Banco Master: How will the confrontation between Vorcaro, former president of BRB and director of BC, unfold | Finance

The face-off is a procedure used in police investigations and legal proceedings to confront different versions of facts presented by people. The aim is to clarify contradictions and assist in the investigation or formation of evidence.

Why was a confrontation triggered against Banco Master?

The measure was requested by Minister of the Federal Supreme Court (STF) Dias Toffoli and is part of the investigation process into allegations of financial fraud committed by Banco Master, which allegedly generated 12.2 billion reais through the issuance of fake credit securities sold to Banco de Brasília (BRB).

According to Toffoli, “the subject of the investigation is limited to the examination of the negotiations which involved the transfer of securities between financial institutions — under the control of the monetary authority, in accordance with legal provisions.”

Who will participate in the confrontation on Banco Master?

Toffoli wants to oppose the versions of Daniel Vorcaro, owner of Master, and Paulo Henrique Costa, former president of BRB, which are the subject of an investigation. Ailton de Aquino Santos, director of supervision at the Central Bank, will participate, but not as an investigator. British Columbia requested clarification on whether the technician was called as an accused, an offended party or a witness. In an order signed on Saturday (27), Toffoli said that Aquino was not under investigation and that the involvement was of “particular importance” due to “the action of the national regulatory authority” in the matter.

Where will the confrontation over the Master affair take place?

The format of the confrontation will be mixed. Vorcaro, for example, must participate by videoconference. Paulo Henrique Costa must go in person to the Supreme Court to participate in the proceedings. BC did not specify whether Aquino would participate virtually or in person.

Who is leading the confrontation on the Master affair?

Although Toffoli ordered the confrontation and is the rapporteur of the case, he will not personally direct the proceedings. Conduct will be the responsibility of a judge assisting the minister.

What is the scenario of the confrontation with Banco Master?

According to sources, from 2:00 p.m., before the confrontation, the statements of Vorcaro and Costa will be transmitted to the Federal Police (PF). Since the case went to the Supreme Court, one of the criticisms leveled against Toffoli is that the procedure would make no sense given the lack of testimony to date and, therefore, the conflicting versions. The Attorney General’s Office (PGR) even requested the suspension of the confrontation, but Toffoli refused. With testimonials, inconsistencies may arise. If this happens, it will be necessary to compare the versions presented by Vorcaro and Costa. There is no specific time for the procedure to end. It will depend on how many doubts the Supreme Court raises after the testimony.

Why is Aquino participating in the showdown with Master and not the other BC directors?

In Toffoli’s ruling on Saturday, the minister said only that Aquino’s participation is of “particular importance” in clarifying the facts. According to the minister, the objective of the current investigation is to understand the negotiations which “revolved around the transfer of securities between financial institutions”. Thus, he continues, “the action of the national regulatory authority (the BC) and its participation in the testimonies and confrontations between the people investigated is beneficial”. Aquino was in favor of selling Master, unlike the technicians tasked with liquidating the bank. Because of this position, some believe that the participation of the director of BC could possibly favor the defenses.

Does Aquino’s call to confront the Master have any legal basis?

The confrontation is provided for both by the Code of Civil Procedure and by the Code of Criminal Procedure. According to the provisions, in addition to the accused and offended parties, witnesses can also participate in the proceedings. In other words, the decision to maintain Aquino’s participation is not illegal. Experts, however, question this decision. Constitutionalist Vera Chemim, for example, asserts that the procedure should have been requested by the PGR, and not automatically defined by Toffoli.

Why is the confrontation around the Master considered so sensitive?

The interlocutors emphasize that a possible reversal of the extrajudicial liquidation of Banco Master would undermine the institutional authority of the Central Bank and create legal insecurity.

Sources heard by Value believes that the turnaround would not solve the bank’s problems, because Master would have enormous difficulties obtaining financing on the market, would remain insolvent and could go bankrupt again in a few months. In addition, there would be a risk of uncertainty regarding payments from the Credit Guarantee Fund (CGF), which could affect the confidence of depositors and investors.

The market fear is that judicial review of the technical merits of a liquidation will weaken the regulatory framework, trigger bank runs as creditors try to take what they can of Master’s assets, and greater caution over the FGC’s own guarantee. Additionally, it could make it even more difficult to sell Will Bank, which is in negotiations with Mubadala, Abu Dhabi’s sovereign wealth fund.

What was the reaction of financial sector entities to the call for confrontation?

Entities representing the financial sector have published a joint note to defend the actions of the Central Bank. The note is signed by the Brazilian Federation of Banks (Febraban), the Brazilian Association of Banks (ABBC), Zetta and the National Association of Credit Institutions (Acrefi), which together represent 244 institutions, including banks, financial institutions and fintechs.

The associations argue that intervention and settlement decisions are technical and prudential, essential to preserving financial stability, and that allowing the merits of these decisions to be reviewed by other institutional actors could compromise regulatory predictability and confidence in the system.

In a separate note, the Brazilian Association of Financial Entities and Capital Market (Anbima) also defended the autonomy and independence of British Columbia to adopt extrajudicial settlements when necessary. According to the entity, a possible reversal of the BC’s decision would weaken the autonomy and confidence of the regulator in the pillars of a solid, competitive and stable market.