A court based in the Brazilian state of Rio de Janeiro issued an injunction forcing Banco do Brasil SA to hand over the bulk of the judicial and administrative deposits it collects from state proceedings to the Rio government, according to a Valor Econômico report.
The court order directs the government-run bank to return 70% of new judicial deposits collected to the government. Banco do Brasil had been withholding the funds, equal to about 3.2 billion reais, in order to replenish a reserve fund created to make payments from judicial decisions.
In doing so, it claimed that it was adhering to a law that requires the reserve fund to hold at least 30% of total judicial and administrative deposits after Rio, which declared a state of financial calamity in 2016, withdrew some 11 billion reais for debt repayments and social security-related expenses, among other items.
However, the injunction effectively removed Banco do Brasil's responsibility to maintain that proportion in a reserve fund. The court did, however, direct the state of Rio to use bolster the judicial reserve fund by 22.6 million reais.
Banco do Brasil has also withheld some 1.5 billion reais of judicial deposits from the state of Minas Gerais, which also declared a state of financial calamity.
Paulo Caffarelli, the president and CEO of Banco do Brasil, said that the bank is currently evaluating the court's decision, but did not indicate whether the company would appeal, according to a Jan. 18 report from DCI.
As of Jan. 17, US$1 was equivalent to 3.22 Brazilian reais.