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The Banco Central do Brazil (BCB) has launched a public consultation that could see new rules overhaul the regulation of trade names, in a bid to improve consumer protection, including for payments products.
The newly proposed resolution from the BCB, introduced in association with the country’s National Monetary Commission (NMC), intends to bring in new regulations that will regulate names, trade names, brands and internet domains.
According to the central bank, the objective is to make the provision of financial and payment services to the population more transparent.
The consultation proposes that authorised institutions in Brazil be required to use terms in their names that clearly refer to the purpose of the authorisation for their operation.
Furthermore, it suggests that firms should be prohibited from using terms in their names that suggest, directly or through similar wording or sound, an activity or type of institution, in Portuguese or in a foreign language, for which they do not have a specific authorisation to operate.
The rules also clarify naming conventions for financial groups, allowing them to reference their activity type, authorised operations or the name of one of their constituent institutions.
Member institutions may also present themselves under the financial group’s name, provided that they clearly state their specific authorisation granted by the BCB.
In addition, the regulation seeks to prevent financial institutions from partnering with or outsourcing services to unauthorised entities that use misleading names.
For instance, a fintech firm partnering with a bank to offer payment services must have a name that clearly indicates its role and authorisation status.
This would mean that existing service contracts and operational partnerships would need to comply with the new naming requirements within the timeframe set by the resolution.
To further improve transparency, the proposal mandates that institutions clearly disclose their authorised activities and services, including financial, consortium and payment services, on customer communication channels, as well as their affiliation with a prudential conglomerate.
Stakeholders have until May 31, 2025 to respond to the consultation.
How should firms respond?
To prepare for adherence to the rules, payment firms and banks operating in Brazil may need to review and possibly modify their branding, trade names and internet domains to comply with these new standards. They will also need to consider their partnerships.
The proposals aim to build transparency and security in financial services by clearly defining company responsibilities and aligning business models with regulatory standards.
They could significantly affect partnerships between authorised financial institutions and their third-party service providers, such as organisations that offer banking as a service (BaaS) solutions.
BaaS solutions could be particularly affected because they involve partnerships where licensed financial institutions provide their infrastructure to third-party companies, enabling them to offer financial services under their own branding.
These partnerships can blur the lines between the licensed institution and the third-party provider, which could lead to consumer confusion regarding the authorisation and oversight of the services offered.
Ultimately, however, the scope of the proposed regulation extends beyond just BaaS, as firms will need to examine their collaborations with fintech companies, payment processors and other entities.
Firms operating in Brazil, whether native or international, should review their existing partnerships, assessing whether each partner's branding aligns with the proposed naming conventions.
If discrepancies are found, they may need to renegotiate contracts to include provisions requiring partners to adjust their names or branding.
Firms should also update their due diligence processes so that future partners adhere to these naming regulations.
International perspective
The rules being outlined by the Brazilian regulator are similar to regulations in place in other countries.
For example, in the UK, the Financial Conduct Authority oversees the approval of business names, particularly those containing sensitive terms related to financial services.
This includes ensuring that company names do not mislead consumers about the nature of a business or imply authorisation for services that the institution is not permitted to offer.
In the US, the Office of the Comptroller of the Currency (OCC) applies similar regulations to its oversight of national banks and federal savings associations.
Rules set out in the National Bank Act and codified in Title 12 of the Code of Federal Regulations (CFR) stipulate that financial institution names must not be deceptive and must accurately reflect their authorised services.
