Fitch: Widespread Tax Inquiries Add to Brazil Bank Woes

(The following statement was released by the rating agency) LONDON, August 11 (Fitch) Investigations into allegations that Brazilian banks may have been involved in longstanding bribery of tax officials and members of the Tax Appeals Board to either waive or reduce tax payments could add to the pressures on the Brazilian banking sector, says Fitch Ratings. The operating environment for banks has become increasingly difficult since 2014 and challenges are likely to persist, as suggested by the Negative Outlook on the sovereign’s ‘BB’ rating and on several bank ratings. Performance indicators in the sector are down: net returns on average assets reached 0.9% in March 2016, against 1.3% in 2015; and the sector’s impaired loans are rising, albeit slowly, to 3.5% of total loans at end-June 2016, against 3.3% at end-2015 and 2.7% in 2014. Brazil’s federal public-sector prosecutors are investigating allegations, code named Zelotes, that a large number of companies may have been involved in corruption schemes to lower their tax payments over many years.

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