A wave of defaults and fraud among Brazil’s “shadow banks” has reportedly caught the attention of regulators.

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That’s according to a report Tuesday (Nov. 10) from Bloomberg News, which says Brazil’s central bank is worried that some investors aren’t getting the transparency required to gauge the risks of these institutions.

The focus here is on FIDCs, or funds that invest in pools of loans in many cases originated by FinTech companies, the report said. FIDCs have gotten the “shadow bank” label because they play a key role in the lending space but are subject to less oversight than traditional banks.

Regulators are concerned more about the flood of capital into these funds than their actual structure, Bloomberg added. Total FIDCs under management rose 14% this year through September to $178 billion and have doubled in the last three years.

In a report published in May, the central bank said it was concerned about the need to boost “the quality of the registered information.” Regulators are examining “the proper measurement of credit risk, and the valuation of illiquid and non-standardized assets.”

Authorities followed up by strengthening some of the rules for legal claims and adding more disclosure requirements.

As PYMNTS wrote last year, shadow banking is a broadly-defined category that includes nonbank lenders and products such as hedge funds, money market and private equity vehicles, and even government-sponsored entities. Banks have been moving into private credit, as well, as they lend to private credit companies or directly to the nonbank financial firms, with that capital then flowing through to corporate borrowers.

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