In addition to being a relevant instrument for financial institution fundraising, the Letra Financeira (LF) has exclusive features that have made it widely used in the market. Letras Financeiras aim to extend bank funding, providing better management of these institutions’ assets and liabilities. Letras Financeiras were created by Provisionary Measure no. 472, dated December 2009, and are regulated by National Monetary Council – CMN Resolution nos. 3,836/2010 and 4,123/2012.
One of its main advantages is a minimum maturity of two years, without possibility of partial or total redemption before that period. Another characteristic is that the asset has a minimum nominal unit value of R$150,000 (R$300,000 if it contains a subordination clause).
Letras Financeiras can be registered by multiple, commercial and investment banks, lenders and investment companies, savings banks, mortgage companies and real estate lenders and the National Bank for Economic and Social Development (BNDES). Remuneration may be based on a prefixed interest rate – combined or not with floating rates – or the price index, and allows periodic remuneration in intervals of at least 180 days.
Public offerings of Letras Financeiras were regulated by CVM Instruction No. 488 issued by the Brazilian Securities and Exchange Commission (CVM) on December 16, 2010. The CVM also allows automatic public offerings of Letras Financeiras as long as the issuers have previously registered a Continuous Distribution Program – PDC with the CVM. PDCs permit several public distributions of the same type of Letra Financeira, allowing issuers to increase issue volumes depending on market conditions.
Financial institutions can acquire LF of their own issue, at any time, only to be held in treasury for subsequent sale. The amount held in treasury may not exceed 5% of the total issue without a subordination clause and the LFs of component entities of the same conglomerate are included in this limit.