SAO PAULO: Brazil’s Finance Ministry signalled that it will help strengthen the regional bank controlled by the nation’s capital city after the lender was hurt by the fallout from the failure of Banco Master SA.
The government pledged to ease fiscal rules to help the city secure a loan of billions of reais with the country’s deposit insurance fund, known as FGC.
That will help it capitalise Banco de Brasilia SA as the lender seeks to plug a hole created by its transactions with Banco Master.
“We established that the Distrito Federal government will borrow money with the FGC, with a bank syndicate acting as a guarantor,” Dario Durigan, Brazil’s finance minister, told journalists in Brasilia.
Public and private banks will be the guarantors with the city government providing collateral, he added, without identifying the banks or discussing how much money Brasilia will ultimately borrow.
This marked the first time the federal government moved to help local officials shore up Banco de Brasilia , which was hit by deals it made with Banco Master involving credit portfolios that authorities said were fabricated.
It got 21.9 billion reais in portfolios from Master, and estimated that roughly 2.6 billion reais of the total would result in losses, Bloomberg reported last month.
In April, Banco de Brasilia shareholders approved a capitalisation of as much as 8.8 billion reais, part of a set of measures to shore up its liquidity. — Bloomberg
