The Central Bank?s treatment of Bancredito was highlighted in the press over the weekend, with comparisons being made between the way the monetary authorities handled the financial difficulties at Bancredito, compared to those of Baninter.
In response to all the talk, the Central Bank published a paid advertisement whereby it reports that it finalized the Banco Profesional buyout of Bancredito last week. Part of the deal is an agreement that includes mechanisms by which the former owners will pay off the loans of Bancredito to affiliate companies. These loans were transferred to the Central Bank, accompanied by real guarantees, according to the Central Bank. The Central Bank also picked up a portfolio of loans owed entailing RD$5 billion guaranteed in commercial paper and issued by affiliate companies through the stock exchange. ?The guarantees for the direct loans to the Bancredito affiliates, estimated at RD$10.6 billion, are backed by RD$1.8 billion in cash in an escrow account, as a result of the sale of Bancredito to the Banco Profesional, and by the endorsement of all shares of the former owners of Bancredito in the various companies ? telecommunications, cable TV, free zone, electricity and insurance.? The Central Bank says that the Bancredito shareholders also provided personal assets to complete the payment of the loans. The Central Bank has given the shareholders five years to pay off the debts ?because the affiliate companies have their own mechanisms for payment, which minimize the risk of possible losses for the Central Bank in the financial rescue operation.?
In the case of Baninter, the government chose to intervene profit-generating businesses, such as the Intercontinental de Seguros, resulting in the latter?s rapid collapse despite being the insurance company market leader prior to the intervention.