For the first time in the institution’s history, Peru’s banking authority seized and auctioned off the assets of a distressed bank.
The Banking, Insurance and Pensions Supervisory (SBS) intervened in the operations of Ica-based Caja Señor de Luren on Thursday when the bank lost over 50% of its capital assets in the midst of shareholder infighting.
“Caja Señor de Luren had serious problems in management due to fierce economic and legal battles between shareholders. The situation prevented its corporate governance from ensuring appropriate management of the company. The shareholder conflict was growing, weakening its economic and financial situation,” said a SBS statement.
While Caja Señor de Luren had $180.8 million in deposits, its loan portfolio only reached $86.2 million. The bank also paid higher than market interest rates for deposits, and deposits more than doubled its loan business.
SBS held an auction for the distressed bank’s business between five members of the Peruvian Federation of Municipal Savings and Loan Banks (FEPCMAC) from Arequipa, Huancayo, Trujillo, Cusco and Piura. Caja Municipal Arequipa won the bid to purchase Caja Señor de Luren’s five locations in Ica.
SBS was able to save 100% of Caja Señor de Luren’s 36,000 customers’ deposits, including those with balances in excess of Peru’s government-insured limit of $30,000.
Last year the SBS intervened in the Ica-based CMAC Pisco bank and dissolved its operations, liquidating the bank’s assets to return deposits to its clients. But this week saw the first time the SBS successfully transferred the business portfolio from one financial institution to another.
Caja Señor de Luren operated in Ancash, Arequipa, Lima, Ica, La Libertad and Ucayali, and its small loans business commanded a 36.9% market share in rural areas. The bank had a 26.7% default rate by the end of April 2015.
Caja Arequipa’s loan portfolio will grow from $914.5 million to just over $1 billion with deposits of $1.1 billion. With five new locations in Ica, the bank will have 99 branches throughout Peru including 24 in Arequipa, 17 in Lima and 13 in Puno.
Depósitos y créditos de Caja de Luren se transferirán a Caja Arequipa (Andina)
La SBS interviene la caja rural Señor de Luren (Gestion)
SBS intervino a la Caja Municipal de Ahorro y Crédito Pisco (Gestion)
Cinco cajas municipales van por cartera de Caja Señor de Luren (El Comercio)
SBS intervino la caja Señor de Luren por pérdida de capital (El Comercio)
Caja Arequipa se quedó con la cartera de Caja Señor de Luren (El Comercio)
Malos manejos de accionistas tumbaron a Caja Señor de Luren (La Republica)
Agencias y Cajeros (Caja Arequipa)