Separating Brazil's Weak From The Strong

A major scandal highlights the stresses on Brazil's banks

It's just the latest upset in Brazil's tumultuous banking shakeout. In late February, revelations surfaced that failed Banco Nacional, which last November merged with healthier Unibanco, had disguised a $4.8 billion shortfall. Brazil's Federal Audit Court plans to investigate whether the central bank slipped in supervising Nacional--and then covered up the mistake. During nearly 10 hours of testimony to the Senate on Mar. 5, central bank President Gustavo Loyola admitted the central bank's error while insisting on its integrity. But he is clearly in a hot seat.

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