Transformation of the Central Bank into a public company should erode its autonomy

The transformation of the Central Bank into a public company, as intended by Proposed Amendment to the Constitution 65, defended by the institution’s president, Roberto Campos Neto, will increase Congress’s interference in the bank and, consequently, erode its independence.

This perception comes from the experts interviewed by the electronic magazine Legal Adviser, which also point to another problem: the Central Bank’s police power. The authority is responsible for monitoring the financial system, including, for example, assisting authorities in preventing money laundering. And, for scholars, this action is incompatible with the status of a public company, as stated in the proposal.

The text of the PEC amends article 164 of the Constitution to modify the legal nature of the Central Bank. This change, if approved, will be followed by a complementary law to regulate this new organization, called by those interviewed as a “blank letter” for Congress to decide, at its discretion, about positions of trust and the supervision of monetary policy, for example.

The aforementioned article would go on to state, in its 7th paragraph, that the “accounting, budgetary, financial, operational and patrimonial supervision of the Central Bank, regarding legality, legitimacy, economicity, application of subsidies and revenue waiver will be exercised by Congress, through external control, with the assistance of the Federal Audit Court, and by the internal control system of the Central Bank”.

Changing the nature of the BC from a special agency — a legal entity under Public Law — to a public company — which falls within the scope of Private Law — would make the bank have fewer tools to carry out its work independently, says the Insper professor and lawyer André Castro Carvalho. “The company will not have guarantees such as court orders, for example. It will have fewer prerogatives and, in the end, it will lose autonomy.”

“It is a truncated wording in relation to the supervision of the Central Bank. It is as if oversight were handed over once and for all to Congress. And this is sensitive because BC management requires double distancing, both from political pressures and market pressures”, says the UFPI professor and prosecutor at the Public Accounts Ministry of Piauí Leandro Maciel do Nascimento.

“When there is greater interference from the Legislature, there is this great risk of capture. If the BC, for example, were to become a public company with very high positions and salaries, this risk would increase. It is possible that the bank’s independence will be compromised, because it will become more attractive (for the political class). It’s as if the BC entered the game of state-owned companies”, adds Nascimento.

Undermined transparency

The professor at Fundação Getulio Vargas and prosecutor at the Public Accounts Ministry of São Paulo Élida Graziane Pinto published an article in ConJur defending the regulation of Complementary Law 179/2021, which defined the autonomy of the Central Bank, and the review of Decree 3088/1999, which determined the inflation targeting system. According to her, the PEC, in addition to compromising the BC’s supervision, also undermines its transparency.

“The Executive would lose its exclusive competence to regulate the organization of federal public administration and society would lose republican control of entities that exercise more powerful regulatory powers and are susceptible to capture by the market.”

The police power attributed to the Central Bank is another delicate point. The Federal Supreme Court decided, with general repercussion (RE 633,782), that state-owned companies “with majority public share capital that exclusively provide public services operated by the State and under a non-competitive regime” can exercise this power.

The discussion in the STF, however, covered issues of traffic fines, which are different in nature from the BC’s actions — the bank acts to prevent financial crimes, such as currency evasion and money laundering, and monitors operations in the capital market.

“There is an incompatibility of supervision, regulation and police power with the new legal nature of the BC that would be established after the approval of this PEC. As a rule, this type of attribution is not accepted for private and state entities, which is why this proposal stands out”, he says. Gustavo Justino de Oliveiraprofessor of Administrative Law at the University of São Paulo and IDP in Brasília.

Justino also endorses the position that there are risks to the BC’s autonomy in the event of the transformation of the autarchy into a state-owned one.

“As a local authority, most positions are filled by career civil servants. This shields the entity itself from political influences. It is delicate to think that, following the transformation into a public company, other positions can be filled by political appointment. And today’s shielding is precisely so that he can carry out his activities independently.”

Problems intact

One of the arguments cited by Campos Neto to defend the proposal is the alleged brain drain from the BC, given the differences in salaries between the agency and the private sector and state-owned companies. According to him, the transformation into a public company could result in higher salaries, without having to respect the public service ceiling (currently equivalent to the salary of a STF minister).

Experts dispute this perspective and fear that the BC will be equated with state-owned companies such as Banco do Brasil and Banco Nacional de Desenvolvimento (BNDES), which have executives with very high salaries, but are contaminated by party politics. Even so, they say, there would be no way to compare the salaries of a public company with those offered by private corporations.

“If we compare with the previous management of Caixa Econômica Federal, for example, we see that the then president (Pedro Guimarães) He supplemented his salary with a position on boards. In other words, even in a public company, there is no way to pay market salaries, and the same thing would probably happen”, says André Castro Carvalho.

Jefferson Alvares, Central Bank attorney and student of the functioning of similar institutions in other countries, states that one of the main concerns raised by employees is the scrapping of their careers. The PEC, which transforms employees into CLT holders and removes their stability, has no answer to this demand, according to him, and also leaves room for more political pressure.

“Are we going to take away the stability of an entity that is super controversial and very relevant to economic well-being? This would greatly expose the entity to political pressure. Even if we managed to create a very adequate institutional structure in law, the pressure could come via salary policy, political persecution or dismissals.”

Alvares, who is enthusiastic about more autonomy for the BC, says that the PEC may even have good intentions when trying to eliminate certain bottlenecks in the autarchy, but he believes that the text only opens up a flank for legislators to decide on the organization of the bank.

“The BC gets a chunk of autonomy and, instead of its leaders self-restraining the political game, they throw themselves headlong into this confrontation. It is a great disservice to the very construction of the bank’s culture of autonomy”, says the prosecutor.

Élida Graziane Pinto, in turn, fears a movement by other authorities seeking the same path as the BC.

“If the BC achieves this autonomy via PEC to become a non-dependent state company, to circumvent the restrictions of the public service remuneration ceiling and budgetary-financial limits, it could open the risk of a herd overflow for all other administration entities indirect, which potentially the market and Congress want to ‘exempt’ from the constraints of the advertising regime.”

PEC why?

The scholars on the subject interviewed by ConJur have no answer to that question. Campos Neto’s crusade against the deterioration of his career and to deepen the BC’s independence, they say, does not require any changes to the Constitution.

Points such as public competitions, which the bank has not carried out since 2013 (the local authority opened a competition this year after 11 years), and the dependence on the Executive to make certain budgetary decisions could be dealt with without the need for a PEC.

“There was a failure in the scenario analysis. They opened the road but didn’t pave it. It would be enough to link the BC’s revenues to its own expenses”, says BC attorney Jefferson Alvares.

“The BC has a large portfolio of securities at its disposal for execution, and by legal provision the Treasury is obliged to maintain this level. In other words, for your final activity, your funding does not need a prior budget”, says also attorney Leandro Maciel. According to him, the idea of ​​changing the remuneration ceiling based on the transformation of the legal nature of the bank “is not compatible with the purpose of the BC”. “It is a risk that is not in the country’s interest.”

“If the objective is to improve, certain governance standards could be applied to state-owned companies, in the sense of having technical control over who occupies the functions. Another point is risk management, which the BC already has, but could be further stimulated internally. Decisions with more governance tend to be more legitimate. This wouldn’t even need a PEC, a decree would suffice”, says professor Andre Castro Carvalho.

Click here to read the proposal
PEC 65/2024