Risk rating agency raised the bank’s long-term rating from BBB (bra) to A-(bra) in October
Banco Master has adopted a series of governance and transparency measures in the last 2 years. In October, it received investment grade from the risk rating agency Fitch. Master had its long-term national rating raised from BBB (bra) to A-(bra).
This Fitch rating qualifies the bank to be at a level equivalent to that of large Brazilian financial institutions. The consequence is that it becomes attractive to receive resources from large foreign funds.
“From the beginning we had in mind that governance guidelines were essential”says Luiz Antônio Bull, statutory director of Banco Master. “We assume that the entire decision-making process is collegial, based on rules that respect regulatory acts and internal disciplines created with risk taking in mind”says Bull, who before joining the institution’s executive team was director of the Safra Group in Brazil and the United States and CEO of Banco Safra in New York, where he lived for more than a decade, until 2013.
Master’s positive assessment is a consequence of the bank’s investments in compliance and risk management structures. One of them was to create, in 2023, an advisory board, made up of a list of respected names in the financial market. The group includes former Central Bank presidents Henrique Meirelles and Gustavo Loyolla and former BC director Geraldo Magella.
An Audit Committee was also created this year, coordinated by Erich Schumann, CEO of Global Atlantic Partners LLC, a company based in Boston, United States. He is also an adjunct professor at Brandeis University in the field of governance and ethics. Schumann is German and worked at the Bank of Boston, alongside Henrique Meirelles, in the 1990s, in Brazil and New York.
“The Brazilian financial system has its challenges, with a high level of market concentration in the hands of 4 or 5 institutions”assesses Schumann. “This is complicated because the banks that have power don’t want to give it up. But what I like about Brazil is that there is a lot of creativity. I know the German system very well, because I’m German, the American system, because I worked for more than 20 years in financial institutions in the United States, and Latin America, and I think that the smaller banks here in Brazil tend to gain a lot of space, building a competitive business, with efficiency and agility”he states.
For Schumann, the governance concept that has been strengthened in the Master must take into account the interests of all market actors, the stakeholders sector, including employees and customers. “This means deeply understanding the company’s strategy, the risks related to the activity and how to mitigate these risks, at the same time that we define how much risk we want to take, and establish the so-called RAS – the “risk appetite statement”, the document that defines these parameters and how to achieve them”.
Master rose from S4 to S3 in 2023, on the Central Bank scale. This added a series of changes to meet new regulatory demands. Ensuring that the regulator’s vision is included in governance processes is also essential, as it makes business viable and allows decisions to be taken in a collegiate manner, with regulatory security and “active transparency”says Geraldo Magella, advisor at Banco Master.
Magella is one of the consultants who reinforce Master’s governance strategies. He was executive secretary of the Central Bank and brought to the bank his vision of the Brazilian financial system, built over a 38-year career.
“Our motto today is to enable business with regulatory security. And for this we have reinforced the so-called ‘lines of defense’”he states. The concept of 3 lines of defense is a practice recommended by regulatory bodies and helps financial institutions maintain a robust governance and control structure.
A 1ª line does the risk management at the operational levelcontrolling processes directly in the business environment, promoting compliance and efficiency.
A 2ª line does monitoring and support through policies and controls.
A 3ª line has evaluation and review by independent members.
“We are structuring a new governance plan that seeks to meet everything that the BC requires in its supervisory practice guides. The entire governance area is being formatted according to these parameters”says Magella.
The results from 2024 so far show positive results in the bank’s performance. In the 1st half of the year, Master’s profit was more than R$500 million. Net equity reached R$4.3 billion. With this, the institution brought forward the goal of reaching a PL of R$5 billion, which was for 2025 and was already achieved in July. The new goal is to reach R$10 billion in PL within 2 years.
