Legal Framework of the Brazilian Financial System

Abstract

In 1988 the new Brazilian Constitution provided for the enactment of a new Banking Law, to replace Law 4.595 of 1964. After the introduction of the Real Plan in 1994, many committees were established at the Brazilian Congress to re-write the Banking Law, to make sure it was adequate to the new era of economic stability. The new law was never produced. The Central Bank never became independent. This essay is a description of the financial system in Brazil as of 1997. It remains, though, valid. The introduction of microfinance, cooperatives and correspondent banking, as well as the participation of Brazil at the FSB since 2009, caused some regulatory changes. The legal pillars - and more than that, its vision - of Brazilian banking remains untouched. Brazil never modernized its banking system and by adhering to international standards in regulation, it seems improbable that anytime soon the country will revisit its laws and bring them up to date.

Keywords: Brazilian Banking System, Banking Law, Regulation, Brazil

JEL Classification: K2, N26, N46