QCOSTARICA — In the event that Coopeservidores (savings and loans) faces a formal bankruptcy process, investors and savers could find themselves in a scenario where they can only recover a maximum of ¢6 million colones, according to Ernesto Solano, a lawyer at the Oficina del Consumidor Financiero (OCF)
Solano explains that the law establishes a deposit guarantee fund that covers demand or fixed-term savings held by individuals and legal entities in a financial institution such as a cooperative.
This scenario, of course, would only occur if all previous resolution mechanisms are exhausted, such as the sale of the entity and/or the assets and liabilities of the cooperative.
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In this way, the guarantee fund would only be applied as a last resort.
“There is a deposit guarantee fund, which covers up to ¢6 million per person and per legal entity (ie corporation), regardless of the currency in which such savings have been established. It will cover only the principal, not the interest. It covers all deposits or savings, demand or fixed-term, maintained by individuals and legal entities in the fund’s contributing entities. The Conassif is the one that will determine if the resolution mechanism is sufficient to return the savings and investments, and if it is not enough, execute the deposit guarantee fund,” Solano told La Republica.
For a month now, the cooperative, also known as CS Ahorro y Crédito, has been under intervention by the Consejo Nacional de Supervisión del Sistema Financiero (Conassif) – National Council for Supervision of the Financial System.
On May 13, Conassif ordered the intervention of Coopeservidores for up to a period of 30 calendar days. However, the legislation stipulates the possibility of extending the period for an additional 30 calendar days. Tuesday night, it was confirmed that the intervention will be extended until June 25.
As part of the intervention, Conassif froze all depositors’ resources, including demand balances and time investments, so no one has been able to withdraw the money.
In this case, it would be up to Conassif to define the way in which at least the guarantee fund would be returned.
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“The Conassif is the one that approves or disapproves the use of the Fund, and if approved, requests the administrator to execute what was approved. When the guaranteed deposits are paid, they must be available to depositors within 10 business days after approval by Conassif. The deposit guarantee will be paid only to the original holder of the deposit or to the designated beneficiary, in the event of the death of the original holder,” Solano added.
The intervention of Coopeservidores is due to the fact that the entity’s administration “jeopardized its security and solvency,” according to Conassif.
The information requested by Conassif from Coopeservidores on loan operations showed serious deficiencies in its precision, consistency, and integrity, which prevented it from truthfully reflecting the situation of the loan quality of the portfolio.
On the other hand, the cooperative applied massive payment moratoriums, avoiding the reclassification of loan operations into higher risk categories and without carrying out any collection management.
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Also on Tuesday, the Comptroller’s Office confirmed the layoff of 147 Coopeservidores workers, explaining that the termination of employment occurred as part of “the current processes of the cooperative that no longer require these personnel.”
The total number of workers at the time of the intervention, on May 13, was 617.
Coopeservidores’ financial situation has been a cause for concern, especially after accumulating losses of ¢30.58 billion colones in just five months this year.
In addition, the cooperative has experienced a rapid deterioration in its loan portfolio, with delinquencies increasing from 5.79% to 9.15% between March and April of this year.
The intervention will end either in a regularization process of the cooperative that allows it to adequately maintain its operation, or in a resolution process that allows the orderly cessation of its operations.
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