The number of banks has been falling in the major countries and major financial institutions are increasingly larger, shows a study by the International Monetary Fund (IMF) released on Monday, March 31. In Brazil, the report shows that the concentration of the sector also rose and the three largest banks in the country, which in 2006 accounted for 35% of bank assets now account for 55%.
The concentration is even greater in countries such as Canada, France and Spain, where the three largest banks hold over 60% of sector assets. On average, says the IMF, this percentage is 40% in advanced economies and emerging.
“The high degree of concentration brings a high degree of systemic risk potential. Problems or bankruptcy of one of the three largest banks can destabilize the entire financial system of a country, “says the IMF in the study. In part because the operations of such a bank can not be easily replaced by another institution. Another reason is the high interconnection broken bank with other financial institutions. Furthermore, the failure can cause a crisis of confidence of the entire system highlights the study.
The number of banks fell in advanced and emerging countries. In the US, for example, there were 10,000 banks in 2000 and now there are about 7000. In Japan, it was 850 and the number dropped to about 650. In India, the total number of banks dropped by half, from 300 to 150. Many of these banks failed in the 2008 crisis, but in many countries the governments themselves encouraged the consolidation of banking sector, says the IMF.
At the same time, the weight of the banking sector in the economy has increased in several countries and the share of financial assets in the Gross Domestic Product (GDP) has grown in recent years. In the US, for example, went from 70% in 2000 to almost 90%. In the euro zone, from 250% to 350% in the same period. The study does not bring the numbers in Brazil.
“The banks continue to get bigger and there are fewer banks in operation,” said the IMF in the material sent to the press commenting on the study. The document is part of the Global Financial Stability Report, to be released in full at the IMF meeting that begins April 7 in Washington.
In the report, the IMF also recommends that governments strengthen reforms in major banks. Since the 2008 crisis, with the collapse of Lehman Brothers, progress has been made, but the agenda for change is still incomplete and regulators have injected billions to avoid problems or breaking of large institutions.
Only in the euro zone, the estimate presented in the IMF study is that governments have poured about $ 300 billion in major banks in 2012. In the United States, were nearly $ 70 billion. These numbers have increased since 2009 and are called by the IMF of “implicit subsidies”.
The IMF study used a sample of 100 banks considered systemically important, including the Bank of Brazil (BB) and Bradesco, among Brazilians. There are several US as Citigroup, JPMorgan Chase and Bank of America, and Europe, as BBVA, Santander, ABN Amro and BNP Paribas.
The IMF points out that the protection of governments to large banks creates several problems, such as uneven competitive environment with smaller financial institutions and the possibility of excessive risk-taking by big banks. The result is that the taxpayer may have to pay the bill if the bank break and need to be bailed out by the government, as happened in the US in the crisis of 2008. Only Citibank, the third largest US bank, needed a Washington aid package US $ 45 billion.
The IMF estimates that the possibility of ending government support to large banks seems unlikely. This could, for example, generate trust issues in the banking sector. But the sector’s reform recommendations, the Fund argues that regulators need to work to avoid financial problems in these banks. So, could strengthen the capital requirements, as is already happening with the United States. The information is the newspaper O Estado de S. Paulo.
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