If BRB's plan fails, the Federal District government's contribution could reach R$ 6 billion.

Brasilia - All of BRB 's efforts over the next six months will be focused on trying to execute the recovery plan submitted to the Central Bank on Friday, February 6th, in an attempt to avoid any financial contribution from the Government of the Federal District (GDF).

But if the mission fails or is not entirely successful, internally at the public bank in Brasília, the most drastic possibility is not ruled out: a full contribution from the local government, which could reach up to R$ 6 billion, a source from the bank told NeoFeed on condition of anonymity.

This amount, which ranges from R$ 5 billion to R$ 6 billion, represents the size of the deficit identified by the Central Bank and has been kept secret even by the president of BRB, Nelson de Souza. The Federal District government controls BRB.

The idea is that BRB's plan will – at a minimum – reduce the size of any potential contribution from the local government to the bank. If this happens, this option would cause enormous fiscal and political strain for the administration of current governor Ibaneis Rocha (MDB), whose candidacy for the Senate is increasingly considered unlikely in Brasília.

This would imply injecting public money into the bank – from the district budget (of the GDF), which includes resources for other areas. In other words, everything that Ibaneis and his allies don't want.

The plan that Souza personally delivered to the Central Bank involves: the sale of assets acquired from Banco Master (such as buildings, credit portfolios like payroll loans, etc.); a loan from the Credit Guarantee Fund ( FGC ); a loan through a consortium of private banks that is being formed; and the creation of a Real Estate Investment Fund (REIT) made up of properties owned by the Federal District Government.

All these measures still need to be approved by the Legislative Chamber of the Federal District (CLDF). There, Ibaneis has an allied base of district deputies that forms a majority, who would approve the plan without difficulty. The issue is implementing the plan in conjunction with the market.

There are potential obstacles to the plan's execution that will depend on negotiations conducted by the BRB president's team. For example, there is no certainty about whether the FGC (Credit Guarantee Fund) will participate, or whether the sale of assets will be entirely successful or sufficient to cover the shortfall, which is still being assessed.

“Not all the portfolios that BRB acquired from Master are bad debts. Some portfolios still exist. So, the bank has amounts to receive from the liquidator,” says the source. “The longer he delays, the more he hinders BRB's liquidity management.”

There is an assessment from people at BRB familiar with the negotiations that, after the liquidation of Master by the Central Bank on November 18, there has been some delay by the liquidator in reimbursing the creditor BRB.

Investors who held Master bonds with the FGC have already managed to recover their investments, but BRB itself has not yet received everything it is entitled to.

BRB also committed to measures to improve its corporate governance in its report to the Central Bank. NeoFeed showed that governance is one of the weaknesses of the public bank , which were exposed after the crisis with Master.

One day after the current president of BRB took office, at the end of November last year, the bank attempted to increase the maximum limit on transactions allowed to senior executives, board members, and even the president himself (related parties).

In addition to the plan that BRB presented to the Central Bank, there are also other alternatives being considered internally at the bank, which include the sale of part of its shares to state-owned companies in the Federal District (of the DF government).

In a statement, BRB explained that the plan constitutes a "set of preventive capital replenishment actions to be implemented in the next 180 days, should the need for financial contributions be proven." It added that the eventual amounts will only be determined after the conclusion of the ongoing investigations.