Crisis at BRB: without a plan B, the bank is held hostage by the District Chamber.

Brasilia - After a meeting that lasted over 11 hours between the president of BRB , Nelson de Souza, and district deputies, it became clear that the public bank of Brasilia, involved in the Banco Master crisis, has no "plan B" to raise capital other than relying on the goodwill of the local legislature to approve the controversial bill from the Government of the Federal District (GDF) to try to recover the financial institution.

“Without approval of the bill, we have no concrete direction,” says a senior source at BRB. “There may even be changes to the project. What is not possible is for it not to be approved. BRB's biggest concern today is its very existence.”

Federalizing or privatizing the bank is not under consideration, according to what Souza indicated to parliamentarians behind closed doors yesterday, NeoFeed has learned.

If the bill is not actually approved due to resistance, the remaining options would be the other items on the menu of solutions submitted to the Central Bank, but which are considered insufficient: selling assets acquired from Master (such as buildings, credit portfolios like payroll loans, etc.); negotiating a loan with the Credit Guarantee Fund (FGC); raising another loan through a consortium of private banks that is being formed; and creating a Real Estate Investment Fund (REIT) made up of properties owned by the Federal District Government.

However, the source points out that even these other measures would need to be approved by the Legislative Chamber of the Federal District (CLDF). In other words, BRB is held hostage by the district parliamentarians. "Part of the measures, if the bill is not approved, would depend on another bill, even if it were just to authorize a loan."

On the afternoon of Tuesday, March 3rd, a meeting of the leadership of the Legislative Chamber of the Federal District will take place to decide whether or not the proposal submitted by the Governor of the Federal District, Ibaneis Rocha (MDB), will be voted on.

On one hand, the GDF's allied base is now trying to put the project to a vote, after even government deputies expressed concern in recent days and suspected that the text would not be enough to recover BRB's finances. "Our main objective is to save the bank," said the president of the CLDF, Wellington Luiz (MDB), yesterday.

On another front, however, the opposition is demanding transparency from the local government and BRB itself, alleging that the nine properties offered as collateral for the bank to take out a loan of R$ 6.6 billion do not cover the estimated deficit of more than R$ 8 billion, according to the most up-to-date data released yesterday by Souza. In the first version of the project, however – two have been submitted so far – the government envisioned 12 properties, which included an abandoned building and an environmental park.

“He himself [the president of BRB] even told us yesterday: the R$ 6 billion won't save BRB. It will help BRB stay afloat,” says district deputy Gabriel Magno (PT) to NeoFeed .

"And BRB still has R$ 21.9 billion in assets from Banco Master that the bank can't sell; nobody wants to buy them. So this shortfall, this loss, could become even bigger, reaching stratospheric proportions," he adds.

Magno and the other members of the opposition point out that caution is needed so that the district representatives do not make another mistake: last year, the District Chamber itself approved the purchase of part of Master by BRB. Later, however, the Central Bank blocked the transaction and months later the Federal Police launched Operation Compliance Zero .

The police investigations culminated in the arrest of banker Daniel Vorcaro , owner of Master, and the removal from office of the then-president of BRB, Paulo Henrique Costa, and the financial director at the time, Dario Oswaldo Garcia.

“We have a study here that shows that these properties, valued at R$ 6 billion, could reach R$ 21 billion. If the project remains as it is, the Federal District will lose almost three times its public assets,” stated District Deputy Paula Belmonte (PSDB). “So today we have a responsible commitment to save BRB, but not to further squander the assets of the Federal District.”

The bill for the deficit

In addition to the GDF's bill requesting authorization for the District Chamber to approve a loan of R$ 6.6 billion , using local government public properties as collateral, BRB has also already called its shareholders to vote at an Extraordinary General Meeting (EGM) on March 18 on an increase in the financial institution's share capital of R$ 8.8 billion.

For the intended capital increase, BRB would make an offering of its shares through a minimum private subscription of R$ 529 million. To this end, up to 1.675 billion common shares will be issued at a fixed price of R$ 5.29 per share, as informed by the bank to the market.

Furthermore, BRB has been trying to sell loan portfolios to private banks and even mortgage loan portfolios to Caixa, according to NeoFeed .

The reputation and image crisis facing the public bank in Brasília, however, has been hindering the movement, which is even being personally led by the president, Nelson de Souza.