Brazils central bank shuts down $16-billion bank following federal fraud investigation

SAO PAULO (AP) — of brazil On Tuesday, the government shut down Banco Master, whose assets reached $16 billion, after federal police investigated widespread fraud.

Central Bank governor Fabio Carlos Ferreira said in his statement that all assets belonging to Banco Master and its current and former managers were seized. The bank, which has been experiencing liquidity problems for months, is now under the control of a government-appointed manager.

Customers and creditors will try to get their money back from a private organization sponsored by other banks, a standard procedure in previous Brazilian banking crises.

Hours earlier, Andrei Rodrigues, director general of Brazil’s federal police, told lawmakers that police had uncovered a fraud worth 12 billion Brazilian reais ($2 billion) in the country’s banking system. He has not publicly confirmed the case involving Banco Master or state bank BRB, which sought to buy Banco Master months ago but was rebuffed by authorities.

Brazil’s federal police said Tuesday’s raid focused on financial institutions suspected of fraud and careless management and involvement in a criminal organization, among other crimes. The force confirmed the arrest of six people, the freezing of billions of Brazilian reals and the seizure of luxury cars, works of art and watches.

The force also said the case involved one bank issuing bonds at interest rates well above the market average and another bank purchasing them despite liquidity risks.

Local media reported that several executives, including a key shareholder, were arrested. Brazilian federal police did not respond to a request from The Associated Press to verify the names of the banks involved in Tuesday’s raid and the names of executives and former executives arrested so far.

Shortly before Banco Master was shut down, Brazilian investment group Fictor announced that they had agreed to purchase it. The operation was cancelled.

Brazilian Finance Minister Fernando Haddad expressed his confidence in the central bank’s decision and said that the closure order was given after a comprehensive investigation.

“The central bank is the regulatory authority of the financial system and I am confident that the process must be very robust when it comes to this point,” Haddad said.

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