Brazil & Southern Cone - January 2026

Banco Master was a small bank compared to Brazil’s giant financial institutions like Bradesco or Itaú Unibanco. It accounted for only 0.6% of the system’s total assets. But its liquidation in November and the temporary arrest of its CEO rocked the country’s financial and political world and will continue to reverberate in the nation’s capital well into this year’s election campaign.

For one, there is the massive bill to cover insured depositors. There are pension funds that got burnt, and there are many questions over the lack of adequate oversight and regulation. The scandal also unveiled obscure connections between the bank and numerous high-profile authorities in politics and the judiciary. All that unleashed a wave of finger-pointing, arrests, lawsuits, and inquiries worthy of a financial crime novel.

Public attention on the whole case intensified when Daniel Vorcaro, the majority owner of Banco Master, was arrested on 17 November at São Paulo’s Guarulhos airport just as he was boarding a plane en route to Dubai. A day later the central bank (BCB) declared the liquidation of the bank and appointed an administrator to settle the accounts. Assets of its shareholders were frozen.

Public prosecutors claimed Vorcaro was fleeing to Malta. He denies any wrongdoing and claims he was going to meet with a potential investor in Dubai. Four other bank officials were arrested as well on suspicion of having falsified financial securities, engaging in recklessness, negligence, and criminal conspiracy.

Suspicious growth

Banco Master was owned and run by Daniel Vorcaro, heir to a real estate business in Minas Gerais who was known for his opulent lifestyle and lavish parties, and frequented the halls of power, rubbing elbows with authorities from all three branches of the state.

The bank posted unusual growth rates of 86% per year on average, in part by raising funds through certificates of deposit that offer above-average interest payments. While leading banks paid under 100% of the CDI, the inter-bank lending rate, Banco Master paid as much as 140% on securities that had longer maturities. Smaller investors were little concerned because the certificates of deposits (CDBs) were backed by the Fundo Garantidor de Créditos (FGC), an industry-run bank deposit insurance agency similar to the FDIC in the US, for a total of up to R$250,000 (US$46,350) per customer.

Critics also pointed the finger at large brokerage platforms such as XP, who massively promoted Banco Master CDBs, and at financial advisors who received premium commissions for selling such products. Longer-dated bills earn brokers higher up-front commissions. To be able to pay for the high cost of capturing deposits, Banco Master needed to invest in riskier assets offering even higher returns, such as illiquid shares in companies or debt gone bad that is subject to legal proceedings. And that is exactly what the central bank found in its review of the bank’s books.

Oversight issues

One of the many questions is why the central bank only intervened in November of 2025, when some brokerage firms stopped selling Banco Master securities as early as mid-2024 due to concern over the bank’s financial health. “The central bank will have to answer why it didn’t act sooner in this case,” said Graciliano Rocha, economics editor and columnist at news website UOL.

Then there is the question of oversight and regulation that investigators and legislators are looking into. How was it possible that a bank could hide fake loans in its books and invest in highly speculative assets without raising alarm bells at the central bank, which is in charge of banking oversight? Why did the bank’s meteoric rise not prompt scrutiny of regulators and credit rating agencies alike?

The Banco Master case comes shortly after the massive scandal at the state-run social security institute INSS, which led some analysts to argue that there exists systemic fraud in Brazil’s financial system consisting of fake debt.

In an extensive investigative report, the news organisation Poder360 explains how fake loans were created through correspondent banks or agencies by simulating ‘creditos consignados’, or loans that are automatically deducted from an employee’s salary at municipalities, agencies, and companies throughout the country. The failure of the system, according to the Poder360 report, is that the central bank does not verify the existence of the loans. It assumes that what is being reported is true.

Political interests

The demise of Banco Master is shrouded in a cloak of nebulous political interests that raises questions about the ties of Brazil’s economic elites to the country’s highest authorities. As first reported by O Globo newspaper columnist Malu Gaspar, there is a potential conflict of interest between supreme court (STF) justice Alexandre de Moraes and the central bank’s role of oversight. De Moraes reportedly contacted BCB President Gabriel Galípolo on numerous occasions to intervene on behalf of Banco Master.

The wife of De Moraes, Viviane Barci de Moraes, had a contract worth R$3.6m (US$669,000) per month for a total of up to R$130m with Banco Master. Her law firm, Barci de Moraes Associados, had been hired to represent the interests of Banco Master and Daniel Vorcaro before the central bank, the finance ministry, the antitrust regulator Cade, and congress.

Central bank technicians told public prosecutors that they had come under extreme ‘political pressure’ and have been summoned to testify, a measure some considered a potential tool of intimidation. The plot thickened when STF justice José Antonio Dias Toffoli took over as presiding judge of the case. As media reports later revealed, Dias Toffoli was seen flying with Augusto Arruda Botelho, his friend and an attorney for Banco Master, in a private jet to see the final game of the Copa Libertadores football championship in Lima, Peru. A week later Toffoli put the case under seal.

Meanwhile, in an effort to ensure transparency and protect the BCB against possible blackmailing or political pressure, Galípolo publicly stressed that every single communication relating to the case had been documented and that he himself was willing to testify in the case. In late December the central bank and the supreme court issued statements saying that De Moraes met with Galípolo to discuss US sanctions applied under the Magnitsky Act against Brazilian authorities, including himself, for their role in condemning former president and ally of Donald Trump, Jair Bolsonaro (2019-2023).

Also in the limelight are officials of Banco de Brasília (BRB), the bank owned by the government of the nation’s capital, for ‘buying’ a portfolio of bad loans worth R$12.7bn from Banco Master. BRB president Paulo Henrique Costa was first suspended by judicial order and then fired by Ibaneis Rocha, the governor of the federal district, in late November.                       

Big bill

The FGC is stuck with an astronomical bill of R$41bn (US$7.6bn) to compensate for the losses of the bank’s customers. It is the largest payout in the FGC’s history. In addition, pension funds who bought securities from Banco Master that were not covered by the FGC face massive losses. Pension funds, including that of Rio de Janeiro state employees, RioPrevidencia, had nearly R$2bn in Banco Master securities on their books.

Institutional clash

A comptroller on the Tribunal de Contas da União (TCU), a government watchdog, appeared to launch a crusade to try and revert the liquidation of the bank. TCU minister Jhonatan de Jesus took the contrarian view that the central bank had intervened too swiftly, despite months of investigations and media reports on suspicious activities. In early January he even ordered an inspection of the central bank to determine possible wrongdoing but later backed down as he seemed to lose support with the TCU and beyond.