Costa Rica's Financial Supervision Council (Conassif), the national agency entrusted with banking oversight, declared a state of intervention over Coopemex on February 17 2010. Coopemex is Costa Rica's third largest financial cooperative, which operate as savings and loans associations.
The regulator decided to intervene as a result of Coopemex's deteriorating capital adequacy ratios as of January 2010. At that point the entity reported a 7.17% capital adequacy ratio, below the 10% threshold imposed by Conassif.
Conassif reported several irregularities after an on-site investigation. Several deliquent off-balance sheet items had not been reported to the local authorities. Credit operations with related parties dealing with a real estate development were questioned as irregular. A press release issued by Sugef, the banking oversight superintendent, reads: "It is possible to conclude that this cooperative is being managed in a manner that has affected its security, transparence and solvency".
|Mauricio Salas, BLP Abogados|
The investigation has led to criminal charges. Several arrests have been made, and criminal action has been brought against board members, management, internal auditors and accountants.
The intervention will be conducted by two regulator appointed managers over a 90-day period. It has been reported that some 80,000 clients have investments at risk with Coopemex. The Costa Rican banking system does not contemplate deposit insurance.
The Superintendent has also indicated that the Coopemex case is "an isolated case, and in no way can it be interpreted as a symptom of systemic risk that may affect the rest of financial intermediaries operating in our country".
The intervention seems to be related to a failed acquisition of Coopemex by Coopenae, another local savings and loans cooperative. That deal fell off five days before regulatory action took place. Coopemex management has criticised the acquisition process as being the direct cause of the entity's operational problems.