TO CURE THE DISEASE, THE CENTRAL BANK MIGHT END UP KILLING THE PATIENT – A CRITICAL ANALYSIS OF PUBLIC CONSULTATION 117/2025
- Diego Mariano da Rocha Santos
- Jun 27
- 9 min read
💡 COULD THE CURE BE WORSE THAN THE DISEASE?
The recent Public Consultation 117/2025 by the Central Bank of Brazil (BCB) raises a fundamental debate on market freedom and transparency within the financial sector. The draft resolution, prepared jointly with the National Monetary Council (CMN), proposes to restrict the use of names, terms, and expressions by institutions authorized and supervised by the BCB if they suggest an activity for which the institution does not have explicit authorization. This restriction would apply to business names, brands, and internet domains, both in Portuguese and foreign languages.
This restriction is also referenced in Public Consultation 108, which addresses Banking as a Service (BaaS). Article 6, §2, item III of the draft attached to the notice prohibits financial institutions under BCB regulation from entering into agreements with companies using misleading expressions in their corporate names.
The earliest known precedent on this subject dates back to 2021, when the Financial System Organization Department (DEORF), a body of the BCB responsible for authorizing institutions to operate within the regulatory scope, requested a legal opinion from the Central Bank’s Attorney General’s Office. The inquiry aimed to assess the legal feasibility for the CMN and the BCB, within their respective legal competences, to issue regulations defining which supervised institutions could use in their business name, trade name, or any public-facing identification, terms such as "bank" or "banco," or similar expressions in either Portuguese or other languages. This resulted in Legal Opinion No. 22/2021-BCB/PGBC.
The justification given for the proposed rule is to enhance transparency in the provision of financial, consortium, and payment services.
🚔 WHERE SHOULD IT HAVE AN IMPACT?
Problematic cases that actually mislead consumers and improperly benefit from the credibility associated with the word "bank" include:
More recently, "GiraBank" — which claimed to be a “digital bank” and was associated with influencer Carlinhos Maia — used BaaS services from Acesso Instituição de Pagamento (Bankly.com.br), which is part of the Votorantim financial and prudential conglomerate, and from Pinbank Instituição de Pagamento. It has been exposed as a fraudulent scheme and currently has more than 2,400 complaints filed on Reclame Aqui, and is a defendant in over 200 lawsuits.
The Fin+ team identified at least 11 companies that used the term “bank” to attract customers and were subject to Stop Orders by the CVM (Brazil’s Securities and Exchange Commission) due to unauthorized financial activities not regulated by the BCB. Ironically, many of these companies — identified as scams and pyramid schemes — would not be affected by the new rule proposed by the BCB and CMN.
If the rule were to apply to all Brazilian companies, we might be able to prevent or at least hinder the rise of such frauds. But as proposed, the regulation only affects entities already under BCB oversight, while scammers remain untouched.
🛑 THE NUBANK PARADOX AND A STEP BACK IN FINANCIAL INCLUSION – HOW DOES IT WORK ABROAD?
We conducted a detailed analysis using the terms “bank” and “banco” as keywords and identified at least 60 institutions authorized and supervised by the BCB, along with at least six others participating in the PIX ecosystem — even though they do not require BCB operating authorization — that would also be impacted.
According to Article 6, item II of the draft regulation, institutions authorized by the BCB would be required to submit a "compliance plan" within 180 days of the rule’s publication. Furthermore, they must also adjust service contracts and operational partnerships established before the rule’s enforcement by June 30, 2026.
The measure raises serious concerns about its effectiveness and real positive impact on the consumers it seeks to protect — particularly those who are low-income, under-educated, and lack financial literacy.
Take Nubank, for instance: it's the "bank" of over 60 million Brazilians and is a proven leader in promoting financial inclusion in the country. Yet, because Nubank is not technically a “bank” — it is authorized by the BCB as a Payment Institution (NU Pagamentos S.A.), a Credit, Finance and Investment Company (NU Financeira S.A.), and a Brokerage Firm (NU Investimentos S.A.) — it would be forced to make sweeping changes in branding and IT infrastructure. Just imagine the technical and operational implications of altering www.nubank.com.br.
Had this rule been in place when Nubank was created, would it have had the same inclusive impact? I have my doubts.
Brazil still lacks deep financial inclusion — particularly in the capital markets, which haven’t yet realized the full potential of Open Finance. Branding flexibility in the banking sector has been essential for fintechs like Nubank to be perceived by the unbanked population as accessible and secure digital banks.
Many customers who were blacklisted or lacked proof of income opened accounts with Nubank and even accessed microcredit.
Restricting this in a country where only 5% of the population invests in the capital markets — while 22% see sports betting as a form of “investment” — is a strategic mistake.
Removing this flexibility from CVM’s development agenda, especially before Open Finance has had a chance to mature in the capital markets, would hinder investment market growth in Brazil.
The percentage of Brazilians who invest in the capital market is already extremely low. Imposing new regulatory barriers makes democratizing access to investments even more difficult — while the banking sector has already enjoyed the benefits of such innovation.
Our comparative study with international markets showed that similar regulations have been enforced more effectively — and for many years. In the European Union, for example, the Capital Requirements Directive (CRD) stipulates that only institutions licensed by national regulators (such as BaFin in Germany, the Autorité de Contrôle Prudentiel et de Résolution – ACPR – in France, and Banco de Portugal) may use the term “bank” in their corporate names. In the United Kingdom, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) impose similar restrictions. The UK Banking Act dates back to 1979. In the United States, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) oversee the use of the word “bank.”
In all these jurisdictions, the main concern of regulators is to ensure that consumers have a clear understanding of the safety mechanisms protecting the funds they deposit in banking institutions. We believe this should also be the primary concern of the BCB — but apparently, it is not.
Consider how contradictory this is: in Brazil, there are non-bank institutions such as Credit, Finance, and Investment Companies (SCFIs) that are members of the Credit Guarantee Fund (FGC). As such, their customers’ funds are guaranteed in the same way they would be in a traditional bank.
These SCFIs are associated with the FGC and, therefore, the funds held by their customers are insured up to BRL 250,000 — the same protection applied to all other “banks.”
It makes absolutely no sense to restrict the use of terms like “bank” for institutions that are not only authorized and regulated by the BCB, but are also closely supervised and monitored by the Central Bank on a daily basis — and that offer undeniably bank-like services.
It is precisely the most vulnerable segment of the Brazilian population that: (i) needs greater financial inclusion; (ii) is most likely to view gambling as a form of “extra income”; (iii) is more susceptible to fraudulent schemes, Ponzi schemes, and financial pyramids of all sorts; and (iv) needs to easily identify BCB-regulated and supervised institutions as the safe place to pursue their financial goals.
⚖️ THE REAL PROBLEM IS BEING IGNORED – INCOHERENCE IS A COUSIN OF INJUSTICE
The Central Bank of Brazil is underestimating its supervisory authority by focusing on only one side of the same coin. While regulated companies would be forced to change their names and branding, financial pyramid schemes and unregulated entities could continue freely using misleading names. Research conducted by FIN+ has shown that several unregulated companies in Brazil already use deceptive brand names, and so far, no specific action has been taken to curb these practices.
Moreover, considering scenarios of systemic risk or insolvency involving these institutions, FIN+ conducted a comparative study on prudential regulations for Payment Institutions and Electronic Money Issuers in Brazil, compared with requirements in the U.S., European Union, and the United Kingdom.
Brazil adopts a robust prudential model for payment institutions, comparable to that of the United States, with high minimum capital requirements and strict supervision by the Central Bank. In contrast, the European Union and the United Kingdom enforce more flexible requirements, reflecting a less stringent regulatory approach for smaller institutions.
In all these jurisdictions, client fund segregation is mandatory, ensuring that money stored in payment accounts cannot be used by the institution for other purposes. This requirement aims to protect clients and mitigate systemic risks — a principle shared by the Central Bank of Brazil, the FCA in the UK, and the PSD2 directive in the European Union. However, despite these safeguards, funds held at payment institutions are not guaranteed in the same way as traditional bank deposits — for instance, through the Credit Guarantee Fund (FGC) in Brazil, the Financial Services Compensation Scheme (FSCS) in the UK, or the Federal Deposit Insurance Corporation (FDIC) in the United States. Therefore, although these companies are subject to rigorous prudential rules, their clients still assume greater risk compared to those depositing funds at regulated banks — and this is what should be made crystal clear to consumers.
Just as in the jurisdictions and regulators researched by the FIN+ team, this matter should be addressed by federal law — not by a regulation issued solely by the Regulator, even if jointly by BCB/CMN. It must encompass all companies that wish to use “sensitive terms” in their corporate or trade names.
📝 CONCLUSION – IF THE CURE IS TOO STRONG, IT MAY KILL THE PATIENT BEFORE HEALING THE DISEASE 💊
The Central Bank wants to increase transparency, but it risks making it harder for companies that already operate within the law and under strict supervision to continue their activities.
Meanwhile, financial scams and crypto pyramids remain free to present themselves as banks, without any real restrictions on the use of misleading names. Brazil needs more financial inclusion — not more obstacles for those trying to do the right thing.
FIN+ Opinion
Regulation is essential, but it must be applied intelligently. If the goal is to protect the consumer, why not start where the real problem lies?
Public Consultation 117/2025 may be a step in the right direction, but without adjustments, it could end up causing more harm than good.
If the cure is too strong, it may kill the patient before healing the disease.
[2] You can find the result of our research and the list of such institutions here: https://drive.google.com/file/d/1-HMyHCBeJOWS9G8-fQVWbLbfttUNBjVk/view?usp=sharing
[3] Nubank and Mastercard published a study titled “Beyond Access: A Look into the Drivers of Long-Term Financial Health”, highlighting Nubank’s role in promoting financial inclusion:https://mastercardcontentexchange.com/news/media/1q0hfryx/mcg-24054-nubank-financial-inclusion-whitepaper_final.pdf
Previously, Nubank had released its own data on the topic:https://backend.blog.nubank.com.br/wp-content/uploads/2023/03/DataNubank6-InclusaoFinanceira_FINAL.pdf
Key insights from the study: 11% of the 35 million surveyed clients stated they gained access to a bank account for the first time through Nubank — representing around 3.85 million previously unbanked people. Between July 2021 and July 2022, 5.7 million clients with no prior credit history were approved for a credit card, and 2.5 million accessed their first personal loan via the fintech.
This democratization of financial services is reflected in the profiles of those included:
80.2% of clients receiving their first credit card had monthly incomes of up to R$ 2,500;
54.5% of those who took out loans, and 56.2% of those who started investing, fell into the same income bracket;
Regionally, access grew most in the Northeast and Southeast, with 31.4% and 37.4% of clients in those areas, respectively, obtaining their first credit card;
Demographically, 44.5% of new credit users were women, and 56.5% were between 18 and 30 years old — reinforcing the fintech’s role in financial inclusion for young people.
Importantly, this expansion of credit did not lead to a significant increase in delinquency. Nubank’s bill payment default rate in Q4 2022 was 5.3%, below the market average of 7.8%, according to Central Bank data.
[4] As highlighted by the 7th Edition of the Raio-X do Investidor Brasileiro survey conducted by ANBIMA in partnership with Datafolha: https://www.anbima.com.br/pt_br/especial/raio-x-do-investidor-brasileiro.htm
[6] You can access the full notice and draft joint resolution here: https://www3.bcb.gov.br/audpub/DetalharAudienciaPage?7&audienciaId=761
[7] The legal opinion signed by BCB Prosecutor Humberto Cestaro Teixeira Mendes, then head of the Specialized Legal Counsel for Supervision of the Financial System (PRSUP), is available at: https://revistapgbc.bcb.gov.br/plugins/generic/pdfJsViewer/pdf.js/web/viewer.html?file=https%3A%2F%2Frevistapgbc.bcb.gov.br%2Frevista%2Fissue%2Fdownload%2F35%2F164
To Cure the Disease, the Central Bank Might End Up Killing the Patient – A Critical Analysis of Public Consultation 117/2025