provide accounting concepts and criteria applicable to financial instruments, and recognized protection relationships (hedge accounting).
  • Applicability
  • Applies to financial institutions and other institutions authorized to operate by BRZ CB.
  • Resolution does not apply to consortium administrators and payment institutions.
  • Also does not apply to instruments listed in resolution covered in other regulations.
  • Overview
  • Defines hedge accounting as the representation, in financial statements, of the use of financial instruments to manage exposures resulting from specific risks of institutions.
  • Resolution establishes the accounting concepts and criteria for classification of assets, calculation, recognition and derecognition of certain financial instruments.
  • Provides for expected losses associated with the credit risk of certain instruments.
  • Additionally, provides for the disclosure of information on financial instruments.
  • Resolution amends definitions and revokes several resolutions and circulars.
  • Effectiveness
  • Resolution 4,966 partly enters into force on Jan. 1, 2022; for rest on Jan. 1, 2025.
  • Nov. 2021 BRZ CB Official Publication
  • On Nov. 29, 2021, BRZ CB published resolution 4.966 in the official gazette.
  • Mar. 2022 BRZ CB Resolution
  • On Mar. 30, 2022, BRZ CB issued Resolution 219 re hedge accounting recognition.
  • Also expected losses accounting for instruments, e.g. guarantees, credit commitments.
  • Discusses classification of financial assets, hybrid contracts, and hedge operations.
  • Resolution 219 come into force May 1, 2022 and Jan. 1, 2025, based on provision.
  • Jun. 2022 BRZ CB Resolution
  • On Jun. 23, 2022, BRZ CB released CMN Resolution 5.019 re hedge accounting.
  • Amends CMN Resolution No. 4.966, article 1 (Nov. 25, 2021) to require institutions to implement the obligatory accounting regulations of Resolution 4,966 by Dec. 31, 2022.
  • In its current form, CMN Resolution 4,966 does not stipulate an implementation date.
  • Provision established in CMN Resolution No. 5019 comes in force on official publication.
  • Jun. 2024 BRZ CB Amendments
  • On Jun. 26, 2024, BRZ CB issued Resolution 5.146 amending Resolution 4.966 of 2021
  • Provides accounting and criteria applicable to financial instruments, and designation and recognition of protective relationships (hedge accounting) by financial institutions.
  • Resolution 5.146 comes into force on Aug. 1, 2024.
  • Jul. 3, 2024 BRZ CB Amendments
  • On Jul. 3, 2024, BRZ CB issued Resolution 397 to amend Resolution 352 of 2023.
  • Resolution 352 on accounting concepts and criteria applicable to financial instruments, and designation and recognition of hedging relationships (hedge accounting).
  • Applies to securities brokerage firms, securities distribution companies, foreign exchange brokerage firms, consortium administrators and payment institutions.
  • Re accounting procedures for defining cash flows from financial assets as only payment of principal/interest, and calculation of effective interest rate of financial instruments.
  • Additionally, the creation of a provision for losses associated with credit risk and the disclosure of information related to financial instruments in explanatory notes.
  • Resolution 397 becomes effective Jan. 1, 2025, as to article 2, and on Aug. 1, 2024 with regards to all the other provisions; revoked Resolution 378, of May 13, 2024.
  • Jul. 5, 2024 BRZ CB Instructions
  • On Jul. 5, 2024, BRZ CB issued Instruction 487 on assessing expected losses, other.
  • Procedures to request authorization to use complete methodology to assess expected losses, determine, set up provision for expected losses associated with credit risk.
  • For financial institutions and other entities authorized to operate by BRZ CB, classified in Segment 4 (S4), mentioned in Resolution 4.966 and in Resolution 352 of Nov. 2023.
  • Authorization subject to proof that requesting institution maintains internal models and systems for measuring, classifying credit risk, internal controls and risk management.
  • Compatible with nature of transactions, complexity of products, exposure to credit risk.
  • The normative instruction 487 will enter into force on Jan. 1, 2025.

Regulators BRZ CB
Entity Types Bank; HF
Reference Ins 487, 7/5/2024; Res 397, Rpl Res 378/2024, 7/3/2024; Res 5.146, 6/26/2024; Res 5.019, 6/23/2022; Res 219, 3/30/2022; OG 223, 11/29/2021; Res 4.966, 11/25/2021; Rpl;
Functions Accounting; Financial; Reporting; Risk; Treasury
Countries Brazil
Category
State
Products Banking; Equity; Forex; Hedge Funds; Loan; Securities
Regions Am
Rule Type Final
Rule Date 11/25/2021
Effective Date 8/1/2024
Rule Id 122528
Linked to N/A
Reg. Last Update 7/5/2024
Report Section International

Last substantive update on 07/09/2024