Haddad talks about expanding credit and capital markets

The Minister of Finance, Fernando Haddad, assumed the expansion of credit and capital markets as a goal. In December, before taking office, he cited these initiatives as examples of reforms to be carried out “beyond the tax”.

“The issue of credit, if we take the trajectory of 20 years here, in 2003, we made a great credit agenda in Brazil, in one of the most effective credit expansion agendas, with responsibility. There was no bank failure, nothing , banks became more robust because they were expansion programs correct,” Haddad said at a press conference in December. “Capital markets, how many IPOs were done in that period, how many companies went public,” he added.

According to Haddad, the focus of “this decade’s agenda” will be to deepen both issues. The mission, however, may not be simple. In the case of the capital market, interventionist policies can alienate investors. This market raised around BRL 544 billion in 2022, around 11% less than in the previous year, according to the National Association of Financial and Capital Market Entities (Anbima). Funding was mainly affected by the 57% drop in operations with variable income, while fixed income increased by 7% and reached a record level.

Reducing banking concentration is an even greater challenge. In 2020, the then Minister of Economy, Paulo Guedes, said that six banks exploited “200 million muggles”. According to the most recent Banking Economy Report by the Central Bank, the five largest commercial banks in the country held 77.6% of assets at the end of 2021, compared to 81.2% at the end of 2018. In commercial bank credit operations , the share of the top five declined from 84.8% in 2018 to 81.4% three years later.

Former chief economist of the Brazilian Federation of Banks (Febraban), Roberto Luís Troster considers that there is a “misdiagnosis” on the subject and disagrees that there is a high banking concentration in the country. But he agrees that it is possible to improve the credit market.

“We have a less concentrated system than most other countries. On average, the big banks charge less than the rest of the system, the problem is not concentration. What is lacking is a willingness to change. Just talking is beautiful , but it doesn’t solve it”, he says.

André Perfect, former Chief Economist at Necton Investimentos, believes that more actions are needed to change the picture of the high spread banking – the difference between the interest that banks pay to borrow money and the interest they charge on loans.

“You can say that [o problema] it’s the risk-Brazil, but I don’t think so. It is something of our financial industry, which has to be improved, but it is not due to the voluntarism of political activity. You have to encourage it to reduce the spread“, evaluates.

What can be done to develop credit and capital markets

According to World Bank data, the spread Banking in Brazil, 25.7%, is only surpassed by Zimbabwe (37.4%) and Madagascar (34.5%). Economist Roberto Luís Troster maintains that most of the measures to change this scenario are the responsibility of the Central Bank and the Ministry of Finance.

Troster questions the absence of interest standardization, criticizes the taxation on credit and the expenses generated to banks by compulsory deposits, and suggests that changes in these aspects could change the reality of credit taking in Brazil.

“Some [bancos] they use a yearly rate, others have a monthly rate, why not do just one measurement? Credit is also taxed, and there are applications that do not even pay the tax. It only depends on the Federal Revenue to take tax from the credit and put it in the application. [Com isso,] those who earn money pay taxes, those who owe money do not,” he points out.

As for compulsory deposits, Troster comments that banks spend money to raise funds that are “frozen” at the Central Bank. “The big issue with the financial system is that it is obsolete. Why can banks that operate here and in other countries manage to operate in other countries with much lower rates? Itaú and Banco do Brasil operate in other countries with rates that, on average, are several times lower than in Brazil”, he comments. “It’s not just about talking, you have to do it”, he adds.

Economist André Perfeito recognizes that the microeconomic agenda conducted by the BC under Roberto Campos Neto’s management and also by his predecessors improved the competitiveness of the credit market. However, he says that more needs to be done. “It has to improve more, credit in Brazil is still very poorly done. The good news is that all information technology builds a possibility of giving better credit. If this industry is encouraged in this sense, there will be a giant gain”, he comments.

Perfect emphasizes that, as they are a regulatory issue, both the credit and capital markets can be improved by the economic team of the new government and by the Central Bank. For him, the best that the government and BC can do is “not disturb” the market.

“The credit and capital industry has improved a lot, the private sector has to be encouraged to play this game. The government has to know how to use the forces of the private initiative”, he analyzes. In the capital market, Perfeito believes that the creation of subsidized interest would be a way of disturbing the market. “A financial infrastructure has been created that is finally evaluating the project, credit, all of that”, he comments.

Initiatives that share risks between the State and the private sector, however, may be welcome. “Any type of initiative by the BNDES or the Treasury, which is accompanied by trying to transfer this to the private sector and do it together, would be important and could really help, such as incentive debentures. That is, creating a type of government incentive, of share the risks”, evaluates Perfect.

What Haddad said about fostering credit and capital markets

In the press conference where he spoke about the “agenda of the decade”, Haddad defended “returning to the microcredit market” and guaranteeing the “democratization of credit”. “We can wean big companies that are resorting to the capital market. As happens all over the world, there is no need for any kind of support from the State for those who have access to cheap credit,” he said.

At the time, Haddad said that credit unions are “claiming for measures” that, according to him, can be done. He defended the regulation of the financial market, which, according to the minister, prospered in the Lula administrations in the sense of guaranteeing more competition. And he also showed willingness to discuss the agenda with the financial system.

“We have no problem sitting down with the financial system to improve rules, governance, sustainability. Without quality education and credit, there is no prosperous market economy. These are two pillars of an efficient market,” said Haddad. He defended that people have more access to credit because he understands that “it is the most effective mechanism, together with education, to guarantee social ascension and the multiplication of opportunities”.

Haddad mentioned the possibility of a Pix credit system and said that, “with the rigors of the monetary authority”, it is possible for there to be a profusion of agents that “will help to democratize credit, strengthen competition and raise interest rates at the same time”. taker falls”, as well as the spreads. “In relation to the democratization of credit, I believe that we will be able to count on a new world that helps us to guarantee more competition and a drop in spreadsfrom the interest rate to the final borrower”, he commented.

Haddad was sensitive to the capital market, but made clear his understanding that it is not the solution to all investment problems. “There is anxiety for long-term investments and that doesn’t always fit in the private equity market,” he said. “For example, urban mobility, not always to make a subway the account closes with the capital market”, justified Haddad, when defending the expansion of public-private partnerships (PPPs).

Chamber leaders demand commitment for competitive markets

Federal deputy José Nelto (PP-GO), deputy leader of the party in the Chamber, supports the expansion of the credit market defended by Haddad, but emphasizes that he will charge. “My first act in the new legislature will be to invite Haddad and his team and the president of the Central Bank to discuss the opening of the financial system”, he says.

“Lula will have to prove that it is not a government of bankers. Let him do and send to the National Congress whatever is necessary, and there is no need to invent anything. He copies American legislation, both labor and judicial”, says Nelto.

The deputy defends reforms to encourage foreign banks to compete in the Brazilian market. “Our labor legislation is draconian, the bank does not want to stay here. We have the most expensive credit card on the planet and the most expensive interest rates on the planet because ministers, governments and part of the National Congress sell themselves to bankers”, he opines. . “Change the two legislations and you will see a different bank arriving every day. The money was made to produce and not to speculate”, he adds.

Federal deputy Zé Vitor (PL-MG), vice-leader of the party and scheduled for the presidency of the Frente Parlamentar Digital in 2023, defends the promotion of a competitive credit market that “empowers” consumers and favors the reduction of interest rates interest rates practiced to expand credit, “responsibly and without putting pressure on the Federal Budget”.

For him, the fintechs play a central role in the debate and BC regulations that included payment arrangements and payment institutions in the Brazilian Payments System (SPB) also contributed greatly to the promotion, in addition to the law on means of payment. “In the last decade, the fintechs were responsible for a 10 percentage point reduction in bank concentration indices in Brazil. There are more than R$ 60 billion saved in tariffs thanks to them. This increases competition and facilitates access to the credit market”, he highlights.

Zé Vitor also defends an agenda of reforms for the construction of a competitive and sustainable credit environment for the population, with greater participation of the fintechs. It also promises to oversee the regulation of the law that sanctioned the legality of the cryptoeconomy and highlights the importance of the flows of portability of financial services, such as salary, credit and investment.

“They can be faster, more transparent and efficient, through the use of technologies that are widely disseminated today and that were not available when such procedures were conceived. This empowers the consumer, increases competition in the market, causes a reduction in interest rates and expansion of access to responsible credit. We have a serious problem when we talk about portability and that must be considered”, says Zé Vitor.

According to the Interbank Payments Chamber (CIP), half of salary portability requests are denied. Of a total of approximately 15.5 million requests made in the last four years, 7.4 million were rejected. “The Central Bank made important advances in regulating salary portability, but some operational aspects still make this transfer slow and bureaucratic”, says the deputy leader of the PL.