Brazil: Financial System

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.

Characteristics of the Leading Institutions

Below is a list, arranged according to the different segments of the financial market, of institutions authorized to operate in each one:

Financial institutions that work with demand deposits:

  • multiple banks with commercial portfolios merchant banks savings banks credit co-operatives Other financial institutions
  • multiple banks without commercial portfolios investment banks development banks credit, financing and investment companies real estate credit companies mortgage societies savings and loan associations

Other financial intermediaries:

  • exchanges dealing in shares and futures brokerage companies dealing in bonds and securities societies distributing bonds and securities mercantile leasing companies brokerage firms dealing with exchange independent investment agencies Entities linked to the social security and insurance systems:
  • private insurance entities insurance companies capitalization societies societies administering health insurance schemes Entities managing resources owned by third-parties:
  • mutual funds and investment clubs portfolios held by foreign investors administrators of consortiums The clearing and settlement system:
  • Special System for Liquidation and Custody (SELIC) Central Office for Custody and Financial Liquidation of Private Bonds (CETIP) Stock Exchanges' clearinghouses  



In Brazil today there are currently in operation 4,317 financial entities, of which 310 are institutions of a banking nature, 1,939 are investment funds and 543 are non-banking institutions associated with the capital market.

Among the banking institutions which are in private hands, 161 are entirely nationally owned, 38 are controlled by foreigners and a further 29 are controlled domestically but involve participation from abroad. Of the State banks, four are in federal hands and 32 are run by the states. Throughout the country there are a total of 17,597 bank branches.

Concentration levels in the banking sector are high, excluding the participation of the Banco do Brasil and the Caixa Econômica Federal. These two represent the major government institutions. The eight leading financial conglomerates in private hands account for approximately 45% of the total volume of deposits.

The contribution of the financial sector to the GDP in the period 1990-1995 was, on average, 10.24%. As a consequence of the stabilization program, this contribution declined to 7.7% in 1995.