By Luciana Magalhaes
SAO PAULO, April 22 (Reuters) - Shareholders of Brazilian state-run lender Banco de Brasilia (BRB) on Wednesday approved a capital increase of up to 8.8 billion reais ($1.77 billion), the bank said in a statement.
The move is aimed at shoring up the lender's finances following a damaging chain of transactions with failed mid-sized Banco Master.
The approval comes just two days after a memorandum of understanding was signed between BRB and financial institution Quadra Capital to
set up a 15-billion-real investment fund to house assets stemming from the bank's dealings with Master.
Together, the two transactions are expected to bolster BRB's capital structure.
Under the terms of the Quadra agreement, up to 4 billion reais would be paid to BRB in cash, while the remaining amount would be converted into subordinated quotas of the investment fund created to manage and monetize the assets, according to BRB.
Earlier this month, Brazilian federal police arrested former BRB chief executive Paulo Henrique Costa on suspicion of accepting 146 million reais in bribes to benefit Banco Master, whose owner Daniel Vorcaro remains in custody.
Banco Master was liquidated by Brazil's central bank last November and, at the same time, Costa was removed from his post at BRB.
Costa's lawyer has maintained that his client committed no crime. Vorcaro's defense team has said he denies allegations made against him.
(Reporting by Luciana Magalhaes; Editing by Kirsten Donovan)
