By Maria Eduarda X. Soares and Heloísa Nogueira
The extrajudicial liquidation of Banco Master and some of the companies comprising its financial conglomerate—ordered by the Central Bank on November 18, 2025—rapidly emerged as the most critical event in the Brazilian financial system since the 1990s. This is due not only to the number of creditors, clients, and investors involved but also to the sheer scale of the financial shortfall; for the first time in history, the Credit Guarantee Fund (FGC) will undertake a reimbursement operation exceeding R$ 40 billion.
The decree affected Banco Master de Investimento S.A., Banco Letsbank S.A., and Master S.A. Corretora de Câmbio, Títulos e Valores Mobiliários, placing them under extrajudicial liquidation. Meanwhile, Banco Master Múltiplo S.A. was placed under the Special Temporary Administration Regime (RAET)—a measure adopted to preserve the operations of its subsidiary, Will Financeira, thereby avoiding a total halt in business and preventing even greater operational risks.
The Central Bank’s rationale was straightforward: the conglomerate was facing a severe liquidity crisis, rapidly deteriorating economic and financial indicators, and significant violations of National Financial System regulations. These irregularities, combined with an inability to restore minimum liquidity levels, rendered continued operations unsustainable. Although Master falls within the S3 segment—comprising smaller banks under prudential regulations—its exposure (while limited to 0.55% of the National Financial System's total capital) was complex enough to trigger a sectoral domino effect had it not been swiftly contained.
Since 2024, the Central Bank has also begun taking "all appropriate measures" to determine liability and impose administrative sanctions on the controlling shareholders and former executives. This investigation covers breaches of prudential regulations, potential governance lapses, transparency failures, and operations incompatible with the conglomerate's size and capital structure.
While the decree reprimands Master’s management from a regulatory standpoint, from a financial perspective, it initiates the greatest institutional challenge ever faced by the Credit Guarantee Fund (FGC).
Master’s liquidation triggers an estimated R$ 41 billion payout, affecting approximately 1.6 million depositors. It is, by far, the biggest operational and financial test in the history of the FGC, whose primary role is to maintain confidence in the financial system and prevent bank runs.
The FGC has confirmed its ability to fully honor insured amounts—which include demand deposits, savings accounts, and various fixed-income instruments (CDBs, LCs, LCIs, LCAs, and RDBs)—subject to the limit of R$ 250,000 per CPF (individual tax ID) or CNPJ (corporate tax ID) per financial institution. The process will be handled via an app, with funds expected to be released approximately 30 days after the payment period begins.
However, these funds do not appear out of thin air. The FGC is funded exclusively by financial institutions, which pay monthly contributions proportional to the volume of guaranteed deposits they hold. In practice, the major banks bear the primary responsibility for sustaining the fund—the very institutions often criticized for their dominant market share.
A payout of R$ 41 billion inevitably puts pressure on the fund's liquidity. This tends to reopen internal and regulatory discussions regarding the future level of contributions, the pace of capitalization, governance, investment policy, and even the limits of the FGC’s scope of action concerning mid-sized institutions, whose business models sometimes involve higher leverage and risk.
In other words, the episode reignites a long-standing debate: how far should incentives go to encourage investors to move to smaller banks in search of higher rates, knowing that, ultimately, the institutions bearing the system's heaviest regulatory and prudential burden are the ones that foot the bill when things go wrong?
While the FGC (Credit Guarantee Fund) protects depositors, the most vulnerable aspect of the Master case lies in the 52 Credit Rights Investment Funds (FIDCs) managed by the conglomerate. Totalling R$ 3.1 billion, these funds were suddenly left without an administrator, a custodian, or an immediate operational continuity plan.
Under regulations, FIDC assets are segregated from the bank's bankruptcy or liquidation estate. However, this does not prevent—and in fact requires—the election of a new administrator by a meeting of unitholders. So far, no meeting has been formally convened, leaving managers and investors in limbo.
Concern is mounting because, unlike liquid funds, FIDCs rely heavily on the administrator for pricing, particularly regarding loss provisioning. Changing the administrator almost always entails asset repricing, and suspicions that parts of the portfolios may be overvalued are already circulating in the market.
Legally, the Master case has moved beyond the administrative sphere. The principal shareholder, Daniel Vorcaro, was arrested by the Federal Police while attempting to leave the country—an episode that adds a criminal dimension to the liquidation, involving potential crimes against the financial system and asset-related investigations.
Furthermore, companies with credit operations, on-lending arrangements, receivables, or accounts linked to Master are seeking guidance on how to handle payments, renegotiations, and enforcement actions. The initial lack of unified instructions—common in liquidation decrees—increases the likelihood of litigation, particularly from companies that relied on the bank for operational cash flow.
Creditors not covered by the FGC (Credit Guarantee Fund)—such as financial institutions, assigning companies, and FIDC shareholders—must also file individual or class-action lawsuits. They seek to hold administrators accountable, recover damages, and secure priority status for their claims within the liquidation payment queue—a line that historically offers slim recovery margins.
It is evident that, in an attempt to diversify the market and foster competition, the system has created an uncomfortable asymmetry. Mid-sized and small institutions, as well as fintechs, operate with enough freedom to grow rapidly but without bearing the same level of oversight, prudential obligations, and structural responsibility imposed on major banks—the very institutions that ultimately foot the bill when things go wrong.
The Master case exposes, with uncomfortable clarity, that while the rhetoric of innovation remains alluring, the reality reveals an ecosystem where a significant portion of smaller institutions enjoy the benefits of the financial system without fully sharing the costs that sustain it.
Central Bank of Brazil. Available at: <https://www.bcb.gov.br/detalhenoticia/20936/nota>. Accessed on: Dec. 5, 2025.
MATOS, F. A “cheap shot,” fear, and mistrust: how the Master case shook the market. Available at: . Accessed on: Dec. 5, 2025.
Banco Master liquidation becomes the biggest test for the FGC. Available at: . Accessed on: Dec. 5, 2025.
TAVARES, Y. Banco Master liquidation tests the recovery of office real estate funds. Available at: <https://valorinveste.globo.com/produtos/fundos-imobiliarios/noticia/2025/12/05/liquidacao-do-banco-master-testa-retomada-dos-fundos-imobiliarios-de-escritorios.ghtml>. Accessed on: Dec. 5, 2025.
