How is the National Financial System structured in Brazil?

Brazil's National Financial System (SFN) is structured on several pillars that ensure its efficient functioning, credibility, and stability. The modernization of the SFN, undertaken from the 1980s onward, was fundamental to Brazil's victory in the war against inflation and to the robustness of the Real. That is, its reform improved the lives of all Brazilians. Here are the main pillars:

1. National Monetary Council (CMN)

The CMN is the highest body of the Brazilian financial system, responsible for formulating monetary and credit policy, aiming at the stability of the currency and the economic and social development of the country. It establishes general guidelines for the functioning of the financial system. Currently, the CMN consists of three members: the Ministers of Finance (who chairs the Council) and of Planning, and the president of the Central Bank of Brazil.

2. Central Bank of Brazil (BCB)

The Central Bank is the country's main monetary authority, responsible for implementing the monetary and exchange rate policies defined by the CMN. Its functions include regulating the financial system, controlling inflation, supervising financial institutions, and managing international reserves. It is an autonomous institution, not tied to any ministry: a special autarchy. Its directors now serve fixed terms that transcend the governments that appointed them, ensuring the permanence of State policies.

3. Securities and Exchange Commission (CVM)

The CVM regulates and supervises the securities market, ensuring its integrity and proper functioning. Its mission is to protect investors, ensure an efficient and transparent market, and encourage capital formation. In 2023, the CVM and the IIEDE held the Contemporary Administrative Sanctioning Law Seminar, with the participation of Fábio Medina Osório. The event consecrated the partnership that the institutions have maintained since 2008, when a technical cooperation agreement between the IIEDE and the CVM was signed.

4. Financial Institutions

These include commercial banks, development banks, credit unions, securities brokerages, and other entities authorized to operate by the Central Bank, both public and private institutions. They play a crucial role in the intermediation of funds between savers and borrowers.

5. Guarantee Funds

The Credit Guarantee Fund (FGC) offers protection to depositors and investors, guaranteeing deposits in the event of the bankruptcy of financial institutions. This contributes to confidence in the banking system. It is a private, nonprofit institution, intended to guarantee the system's security against the effects of possible crises and bankruptcies.

6. Regulation and Supervision

The rules and regulations established by bodies such as the CMN, the Central Bank, and the CVM ensure the stability and transparency of the financial system. Rigorous supervision prevents abusive practices and minimizes systemic risks.

7. Capital Market

The Brazilian capital market, operated mainly by B3 (Brasil, Bolsa, Balcão), is an important pillar of the SFN, allowing companies to raise funds for investment and providing investors with a platform for trading shares, bonds, and other financial instruments. Now, Brazil will gain a new Stock Exchange, with the creation of the new Rio Exchange, operated by Americas Trading Group (ATG).

8. Brazilian Payment System (SPB)

The SPB is the infrastructure that allows the transfer of funds between financial institutions, contributing to the efficiency and security of financial transactions in the country. It includes systems such as Pix, which facilitates instant payments and has revolutionized the democratization of the Brazilian population's access to the financial system.

9. Open Banking

Recently implemented, Open Banking promotes competition and innovation in the financial sector, allowing the secure sharing of financial data between institutions, with the customers' consent.

References

• Central Bank of Brazil

• Securities and Exchange Commission (CVM)

• Law No. 4,595 of 31 December 1964