The National Financial System (SFN) in Brazil is formed by a normative system and an operative system.
The regulatory and supervision entities are the National Monetary Council (CMN), that oversees the financial system as a whole; the Central Bank (BACEN) that carries out traditional central banking functions and implements CMN policies; the Private Insurance Regulator (SUSEP), that is responsible for the supervision of the insurance industry; the Complementary Pensions Department (SCP) that is responsible for the supervision of the complementary pension industry; and the Securities Commission (CVM), that is responsible for the supervision of the capital markets and the asset-management industry.
The entities that operate in the financial market can be controlled either by government or by private institutions.
The main government institutions are the National Bank for Economic and Social Development (BNDES), that implements the government’s investment policy by granting loans and supervising government financing plans. It is also responsible for managing the National Privatization Program; Bank of Brazil, a mixed-capital federal company, this is the government’s financial agency and handles all federal receipts and payments. It is also a commercial and agricultural bank; and Federal Savings and Loans Association (CEF): A savings and mortgage bank, which also administers the Employee Severance Indemnity Fund (FGTS), PIS/PASEP (Social Integration Taxes) and the national lotteries.
The Brazilian banking sector is strong, diversified and adequately capitalized. Its high levels of capitalization and modern corporate governance have allowed it to deal proficiently with the recent global credit crunch.
In addition to granting loans, commercial banks provide a wide range of financial services, such as accepting deposits, paying cheques, issuing letters of credit, dealing in foreign exchange, cash and asset management services, electronic transfers of funds, investment banking services and investment management.
Not only local players have being acting inside Brazil, but foreign banks have played an important credit role in lending to local companies. However, since the 1988 constitution, special authorization must be obtained for the installation of new foreign controlled banks and for any increase in existing foreign capital interests.
There are also various types of non-depository financial institutions in Brazil. Lease finance, funding saving, loans and factoring are readily available. Investment institutions other than investment banks include insurance companies, pension funds and investment and mutual funds. Under recent legislation, Brazilian investment funds are now allowed to invest in overseas investment funds.
Brazilian's stock market is another highlight, because it has increasingly developed from the year 2000 onwards, and regional stock exchanges had to transfer their stocks to the Brazilian Mercantile & Futures Exchange (BM&F) and to the São Paulo Stock Exchange (Bovespa). In 2008 these two entities merged, creating BOVESPA S.A., one of the largest exchanges in the world in terms of market value: the second largest in the Americas, and the leading exchange in Latin America.
One last interesting form of local financing is the program that offers low-cost financing smalland medium-sized businesses, export financing and rural credit.
Finally, there are generally no restrictions on the access of foreign-controlled companies to local private-sector financing in Brazil and on their ability to invest in government securities and in listed companies. A foreign investor has access to the Brazilian securities market through registered Brazilian investment funds.
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