Brazil is South America's leading economic power, and overtook the
UK in 2011 to become the world's seventh largest economy. It was one of the
first of the "emerging markets" to return to economic growth following the
global financial crisis, and its banking system emerged from the crisis as one
of the world's most resilient.
Brazil's banking sector represents a mix of public-sector, private
domestic and foreign-owned banks. Of the top five banks, three (Banco do
Brasil, the Brazillian development bank Banco Nacional de Desenvolvimento Econômico e Social (BNDES) and Caixa
Econômica Federal (CAIXA)) are majority government-owned.
The market share of public sector banks is now the highest
in 10 years, in part due to the government's use of credit from public sector
banks to support the economy.
The private sector banks Banco
Bradesco and Itaú
Unibanco make up the remainder of the top
five, which together account for almost 70% of the sector by asset value.
Santander and HSBC also have a significant presence in the Brazilian banking
sector, and are the sixth and seventh largest banks respectively.
Brazil's banking system is characterised by relatively high
capital reserve requirements and strong oversight by the Brazilian Central Bank
(Banco Central do Brasil), a system bought in during the 1990s as the government
took steps to rein in hyperinflation. Unlike the U.S. Federal Reserve, whose
regulatory authority is limited to depository institutions, Brazil's central
bank also has the authority to monitor riskier investment banking activities. This has helped
Brazil avoid major bankruptcies and nationalisations during the current global
Brazil's Central Bank is a branch of government, and is
responsible for authorising new financial institutions and supervising existing
institutions. The two other key regulatory organisations in Brazil are The
National Monetary Council (Conselho Monetário Nacional - "CMN") and
the Securities and Exchanges Commission (Comissão de Valores Mobiliários -
"CVM"). The CMN formulates monetary and credit policies for the
Central Bank, and is made up of the Finance and Planning Ministers and the
President of the Central Bank. The CVM is attached to the finance ministry, and
is responsible for oversight of the capital markets.
sustainability and reform initiatives
2012 saw the launch of Brazil's Fair Bank Guide, the Guia dos Bancos Responsáveis, which assigns a responsibility rating to each of Brazil's
largest banks based on consumer protection, social and environmental financing
criteria and respect for labour standards. The project is backed by the Brazilian
consumer protection organisation IDEC and Friends of the Earth Brazilian
Amazonia, among others.
Voluntary and regulatory sustainability initiatives
Banco Bradesco and Itaú Unibanco were among the earliest banks to
sign up to the Equator Principles, in 2004, and Banco do Brasil and CAIXA have
since followed. For comparison, among the other BRIC countries, no Russian or
India banks have signed up to the Principles, and only one Chinese bank is a
signatory. Bradesco and Itaú were also early adopters of the UNEP FI Statement.
Verde" or Green Protocol, introduced in 2009, is a letter of intention in
which the signatories commit to cooperate to create social and environmental
policies to promote sustainable development in Brazil. The Letter of Principles for Sustainable Development, which
preceded the Protocol, was developed by the Brazilian banking association Febraban, and signed, at first, by state
controlled banks: BNDES, Banco do Brasil, Caixa, BNB and Banco da Amazônia.
These five institutions committed to incorporate environmental issues into
their project analysis and assessment systems and to prioritize actions to
support sustainable development. Other banks that signed up to the Protocol
afterwards inlcuded Bradesco, Cacique, Citibank, HSBC, Itaú, Safra and
However, implementation of the Protocolo Verde was weak, with little evidence of reporting or concrete outcomes. Most of Brazil's major banks continued to participate in the funding of important ‘dodgy deals', most notably the Belo
Monte and Rio
Madeira dam projects.
In 2014 the Central Bank of Brazil's published Resolution No. 4,327 [Portuguese], stipulating that all institutions authorized to operate by Central Bank must draft and execute a Social and Environmental Responsibility Policy, aimed at managing environmental risk and preventing losses from environmental damages. The SELP must be implemented by February 28th 2015 for financial institutions subject to Icaap, and by July 31st 2015 for all other institutions.