Brazil: The National Bank for Economic and Social Development extends veto to clients with environmental embargoes in force

19 Feb 2024    1 minute read

In brief

The National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social (BNDES)) has informed financial institutions of the extension of the prohibition on contracting rural credit operations and the suspension of the release of funds to clients with current embargoes registered in IBAMA's Register of Environmental Charges and Embargoes and who have not taken effective measures to regularize them. SUP/ADIG Circular No. 76/2023-BNDES included this prohibition in SUP/AIDIG Circular No. 13/2022-BNDES, which sets out guidelines and general orientations for Accredited Financial Institutions. The Circular was published on 11 December 2023, and will come into effect on 10 March 2024.

Contents

More details

In December 2023, the Superintendent of the Digital Operations and Channels Area - ADIG communicated via Circular the adoption of additional measures to the social and environmental prohibitions and obligations already required by the BNDES. The new determinations complement the guidelines, obligations and annexes already existing in SUP/ADIG Circular No. 13;2022-BNDES, of 26 May 2022.

For new credit contracts, the regularization process needs to be active and meet the requirements set out in normative acts and the law. The Circular lists as effective regularization measures the filing of a Degraded Area Recovery Project (PRAD), Term of Commitment (TC), Conduct Adjustment Term (TAC), or other similar regularization document.

The new terms, in short:

  1. Prohibit the contracting of rural credit without due regularization of the embargo, in accordance with the normative act and law in force.
  2. Stipulate that if the embargo is identified after the contract has been executed, without the Final Client having a regularization document on file, the release of funds will be suspended until the necessary documentation has been filed, at the risk of early settlement.
  3. Stipulate that early settlement will take place if non-compliance is identified in the execution of any regularization measure that has been accepted by the Final Customer.

This information has been added to Item XXVII - Client Declarations to ensure that everyone is informed of the credit application conditions. The new measure will apply to operations contracted from 10 March 2024 on.

Our Environment, Climate Change and Sustainability team is following the issue closely and is at your disposal should you have any doubts and/or questions regarding the new rules.

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