In this paper, I show why Brazilian public banks acted as stabilizers of credit supply after the 2008 financial crisis. My analysis utilizes data from the Brazilian banking system and the seven largest Brazilian banks to evaluate the hypotheses posed by Micco and Panizza (2004). This analysis provides evidence that the stability or expansion of the deposit base was not the main factor that explains the less pro-cyclical behaviour of public banks after the crisis. In fact, an explicit stabilization mandate was observed. Public banks were able to maintain faster expansion of loans after the 2008 crisis ultimately due to the additional funding received from the government.

Juliano Adolfo Wide Pissetti

Published in Berlin Working Papers on Money, Finance, Trade and Development, July 2012