Central Bank Liquidates Banco Master as Police Allege R$12 Billion Fraud

Overview

• Federal Police arrested controller Daniel Vorcaro and other executives in Operation Compliance Zero, saying the alleged fraud could reach about R$12 billion.
• A federal judge cited robust signs of organized criminal conduct, suspended BRB’s CEO and CFO for 60 days, and detailed transfers of up to R$16.7 billion between BRB and Master with evidence of fabricated credit portfolios.
• The Banco Central ordered extrajudicial liquidation of the Master conglomerate for a severe liquidity crisis and regulatory violations and said the case poses no systemic risk to the financial system.
• The BRB said it had flagged documentary divergences to the Banco Central, replaced most portfolios acquired from Master, remains operational, and will hire an external audit after a court order clarified the bank itself was not subject to an asset freeze.
• Eighteen state and municipal pension plans invested R$1.876 billion in Master letras financeiras without FGC coverage, and the Federal Police will investigate those exposures as the FGC prepares to pay insured creditors up to the legal cap.