Impediments to the Development and Efficiency of Financial Intermediation in Brazil

15 Pages Posted: 20 Apr 2016

See all articles by Thorsten Beck

Thorsten Beck

City University London - The Business School; Tilburg University - European Banking Center, CentER

Date Written: June 2000

Abstract

To improve on the low level and low efficiency of Brazil's financial intermediation (and hence economic growth), Brazil needs reforms leading to a more efficient judicial sector, better enforcement of contracts, stronger rights for creditors, stronger accounting standards and practices, and a legal and regulatory framework that facilitates the exchange of information about borrowers.

Reforms to improve both the level and the efficiency of financial intermediation in Brazil should be high on Brazilian policymakers' agendas, because of the financial sector`s importance to economic growth. This means that Brazil must also improve the legal and regulatory environment in which its financial institutions operate. Brazil is weak in important components of such an environment: The rights of secured and unsecured creditors, the enforcement of contracts, and the sharing of credit information among intermediaries.

Recent reforms, such as the extension of alienacao fiduciaria to housing, the introduction of cedula de credito bancario, the legal separation of principal and interest, and improvements in credit information systems, are useful steps in strengthening the framework. But more is needed. Reforms that will significantly increase the level and efficiency of financial intermediation and have a positive impact on economic growth include:

A more efficient judicial sector and better enforcement of contracts.

Stronger rights for secured and unsecured creditors.

Stronger accounting standards and practices, to improve the quality of information available about borrowers.

The development of a legal and regulatory framework that facilitates the exchange among financial institutions of both negative and positive information about borrowers.

This paper - a product of the Financial Sector Strategy and Policy Department - is part of a larger effort in the department to better understand the link between financial development and economic growth, with application to Brazil.

Suggested Citation

Beck, Thorsten, Impediments to the Development and Efficiency of Financial Intermediation in Brazil (June 2000). Available at SSRN: https://ssrn.com/abstract=630752

Thorsten Beck (Contact Author)

City University London - The Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

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