Last Tuesday (18), the Central Bank decreed the extrajudicial liquidation of Banco Master and the Federal Police arrested its main shareholder, Daniel Vorcaro. Basically, the bank grew, selling bank securities, mainly CDBs, at rates much higher than the market. Under the myth that the securities were risk-free, as they were guaranteed by the FGC (Credit Guarantee Fund), investors bought the securities believing that they were out of danger.
Firstly, the FGC guarantees reimbursement of up to R$250,000 per CPF and per financial institution, limited to R$1 million. In such a way that, if someone has positions in a bank above R$250 thousand and that financial institution fails, the investor will not receive anything exceeding this limit. For example, if someone has R$400,000, considering the principal invested plus interest earnings, and this bank fails, the person will only receive R$250,000, incurring a loss of R$150,000.
This finding, in itself, already demonstrates that the operation has credit risk (uncertainty of not receiving the amount invested plus interest). The question remains for people who have positions smaller than R$250,000. In this case, is the operation free of credit risk?
The case of Banco Master proves that not. There are doubts whether the FGC’s resources will be sufficient to honor all of the Master’s creditors. Probably yes; but at the expense of a major decapitalization of the FGC — 40 billion will be consumed from a net total of R$122 billion. These numbers show that in the event of a systemic crisis — default by the National Treasury, leading to the failure of some banks — there will not be enough resources from the FGC to pay everyone.
Therefore, an application guaranteed by the FGC should not be understood as risk-free. The FGC guarantee should be assimilated by the investor as an additional comfort, in case there is a specific problem at a particular bank. In other words, the investor must assess the risk of the financial institution issuing the paper, regardless of whether or not the issue is guaranteed by the FGC.
In finance, theoretically, what is considered a risk-free paper is a bond issued by the US federal government. And even so, it is very questionable whether they are in fact risk-free. Imagine then Brazilian securities guaranteed by the FGC. Here is the hard lesson from Banco Master.
*This text does not necessarily reflect the opinion of Jovem Pan.
