Bank failures reflect previous financial excesses

The recent seizure of a handful of small Brazilian banks and a Colombian brokerage underline the extent of financial excesses in parts of the region in recent years. While there may be additional bank failures in the future, the authorities have the capacity to prevent them from triggering a systemic financial crisis. But signs of stress in the banking system underscore our view that the recent pace of credit growth has been unsustainable and needs to slow.