Par Rogério Sobreira, Luiz Fernando de Paula
The 2008 financial crisis hit the Brazilian economy by two financial channels – capital flight from stock market and (some) reduction in the domestic supply of credit caused by the international credit crunch to the Brazilian big commercial and investment banks, with effects on the supply of interbank credit to the small and medium size banks and, as a consequence, on the ability of the banking system to serve the demand of credit of their clients – and one real channel, that is, the decrease in exports with impacts on the GDP growth. Despite the adoption of counter-cyclical monetary and fiscal policies by the Brazilian government, the Brazilian banking sector remained sound in comparison to what happened in industrial countries. This soundness can be explained by some varied factors that include the still low development of the securities (mainly private securities) market, the banking regulation that prevented the development of toxic assets and high banking leverage – in spite of some critics related to the functionality (in the Post Keynesian sense) of the Brazilian banking regulation – and the combination of still high interest rate with public indexed (and very liquid) bonds. Those factors helped to keep the domestic savings pretty stable with positive impacts on the reduction of the supply of credit. The paper, thus, aims at analyzing the role played by the Brazilian banking regulation as a reason why the banking sector was not deeply affected by the crisis, as well as some aspects that characterize the Brazilian banking behavior in order to understand why Brazil did not have a Minsky’s crisis.
JEL codes: E44, E58, G21, G28