Brazil’s Deposit Insurer Nears R$41 Billion Payout in Banco Master Liquidation as Rate Cap Limits Exposure

Overview

• An agreement signed in May capped Banco Master CDB yields at 100%, a measure cited by the Central Bank in a report to the TCU as curbing the deposit insurer’s potential losses.
• The Central Bank intervened after a liquidity crisis and ordered Banco Master’s liquidation, and Finance Minister Fernando Haddad called the case possibly the largest bank fraud in the country’s history.
• Eligible investors are reimbursed up to R$250,000 per claim under FGC rules, and market specialists say the fund has sufficient assets and liquidity to cover the expected payments.
• Analysts expect reimbursed money to shift toward safer options such as Tesouro Selic and top-tier bank products, with medium-sized banks likely to face tougher funding conditions and some flows heading to real estate funds.
• Authorities and market participants are weighing changes to make insurance costs more sensitive to issuer risk and to increase transparency and prudential limits for digital investment platforms seen as systemically relevant.