SAO PAULO, April 17 (Reuters) - Brazilian banks face rising risks of litigation due to an anti-corruption investigation of the country’s tax appeal board CARF, adding to a wave of legal cases that could threaten lenders’ bottom lines, Fitch Ratings said on Friday.
The far-reaching probe of tax evasion and bribes allegedly paid to CARF board members follows a corruption investigation at state-run oil company Petrobras and a landmark savings account case dating back more than two decades.
Led by senior director Claudio Gallina, Fitch analysts said it was too early to tell the outcome of the new tax evasion probe, but it clearly meant higher legal costs for the private-sector banks rumored to be under investigation.
“In most cases, tax dispute reversals would not likely be material credit negatives for the banks,” they wrote. “However, the burdensome and lengthy legal process in Brazil could prolong these disputes for years, adding operational costs.”
The Fitch analysts noted that authorities have not said which institutions are being targeted, and all of the banks named in local press reports have denied any wrongdoing.
Last month, police raided the offices of the tax appeals board in Brasilia as well as the homes and offices of tax consultants and lawyers suspected of acting as intermediaries.
They also raided the headquarters of Banco Safra SA , Brazil’s eighth largest bank, owned by Lebanese-Brazilian billionaire Joseph Safra and his family, according to two sources with knowledge of the situation.
“Overall, if a bank’s involvement in a corruption scheme is proven, it could cause serious reputational damage to the franchise and lead to risk aversion from investors and clients, ultimately resulting in pressure on its ratings,” Fitch analysts wrote. (Reporting by Brad Haynes; Additional reporting by Guillermo Parra-Bernal; Editing by Alan Crosby)