In this edition of “Case Study Solutions,” the case that produced the most important results involved a BRICS Country with a sizable offshore banking sector. The offshore banking sector, which was largely outside the regulatory framework in Brazil, required the Bank of Brazil to come up with a set of strict new guidelines to ensure that it was complying with the Brazilian financial regulations.
The case study solution was based on a detailed analysis of the BRICS Banking Regulations. The case involved three banks that were not regulated by the Brazilian government. Each of the three banks had an office in the United States and each bank’s executives had broad authority to make decisions affecting all of the companies involved.
The first bank, a major bank that lent money to Brazilian consumers and corporate clients, received complaints from its U.S. affiliate, which incurred significant losses due to non-compliance with the Bank of Brazil regulations. The Brazilian executive responsible for overseeing the process was fired. This made the issue of non-compliance more difficult, especially because the executive was one of the key players in the bank’s accounting and financial functions.
The second BRICS Country-offshore bank became aware of the U.S. affiliate’s failure to comply with the Bank of Brazil regulations. This bank needed to take immediate steps to correct its problems, because if it did not do so, it could be forced to shut down.
The Bank of Brazil recommended that the Bank of Brazil transfer all U.S. dollar assets held by the Brazilian branch to the Brazilian bank to avoid future problems. When the Brazilian bank did not follow the Brazilian bank’sadvice, the Brazilian bank said that it would close the branch, a major setback for U.S. business in Brazil.
The Bank of Brazil set up an audit committee to oversee the activity of the Brazilian bank in the United States. The auditors had authority to shut down branches that failed to comply with the Brazilian laws. This required the bank to make structural changes.
The third case study solution involved a different, but similar problem. The second BRICS Country-offshore bank was a large international bank that lent money in several countries and had operations in Latin America.
Because the bank’s foreign currency loan accounts were subject to anti-corruption controls, the bank was required to conduct an annual anti-money laundering review. The Bank of Brazil instituted strict controls to ensure that it complied with the requirements of the Bank of Brazil regulations. However, the bank’s executives retained broad authority to determine how these controls were implemented.
The bank’s senior executives decided to investigate possible bribery involving senior members of the bank’s management. When the bribery charges were brought against the bank’s executives, the bank was forced to divest many of its assets. It also faced a penalty from the Brazilian government for not meeting the requirements of the Brazilian bank’s regulations.
These examples illustrate the types of problems that can occur when developing countries do not adhere to the BRICS Development Bank regulations and principles. When a BRICS Country-offshore bank is affected by non-compliance, the BRICS Development Bank reviews the bank’s rules and structure. As a result, when a BRICS Country-offshore bank is facing problems, the Bank of Brazil’s audit committee and financial management inspections have much power to implement corrective measures.
Finally, the BRICS Bank offers a number of other services and reports to the global community. These include financial services for emerging markets, financial services for member states of the G20, financial services for developing countries, and international development finance.