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Continuing our series of translating the message of every chapter of the Yellow Book into English—so that those who do not speak Portuguese, or who cannot access the book due to geographic distance, can still follow its ideas—today we will discuss another chapter that is very present in the current public debate: the book’s proposals to address the problems related to the Brazilian banking oligopoly.

This theme is discussed in the third chapter of the fifth fascicle of the Yellow Book, titled “Banks, Public Enemies.” The subject has gained renewed attention due to the arrest of the owner of Banco Master, Daniel Vorcaro, who was involved in a multibillion-real fraud scheme at a bank outside what we usually consider Brazil’s major banking oligopoly. This case highlights an important message: changing the system alone does not guarantee that everything will improve. Risks are always present.

The chapter of the Yellow Book recognizes this reality, yet it does not limit itself to diagnosis. It moves forward and offers solutions which—just as we saw in the Vorcaro case—may be bitter, but the inertia of the current system guarantees only one thing: persistent inefficiency. Let us begin with the chapter’s initial diagnoses before arriving at its proposals.

After analyzing the underlying causes, the book does not shy away from presenting its reform propositions, which prioritize greater competitiveness. It acknowledges that one of the side effects could be a temporary reduction in banking safety, as seen in the Banco Master case. But it argues that, in the medium term, these risks would be reduced through increased competition, the entry of foreign banks, administrative reforms, privatization of public banks, a new constituent process allowing for banking deconcentration, lower spreads, and lower interest rates. According to the chapter, these combined measures would ultimately bring far greater benefits to users and to the country than the “banking safety” we have today—an environment that ends up protecting the existing oligopoly by fueling the fear of new Banco Master-type scandals.