By Brazil Stock Guide – A court in Brazil’s Federal District on Monday (March 16) temporarily blocked a government plan to use public land as collateral in a capital-raising effort for Banco Regional de Brasília (BRB).
Judge Daniel Eduardo Branco Carnacchioni of the 2nd Public Treasury Court issued a preliminary injunction suspending a recently approved law that authorized the use of government-owned properties to support the bank’s recapitalization.
The measure halted a strategy designed to stabilize Banco Regional de Brasília (BRB) after the lender faced a liquidity crisis tied to roughly 12 billion reais in securities purchased from Banco Master. The instruments were later found to lack backing by real assets.
The capital plan allowed the Federal District government — BRB’s controlling shareholder — to pledge nine public properties as collateral to help raise as much as 6.6 billion reais in financial markets.
The bank had proposed a broader capital increase of up to 8.6 billion reais to comply with regulatory requirements in Brazil’s financial system following the deterioration of its balance sheet.
In his ruling, the judge said the law failed to demonstrate how the operations would serve the public interest and questioned whether a district law could determine instruments for a bank’s capitalization.
“I determine the immediate suspension of any act provided for in the legislation that is currently in execution, until further deliberation by this court,” Carnacchioni wrote in the decision.
The injunction was granted in response to a popular lawsuit filed by politicians from Brazil’s Socialist Party (PSB), who argued the measure could expose public assets to financial risk.
Political Dispute Over the Plan
The law authorizing the capital plan passed the Federal District Legislative Chamber by 14 votes to 10.
Opposition lawmakers criticized the proposal, describing it as a potential “blank check” for the district government because it lacked detailed information on financial risks and potential impacts on public assets.
Some legislators also raised concerns that government properties could be transferred to BRB and later traded in financial markets through real estate funds.
Technical staff within the legislative chamber had previously recommended against approving the bill.
Environmental groups also opposed the proposal, citing the inclusion of the Serrinha do Paranoá area among the properties listed in the operation. The region is considered environmentally sensitive.
Investigation Into Bank Securities
The securities purchase took place during negotiations for BRB to acquire Banco Master, a deal that was later blocked by Brazil’s central bank.
The transaction is currently under investigation by Brazil’s federal police and is being reviewed by the Supreme Federal Court under Justice André Mendonça.
Former BRB executives are also under investigation.
Banco Master owner Daniel Vorcaro has been held in preventive detention since Tuesday (March 4) under an order from Mendonça as part of a probe into alleged crimes against Brazil’s financial system.
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