Brazil’s central bank has shut down Banco Master, halting the mid-sized lender’s operations and placing it into extrajudicial liquidation after months of escalating liquidity strain—just as police arrested its controlling shareholder, marking one of the country’s most dramatic financial interventions in recent years.
A central bank–appointed liquidator will now oversee creditor claims and asset sales, effectively ending a turbulent chapter for Master, which expanded aggressively by issuing high-yield debt through investment platforms. A last-minute rescue attempt collapsed after Fictor, a potential buyer backed by investors from the United Arab Emirates, withdrew only hours after announcing a deal.
Brazil’s Finance Minister Fernando Haddad defended the regulator’s decision:
“The central bank is the regulatory authority… to have reached this point, the process must be very robust.”
Federal police launch fraud probe; controlling shareholder detained
Brazil’s federal police confirmed an operation targeting the issuance of fraudulent credit securities, aiming to freeze 12.2 billion reais ($2.28 billion). Two sources told Reuters that Master’s controlling shareholder Daniel Vorcaro was arrested.
The investigation also involves the sale of Master’s loan portfolio to BRB, the state-run bank that had attempted to acquire Master before the central bank blocked the deal in September. A court has now suspended BRB CEO Paulo Henrique Costa for 60 days. Search and seizure warrants were executed at BRB headquarters.
BRB said it continues to operate normally, emphasizing its commitment to transparency and compliance.
Investors and pension funds absorb heavy fallout
Master’s debt had been sold as being protected by the FGC deposit insurance fund, which covers up to 250,000 reais ($46,926) per investor. The FGC confirmed its guarantee mechanism will be activated, though the total payout remains unclear.
However, several large creditors hold securities not covered by FGC, highlighting broader systemic exposure:
- Oncoclinicas shares dropped 8.7%; the medical group holds 478 million reais in Master debt, redeemable through 2027.
- Rioprevidencia invested 960 million reais in Master-issued bills—uninsured.
- Amprev disclosed 426 million reais in similar uninsured financial bills.
None of the institutions responded to requests for comment.
Unraveling of a high-growth strategy
Master relied heavily on high-yield debt issuance, marketed under FGC protection. When liquidity pressure spiked, the bank needed fresh capital to meet maturities—but failed to secure it in time.
With liquidation now in effect, an administrator will compile a list of debt holders as the FGC prepares to reimburse eligible investors.
Broader implications for Brazil’s financial system
The collapse raises urgent questions about risk oversight, debt transparency, and the vulnerability of lightly regulated investment products. The failed acquisition attempt and fraud allegations add further pressure to Brazil’s already strained credit ecosystem.
As the dust settles, regulators, pension funds, and corporate creditors may be forced to reassess their exposure to high-yield structures that appeared safe on the surface—but masked deeper structural weaknesses.