Papers Brazilian banking and stabilisation
| DOI | https://doi.org/10.1108/eb025002 |
| Published date | 01 February 1999 |
| Date | 01 February 1999 |
| Pages | 105-113 |
| Author | Roberto Luis Troster |
| Subject Matter | Accounting & finance |
Journal
of
Financial Regulation
and
Compliance
Volume
7
Number
2
Papers
Brazilian banking and stabilisation
Roberto Luis Troster
Received: 22nd March, 1999
Rua
Amandaba,
136 São
Paulo
SP
04648-140
Brazil; tel:
005511-246-2321
and
005511-9103-0336;
e-mail:
troster@ibm.net
Dr Roberto Luis Troster is the Chief Econ-
omist at ABBC, Brazilian Banking Associa-
tion and a Professor at the Pontificia
Universidade Católica, São Paulo. He has
researched and published a number of
works in banking.
ABSTRACT
This paper focuses on the influence of
stabilisa-
tion and policy
choices
on Brazilian banking. It
is generally understood that stabilisation,
ceteris paribus, allows banking to develop,
but, Brazil faced its worst banking
crisis
just
after stabilisation. The main conclusions are
that a
considerable
proportion of the obstacles
faced were due to an inappropriate banking
policy and that even though many of the pro-
blems have been
solved,
some remain.
INTRODUCTION
The Brazilian banking system is undergoing
a huge transformation instigated by eco-
nomic and regulatory factors influenced
basically by the stabilisation plan or Piano
Real. In the last five years, inflation fell
from over 40 per cent a month in early
1994 to less than 2 per cent per year in 1998,
one fifth of the banks were either liquidated
or taken over by the central bank, there
were several mergers and acquisitions, and
at the same time banking assets more than
doubled. The objective of this paper is to
discuss specific aspects of this major change.
Thus,
the paper is divided into three sec-
tions:
the background which gives an over-
view of the system and recent changes;
policy issues which discuss the effect of
stabilisation on banking, the overbanking
issue and how to measure it; and the three
waves of the banking crisis — what hap-
pened to the banking system, and what
was done to correct the problems.
BACKGROUND
The first Brazilian banks were established
in the early 1800s, and up to 1964 were
basically focused on typical short-term
commercial banking activities. The
number and economic importance of
financial institutions were set by the level
of economic activity of the rest of the
economy. Economic booms came hand in
hand with rising banking activities and
were followed by recessions and financial
crises.
In 1964, a new regulation changed
the basic characteristics of banking in the
country. Brazil was to have a segmented
financial system and a regulatory structure
similar to the US one with some adapta-
tions:
a special role for the state banks, a
concentration bias and a closed system.
An important event for the future of
Journal or Financial Regulation
and Compliance, Vol. 7, No. 2,
1999,
pp. 105-113
© Henry Stewart Publications,
1358-1983
Page
105
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