President Luiz Inacio Lula da Silva’s administration is resisting calls to bail out BRB, the state-owned bank controlled by Brasilia Governor Ibaneis Rocha, after losses tied to Banco Master SA. The federal government is monitoring the situation but has shown little inclination to intervene, according to sources familiar with the matter.

Banco do Brasil and Caixa Economica Federal, the two largest federally controlled lenders, have not been authorized to participate in negotiations or assess BRB’s books. The government’s reluctance stems partly from political tensions ahead of October’s presidential election, as Rocha is aligned with former President Jair Bolsonaro and his centrist congressional bloc.

BRB faces a March 31 deadline to resolve an estimated 5 billion-real capital shortfall linked to transactions with Banco Master, which collapsed after selling credit portfolios totaling nearly 13 billion reais to BRB in 2024. The Federal District government has proposed transferring public assets and increasing capital by up to 8.9 billion reais, but the process has stalled. An extraordinary shareholders’ meeting is scheduled for March 18 to deliberate on the proposed capital increase, as BRB risks stricter operating limits under central bank rules.