Brazil's federal audit court, the TCU, has completed a technical review of how the central bank managed the liquidation of Banco Master and found no reservations or recommendations regarding the regulator's actions, a person familiar with the matter said. The source asked not to be named because the process remains under seal.
According to the source, the court allowed some central bank personnel to read the conclusions but did not grant access to the actual document. The central bank has not provided a public response to requests for comment.
In a statement, the audit court reiterated that the matter is confidential and declined to provide further details. The court also said it has not yet set a date for a formal ruling on the case.
The TCU's involvement in Banco Master's liquidation - an intervention that market participants regarded as unusual for a bank wind-down in Brazil - has drawn close attention. That scrutiny intensified after Judge Jhonatan de Jesus, who is handling the file at the audit court, indicated he might consider measures to prevent the sale of assets during Banco Master's liquidation. Judge Jesus ordered an inspection of the central bank documents that formed the basis for the regulator's decision to close the lender.
Last Thursday, the judge increased confidentiality protections in the case, restricting access to filings and effectively removing the central bank's full access to the proceedings despite the central bank being a party to them. The TCU said the move aimed to prevent leaks - including information classified as confidential by the regulator - and that it was carried out with the central bank's knowledge.
Banco Master, which held under 1% of Brazil's banking assets, was liquidated in November after the central bank cited a severe liquidity crisis, sharp financial deterioration and serious rule violations. The shutdown coincided with a federal police operation into allegations that the lender issued fraudulent credit securities. That operation led to the arrest of the controlling shareholder, Daniel Vorcaro. Vorcaro was later released but ordered to wear an electronic ankle monitor.
The bank's rapid expansion and its sale of high-yield debt marketed as covered by the FGC credit guarantee fund intensified scrutiny of the collapse. The privately owned FGC has estimated it will pay 40.6 billion reais to about 800,000 investors as a result of Banco Master's liquidation.
Context and implications
This technical review from the audit court finds no procedural reservations about the central bank's conduct but leaves key aspects of the case under seal. The restricted circulation of the conclusions to selected central bank staff, rather than full disclosure of the document, maintains a layer of opacity about the TCU's internal assessment. Meanwhile, judicial steps to tighten confidentiality and to inspect regulator records underscore continued judicial scrutiny of the liquidation process.
The outcome of a formal ruling remains pending and the TCU has not specified when it will be scheduled.