“A Snapshot of Brazilian Experience” XXVI International Financial Congress RT 1.2 – Banking Regulation for stimulation of economic development: opportunities and limitations “A Snapshot of Brazilian Experience” St. Petesburg, Jul 13th, 2017

Agenda Prudential regulation x economic development Stability x efficiency Brazilian initiatives: segmentation and proportionality

Prudential Regulation x Economic Development - Risk management - Capital requirements - Liquidity buffers - Leverage cap - Monitoring - Etc. Economic Development: - Productive capacity - Employment - GDP - Quality of life - Etc. Financial Stability Sound Financial System

Prudential Regulation benefits to economy Assessment of the long-term economic impact of stronger capital and liquidity requirements (2010), www.bis.org Assessing the macroeconomic impact of the transition to stronger capital and liquidity requirements (2010), www.bis.org Effect of bank capital requirements on economic growth: a survey (2015), www.dnb.nl Understanding the links between Macroprudential Regulation, Financial Stability, and Growth (2016), www.manchester.ac.uk Macroeconomics of bank capital an liquidity regulations (2016), www.bis.org Economic resilience: a financial perspective (2016) www.bis.org The impact of liquidity regulation on banks (2017) www.sciencedirect.com … etc.

“Supervisors can contribute to sustainable economic growth by ensuring that supervised entities are resilient to plausible shocks, properly managed, adequately capitalised and subject to an efficient risk management and the right incentives.”  (...) “There seems to be a consensus in the academic literature that an increase in regulatory capital requirements has a positive impact on lending to the real economy in the long term, while loan reduction can occur in the short term.” “Supervisors can contribute to sustainable growth by ensuring that supervised entities are resilient to plausible shocks, properly managed, adequately capitalised and subject to an efficient risk management and the right incentives.” “As a supervisor, our most valuable contribution to economic growth is to do our job – by implementing regulation consistently, by closely monitoring supervised institutions in a forward-looking, risk-based and proportionate way and by taking timely and determined action when needed.”   Sabine Lautenschläger Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism Frankfurt, 16 March 2015 www.ecb.europa.eu

Brazil: does the prudential regulation work? Resilience of the financial system (Brazilian Banking System - Dec, 2016): Return on equity: 11.4 Basel ratio: 16.7 Leverage ratio: 7.4 Short term liquidity ratio: 2.36 Structural liquidity ratio: 1.06 Brazilian financial system remains resilient; not only it absorbed the shocks but also did not propagate it further.

Brazilian Central Bank Mandate: monetary stability, sound and efficient financial system EFFICIENCY RISK MITIGATION

Brazilian initiatives Segmentation and Proportionality Resolution 4,553 (2017) www.bcb.gov.br non-banking financial institutions and small banks have a too demanding prudential regulation New international standards too complex 5 segments based on size, international activities and risk profile Proportional prudential regulation

Brazilian initiatives Segmentation and Proporcionality Resolution 4,553 (2017) www.bcb.gov.br Premisses: Maintain adequate level of conservatism Keep international compliance standards Provide stable, objective and transparent regulatory framework Benefits: Mitigate overburden Increased competitiveness Favour risk profile regulation More efficient financial system

Thank you!