Brazil’s Chamber of Deputies must initiate on Tuesday (Oct.10) the voting of Provisional Measure (MP 784), which modifies procedures related to Central Bank’s intervention in banks and other financial institutions. If the MP is not approved by Congress until Oct. 19, the bill loses validity.
MP 783 updates a 1974 law, reducing obstacles to new and efficient payment solutions for creditors in cases of out-of-court liquidation of financial entities, granting greater rights of intervention to creditors’ assemblies. In situations like these, the Central Bank would no longer have exclusive decision power.
Out-of-court settlement is the insolvency regime applicable, at least initially, to institutions under Central Bank supervision. In such cases CB had exclusive power to remove directors, to appoint liquidators and to investigate the causes of the bankruptcy.
With the sovereignty of the creditors’ assembly and the possibilit of corporate control transfer, a broad door for market solutions opens up, leaving the State away from a role that is best left to the main stakeholders , creditors and debtors.