One of the world’s biggest emerging market economies, Brazil, has told the private banking divisions of several Western financial firms to cease operations in the country, Reuters reported, quoting from a local business newspaper.

The Brazilian central bank has forced several large international groups to close representative offices that offered private banking services in the country illegally, business daily Valor Economico newspaper reported, as cited by the news agency. Valor Economico said that the central bank acted after Brazilian Federal Police probes on tax evasion, illegal money transfer and racketeering in past years resulted in the arrest of executives from Credit Suisse, UBS and AIG Private Bank in the country. The report also mentioned that Merrill Lynch and Clariden Leu have closed representative branches in the Latin American country.

The central bank said it would respond to emails from WealthBriefing on the matter but at the time of publication had not done so.

The move, if confirmed, would be the most dramatic act by a large country to expel a private bank or banks since Japan told Citigroup to cease offering private banking in the country in 2004, following investigations into improper transactions.

Brazil, as one of the BRICS – Brazil, Russia, India and China – has been regarded as an important growth market for private banks, eager to tap into the country’s fast-growing economy and expanding numbers of high net worth individuals. Last year’s Merrill Lynch/Capgemini annual report on the world’s wealthy, giving data for 2007, said Brazil enjoyed the third-highest growth rate in HNW individuals in 2007, with a 19.1 per cent increase, spurred by a wave of robust market capitalization growth of 93 per cent and real GDP growth of 5.1 per cent.

The central bank has ordered the shutdown of all representative offices of banks with subsidiaries in Brazil, the newspaper said.

Except Merrill Lynch and Credit Suisse, none of the banks immediately replied to WealthBriefing’s enquiries on the matter.

"We continue to work in Brazil and serve clients. We are looking forward to growing our business," a Merrill Lynch spokesperson said.

Credit Suisse confirmed the Reuters story as accurate.