Commercial Banks, Investment Banks, Conglomeration, and the Financial Structure of Firms
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Commercial banks historically have been the key institutions in the Brazilian financial system. They were affected directly by the following developments in different degrees over the last twenty years: (1) the institution of formal financial indexation to the inflation rate and the subsequent strengthening of the secondary market for ‘pre-fixed indexed’ assets — LTNs, certificates of deposits, bills of exchange, etc. — and ‘post-fixed indexed’ assets — mainly ORTNs — in the so-called ‘open market’; (2) competition from non-bank intermediaries; (3) the ability to contract foreign loans through Central Bank Resolution 63; and (4) the explicit promotion by the Brazilian government of financial conglomeration. It should be noted that the importance of non-bank competition vis-à-vis commercial banks was dampened by the process of conglomeration because commercial banks are usually the central institution in a financial conglomerate. The typical financial conglomerate in Brazil is centred on a commercial bank; other members are an investment bank, a ‘financeira’, a broker and dealer.1
KeywordsInterest Rate Total Asset Commercial Bank Real Interest Rate Investment Bank
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