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The dissolution of Bancamérica does not lead to contagion

Bancamérica, the financial entity that the Superintendency of Banks (SB) is in the process of dissolving, has 28,485 depositors, which represent just 0.34% of the system.

Only 15,260 of them have a balance in their savings accounts and/or instruments, with a total of RD$3,257 million. The number of debtors amounts to 5,438, representing 0.27% of the system, and given Bancamérica’s participation in the market and the fact that it has minimal interconnection with other participants, there is no risk of contagion caused by its departure.

This is what the monetary authority takes for granted. Yesterday, the SB reported that via the Second Resolution of January 28, 2022, the Monetary Board ordered the dissolution of Banco Múltiple de Las Americas, SA (Bancamérica), an entity that had been under a special supervision regime since 2019, following a regularization plan that did not comply.

The decision was adopted in accordance with the provisions of article 62 of Monetary and Financial Law number 183-02 of November 21, 2002, regarding the causes of dissolution.

Bancamérica registers assets for RD$3,577 million, which represent 0.13% of the system’s total assets and place it in position number 31 among the 49 financial intermediation entities. The problems that the bank is going through come from afar: The last time it reported profits was seven years ago (in 2014); by then those profits were for RD$14.2 million.

As part of the dissolution process and in accordance with the regulatory protocols, the Superintendence of Banks will ensure that the assets and liabilities (loans and deposits) of Bancamérica are transferred to another financial intermediary entity through a transparent and competitive bidding process, within the next 30 days.

The Monetary and Financial Law number 183-02 (article 46, literal E) requires a solvency coefficient of a minimum of 10%. It makes it clear that multiple banks and credit institutions that do not meet that level of solvency ratio will be considered in a situation of regulatory insolvency.

The solvency ratio is an index that expresses, in percentage terms, the relationship between the amount of technical equity and the sum of the amounts of assets and contingent operations weighted by risk of financial intermediation entities.

The Monetary Board has set the implicit coverage of deposits up to an amount of RD$1,860,000 per depositor. 98.1% of the entity’s depositors have savings below this threshold, according to official data.

In the regularization plan, the SB required Bancamérica to return deposits held in related entities abroad, increase capital and strengthen its collection methods and internal controls.

During the term of the plan, close surveillance of the entity and its operations was maintained, including the presence of special supervisors. The entity did not correct the main breach, related to the repatriation of deposits held in a foreign related party, nor did it contribute additional capital.

In the document served to the press, the SB informed Bancamérica’s depositors and creditors that as of Monday, February 7, 2022, they must go to the bank’s branches to validate their deposits and other credits, or do so virtually through of the digital channels that the Superintendence of Banks will make available.

Bancamerica operated nine branches in the Dominican Republic, including its headquarters in the Evaristo Morales expansion in Santo Domingo. It has offices in Barahona, Vicente Noble, Neiba and Punta Cana.

Main shareholders; the theme of the percent

Venezuelan citizen Víctor José de Jesús Vargas Irausquín directly owns 35% of the shares and, through the company Cartera de Inversiones Venezolanas, CA, owns the remaining 65%, the SB reported.

Vargas is, in turn, the president of its Board of Directors. The bank presents accumulated losses from fiscal years prior to 2021 for RD$851 million and losses for RD$147 million during the last fiscal year (data as of November).
In addition to these negative results, the entity made business decisions that affected its prudential indicators (its solvency).

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