The big banks and their small banks: Market division for low-income credit holders and interest comparison within the conglomerates
Abstract“Finance companies” (technically, credit, financing, and investment companies - SCFIs) coexist with large banks within economic conglomerates. Using historical series of interest rates, we tested the hypothesis that SCFIs belonging to banking groups and other subsidiary institutions (non-major banks) would focus on more vulnerable customers, who would accept to contract credit at higher interest rates than those practiced by large banks of the same group, in the same credit modalities. We conclude that our data capture evidence of the practice of higher interest rates by subsidiaries (SCFIs or subsidiary banks) comparing to the respective main banks, which may reflect the credit specialization in certain niche markets; however, we also find situations in which major banks charge higher interest rates than their subsidiaries. Furthermore, we present the main resolutions of the National Monetary Council (CMN) that regulate SCFIs and highlight the SCFIs' relationships with banks, banking correspondents, and franchises. Finally, we examine the equity profile of SCFIs according to the following categories: (i) financial institutions linked to one of the five major banks; (ii) financials linked to banking conglomerates, except those of the five major banks; (iii) financial institutions linked to non-banking economic groups; (iv) independent financial companies.
The submission of a paper to Economic Analysis of Law Review implies the transfer, by the author(s), to the Catholic University of Brasília (UCB), of the aforementioned work for purposes of reproduction, dissemination, distribution, printing, publication and availability.
This journal offers immediate free access to its content, following the principle that making scientific knowledge freely available to the public provides greater global democratization of knowledge.
Authors who submit manuscripts for publication in EALR irrevocably agree to the following terms:
- Authors retain copyright but grant Economic Analysis of Law Review the right of first publication, with the work simultaneously licensed under a Commons Attribution-Share License, after publication, allowing the sharing of the work with acknowledgment of its authorship and initial publication in this journal.
- Authors and EALR are authorized to sign additional contracts separately, for non-exclusive distribution of the version of the article published in this journal (e.g., publish in an institutional repository or as a book chapter), with recognition of authorship and initial publication in this journal.
- Authors are allowed and encouraged to publish and distribute their work online (e.g., in institutional repositories or on their personal webpage) at any point before or during the editorial process, as this can generate productive changes as well as increase impact and citation of the published work (see The Effect of Open Access).