Defaults Rattle Brazil’s Shadow Banks, Spark Regulatory Scrutiny

What happened: Investors continue putting money into Brazil's FIDC funds even as defaults climb, prompting the central bank to flag concerns about transparency and disclosure. Key numbers: FIDC assets rose 14% this year through September to 978.8 billion reais ($178 billion) and doubled in three years. Funds grew almost 8% to 4,197. Why it matters: Regulators are examining credit risk measurement and valuation of illiquid assets, and have added disclosure requirements. Credit spreads are tightening even as delinquency rates are expected to rise further next year.

Investors continue putting money into Brazil's FIDC funds even as defaults climb, prompting the central bank to flag concerns about transparency and disclosure.

Regulators are examining credit risk measurement and valuation of illiquid assets, and have added disclosure requirements. Credit spreads are tightening even as delinquency rates are expected to rise further next year.