Legal action by Brazilian depositors demanding compensation for the impact of past economic plans could drive some banks to insolvency, a local newspaper said on Thursday, citing a central bank document. The Federal Supreme Court is weighing depositors' arguments that five economic plans, implemented by the government since January 1989, caused incorrect remuneration to their accounts, reported the Estado de Sao Paulo newspaper.
A report from the central bank for the court said a ruling for the plaintiffs could bring the country's financial system to the brink of insolvency, with losses estimated at 105 billion reais ($54 billion), the equivalent to 65 percent of the banking industry's capital, the newspaper reported. "A ruling against financial institutions (would imply) ... a brusque decapitalisation in the industry with possible insolvencies and the weakening of capital positions," Estado quoted the document as saying.
Finance Minister Guido Mantega, Central Bank President Henrique Meirelles and other top government officials have said in recent meetings that a decision forcing banks to pay compensation for the impact of the plans would be "disastrous," Estado reported.