The Banks in Brazil by Ruban Selvanayagam

Post global recession, the banking system of Brazil is now internationally recognized as a highlyefficient model. Many economists have attributed its recent success to the sophisticated mechanismsand regulatory systems that were created during the 'lost-decade' of hyper-inflation.

Nowadays, financial regulation is very conservative and was created to ensure the banks would beable to regularly stress test their processes to check and balance their activities in a variety ofhypothetical unstable environments. Internal controls, limits for client exposure, loss provisions,company credit capital are all closely and strictly monitored. The following practices are also worthhighlighting:

- The minimum Basel Ratio of the Brazilian banking system is 11 percent, 3 percent higher thanwhat is suggested in the Basel Accord. Most banks, in reality, operate much higher than this level (atover 17.5 percent) with low leverage ratios (over six times their capital holdings);

- All banking limits and requirements are applied in consolidated terms which means that so calledtoxic assets or special investment vehicles are put under heavy scrutiny;

- All investment funds are weighted in line with their corresponding assets (to ensure that leveragelevels are reasonable and over-exposure is kept to a minimum);

- Over the Counter (OTC) derivatives are required to be registered with the Central Bank;

- The Brazilian Securities and Exchange Commission (Comisso de Valores Mobilirio) legally obligesall public companies to disclose all information about financial instruments that are being used andundertakes full sensibility analyses on a regular basis;

- The central bank has control over all non-financial subsidiaries of banking institutions;

- Expected loss provisions are taken into consideration (not solely actual losses);

- Liquidity and market risks are monitored intensively by the Central Bank on a daily basis;

- Bank reserves must cover all debt payments past;

- All lending exceeding the value of $BRL 5,000 must be registered with the Central Bank;

- Regular issue ratings are undertaken;

- Regulatory procedures are applied to all banks and are also regularly updated in line with financialinnovations (approved by the Central Bank), international standards and conjuncture changes.

Many commentators attributed Brazil's above average resistance to the effects of the globalrecession to the reasons stated above. A point of fact also worth noting is that, at the onset of theglobal economic crisis, the securitisation market was less than 10 percent in comparison to thecredit volume of the country - therefore, the intersection between the two markets did not bring any

significant damage significant damage and loss dissemination.

At the close of 2009, Brazil was one of only four countries in the world with a wide spread onlending, with its average at over 30 percent. Indeed, the country was commended for its highregulatory standards at the 2009 Financial Stability Forum in Basel that helped it avoid the worst ofthe global economic crisis. As pointed by Alexandre Tombini, Director of Regulation at the CentralBank: We are used to dealing with challenging environments at our institutions and our regulations.Everything we have done since the mid-1990s has tended to take a more cautious approach.

Below is a list of the main banking institutions of Brazil:

Central Bank of Brazil the highest monetary authority and the country's governing body in allmatters related to finance and economics. The institution is linked with the Ministry of Finance anddecides the monthly SELIC interest rate.

Banco do Brasil the largest Brazilian and Latin American bank by asset values. With its headquartersin Braslia, it is also the oldest active bank in Brazil (founded in 1808).

Caixa Econmica Federal founded in 1861 (more often referred to as Caixa'), nowadays the bank iswell known for financing the civil and construction sectors; administering the Minha Casa, MinhaVida' housing programme as well as being the large stakeholder in Brazil's largest property and landsales and rentals website, Zap.

The Brazilian Development Bank (Banco Nacional de Desenvolvimento Econmico e Social or BNDES)established in 1952, it is a federal public company associated with the Ministry of Development,Industry and Foreign Trade and now the second largest development bank in the world.

Bradesco founded in 1943, it is one of the largest and most popular banks in operation in the country(it was formerly the largest until Banco Ita and Unibanco merged in 2009).

Ita Unibanco based in So Paulo, the bank was formed out a merger of Banco Ita and Unibanco in late2008. It now operates as the largest financial conglomerate in the Southern Hemisphere and the10th largest bank in the world.

Banco Santander Brasil founded in 1982, with its headquarters in So Paulo, major acquisitions weremade in the late 1990s and 2000s including Banco Real, Banco Geral do Comrio, Banco Noroesteand Banespa.

Banco Real a Brazilian bank that was previously owned by ABN AMRO.

HSBC Brazil in 1997 Banco HSBC Bamerindus was set up to take over Banco Bamerindus do Brasilwhich was subsequently changed to HSBC Bank Brasil in 1999.

Safra the bank is part of the larger Safra Group' of financial institutions (with its headquarters in SoPaulo).

Banco Nossa Caixa the bank was incorporated into the Banco do Brasil in 2008, formerly serving asthe financial agent of the State of So Paulo.