Presidential Decree No. 9,544/18, published on the last 30th, acknowledged the interest of the Brazilian government in having foreign ownership of up to 100% of the capital stock of Direct Credit Companies (SCDs) and Interpersonal Lending Companies (SEPs) authorized to operate by the Central Bank of Brazil (Bacen), also known as credit fintechs.
These types of financial institutions were recently created by Bacen, mainly to foster competition in the credit market and to legally support the growing evolution of the use of technology in the development of banking activities. Credit fintechs are subject to more lenient regulations as compared to those applicable to "traditional" financial institutions, acting exclusively via electronic platform.
In Brazil, foreign participation in the capital stock of financial institutions is authorized only if it is in the interest of the Brazilian government, in view of article 52, sole paragraph, of the Transitory Constitutional Provisions Act (ADCT). If, for example, a financial institution that has foreign participation in its capital wishes to initiate its activities in Brazilian territory, or a financial institution that already operates in Brazilian territory has an interest in receiving foreign investment, it must, in addition to obtaining authorization from Bacen, request an opinion from the government, through a decree by the President of the Republic, attesting to the interest of the Brazilian government in this foreign participation, in accordance with the procedure prescribed by Bacen Circular No. 3,317/16.
Under Decree No. 9,544/18, the national interest in foreign participation of up to 100% in credit fintechs is automatically recognized, which makes the authorization process more agile and efficient, since an opinion by the presidency of the Republic in each specific case is avoided.
The issuance of the decree was a significant step forward in the effective practical implementation of the BC+ Agenda, inasmuch as it eliminated a time-consuming and costly legislative step that until today needed to be met for any foreign investment in the credit fintechs regulated by Bacen.
Since the process for operating authorization for credit fintechs is faster than that of "traditional" financial institutions, because of the very nature and the limited scope of these companies, it made perfect sense that this requirement for the authorization process also be simplified. The measure will serve as a catalyst for potential new investments in these types of financial institutions, which will likely also contribute to the emergence of more players in this segment, thereby creating more competition and reducing the cost of credit for the end customer.