Brazil bank oversight under fire
Friday, November 12, 2010
Brazil’s central bank is being urged to strengthen its oversight of the banking sector after it alleged that Banco Panamericano, a medium-sized bank by assets, had concealed losses of about R$1bn (US$580m), apparently resulting from high rates of customer default at the height of the global financial crisis in 2008 and 2009.
Shares in Panamericano fell by 30 per cent on Wednesday after the bank’s difficulties became public and its management was replaced. But they rallied by 8 per cent in early trading on Thursday after its owner, Silvio Santos, a high-profile media magnate, said he would sell assets to repay an emergency loan of R$2.5bn from Brazil’s credit guarantee fund (FGC), a private institution funded by the banking sector.
“Panamericano had a portfolio of about R$8bn and non-performance rates of about 20 per cent,” said a credit analyst at a fund management firm who asked not to be named. “They were lending to the bottom of the pyramid, which can be very problematic.” He said there was no evidence that Panamericano’s difficulties had contaminated other banks.