The risk rating agency Fitch Ratings announced last Monday (22) the reduction of the rating and the withdrawal of the evaluation of Banco Digimais. This significant movement occurred one day before the launch of Operation Mirage, conducted by the Federal Police this Tuesday (23).
The police action carried out nine search and seizure warrants, aiming to investigate crimes against the financial system. The objective was to dismantle an alleged fraudulent scheme at the institution. The bank belongs to Bishop Edir Macedo, known as the founder of the Universal Church of the Kingdom of God and owner of RecordTV.
Fitch downgrades risk rating and suspends analysis of Digimais
A report released by Fitch on Monday afternoon detailed the change in the bank’s risk rating. Banco Digimais’ national long-term rating was downgraded to CCC(bra), indicating considerable risk. Previously, it was in BB+(bra). The rating for short-term debts also fell, going from B(bra) to C(bra), which signals that default is approaching.
Simultaneously with the resets, the agency removed all classifications attributed to Digimais. This decision means that Fitch will no longer issue analyzes on the financial institution, ending its monitoring and coverage.
The agency explained that the downgrade reflects the bank’s “very low safety margin”, with a “real possibility of the financial institution failing and/or defaulting”. These conclusions were driven by “considerable uncertainties” about Digimais’ financial profile, in addition to “relevant restrictions” in the agency’s assessment. These restrictions were reportedly caused by “the absence of current information” and “limited visibility into the bank’s strategy.”
Due to the lack of sufficient data, Fitch justified the withdrawal of the ratings. The agency highlighted that it would not be able to maintain adequate monitoring, as it did not have “sufficient, reliable and verifiable financial information”.
Legal dispute involving investment fund
Fitch also mentioned the bank’s pending legal action in its report. The dispute refers to a Credit Rights Investment Fund (Fidc), adding another point of attention to the already delicate situation of Digimais.
The process involves assets that would have originally been generated by Banco Master and the EXP1 fund, managed by Yards Capital. The latter claims that part of the assets sold to him by Digimais does not exist, demanding the return of the amount corresponding to the payment made.
During the process, Digimais states that the credits are legitimate, but the transfer of payments for these loans has been interrupted. The stoppage would be due to the situation of Banco Master, which is in extrajudicial liquidation and under investigation.
The EXP1 fund, in turn, contests Digimais’ argument. In a statement, he stated that the contract assigned Digimais “direct and non-transferable obligations”. These obligations included the guarantee of credit backing, the delivery of supporting documentation, the punctual transfer of all amounts received and the “express prohibition of any interference in the flow of payments”.
Uncertainties about the sale of Digimais to BTG Pactual
Another factor raised by Fitch was the uncertainty surrounding the sale of Digimais to BTG Pactual, a deal that had been announced in April. The agency signaled that the closing of the transaction remains subject to a series of steps and approvals.
The conditions for completing the sale include the launch and development of a competitive process, the declaration of the winning proposal and the necessary regulatory approvals. These approvals include those from the Central Bank of Brazil and Cade (Administrative Council for Economic Defense).
At the time of the announcement of the potential sale, the press found that the completion of the transaction depended on several complex negotiations. One of the crucial points involved an agreement with the FGC (Credit Guarantee Fund) to finance the operation. This need for financing by the FGC highlights the perceived financial fragility of Digimais, indicating a risk that the traditional market may not be willing to assume without additional guarantees, impacting the confidence of customers and investors and “why this matters” from the point of view of the stability of the financial system. The FGC acts to protect depositors and avoid a cascade effect in the event of bank failure.