4. The Global Financial Crisis and Banks in BRIC Countries: A Comparative Perspective

Banks are the cornerstone of the financial system, especially in developing countries where capital markets are underdeveloped. The global financial crisis in 2007–2008 caused great turmoil in the banking sectors of the developed world with the clustered collapses of international financial giants in the advanced economies. However, there have been fewer bank failures in transitional and emerging economies and it is important to understand the role of the banking sector in developing countries and transitional and emerging economies. This chapter takes a comparative approach and puts Chinese banking into the context of the emerging economies. The importance of the banking systems in Brazil, Russia, India, China, and South Africa (hereinafter the BRIC refers to Brazil Russia, India, and China and the BRICS includes South Africa) has been rising in the global banking marketplace, noticeably witnessed by the launch of the New Development Bank in 2015. Moreover, BRICS’ banking sectors have withstood the storm wave of the 2008–2009 global financial crisis without major bank failures. This chapter, in particular, examines the impact of bank risk-taking and market concentration on bank performance from the perspective of emerging economies. The rest of this chapter unfolds as follows. Section 4.1 reviews related literature on developing countries and transitional and emerging economies. Section 4.2 introduces the economies and the evolutionary background of the banking systems in BRICS. Section 4.3 outlines the research methodology—the output distance function approach—and describes data. Section 4.4 discusses empirical results, and Sect. 4.5 concludes.