On October 02nd, Provisional Measure No. 897/2019 was published (“MP”) which authorizes the issuance of a Bank Credit Certificate (“CCB”) through an electronic bookkeeping system, which will be maintained by financial institutions and other entities authorized to carry out electronic bookkeeping activities by the Central Bank of Brazil (“BACEN").
The CCB is a credit instrument issued by an individual or legal entity that will receive credit (debtor) in favor of a financial institution (creditor). This credit title is widely used by fintechs, especially those that operate in the credit market. In this sense, in most cases, the credit granted by fintech is embodied in a CCB.
The changes promoted by the MP substantially increase the legal security of the business model of several fintechs, which already carried out credit operations backed by electronic CCBs – despite the regulatory gap.
Until then, the full validity of a CCB was conditioned on its issuance in a physical medium and the Judiciary could not recognize the nature of an electronic CCB as an extrajudicial executive title, making it difficult to collect the credit in the event of default.
Due to the impossibility of dividing credits, it was also common to fintech issue several CCBs constituting a single credit operation. With the MP, the issuance of certificates for fractions of CCBs or even multiple CCBs was made possible, enabling innovations in the sector and facilitating the securitization of credits originating in CCBs.
In summary, the MP promoted the following innovations in Law No. 10.931/2004:
- express permission to issue CCBs in written form, through entry into an electronic bookkeeping system;
- attribution of the force of an extrajudicial enforceable title to the CCB's full content certificate, facilitating the collection of credit in the event of default;
- permission for the electronic signature of the CCB (by the issuer and, if applicable, the third party guarantor), as long as it is possible to unequivocally identify its signatory; It is
- possibility of the certificate, which previously represented a single CCB, also representing (i) several CCBs together; or (ii) the fractions of a CCB.
In the event of an electronic CCB being issued, the control will be carried out through an electronic bookkeeping system that will record: (i) the issuance of the CCB (observing the essential requirements already provided for); (ii) CCB endorsement (transfer); (iii) amendments, rectifications and ratifications of the CCB; (iv) the inclusion of notifications, contractual clauses, information, including on fractionation, if applicable, or other statements regarding the CCB; and (v) possible liens and encumbrances.
The changes will also benefit traditional financial institutions, such as banks and credit unions. These institutions will be able to reduce costs by simplifying their credit granting processes.
From now on, BACEN will regulate and be responsible for authorizing and supervising the exercise of electronic bookkeeping activities, as well as being able to regulate the issuance, signature, negotiation and settlement of CCB issued in book-entry form. In any case, the MP will be in force for up to 120 days, and after this period, it will depend on its conversion into law by the Chamber of Deputies and the Senate.