ABSTRACT
This chapter analyzes the Brazilian banking industry's competitive regime from the Real Price Stabilization plan in 1995 to 2015. In the aftermath of the Washington Consensus, Brazil engaged in a broad process of economic liberalization. Price stabilization put a sudden end to one of the most important sources of revenue for Brazilian bank – the so-called "inflationary revenues" earned from inflationary floating. The Brazilian banking industry features three distinct characteristics: it practices one of the highest bank spreads in the world; it has substantial participation by public banks; and it is one of the most strictly regulated banking industries in the world. Brazil's high market interest rates provide a piece of evidence that Brazilian banks have substantial market power. Public banks played a major counter-cyclical role in the credit market and contributed to avoiding a sharper decline in the total credit supply. The chapter analyzes the Brazilian banking industry's market structure.
