Credit stabilization through public banks: the case of Banco Estado
A novel element in the policy mix that responded to the 2008- 2009 financial crisis was the explicit role given to BancoEstado a publicly-owned commercial bank to alleviate the contraction in domestic credit provided by the banking sector. In order to aid its mission BancoEstado was capitalized by 500 million dollars in 2009 ensuring that it would not be bounded by its loans to capital ratio. While this in a sense is quasi fiscal policy (with the public sector channeling resources to potentially credit-constrained firms) and could thus be seen as similar to policies adopted in the U.S. at the same time credit was not provided directly by the government but through a bank that competes directly and successfully within the banking sector. While publicly owned BancoEstado operates as a (constrained) profit-maximizing institution that tries to attain certain public policy objectives (like providing access to banking in remote areas) while still being competitive and profitable.