BRASILIA, Feb 9 (Reuters) - Brazil's central bank chief on Monday defended the institution and its board over the handling of Banco Master's liquidation, saying he was grateful to have overseen the process under President Luiz Inacio Lula da Silva.

Speaking at an event in Sao Paulo, Gabriel Galipolo said Lula had reinforced the autonomy of the central bank and the federal police in the case, providing the necessary reassurance for authorities to carry out their work independently.

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Banco Master held under 1% of Brazil's banking assets, but its collapse last November drew scrutiny after the commercial lender expanded rapidly by selling high-yield debt marketed as covered by the FGC deposit guarantee fund.

Privately-owned FGC estimated it will pay 40.6 billion reais ($7.8 billion) to around 800,000 investors following the bank's liquidation in November.

In the week that it failed, Banco Master had only 4 million reais in cash against 120 million reais in upcoming debt repayments and had failed to make more than 2.5 billion reais in compulsory deposits to the central bank, Galipolo said.

He said the case prompted the central bank to examine tighter enforcement of asset‑liability matching rules for banks.

Addressing questions over oversight of a lender long viewed as risky, Galipolo praised the central bank's supervision director, Ailton de Aquino, and Renato Gomes, who was the central bank's financial system organization director at the time of Banco Master's collapse.

Galipolo denied the central bank asked the FGC to extend a credit line to Banco Master in 2025, saying the fund had begun honoring guaranteed debt as it would under a liquidation. That position contributed to a drop of 9.2 billion reais in FGC‑backed funding to Banco Master last year, he said.

Non‑guaranteed funding fell by 2 billion reais in 2025, while shareholders injected more than 2 billion reais, according to Galipolo.

The central bank chief said coordinated action with the FGC supported the decision to block BRB's planned acquisition of Banco Master in September and to back the bank's liquidation.

($1 = 5.2036 reais)

https://www.reuters.com/world/americas/brazil-central-bank-head-stresses-policy-calibration-ahead-expected-rate-cuts-2026-02-09/