By Marcela Ayres
BRASILIA (Reuters) – Brazil’s central bank announced on Friday tougher rules for fintechs, saying that payment institutions will now be subject to regulations based on their size and complexity, and it also increased the standards for required capital.
The new framework, which will start taking effect in January 2023 with full implementation by January 2025, will extend the proportionality of regulatory requirements currently used for conglomerates of financial institutions to include financial conglomerates led by payment institutions.
The move is expected to affect companies such as credit card issuer Nubank, payment company PagSeguro, financial technology solutions firm StoneCo and digital wallet PicPay.
The calculation of regulatory capital will now disregard assets that have little or no value for payment institutions functioning, said the central bank, noting that this will ensure companies have a greater capacity to absorb unexpected losses.
The changes, which the sector has been waiting for since a public consultation was opened on the subject in late 2020, will preserve easier entry for new competitors in the payments sector, “in order to increase competition in the system and financial inclusion,” the central bank said.
Traditional banks in Brazil were urging the regulator to bring rules for highly successful fintechs into line with their own, saying that many such firms have grown at a dizzying pace amid loose regulation.
The central bank views the new rules as necessary given the diversification and sophistication of payment institutions since 2013, when it put them under its supervision, paving the way for the nascent industry of financial start-ups using technology to simplify payments, transfers and borrowing.
“In this process, part of the segment created financial subsidiaries and started to assume new risks, without proportional prudential requirements,” the central bank said.
(Reporting by Marcela Ayres; Editing by Toby Chopra and Hugh Lawson)
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