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An initiative by the Central Bank of Brazil, in public consultation, aims to restrict the use of the term 'bank' to licensed institutions, which could affect well-known fintechs.
Brazil’s Central Bank is proposing new regulations for the financial sector. The proposal under discussion could significantly change the current landscape for fintechs. It aims to restrict the use of the terms “bank” and “banco.” According to the proposal, only institutions with a formal banking license would be able to use these words in their brands and communications.
Popular companies like Nubank, which operate as payment institutions or direct credit companies, can be directly impacted. The Central Bank's initiative is currently in the public consultation phase.
Proposal by the Central Bank of Brazil on the use of the term 'bank'
The proposal presented by Central Bank of Brazil is clear in its main objective. It seeks to limit the use of the words “bank” and “banco”. Only financial institutions duly authorized and licensed as banks could use these terms. The restriction would apply to both the brands and the communication materials of these companies.
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Consequently, well-known fintechs that do not have a formal banking license but use terms associated with banks would have to comply. The measure is currently in the public consultation phase, allowing civil society and companies in the sector to give their opinions on the proposal. Central Bank of Brazil.
The reasons for the new regulation
O Central Bank of Brazil justifies the need for the new regulation with some central arguments. The main objective is to protect financial consumers. The aim is to increase clarity about the type of institution with which the customer is interacting. The proposal aims to avoid possible confusion between traditional banks, which have more comprehensive regulations, and fintechs, which operate under different regulatory frameworks and levels of financial security.
By restricting the use of banking terms, the Central Bank of Brazil hopes that consumers will be able to more easily identify whether they are dealing with a full-fledged bank or a fintech that offers specific and sometimes more limited financial services. Regulatory experts point out that the measure seeks to standardize the system and follows international trends.
