Brazil Court orders banks to refund depositors decade-old savings losses

Brazil's Superior Court of Justice reaffirmed a decision ordering banks to refund depositors losses stemming from four government anti-inflation plans almost two decades ago. A banking group estimates the refund, if upheld, could cost as much as 180 billion reais ($102 billion).

The court ruled that savings accounts that were open from 1987 to 1991, when the government took steps like seizing deposits to tame hyperinflation, must be adjusted at a rate of as much as 44.8 percent.

The court set a deadline of five years from the date of each plan for bringing class action lawsuits against the banks. The time limit for individual lawsuits is 20 years, the court said yesterday in Brasilia.

The decision was based on the court's analysis of two appeals by ABN-AMRO Real SA, acquired in 2007 by Banco Santander SA, and government-controlled Caixa Economica Federal. The banks disputed claims that they didn't make correct interest payments to savings accounts during the stabilization plans.

The decision will be used in similar lawsuits against other banks, according to yesterday's ruling. Banks still can appeal to Brazil's Supreme Court.

Customers are suing the banks for interest owed during the period, after the end of Brazil's military dictatorship in 1985, when the currency changed three times and emergency austerity plans were introduced to tame inflation that reached as high as 5,000 percent.

Brazil's Banking Association, known as Febraban, estimates there are more than 840,000 lawsuits filed by individuals or groups, with potential claims totaling 180 billion reais against Brazilian financial institutions.

Banks say they were acting according to central bank instructions and are not responsible for possible losses to savings accounts.

William Salasar, a spokesman for Febraban, did not respond calls seeking comment.

(Published by Bloomberg - August 26, 2010)