Brazil: Financial System

Article Index

Banking System

Institutional Structure

The Brazilian banking system is characterized by the presence of large, private financial conglomerates, State banks and smaller, private banks.

Until 1989, the system was notable for its specialized nature; each institution could only act in specific segments of the market. But, from then on, Brazil saw the advent of the multiple bank, permitted to act simultaneously in different market segments, accompanied by a reduction in the minimum capital requirements for their constitution. These changes intensified competitiveness in the financial sector.

Another marked feature of the Brazilian financial sector is its operational efficiency. The high inflation registered over the last two decades and the large-scale economies achieved by the major conglomerates have led to the development of systems for clearing, collections, liquidation and electronic transfer of funds which stand out for their high standards of efficiency. It is now possible to make electronic payments of any value between practically all Brazilian cities and to clear checks between the main centers within 48 hours. The successive plans for economic adjustment and price freezes have taught the banks to not depend solely on earnings reaped from inflation, which in turn has induced them to reduce costs and invest in technology. Consequently, they have been able to raise levels of operational efficiency to an extremely high point.

These characteristics have ensured that the Brazilian banking system, looked at from an operational point of view, is one of the most efficient in the world.

The Brazilian financial system is currently passing through a phase of adjustment. The drying-up of liquidity and credit squeeze measures taken to maintain the stability of the currency caused problems of liquidity and default in various institutions. Confronted by this situation, the Government has adopted measures to restructure the financial sector.