Hidden and mystification of central bank relationship with banks: observations on brazilian experience

Abstract

Notwithstanding the huge relevance of the issue and the potential risks involved, the relationship of central banks with banks is systematically hidden in the debate about central banks’ role in the contemporary economies and in the legal framework of its competences and attributions. When the issue emerges, due to banking crises and financial losses to public sector, comes into sight a powerful mystification of questions involved, treated as “inevitable” and “technical” problems to be maintained out of the “political” debate. After reviewing the role of central banks as lenders of last resort, the article detaches the Brazilian experience, especially the hiding and mystification process applied to BCB action in the Banco Econômico case. It presents, also, a summary of the challenges, resulting from these problems, to transparency, regulation and democratic control by society of the financial sector and CB. Keywords: Central banks; lender of last resort; Proer; Banco Econômico.