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| Additional information |
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| Banco Central do Brasil |
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History:
The Banco Central do Brasil (BCB), created by Law no. 4,595 of December 31st, 1964, is an autonomous federal institution and part of the National Financial System (SFN).
Before the creation of the Central Bank, the Brazilian monetary authorities were the Currency and Credit Superintendence (SUMOC), the Bank of Brazil (BB) and the National Treasury.
The SUMOC, created in 1945 with the objective of exercising the monetary control and preparing the basis for a central bank, had the responsibility of setting forth the: reserve requirements ratio for commercial banks, discount rates (linked to development funds) and financial assistance for liquidity (meaning the discount as a classic instrument of monetary policy), as well as the interest rate on bank demand deposits. At the same time, it supervised the operation of commercial banks; managed the exchange policy and represented the Country at international organizations.
Banco do Brasil carried out the functions of the government bank: controlling foreign trade operations; executing foreign exchange operations on behalf of public sector enterprises and the National Treasury; executed the rules set forth by the SUMOC and the Bank for Agricultural, Industrial and Commercial Credit, as well as receiving reserve requirements and voluntary deposits of commercial banks.
The National Treasury was the currency issuing authority, but the issuing process was a complex one involving several governmental entities.
Although some improvement has been reached, the institutional process was not complete. The Central Bank became the currency issuing bank, but acted according to the needs of the Bank of Brazil. It was also the bank of banks, but was not the sole holder of the financial institutions' deposits because the institutions placed their voluntary reserves in the Bank of Brazil. Besides, the Central Bank was the government's financial agent, in charge of managing the federal public debt, but was not the cashier to the National Treasury, since this was a function of the Banco do Brasil.
In 1985, the decision was made towards a financial reorganization of the government, with a breaking down of the accounts and functions of the Central Bank, the Bank of Brazil and the National Treasury. In the 1986 fiscal budget, not only all the revenues and expenditures of the National Treasury were included, but also all the accounts of fiscal nature that were under the Monetary Budget. In 1986, the "movement provisional account" was extinguished and, from then on, the disbursement of funds from the Central Bank to the Bank of Brazil were clearly identified in the budgets of each institution, eliminating the automatic transfers that hampered the management by the Central Bank.
In a process that continued through 1988, the functions of monetary authority were progressively transferred from the Bank of Brazil to the Central Bank, while the atypical activities carried out by the latter, such as those related to economic incentives and the administration of the federal public debt, were transferred to the National Treasury.
The 1988 Constitution sets down Central Bank's matters, such as the exclusive attribution of the Union to issue money, the need to submit persons appointed by the President of the Republic to be president and director of the Central Bank to prior approval by the Senate, and the prohibition to direct or indirect granting of loans to the National Treasury. The 1988 Constitution also establishes the drawing up of a Complementary Law of the National Financial System, to substitute Law no. 4,595, dealing with varied and important aspects of the structure and activities of the Banco Central do Brasil. |
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