National Bank: Ponzi game, PROER and FCVS
This paper analyses the causes of the failure of Banco Nacional and the resolution method adopted by the Brazilian central bank. The program (PROER) designed by the central bank and its legal framework allowed the failed bank to buy “defaulted securities”, financed by the central bank, and to use them as borrowing collateral. The paper also analyses the private and social costs of this bank failure.
JEL Classification: E58, G21.
Keywords: Bank Failure resolution method Central Bank intervention in failing banks