THE BANKER: Brazil’s small banks face big decisions

The small and medium-sized banks of Brazil have faced a series of challenges in recent years, from fraud scandals to adapting to international accounting standards. In light of this, the country's government has attempted to offer some sort of salvation in the shape of its Special Guaranteed Time Deposits, but is this a short-term solution to a long-term problem?

The executives of Brazil's small and medium-sized banks have been looking on with anguish as tortuous negotiations to rescue Banco Cruzeiro do Sul, which is under central bank administration, are concluded. The deadline for finding a buyer for the family-owned bank was set to expire as The Bankerwent to press, with harassed bondholders still searching for a solution.

Some industry-watchers are pondering just how deep-rooted the problems in Brazil's banking sector are. Central bank investigations into fraud at Cruzeiro do Sul, as well as Banco PanAmericano and the smaller Schahin and Morada banks, have caused the widespread withdrawal of foreign bond investor trusts, which is shutting off the already tight funding markets. Tougher competition in niche markets in Brazil’s rapidly maturing credit markets is emerging and government pressure to bring down rates has seen state-owned banks cutting spreads. All of this comes amid a weaker macroeconomic situation in Brazil, which is expected to grow by just 1.75% this year.

 

This is the start of an article that looks at the funding crisis facing smaller Brazilian banks. To see the full article, please go to The Banker website (www.thebanker.com). 

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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