Joint research unit 7235

Managing the 2008 Financial Crisis: How Legal Constraints Caused Fragmentation of the Monetary Power in Brazil

Speaker :Camilla Villard Durand (Pofesseure à l'Université de São Paulo (USP, Brazil))

The Lender of Last Resort (LoLR) is a financial agent that has the economic capacity and is willing to provide liquidity when no other agent would. Resolution authorities are legally empowered to apply technical tools to deal with solvency crises. Unlike developed countries, where central banks created a wide range of emergency liquidity facilities and occasionally played the role of resolution authorities, the Brazilian Central Bank (BCB) was legally prevented from increasing its political actions due to legal and political constraints. This article argues that the management of the 2008 crisis caused the institutional fragmentation of the monetary power in Brazil. Monetary power is the economic capacity, combined or not with the legal mandate, to influence directly the creation of credit money in the economy. In the Brazilian case, the official functions of the BCB and the Deposit Insurance Fund were institutionally reformed. In this study, we scrutinize the legal instruments used by them to cope with the financial crisis. An analytical model is proposed to identify both the extension of this rearrangement and its inherent institutional limits. It is possible to identify significant problems of economic efficiency as well as accountability gaps in the current fragmented legal framework.

 

Keywords: Brazilian Central Bank (BCB), Brazilian Deposit Insurance Fund (FGC – Fundo Garantidor de Crédito), Emergency Liquidity Assistance (ELA), Lender of Last Resort (LoLR), resolution regime, deposit insurance.

AGENDA

Thursday 8 June 2023

Doctorants

Sahil Chopra (Université Sorbonne Paris-Nord)

Economics of litigation : Securities class action with third-party funding

Thursday 8 June 2023

Economics of litigation : Securities class action with third-party funding

Sahil Chopra (Université Sorbonne Paris-Nord)

Economics of litigation : Securities class action with third-party funding

Monday 12 June 2023

Law, Institutions and Economics in Nanterre (LIEN)

Arthur Silve (IAST / Univ. Laval)

TBA

Monday 12 June 2023

TBA

Arthur Silve (IAST / Univ. Laval)

TBA

Thursday 15 June 2023

Lunch

Guillaume Pierné

TBA

Thursday 15 June 2023

TBA

Guillaume Pierné

TBA

Monday 19 June 2023

Law, Institutions and Economics in Nanterre (LIEN)

Juan Mora-Sanguinetti (Banco de Espana)

TBA

Monday 19 June 2023

TBA

Juan Mora-Sanguinetti (Banco de Espana)

TBA

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