State-run banks: a movement driven by unusual politics

Marshall Swearingen • http://www.hcn.org • November 26, 2012

During Tea Party champion Joe Read’s first session in the Montana Legislature, in 2011, he drew widespread ridicule for introducing a bill that declared global warming “beneficial to the welfare and business climate of Montana.” With another anti-science bill, Rep. Read called for Montana’s government to overrule federal regulations on greenhouse gases. He also passed out 170 DVDs of The Secret of Oz, a low-budget video charging that the Federal Reserve system has been corrupted by corporate bankers, symbolized by the “Wicked Witches” in the original Wizard of Oz.

The DVDs were part of Read’s attempt to create the “Last Chance State Bank,” named for a gulch where gold was mined in the 1800s. The colorful name also cut to the urgency of Read’s banking concerns: Desperate to fix a broken fiscal system, he envisioned that the Last Chance State Bank would be run by Montana’s government.

None of those bills became law, but the bank measure attracted a surprising supporter — Rep. Sue Malek, a Democrat who represents Missoula, a college town. Malek herself sponsored a bill supporting the state-bank idea (which also went nowhere), and Read wholeheartedly supported it…

“You hear that giant sucking sound?” read a flier circulated by the Service Employees International Union in Oregon in 2011. “That’s Wall Street’s big banks sucking up all the public dollars out of Oregon. (The state) does billions of dollars of business with big banks like Bank of America, JPMorgan Chase, and Wells Fargo … And what do we have to show for it? 28,000 homes in foreclosure, 10.6% unemployment, and devastating cuts to vital services.”

Read the article here.

A Reappraisal of State-Owned Banks

Eduardo Levy Yeyati, Alejandro Micco, & Ugo Panizza • http://www.brookings.edu • Spring 2007

A reappraisal of state-owned banks
Authors: Eduardo Levy Yeyati; Alejandro Micco; Ugo Panizza
Year: 2007
Published in: Economia : Journal of the Latin American and Caribbean Economic Association. – Washington, DC : Brookings Institution Press, ISSN 1529-7470, ZDB-ID 20698392. – Vol. 7.2006/07, 2, p. 209-247.

Abstract
We revisit the public banks debate, survey the theoretical arguments and test the robustness (and expand) the existing empirical evidence. While we find some support for the view that public banks do not allocate credit optimally, we also report indicative evidence that they exert a positive influence on private bank efficiency, and may contribute to reduce credit procyclicality. Ultimately, we find that the recent criticism to public banks has generally been based on inconclusive cross-country evidence. More specific bank-level research is still needed to substantiate a case for or against public banks in developing economies.

This paper is divided into three parts. The first part describes the evolution of state ownership of banks in Latin America and the rest of the world. The second part discusses the theoretical justification for the existence of public banks. The third part surveys the existing empirical evidence and presents some new results.

Read the entire paper here.
A .pdf version of the paper is here.

The 10 Major Brazilian banks — 3 of 10 Major Banks in Brazil are Publicly Owned

Andréa Novais • http://thebrazilbusiness.com • April 10, 2012

1 – Banco Bradesco Financiamentos. Founded in 1943, in the city of Marília, São Paulo, Banco Bradesco is the second largest private bank in Brazil. It is currently headquartered in Osasco, SP, at Companhia Cidade de Deus. Over its almost 70 years of existence, Bradesco has acquired several financial institutions in Brazil, such as Banco do Estado do Maranhão, Banco Morada, Banco de Crédito Nacional (BCN), Banco do Estado do Ceará and Banco Boavista. In 2006, Bradesco took over the American Express credit card operations in Brazil. Official website: http://www.bradesco.com.br

2 – Caixa Econômica Federal. Founded in 1861, Caixa Econômica Federal is a public bank owned by the federal government and is the only working with FGTS, PIS and the payment of unemployment insurance. It is also where all benefits offered by the federal government, such as Bolsa Família, are paid. Its expertise is banking services, FGTS, PIS, unemployment insurance and other initiatives made by the federal government, such as Programa Minha Casa, Minha Vida. Official website: http://www.caixa.gov.br

3 – HSBC. HSBC is a commercial and an investment bank organized within four business groups: commercial banking; global banking and markets; personal financial services and global private banking. Present in 87 countries, HSBC is present in Brazil since 1997 and is headquarted in Curitiba, PR. Official website: http://www.hsbc.com.br

4 – Banco J Safra S/A. Banco Safra is one of the 10 major Brazilian banks, operating in all banking divisions, focusing on companies and upper-class customers. Established in 1955, it is headquartered in São Paulo. Official website: http://www.safra.com.br

5 – Banco Itaú. Since the acquisition of Unibanco, in 2008, Itaú saw its market value increase 120%, becoming one of the 10 major banks in the world and the largest financial conglomerate in Latin America. Headquartered in São Paulo, Itaú is a branch of Itaú Unibanco Holding SA. It has operations in Argentina, Chile, Paraguay, Uruguay, England, Luxembourg, Portugal, USA, Japan, China and United Arab Emirates. Its major focus is financial services, such as commercial and corporate banking, besides insurance, assets management and capitalization plans. Official website: http://www.itau.com.br

6 – Banco do Estado do Rio Grande do Sul S/A. Banco do Estado do Rio Grande do Sul (or simply Banrisul), is a state-owned bank focused on business in Southern Brazil. Present in 364 cities, most of them concentrated in Rio Grande do Sul state, Banrisul is headquartered in the city of Porto Alegre and its major focus are banking services. Official website: http://www.banrisul.com.br

7 – Banco PanAmericano S/A. Founded by Grupo Silvio Santos in 1969, PanAmericano has operated as a multi-service bank since 1991, having started its credit card operations in 1994. PanAmericano Seguros was incorporated to the bank in 1999. In 2009 Caixa Econômica Federal bought part of the bank’s shares and became the second largest shareholder of the institution. Official website: http://www.panamericano.com.br

8 – Banco Santander. Santander fisrt came to Brazil in 1982, but it was only in 1991 that Santander Investment operations have begun. The Brazilian operation is considered to be the most important one, being responsible for 25% of the bank profit. In 1997 Grupo Santander acquired Banco Geral do Comércio and in 1998 and the control of Banco Banespa. In 2008 it acquired the Latin American operation of ABN Amro Bank and became the third major bank in Brazil in terms of assets. Official website: http://www.santander.com.br

9 – Banco do Brasil. Banco do Brasil is the largest Brazilian and Latin American bank in terms of assets and third by market value. Headquartered in Brasília, Banco do Brasil was founded in 1808 and is the oldest active bank in Brazil. The bank is controlled by the Brazilian government and since 2000 it is one of the four most-profitable Brazilian banks, holding a strong leadership position in retail banking. Its major services are the issuance of boletos, ATM loans, automatic payments, and the account holder may apply for international Mastercard and Visa debit cards. Also, the bank has got offices I several locations throughout the world, such as Amsterdan, Buenos Aires, Dubai, La Paz, Miami, New York City, Santiago and others. Official website: http://www.bb.com.br

10 – Citibank. Citibank Brasil is headquartered in São Paulo and is a branch of Citigroup FNC, the largest multi-bank in the world. The bank came to Brazil in 1915 and is present in 21 of the 26 Brazilian states. Official website: http://www.citibank.com.br

Read the article here.

Public Banks in Latin America

Alejandro Micco & Ugo Panizza • http://www.iadb.org • February 25, 2005

Public Banks in Latin America
Background paper prepared for the conference on Public Banks in Latin America: Myth and Reality Inter-American Development Bank (February 25, 2005)

Government ownership of banks is a major phenomenon worldwide. In 1995 the average percentage of state ownership in the banking industry around the world was about 41.6 percent (Figure 1). This share was even larger during the 1970s, when more than 50 percent of worldwide bank assets were controlled by the public sector. Ideological changes regarding the state’s role in the economy, as well as financial crises, led governments to privatize financial institutions. Megginson (2004) documents that worldwide, from 1987 to 2003 more than 250 banks were privatized, raising US$143 billion.

Read the entire report here.
The 2005 Conference details are here.

The Association of German Public Banks (Bundesverband Öffentlicher Banken Deutschlands, VÖB)

http://www.voeb.de • November 26, 2012

The Association of German Public Banks – Bundesverband Öffentlicher Banken Deutschlands, VÖB – is a leading industry association in the German banking industry. It was founded in 1916 and represents nowadays 62 member institutions including the regional banks (Landesbanken) as well as the development banks owned by the federal and state governments. The VÖB together with the four other top-level associations of the German banking industry comprise the German Banking Industry Committee, GBIC (Die Deutsche Kreditwirtschaft, DK).

Mission. The VÖB represents the joint business and general interests of its members in all matters relating to banking policy promotes cooperation between member banks and supports them in the fulfillment of their missions. The association represents and promotes the interests of its members through communication with lawmakers on the national and state level, national and international regulatory authorities, the media and the public. It is accredited with the German Bundestag, the European Parliament and the European Commission. The VÖB has maintained an office in Brussels since 1987. The association is also a member of the European Association of Public Banks (EAPB), which is located in Brussels.

Members. German financial institutes held directly or indirectly by the public sector either in whole or in part, or which perform special missions in or arising out of the public interest, can become regular members of the VÖB. Banks that already belong to another banking-industry association can apply for special membership.

Employer association. The VÖB is also an employer association. It represents the members of the collective-bargaining association of public banks in collective-bargaining negotiations for public banks and the private banking sector.

Ombudsman. The VÖB has been operating a customer complaint system since 1992; in May, 2001, the system was expanded to include an extrajudicial arbitration body and an ombudsman. On the European level, the VÖB ombudsman is a member of the Financial Complaint Service Network (FIN-NET), to which over 40 national arbitration bodies belong.

Deposit guarantee. The VÖB compensation scheme (statutory deposit guarantee) secures customer deposits as well as liabilities from securities transactions. The association’s Voluntary Guarantee Fund provides additional security for deposits.

Total assets. As of the end of 2011, the total assets of all VÖB member banks amounted to 1,991 billion euros. The market share of the VÖB member banks was thus 24 percent, as measured by the total assets of the entire German banking industry. The VÖB banks employ roundabout 80,000 persons.

Read more about the VÖB here.