BRASILIA Brazil's central bank is looking to implement regulations this year to oversee financial technology companies that are expanding rapidly in Latin America's biggest economy, director Otavio Damaso told Reuters.
Increased innovation and a growing number of fintechs, as technology startups in the financial sector are known, are "very positive" for the efficiency of Brazil's financial system, Damaso said on Monday.
Damaso said the bank also wanted to facilitate the entry of foreign banks in the local market by eliminating the need of a presidential decree to continue the approval process.
Brazilian consumers, who are reeling from a record recession that has left millions unemployed, pay some of the highest interest rates among major economies.
In the last few years, hundreds of fintechs have sprouted in Brazil to provide cheaper loans and more accessible services, challenging cautious banks that have tightened their purses during the two-year recession.
While fintechs still have only a small share of Brazilian banking, they are expanding rapidly in segments such as credit cards and consumer lending.
"I believe there is room for further expansion of credit fintechs," Damaso said, "and new regulations would pave the way for that development within a secure judicial framework."
The new rules would cover fintechs teaming up with banks to offer loans, those providing securitized credit from institutional investors, and "peer-to-peer" lenders connecting borrowers directly with individual investors, Damaso said.
To further diversify Brazil's financial system, which is dominated by four local banks, the central bank is also trying to simplify the entry of foreign banks.
The central bank is in charge of approving licenses for foreign banks interested in operating in Brazil, but the process still hinges on a presidential decree recognizing the request as being in the national interest.
"The idea is for that recognition to be transferred to the central bank so that way you eliminate one step of the process," Damaso said.
Media representatives for the president did not immediately respond to a request for comment.
Last year, Banco do Brasil SA (BBAS3.SA), Itaú Unibanco Holding SA (ITUB4.SA), Banco Bradesco SA (BBDC4.SA) and Caixa Econômica Federal held 72.7 percent of the assets of the country's commercial financial institutions.
That concentration has grown as two major foreign banks announced their departure last year. HSBC Holdings Plc (HSBA.L) sold its local unit to Bradesco, and the central bank is evaluating Itaú's purchase of Citigroup Inc's (C.N) retail banking assets in Brazil.
(Reporting by Marcela Ayres; Writing by Alonso Soto; Editing by Brad Haynes and Lisa Von Ahn)