(Bloomberg) — Brazil Central Bank President Gabriel Galipolo met with top bankers over the weekend as they sought to mitigate the impact of the sale of Banco Master SA, a smaller bank that had grown rapidly with backing from the nation’s financial safety net.
The officials discussed the governance of the deposit-insurance fund, known as FGC, as well as the fate of Banco Master, according to people with knowledge of the matter.
In attendance were the chiefs of Itau Unibanco SA, Banco Bradesco SA, Banco Santander Brasil SA and Banco BTG Pactual SA, according to a statement from the Central Bank. Daniel Lima, the head of FGC, was also present at the session on Saturday in Sao Paulo.
The Central Bank said in the statement that it “periodically holds meetings with members of the National Financial System to deal with issues relating to financial stability,” to discuss “current issues and especially to conciliate the participants’ schedules.”
It’s also set to hear from executives at smaller private banks in coming days, one of the people said.
The executives left the meeting without speaking to reporters. Representatives for the banks didn’t immediately return emails left outsider regular business hours on Sunday to discuss the meeting.
Last week, BRB-Banco de Brasilia SA, a small public-sector bank, struck a deal to combine with Master, though some assets would be carved out prior to the acquisition. That raised questions on the fate of the remaining part of the bank, which includes riskier assets such as equity stakes in small and mid-size companies and a portfolio of bonds linked to court-payment disputes.
Financial companies and regulators would like to avoid a hypothetical liquidation or intervention of Banco Master, since a significant portion of FGC’s resources could be involved.
Banco Master fueled years of robust growth by paying above-market rates on individual investors’ deposits. It lured clients by marketing a benefit from FGC, which is funded by reserve requirements from banks and owned by the biggest lenders. The fund insures deposits in Brazil up to 250,000 reais ($42,788) per individual per bank.
At the end of December, Master had about 16 billion reais ($2.7 billion) in liabilities due this year, according to the bank’s financial report.
–With assistance from Dayanne Sousa, Peter Frontini and Cristiane Lucchesi.
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