Resolution CMN No. 4,553/17 provides for 5 segments of financial institutions and other entities authorized to operate by the BACEN, based on the size and significance of international activity:

(i) Segment 1 (“S1”), composed by multiservice banks, commercial banks, investment banks, exchange banks and savings banks (caixas econômicas) (a) whose size equal to or higher than 10% of Brazilian gross domestic product (“Brazilian GDP”); or (b) performing significant international activity, regardless of the size;

(ii) Segment 2 (“S2”), composed by multiservice banks, commercial banks, investment banks, exchange banks and savings banks whose size is lower than 10% and equal to or higher than 1% of Brazilian GDP, as well as other entities whose size is equal to or higher than 1% of Brazilian GDP;

(iii) Segment 3 (“S3”), composed by any institution whose size is lower than 1% and equal to or higher than 0.1% of Brazilian GDP;

(iv) Segment 4 (“S4”), composed by any institution whose size is lower than 0.1% of Brazilian GDP; and

(v) Segment 5 (“S5”), composed by (a) any institution whose size is lower than 0.1% of Brazilian GDP and which applies a simplified methodology for calculation of minimum requirements of Regulatory Capital (Patrimônio de Referência), Tier I Capital (Capital Nível I) and Principal Capital (Capital Principal), except for multiservice banks, commercial banks, investment banks, exchange banks and savings banks; and (b) institutions not required to calculate Regulatory Capital.

Institutions belonging to a prudential conglomerate (conglomerado prudencial) shall determine their respective segment based on consolidated information of their conglomerate.

In case of institutions authorized to operate by the BACEN after January 30, 2017, the respective segment will be determined considering size and significance of international activitity, based on the information contained in the business plan submitted to the BACEN.

For purposes of Resolution CMN No. 4,553/17, the size of the relevant entity will be determined by the ratio between its Total Exposure (Exposição Total), as defined under Circular BACEN No. 3,748/15, and Brazilian GDP, as published by the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística – IBGE). As to the international activity, it will be considered significant in case the total consolidated amount of assets held abroad by the relevant entity (or its prudential conglomerate) is equal to or higher than US$10,000,000,000.

Resolution CMN No. 4,553/17 also sets forth the criteria to be applied in case of a change of segment, which will be effective as from the end of the semester subsequent to the date of change. BACEN shall publish at least on a semi-annual basis information concerning the framing of the financial institutions and other authorized entities.

For the time being, Basel III rules and other prudential regulation are, apart some exceptions (such as concerning credit cooperatives) the same for any entity authorized to operate by the BACEN. In this sense, the segmentation established by Resolution CMN No. 4,553/17 shall improve suitability of prudential regulation according to the size and risk profile of the financial institutions and other entities authorized to operate by the BACEN. Considering the high concentration in the Brazilian financial sector, it is expected that the proportional application of prudential regulation may have the effect to foster competition, consequently bringing potential improvements to the sector and benefits to consumers.