Financial Services Advisor

Murilo Portugal, president of the Brazilian Federation of Banks (Febraban): “Competition in Brazil’s banking sector is quite robust. Nevertheless, Febraban and its associated banks favor even more intense competition, which drives progress for countries and enterprises. Banking is a capital-intensive industry, as central banks’ prudential regulations require banks to hold large capital levels in order to protect savings. As a consequence of being capital-intensive, banking tends to be a concentrated industry almost everywhere. The market structure of the Brazilian banking sector is moderately concentrated, with a Herfindahl-Hirschman index of 1.413. Compared with other sectors of the Brazilian economy, the credit market is the ninth most concentrated. Part of the concentration of the Brazilian credit market is due to the high market share of state-owned banks, which account for 50 percent of the market. While less concentrated markets tend to be more competitive, there can be competition even in concentrated industries. Academic studies about banking competition in Brazil reject the hypothesis of cartelization and price collusion, even though the credit market may not conform to a model of perfect competition. The Brazilian monetary council and central bank have already established differentiated and lighter regulatory requirements for smaller banks, credit cooperatives and fintechs, as compared with large banks. For instance, the number of fintechs…”