Banco Central do Brasil authorized Banco Santander (Brasil) SA's $2.50 billion issuance in capital instruments that make up the bank's Tier 1 and Tier 2 regulatory capital.

The total amount represents two issuances of $1.25 billion each for Tier 1 perpetual notes and Tier 2 notes. The Tier 1 notes have an annual interest rate of 7.250%, while the Tier 2 notes have an annual interest rate of 6.125%.

The offering will be made outside Brazil and the U.S. through Santander Brasil's Cayman branch. Spanish parent Banco Santander SA will purchase all the notes to be issued.

The transaction aims to reduce the bank's financial costs and optimize its capital structure.

Brazil's central bank also authorized the redemption of a previous set of Tier 1 and Tier 2 capital instruments at Santander Brasil that currently make up its capital. These had been issued following a bank board meeting in January 2014.