Returns on the federal public banks versus the opportunity cost of funds invested by the National Treasury

Abstract

Objective: The aim of this study is to assess whether the yields earned by the federal public banks remunerate the National Treasury to a enough degree, to cover the opportunity cost of the capital invested by the Federal Government, which is defined as the benchmark Selic base interest rate. Methodology: This involved using four different metrics for the return on economic capital invested by the Treasury, on the basis of the balance sheets of the Banco do Brasil (BB), Caixa Econômica Federal (CEF), Banco Nacional do Desenvolvimento Econômico e Social (BNDES) [National Bank of Economic and Social Development], Banco do Nordeste do Brasil (BNB) and Banco da Amazônia (BASA), from 2002 to 2018. Results: The empirical comparison of parametric and nonparametric tests revealed that, on the whole, the federal public banks offered economic returns that were higher than the fundraising costs of the National Treasury. On the other hand, when examined individually, the results were as follows: i) the BB and CEF, that have retailing practices, achieve results that are consistently better than Selic; ii) despite their higher nominal returns, BNDES and BNB, did not record a statistically significant difference; and iii) BASA recorded returns that were lower than the opportunity cost. Contributions made by this study: The results of this study have led to a better understanding of the relations between the National Treasury, and public financial institutions, with the reservation that they are not restricted to the economic/financial factors of this relationship and do not cover making inferences or dimensional testing such as efficiency or priority claims in the application of public funds.

Keywords

• public banks; federal banks; cost of debt; national treasury; bank yield.