Reuters: Regulatory News: UPDATE 1-Brazil extends probe of failed Banco BVA, buying time

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UPDATE 1-Brazil extends probe of failed Banco BVA, buying time Apr 4th 2013, 22:01 Thu Apr 4, 2013 6:01pm EDT * Central bank steps give potential deal a lifeline * Wave of bank failures expected to end with Banco BVA By Luciana Otoni and Guillermo Parra-Bernal BRASILIA/SAO PAULO, April 4 (Reuters) - Brazil's central bank appointed a committee on Thursday to investigate the reasons behind last year's collapse of Banco BVA SA for an additional 120 days, giving potential buyers more time to consider acquiring the mid-sized lender. The central bank seized the Rio de Janeiro-based bank on Oct. 19, citing deteriorating financing conditions and a breach of regulations. At the time, regulators gave the bank's administrators 90 days to find a buyer or face liquidation. One of a series of central bank seizures of failed banks since 2010, Banco BVA is the first being extended from the original deadline, a sign that regulators and creditors see a solution for the lender other than liquidation. A proposal by car dealership and financing group CAOA to buy the bank was shunned by a group of bondholders on March 27, hours ahead of the legal deadline set by the central bank. Representatives of São Paulo-based CAOA could not be immediately reached for comment on Thursday's central bank decision. The shutdown of rivals Banco Prosper and Banco Cruzeiro do Sul last year resulted in heavy losses for bondholders, who have repeatedly complained that their claims were treated unequally compared with those of state-controlled creditors. Banking analysts expect the flurry of small-sized bank failures that began in November 2010 with the demise of Banco PanAmericano SA, to end with Banco BVA. In a March 27 statement, executives at CAOA said they were not hopeful that the central bank deadline could be extended. Lenders such as Banco BVA enjoyed several boom years with the creation of new consumer products in Brazil in the mid-2000s. But much too rapid growth and worsening funding conditions in the aftermath of the 2008 global financial crisis affected their business models. In addition, relaxed credit risk assessments and the inability to cope with tougher auditing controls led some of those lenders to bankruptcy. Link this Share this Digg this Email Reprints

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