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Sources say: Brazil’s central bank monopolizes tougher regulations on fintech

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

December 22, 2021

By Marcela Ayres and Aluisio Alves

BRASILIA/SAO PAULO (Reuters) – Brazil’s central bank has blocked tougher regulations on the burgeoning fintech industry, withdrawing a draft proposal that had been approved by the financial policymaking body The government’s top government voted last month, four sources familiar with the matter told Reuters.

On November 18, the central bank proposed that regulations be discussed at an extraordinary meeting of the National Monetary Council (CMN) but the new rules – aimed at leveling the playing field between fintech and traditional banks – has never been voted on, the sources said.

The central bank declined to comment.

It’s not clear why the central bank chose to delay the passage of the regulatory changes, but it has left a multibillion-dollar sector in jeopardy.

The proposed changes would raise the minimum capital requirements for payment institutions according to their size, trading volume and risk-weighted assets.

They have been expected in some form by the industry since a public consultation was opened on the topic in late 2020.

Two of the unnamed sources said the delay did not necessarily signal that the rules would be lowered.

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

It’s been almost a decade since Brazil’s central bank changed the regulatory framework for payment institutions, putting them under its supervision and paving the way for the fledgling financial industry to use the technology. to simplify payments, transfers and loans.

The various regulations are intended to create more competition for an aging banking sector dominated by a handful of traditional institutions and disrupt the dynamics of historically high lending rates in the country. Brazil.

Now, in part as a result of those changes, Brazil’s fintech industry is booming. Credit card issuer Nubank just listed on the New York Stock Exchange at a valuation that makes it Latin America’s most valuable financial institution.

Its initial launch last month came before any changes but Nubank revealed in its IPO prospectus that under the new rules – as set forth in the public consultation of central bank – it will be subject to a 60% higher minimum regulatory capital level, which is 2.1 billion reais ($367.55 million).

Nubank’s impressive IPO follows the rise of other companies in Brazil such as PagSeguro, Stone and PicPay, all of which have acquired millions of customers, raised venture capital and have listed operations or projects. intend to do so.

Traditional banks are increasingly calling for the error and urging the regulator to come up with rules for highly successful fintechs that align with their own rules.

But one of the complexities of a regulatory move, such as that intended by the central bank, is that fintechs – numbering more than a thousand in Brazil – have taken very different paths.

According to industry insiders, using only the size of the customer base or financial volume to set requirements can create more problems than solutions.

Fabiano Camperlingo, president of SumUp, which specializes in payment solutions for micro and small businesses, said: “In the wrong dose, central banks can create barriers to entry and even cripple operations. business is not viable.

($1 = 5.7135 reais)

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

https://www.oann.com/exclusive-brazil-central-bank-puts-brakes-on-tougher-rules-for-fintechs-sources-say/?utm_source=rss&utm_medium=rss&utm_campaign=exclusive-brazil-central-bank-puts-brakes-on-tougher-rules-for-fintechs-sources-say Sources say: Brazil’s central bank monopolizes tougher regulations on fintech

Bobby Allyn

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