Foreign Bank Penetration in BraziL

Foreign Bank Penetration in Brazil



Foreign Bank Penetration in Brazil

Introduction

This paper analyzes the determinants of recent foreign investment banks in the retail banking market in Brazil and the strategies of major European banks in Brazil. Since the recent wave of internationalization of banking, financial institutions have continued to apply their existing relationships, while seeking greater integration into local markets. The recent arrival of European banks in Latin America and Brazil, meanwhile, is due to a variety of factors, including bank restructuring in Europe, the dynamics of internationalization in the Spanish banking system and the process of deregulation market in the region.

The document also highlights some common and specific characteristics of major European banks in Brazil. A common feature is that it is the large universal banks that have chosen to develop abroad as a business expansion strategy.

Analysis

Cross-border consolidation among financial institutions has accelerated in recent years, and recently reached the retail market. For the purposes of this section, you have to ask is why the banks headquartered in particular countries, establish branches or subsidiaries abroad.

Overall, the literature of the years 1970 and 1980 (Grubel, 1977; Aliber, 1984) constructed a theory of international banking, which was strongly influenced by the theory of direct foreign investment in manufacturing, as advanced by Kindleberger (1969), Vernon (1966) and Cuevas (1971). According to this explanation, multinational banks have some advantages. Banks are going abroad to serve their domestic customers who have done likewise, a process sometimes called the "effect of gravitational attraction."

Multinational banking is growing in parallel with direct foreign investment as banks try to meet the demand for banking services for multinational companies abroad. The willingness of banks to move abroad in these circumstances is seen as essentially defensive, a way of ensuring that they will continue doing business with the national parents of subsidiaries abroad, so that current flow of information resulting from bankClient relationship is not anticipated by a competitor bank. Second, service multinational banks also do business with local wealthy individuals by providing specialized services and information necessary for trade relations and capital markets with their countries of origin.

The reasons that push banks to expand abroad can be interpreted in terms of price theory. According to Grubel (1977), "the continuing trade contacts between the banking and manufacturing companies to enable the bank has access to information on the financial condition of the company at low cost and high ...