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Brazil credit guarantee fund starts reimbursing customers of failed Banco Neon

Brazil's deposit guarantee fund FGC on May 18 will start transferring settlement payments to the customers of failed Banco Neon SA, which the country's central bank liquidated May 4.

In a statement, FGC said it would cover deposits of up to 250,000 Brazilian reais in a payment period that runs until Sept. 17, after which the remaining creditors will have to request payments directly from the bank.

Customers of fintech startup Neon Pagamentos that held certificates of deposit instruments at Banco Neon will be offered repayments through an online application, FGC said.

On May 4, Banco Central do Brasil ordered the liquidation of Banco Neon, citing regulatory breaches and impairment of the bank's "economic and financial situation."

At the time the central bank said it would implement measures to collect the balances of prepaid cards for customers that are due a refund, as well as amounts related to hedges of the FGC, "as soon as possible."

Banco Neon, a digital financial services firm that was launched in 2016, has only one branch located in Belo Horizonte and is a small financial institution holding 0.0038% in assets of the national banking system, the regulator noted.

Meanwhile, Neon Pagamentos SA, a financial technology startup that leveraged Banco Neon to process checking accounts, was not a part of the liquidation. On May 16, the fintech company said it reinstated operations after forming a partnership with Banco Votorantim SA.

As of May 16, US$1 was equivalent to 3.68 Brazilian reais.