Brazilian banks are constantly praised for being safer than others when it comes to world financial crisis. But the question is: why exactly?

According to a study released by the World Bank on Tuesday, they are safer because, obviously, they just don’t lend very much (the government does!). Latin American banks, in general, have failed when it comes to contributing to social welfare and economic growth, says Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean. 

Credit to the private sector is low by global standards, about half of what it should be, according to calculations based on benchmarks for middle-income countries. When the banks do make loans, they are tilted in favor of consumption – think credit cards – rather than investment or mortgages. In addition, small firms and individuals pay higher fees than anywhere else in the world.
Mr. de la Torre says there are three causes of the banks’ hesitation. 
1. The first is that the effects of a financial crisis tend to linger for as long as 15 years as banks and regulators act cautiously against any possibility of a relapse.
2. The second cause is that contract rights in Latin America are generally weak and hard to enforce. While systems to manage credit card risk are easily imported and adapted to the region, “legal innovations cannot be imported,” he said.
3. There is a more amorphous reason that might explain why banks are not lending, particularly to businesses: low productivity, or what is called “insufficient prospects”. There may simply not be that many bankable projects. 
The question now is whether banks can increase their lending without creating the sort of bubbles that have led to past crises.
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