Brasilia - Pressed for time, the BRB leadership now sees a concrete hope of unlocking its capitalization plan and finally obtaining the long-awaited approval from the National Treasury for a R$ 6.6 billion loan that the local government (GDF) is trying to secure from the Credit Guarantee Fund ( FGC ) and private banks: a negotiation with the Supreme Federal Court (STF), which could mediate the conflict.
The state-owned bank of Brasília signed an agreement with the Central Bank to execute its financial capitalization plan by Friday, May 29th – a deadline that will be difficult to meet if the Treasury does not guarantee a loan with the FGC (Credit Guarantee Fund) and a consortium of private banks, which have been refusing to release the billions of dollars in funds without a guarantee from the Federal Government.
Facing difficulties attracting private investors, BRB (Banco de Brasília) went to the Supreme Court to compel the Treasury to approve the operation with private financial institutions and the FGC (Credit Guarantee Fund). Supreme Court Justice Luiz Fux gave the Attorney General's Office (AGU) 24 hours to respond. He will hold a meeting on Tuesday afternoon, May 26th, between the Governor of the Federal District, Celina Leão, the Minister of Finance, Dario Durigan, and the AGU.
The Supreme Court's objective is to pacify the situation and find a definitive solution for the bank, since private operations alone are not sufficient to resolve BRB's problem. The deficit is estimated at R$ 8.8 billion, but it is already around R$ 9 billion, in a scenario where the institution has not yet published its 2025 financial statement (the last one refers to the second quarter of last year).
The Ministry of Finance is still resisting endorsing the operation, since the fiscal rating of the Federal District, which controls the bank, is very low (grade “C”) and in theory disqualifies the institution from receiving such a public guarantee. And President Luiz Inácio Lula da Silva (PT) has not even met with the governor to discuss the possible endorsement.
Furthermore, a senior source at BRB, speaking to NeoFeed , points out that if the Treasury acts as guarantor for the Federal District, there is a high risk of creating an undesirable precedent for other states that also have a poor fiscal situation – sometimes even worse than the federal capital – and have not been able to obtain similar guarantees due to fiscal rules.
"Other states with Capag [Payment Capacity, a Treasury indicator for evaluating the finances of states and municipalities] will also want to go to the Supreme Court," says the source.
However, the fact that BRB still holds a portfolio of R$ 30 billion in judicial deposits could be a decisive factor that would lead the Judiciary to sympathize with the dramatic situation of the state-owned bank, says the source. This is because it would also be in the interest of the Judiciary to resolve this deposit imbroglio to avoid injunctions that would further disrupt the situation.
In addition to the Federal District, state courts in Paraíba, Bahia, Alagoas, and Maranhão are holding these BRB deposit funds in court. This domino effect on the states will be a factor in the Supreme Court's decision regarding the fate of BRB. If the bank is liquidated, these funds would be seriously compromised, as they are not covered by the FGC (Credit Guarantee Fund).
Bank executives believe that the "salvation" for BRB lies in this Treasury guarantee, because in this way the consortium of banks together with the FGC (Credit Guarantee Fund) would become viable, preventing the institution from suffering intervention from the Central Bank. This path would inject capital into the bank and avoid layoffs due to a future privatization process.
In recent days, there has been a bit more optimism in the bank's corridors. This is because the "concrete signs" required by the Central Bank to approve BRB's plan have begun to materialize, even though they are insufficient to resolve the institution's entire financial problem.
On Monday, May 25th, BTG Pactual purchased R$1 billion worth of securitization quotas from BRB's active debt. And by Friday the 29th, the bank is expected to sell an additional R$2.5 billion. These amounts represent real capitalization and, in the best-case scenario, would be added to the R$6.6 billion loan, should the Treasury ultimately decide to guarantee the operation.
And in the area of liquidity, the bank has also already received part of a transaction involving the sale of R$ 15 billion in Master assets held by BRB through Quadra Capital, an independent asset manager that administers ports in Espírito Santo. At least R$ 1 billion of the initial R$ 4 billion projected has already been accounted for by the state-owned bank.
Liquidation risk
If the solution via the Supreme Federal Court (STF) doesn't work, however, the risk of liquidation remains , as NeoFeed has already shown. And it hasn't been ruled out by people at the bank who are following the negotiations.
The Central Bank is closely monitoring whether BRB will actually be able to execute its financial recovery plan. And as the difficulties faced by the Brasília-based public bank in raising capital accumulate, this scenario is likely to persist, according to sources at the state-owned bank.
NeoFeed has learned that the Central Bank does not want to make an exception for the BRB case, in the sense of easing the burden on the bank. However, the monetary authority is closely monitoring the signals that will be given by the Supreme Federal Court.
Even if the recovery plan for the public bank in Brasília is not fully implemented, as initially agreed, the Central Bank is also considering allowing more time for operations to develop, now that resources are entering BRB's coffers.
