UPDATE 1-Brazil top court delays savings case ruling, bolstering banks

miércoles 28 de mayo de 2014 15:37 GYT

(Recasts to add context on decision, comments from justices, analysts, share performance throughout)

By Guillermo Parra-Bernal and Luciana Otoni

SAO PAULO/BRASILIA May 28 (Reuters) - Brazil's Federal Supreme Court on Wednesday indefinitely delayed a ruling on a landmark savings case dating back more than two decades, handing a temporary victory to the nation's largest banks and the government, and a corresponding defeat to savers who claim they are owed money by the banks.

Brasilia-based STF, as the court is commonly known, made the unanimous decision at a hearing. The decision was taken after a short period of deliberation, in which some justices argued that the court was grappling with a heavy case load.

The savings-account case highlights the legal uncertainties that abound in Brazil, where tax and regulatory disputes with the government can force companies into years of costly litigation. Millions of depositors claim they were incorrectly remunerated when the Brazilian government changed the indexes to which savings rates were pegged between 1989 and 1991.

Savers brought thousands of lawsuits against banks years later. The government argues that a ruling against banks could have devastating consequences on the economy.

A recent study by consultancy firm LCA on behalf of Brazil's central bank estimates a victory for depositors could cost banks between 61 billion reais and 346 billion reais ($27 billion and $155 billion).

Banking shares and bonds led gains, on signs that the court is conscious that a negative ruling could badly affect the nation's banks. With three justices already having recused themselves from the case, investors are hopeful that the remaining court members will swing the case in banks' favor.

Banco do Brasil, which analysts point to as the most affected in a decision against banks, led gains and added 4 percent in mid-afternoon trading. Private sector peer Itaú Unibanco Holding SA rose 2 percent, Banco Bradesco SA gained 1.7 percent and Banco Santander Brasil SA added 1.3 percent.   Continuación...