The Banking Crisis in 2000 in Nicaragua
The Banking Crisis in 2000 in Nicaragua
Commercial banks in Nicaragua has suffered a deep crisis in 2000, which was characterized by the closure of Banco de Crédito Popular in January, the collapse of Banco Intercontinental (Interbank) in August, which was bought by Bank of Production (BANPRO), the collapse of Banco del Café (BANCAFÉ) in October, which was bought by the Banco de Finanzas (BDF) and the massive outflow of deposits from the Banco Nicaragüense de Industria and trade rumors associated with weak financial statements on its financial situation.
The financial assistance of the Central Bank of Nicaragua to attend the bank bailouts and liquidity problems of the banks who want to buy the failed banks joined at December 31, 2000, an amount equivalent to U.S. $ 139 million of dollars, and it contributes to the decline of U.S. $ 116 million adjusted net international reserves, excluding the privatization funds of ENEL. In addition, in February 2001 El Banco Mercantil broke and in order to avoid further deterioration of public confidence in the financial system, a mechanism for the sale of troubled banks to solid banks was tested. It is important to mention that the BAMER was bought by Banco de Credito Centroamericano (BANCENTRO).
The first bank to fall in October 2000 was the Interbank, despite efforts to save it, the mistrust generated when meeting the financial hole caused by fraudulent transactions against the bank, created a level of uncertainty that the public withdrew $ 49 million in just four and a half days, which led to an unsustainable situation. The next one was the Banco del Café, in compulsory liquidation on November 17 of the same year, by detecting a negative net worth (excess of liabilities over assets) of 154.8 million cordobas. The following would be the BAMER, which was losing 11% of their deposits (about 153 million cordobas) in just five months, with rumors that would follow the same path as the Interbank, until it decided to intervene on 3 March 2001, being sold to Bancentro.
Finally, the BANIC also suffered not only by the crisis of confidence generated by the process of bankruptcy, but by the comments of the opposition leader, Daniel Ortega, resulting in a massive withdrawal of deposits of 697.4 million cordobas, which signified the 32% of the total, which led to its purchase by BANPRO at the end of 2001.
The FMI reaction to the banking crisis
The FMI gave a loan to Nicaragua of 26.1 million dollars to cope with the financial crisis that began in 2000. To obtain this refunds, the central government committed to implement a series of measures in the banking and financial system, many of which had to be fulfilled during the first quarter of this year. Some of the conditions were strengthening the institutional framework, establishing the legal basis for restructuring the banking system, improving the solvency and liquidity of banks, the management solution and recovery of depreciated assets of intervened banks, and strengthening of prudential regulations and supervision. Some of them have been already approved and others are on hold.
The banks between March 2001 and March 2000
The banking business in Nicaragua, in an adverse situation with the closure and bankruptcy of several institutions, has experienced mergers and transfer of assets and liabilities of banks closed to the most solid banks of the country. For this reason we can see great growth within the seven banking institutions.
At March