Brazil’s economy is weak but the banks are strong. That is the popular belief among investors. The banks are well-capitalized and liquid, with high profits. Brazil’s banking sector has been restructured and balance sheets cleaned up. While investors fret over the government’s failure to sort out public finances they can rest assured that the financial system is solid. Right?
Well, not exactly. The reason Brazilian banks are seen as strong is that their credit exposure is low and their dollar liabilities are matched.
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