Brazil's XP and Banco Master's Explosive Growth Fueled by High-Risk Bonds and FGC Guarantees

Brazil's failed bank Banco Master SA relied heavily on XP Inc.'s retail investing platform to fuel its breakneck growth, with XP selling clients 26 billion reais of Master's bonds. The relationship was facilitated by deposit-insurance fund FGC guarantees, which allowed Master to offer higher yields and sweeter terms than its competitors. Critics argue that the fee system can create perverse incentives for investment advisers, while XP disputes claims of a conflict of interest.