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Brazilian banks offer settlement to end deposits lawsuit -report
March 11, 2014 / 11:57 AM / 4 years ago

Brazilian banks offer settlement to end deposits lawsuit -report

BRASILIA, March 11 (Reuters) - Banks have reached out to Brazil’s Supreme Court to propose a settlement in a landmark case on savings accounts, seeking to reduce potential losses, Valor Economico reported on Tuesday.

Banks are ready to refund to some depositors a portion of the fair interest on savings accounts dating back two decades, but only to those who withdrew cash at that time, Valor reported, without citing its sources.

The settlement would mean small losses for banks, compared with the 341 billion reais ($145 billion) they might pay if the Supreme Federal Court (STF), Brazil’s highest court, ultimately rules against them, Valor added. The newspaper did not say how much the banks’ proposal could cost.

The plaintiffs have accused banks of failing to pay fair interest on deposits between 1987 and 1992, when hyperinflation led the government to peg savings rates to a number of consumer price indexes. Banks say they only followed orders from policymakers at the time, but analysts say depositors have a better chance of winning in the high court.

Calls to a spokesman for Brazil’s bank association Febraban were not answered. A spokesman for Brazil’s supreme court was not immediately available to comment.

Under the settlement, banks would only refund depositors who withdrew cash up to four months after the adoption of the so-called Plano Verão during José Sarney’s 1985-1989 administration and in a few other cases in which the IPC consumer price index was not used as benchmark for inflation, according to Valor.

Uncertainty over the case has caused unease in the financial sector and weighed on bank shares. Since November, when the court delayed hearing the case, an index of financial shares on the Sao Paulo stock exchange has fallen 14 percent.

The case reflects the legal uncertainties common in Brazil, where tax and regulatory disputes with the government can mean years of costly litigation for companies.

The Supreme Court has not yet set a date to resume deliberations in the case. ($1 = 2.3491 Brazilian reais) (Reporting by Silvio Cascione; Editing by Jeffrey Benkoe)

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