Brazil's BRB may book nearly $1 billion loss from Banco Master deals, central banker says

By Ricardo Brito

BRASILIA, Jan 29 (Reuters) - Brazilian state-run bank BRB will likely have to set aside more than 5 billion reais ($970 million) to cover transactions with failed lender Banco Master, a central bank director told the federal police in testimony seen by Reuters.

The figure is nearly double the initial ?provision of about 2.6 billion reais the central bank had required from BRB to cover potential shortfalls related to ?Master, which was liquidated in November.

"The size of the provision in BRB's balance ?sheet will be very large. More than 4 billion reais, more ?than 5 billion. ?The likelihood is that it exceeds 5 billion reais," central bank director Ailton Aquino testified in late December.

Aquino testified ?as part of an investigation led by ?the Supreme Court into alleged fraud involving transactions between BRB and Master.

BRB SAYS CAPITALIZATION PLAN TO ADDRESS SHORTFALLS

BRB said in a statement that any ?estimate of capital needs will be based ?on central ?bank estimates and an independent investigation. It added that a capitalization plan has already been designed to address potential shortfalls.

The central bank did not immediately ?respond to a request for comment.

BRB, which is controlled by the Federal District's government, announced plans to acquire Master, but the deal was blocked by the central bank in September as the privately owned bank faced a severe liquidity crisis.

BRB had also been buying securities from Master, some of which may have been tied to non-existent ?assets, according ?to ongoing investigations.

Transfers between the lenders totaled 16.7 billion reais from July 2024 to October 2025, according to a November court ruling.

Aquino, the head of ?supervision at Brazil's central bank, said in his December testimony that the monetary authority had raised concerns about BRB's transactions since March 2025 through a series of formal notices.

Master was liquidated on the same day the federal police launched an operation targeting alleged fraud at the bank. The bank's owner, Daniel Vorcaro, was arrested but later released with an ankle monitor.

Vorcaro's lawyers said the ?credit portfolios involved in the BRB deals were swapped for assets that were regularly recorded, audited and priced under formal risk-classification methods. They added that BRB approved the asset purchases in line with technical and ?accounting standards.

($1 = 5.18 reais)

(Reporting by Ricardo Brito; Writing by Gabriel Araujo; Editing by Rod Nickel)