On February 28 2018 Brazil's antitrust authority, the Administrative Council for Economic Defence (CADE), and the Central Bank entered into a memorandum of understanding, under which they have agreed to harmonise proceedings relating to merger review and the investigation of infringements to the economic order regarding financial institutions. The agreement provides for closer communication between the two authorities when dealing with competition issues within the financial system.

The memorandum also represents an important development to the competence conflict between the two entities, which is still pending a decision by the judiciary courts.

In the 1990s a dispute involving the two bodies started concerning which entity had jurisdiction over mergers involving financial institutions. While the Central Bank maintained that it had sole jurisdiction to review such cases – including in relation to the assessment of competition matters (based on Law 4,595/64, which sets the Central Bank as the regulatory agency responsible for supervising and ensuring the stability of the Brazilian financial system) – CADE concurrently affirmed and exercised its merger control jurisdiction regarding transactions carried out between financial institutions (based on Law 12,529/11, which grants CADE powers to prosecute antitrust offences and review concentration transactions throughout the Brazilian economy).

Memorandum's terms

The memorandum's objective is to:

  • establish greater foreseeability in the review of merger cases involving financial institutions; and
  • clarify that both authorities must approve such transactions.

According to the agreement, both CADE and the Central Bank will maintain jurisdiction, and both will continue to provide their opinions on merger review cases involving the financial sector. Naturally, each agency is expected to hold a priori different purposes with respect to its analysis: the Central Bank is responsible for regulatory concerns (especially systemic risk), while CADE is responsible for competition-related matters. However, approval from the two agencies will be required for a merger to proceed, and the memorandum expressly states that the Central Bank and CADE are committed to issuing joint rules on the submission of merger cases where financial institutions are involved.

Only if a merger case presents significant and imminent risks to the solidity and stability of the Brazilian financial system can the Central Bank grant unilateral approval; such approval should not interrupt CADE's review proceedings. The Central Bank will notify CADE of its decision, so that CADE can approve the case with no restrictions, taking the Central Bank's decision as a supporting element that the legal criteria of efficiency and economic development required for an approval are met. Both agencies are expected to provide further details regarding such proceedings in their respective regulations (or in a joint regulation), particularly for those situations eliciting systemic risks to the stability of the financial system, as timely and discrete approval is key to averting such risks.

As for the investigation of anti-competitive conducts, each agency will continue to exercise its own jurisdiction over infringing conduct taken by financial institutions, although there will now be greater communication and information exchange between them. In this context, CADE must consult the Central Bank before imposing penalties for infringements to the economic order on any entity under the Central Bank's jurisdiction.

The memorandum also provides that the two authorities will ensure a more robust exchange of information and will work together on rules and regulations in which they have a common interest. They will also promote debate on technical parameters, with a view to ensuring greater legal certainty and foreseeability for the defence of competition within the Brazilian financial system. Additionally, it sets further engagement between the two agencies for joint activities, such as seminars, studies and training sessions to maximise the efficiency of both autarchies.


This initiative strengthens the relationship between the two authorities and promotes greater cooperation among them for the analysis of merger cases and anti-competitive practices by financial institutions. It also represents an important step forward, signalling the end to the longstanding dispute between CADE and the Central Bank over jurisdictional conflicts.

For further information on this topic please contact José Inácio Ferraz De Alemeida Prado Filho or Vivian Terng at BMA Barbosa Müssnich Aragão by telephone (+55 21 3824 5800) or email (jip@bmalaw.com.br or vit@bmalaw.com.br). The BMA Barbosa Müssnich Aragão website can be accessed at www.bmalaw.com.br.

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