Debate surrounds proposed Open Finance legislation in Brazil

The Brazilian Senate has reviewed a Complementary Bill (PLP) that aims to regulate the sharing of customer data among financial sector entities.

This bill, designated as PLP 207/2023 introduces comprehensive legislation for Open Systems, collectively referred to as Open Finance in the PLP. Open Finance encompasses Open Banking (under the purview of the Central Bank), Open Insurance (regulated by the Private Insurance Superintendency, Susep), and Open Capital Market (overseen by the Securities and Exchange Commission, CVM). 

Presently, these initiatives are governed by sub-legal regulations, meaning there is no specific law in Brazil that governs the operations of these open data systems. The Central Bank has pioneered Open Banking in Brazil, which has evolved into Open Finance with more than 40 million active consents. Susep is developing Open Insurance based on the Central Bank's experience, and the CVM is planning a similar model for the capital market.

Reactions to the proposed bill 

According to finsiders.com, the introduction of the PLP text into discussions has prompted reactions of surprise and concern among professionals, executives, and leaders in fintechs, banks, and other financial entities. The general consensus among these stakeholders is that the proposal lacks coherence and disregards the collaborative development efforts between regulators and the ecosystem in recent years. Currently, some sector associations are working on a collective document to address the project. 

The bill introduces several notable changes. It mandates the participation of institutions authorised by the Central Bank, Susep, and CVM. This goes beyond current regulations, where only larger players in the S1 and S2 segments are obligated to integrate into the Open system. This change is expected to impose significant regulatory, technological infrastructure, and personnel costs on companies. 

The bill also proposes the creation of an Open Economy Council that includes not only the Central Bank, Susep, and CVM but also the National Consumer Secretariat (associated with the Ministry of Justice), the National Data Protection Authority (ANPD), the Administrative Council for Economic Defense (Cade), and various financial sector associations, although the specific associations are not specified in the text. 

It's important to note that both Open Finance and Open Insurance already have deliberative councils with representatives from different entities. 

The bill also places responsibility on regulators in the 'Open Finance deliberative council.' According to the text, regulatory bodies would be held responsible for failures in technological infrastructure that result in losses to customers and would jointly address any crimes committed against clients of participating institutions, as per the Consumer Protection Code. 

Finsiders.com reports that it's customary for bills involving financial sector regulation to be led by the relevant regulatory bodies themselves, with public consultations and input from the market and society. The bill is currently awaiting the appointment of a rapporteur in the Senate's first committee, which deals with Science, Technology, Innovation, Communication, and IT.