Brazil economy chief slams ‘excessive’ bank profits, urges competition

Brazilian banks are chalking up “excessive” profits, Economy Minister Paulo Guedes said on Tuesday, adding that the country needs an injection of competition to end what he called the cartels that dominate many of its major sectors.

In testimony to the lower house Finance and Taxation Committee, Guedes said sectors such as banking, oil and postal services reflected a lack of competition that is holding Brazil back and preventing growth from picking up.

Banks did well in the first quarter of the year, lawmakers put to Guedes, even though the economy contracted for the first time since 2016, putting Brazil half way back to recession.

“Banks’ profits are huge, they are really excessive,” Guedes said, noting that Brazil’s handful of big banks, one major oil producer, two main refineries and a distributor points to a ‘cartelized’ economy.

“We need competition, competition is good,” he said, adding that the central bank has made it a priority to help open up the economy, particularly the financial sector.

According to Brazil’s central bank, citing Bank for International Settlement figures, the top five Brazilian banks hold 82% of total banking assets. That’s a higher level of concentration than all other major emerging countries such as India, China, South Korea, Mexico and Singapore.

Guedes repeated that he wants to accelerate the privatization process, echoing his comments earlier this year that if he had his way he would sell “everything”, but noted that President Jair Bolsonaro doesn’t quite share his privatization instincts.

Still, the president is coming round to his way of thinking, Guedes told lawmakers.

He once again struck an optimistic and bullish note on the impact of pension reform on the economy, arguing that approval of a strong package would put Brazil back on the path to growth “immediately”.

Many economists doubt this, and have slashed growth forecasts for this year and cut them for next, even while maintaining expectations that a meaningful pension reform bill will be approved.

The government’s bill aims to save the public purse 1.237 trillion reais ($321 billion) over the next decade through a mix of raising the minimum retirement age, increasing workers’ contributions and other changes to the social security system.


Source: Reuters

Brazil antitrust watchdog probes banks in cryptocurrency trade

Brazilian antitrust watchdog CADE opened an investigation into the country’s largest banks on Tuesday for allegedly using their market position to corner the cryptocurrency trade to the disadvantage of brokers.

CADE said it was looking into alleged monopolistic practices by Banco do Brasil SA (BBAS3.SA), Banco Bradesco SA (BBDC4.SA), Itau Unibanco Holding SA (ITUB4.SA), Banco Santander Brasil SA (SANB11.SA), unlisted Banco Inter and cooperative bank Sicredi.

The investigation was requested in June by the Brazilian Association for Cryptocurrency and Blockchain (ABCB), which said the banks were abusing their power as financial players by closing accounts of brokerages trading in bitcoins.

CADE said in a report calling for the investigation that information it collected indicated that “in fact, the main banks are imposing restrictions or even prohibiting access to the financial system by cryptocurrency brokerages.”

The banks argued, in response to questions from CADE, that the accounts were closed because of the absence or lack of client data that is required by law to prevent money laundering.

Brazilians investors have taken enthusiastically to trading in bitcoins and now have more cryptocurrency accounts than stock brokerage accounts, which has put regulators on the defensive.

Brazil’s Securities and Exchange Commission, CVM, banned investment funds from trading in cryptocurrencies earlier this year, although it later said indirect ownership was allowed.


Source: Reuters

Banks and brokerages worried about impact of BM&FBovespa-Cetip merger

Some of the major banks and brokerage firms in Brazil are concerned about market concentration and abusive pricing risks from the merger of BM&FBovespa and clearinghouse Cetip, according to documents presented to the Administrative Council for Economic Defense (Cade). To date, Banco do Brasil, Bank of America Merrill Lynch, Credit Suisse, XP Investimentos, UBS and Citi have publicly expressed some kind of concern with the consequences of the merger, though they do not oppose the transaction itself. For Edemir Pinto, president of BM&FBovespa, the concerns are not justified because the stock exchange’s bylaws have undergone a number of changes in May to avoid this kind of problem. The changes still need to be approved by the Securities and Exchange Commission of Brazil (CVM).

Source: Valor Econômico S.A.