Banking Structures

Around the World

Brazil and Germany
German Banking System
Features
German banks are typically universal
A universal bank provides a complete range
of commercial and investment banking
services
German Banking System

The broad umbrella of universal bank
can be divided into three categories on
the basis of ownership and legal form.
These categories are:
commercial banking sector;
saving bank sector; and
credit co-operative sector
These three categories of universal
banks together account for roughly 80%
of the volume of business in Germany.

The Structure of German Banking
German Banking Sector
Commercial Saving Credit Co-op Other
Big Banks
Foreign Banks
Private Banks
Regional + Other
Local Savings
State Savings
Central Savings
Local Co-op
Regional Co-op
Fed. Clearing
Mortgage Banks
Banks w/Sp.Functions
Commercial Banks in Germany

Commercial banks in Germany as a whole,
account for roughly 25% share in the total volume
of banking activity.
There are four different classes of banks under
commercial banks category:
The Big Banks
Regional and other commercial banks
Foreign banks
Private banks

The Big Banks

Deutsche Bank, Dresdner Bank, Commerzbank
and their Berlin subsidiaries operate nationally
through network of local branch offices.

Although these banks are major banks in term of
their balance sheet volume, however, their
volume is not as significant in terms of their
share of the German banking sector.

If their interest in private business (such as
mortgages) is included in the volume, then the
case may be different.
Regional and other Commercial
Banks

These banks are all banks other than those big
banks.
These banks concentrates on providing universal
banking services in their particular regions, but
some maintain their system of branches which
had allowed them to operate on interregional or
national basis.
Two such banks with an extensive branch
network are the Bayerische Vereinsbank and the
Hypo-Bank.

Foreign and Private Banks

Foreign banks in the German banking system have not
been significant
Foreign banks are legally allowed to offer the same
services which are allowed to domestic banks.

Private banks consist of limited partnership (sole
ownership is not allowed under German banking law)
Although private banker can conduct all banking
activities, they specialise in export finance, securities
trading, industrial finance, property management and
housing finance etc.
Saving Bank Sector

Savings Bank Sector had the largest share in the
domestic volume of banking activity.
Saving banks were originally conceived as non-
profit making concerns
to serve relatively less well-off members of the
community;
to give credit on favourable terms to public
authorities;
to finance local investment in the region in which
the saving bank was located
These banks still follow these obligations but now
they have become universal banks which compete
with the commercial banks for most forms of
banking services.
Saving Bank Sector
There are three tiers within the saving
bank sector. These are:
Local savings banks
State saving banks
Central saving banks

Local Saving Banks

These are municipal or district institutions
incorporated under public law as independent legal
entities.

Each state had its own Savings Bank Act, which
specifies the structure and organisation of the
saving banks in that state.

A local saving bank is usually permitted to operate
only in its own region and its investment in
securities and other assets are subject to
restrictions.
State Savings Banks (Central Giro
Institutions)

Each state saving bank is incorporated
under public law and is owned by its
respective sate government and state
saving bank association
Works as clearing houses for their member local
savings banks.
They are state bankers in their respective
states and can conduct their business on
interregional and international basis.
The largest state saving bank is the
Westduetsche Landesbank Girozentrale, which
is roughly comparable to Commerzbank in terms
of balance sheet assets.

Central Savings Bank
Deutsche Girozentrale (DGZ) serves as the
central clearing bank for the saving bank
system and holds reserves for state
saving banks

Is similar to state saving banks in term of
business it conducts, but it is smaller in
size than many of them.
Although, both local saving banks and state
savings banks are universal banks, some
activities such as securities trading
underwriting and international business are
more important.

Credit Co-operative Sector

The credit cooperative originated simply as cooperative banks.
Provides credit to their members, but now have developed to
universal banks.
The organisation of the credit cooperative sector is similar to
that of the saving bank sector.
There are large numbers of local credit cooperatives and a
system of larger regional banks headed by a central clearing-
house institution.
There are three tiers within the credit cooperative sector.
These are:
Local cooperative banks
Regional central cooperative banks
Federal clearing house institutions
Local and Regional Co-operative
Banks

Local cooperative banks
The first tier of this sector comprises local banks
organised as cooperatives, whose members are local
individuals and businesses.
Members of the local credit cooperatives contribute
capital.

Regional Central cooperative banks
The local credit cooperative are headed by a second tier
consisting of regional central cooperative banks, which
are either stock corporations or registered cooperatives
owned by the local credit cooperatives.

Federal Clearing House
Institutions

Third tier consists of a federal clearing-
house institution, which is a stock
corporation owned by the regional credit
cooperatives.


Mortgage Banks

Among those banks in Germany, which provides a
specialised range of banking services rather than universal
services, the most important group consists of the mortgage
banks.
These banks are owned by public or private sectors.
The laws in Germany generally limits mortgage banks to
making long term mortgage loans and loans to public
authorities.
These banks finance through bonds and long term deposits.
Most private mortgage banks are usually owned by
commercial banks, which are interested to enter into this
market.
Banks with Specialised Functions

The group of banks offering specialised banking
services comprises various public and private
institutions
Their share in total volume of banking business
in Germany has been in the range of 10-12%.
These banks provide loans finance such as:
export finance;
finance of projects in less developed countries;
environmental programmes;
lending to small/medium sized German firms
These banks finance through government funds,
bank loans and other sources such as bond issues.

BRAZIL
A SOLID BANKING SYSTEM
Brazil has a
solid banking
system and
national
banks with
branches
throughout
the country
A SOLID BANKING SYSTEM
All payment orders
(funds transfer) are
handled electronically
and may be settled in
real-time with intraday
availability.
A SOLID BANKING SYSTEM
Checks issued anywhere in
the country are cleared and
settled within 48 hours.

Web-based services have
become common and
Brazilian banks are leaders
in Internet banking.
Key Facts
Since 2003, more than 8 million jobs have been created in Brazil and the
unemployment rate has fallen from 12.1% to 6.5%. This has created a new section of
borrowers the lower-middle and working classes.


The total stock of mortgages in Brazil is less than 4% of GDP now, and the country
has a housing deficit of 6-8 million units. Both factors are expected to drive growth
in the mortgage lending segment of the banking industry.


Total credit in Brazils economy, comprising credit to both individuals and industry,
has grown from 35.2% of GDP in 2007 to 46.4% of GDP, as of March 2011.


According to credit rating agency Serasa Experian, in May 2011, loan defaults
registered the highest monthly increase since March 2010. Whats more, they
indicated a growth of 20.6% in defaults during the first five months of 2011.


Brazil is building a positive credit registry to help banks review the credit histories of
all borrowers and not just defaulters.

Key Facts ( Contd.)
Key Facts (Contd.)
The minimum Basel Ratio of the Brazilian banking system is set at 11 percent,
which 3 percent higher than what is suggested in the Basel Accord. Most
banks, in reality, operate much higher than this level (at over 17.5 percent) with
low leverage ratios (over six times the level of their capital holdings)
All banking limits and requirements are applied in consolidated terms which
means that so called toxic assets or special investment vehicles are put under
heavy scrutiny
All investment funds are weighted in line with their corresponding assets. This
is undertaken to ensure that leverage levels are reasonable and over-exposure
is kept to a minimum
Over the Counter (OTC) derivatives need to be registered with the Central Bank
(or face legal action)
The Brazilian Securities and Exchange Commission (Comisso de Valores
Mobilirio) legally obliges all public companies to disclose all information with
regards to the financial instruments that are being used. In addition, full
sensibility' analyses are undertaken on a regular basis
Key Facts (Contd.)
- The central bank has control over all non-financial subsidiaries of banking
institutions;

- Expected loss provisions are taken into consideration (not just actual
losses);

- Liquidity and market risks are monitored intensively by the Central Bank
on a daily basis;

- Bank reserves must cover all debt payments past;

- All lending above the value of $BRL 5,000 must be registered with the
Central Bank;

- Issue ratings are regularly undertaken;

- Regulatory procedures are applied to all banks and are also regularly
updated in line with financial innovations (approved by the Central Bank),
international standards and conjuncture changes.
Major Players
Among the top ten Brazilian banks in terms of total assets, three are
government-owned (Banco do Brasil, Caixa Economica Federal or
CEF, and the countrys development bank BNDES); five are domestic
non-government owned (Bradesco, Itau-Unibanco, Banco Santander
Brasil, Safra, and Votorantim); and two are foreign (HSBC and
Citibank). The top four publicly listed banks are Banco do Brasil, Itau-
Unibanco, Bradesco, and Banco Santander Brasil.