Guatemala Bank Failures and Risk



Posted: Wednesday, July 15, 2009

by Aurelia Masterson
Panama Legal

Some shy away from Guatemala for various reasons not understanding that it has the largest economy in Central America ($40,000,000,000 approx.). Their banks reflect this. The government of Guatemala watches the banks closely and has at times taken steps to correct problems thus protecting all the depositors which is as good as having government insurance on the bank deposits. And Guatemala does in fact have a Government Deposit Insurance fund for bank accounts, which is called FOPA and stands for Fondo para la Proteccion del Ahorrante.

Guatemala Bank Failures – There are websites that incorrectly speak of bank failures in Guatemala when these failures were in actuality mergers of banks in Guatemala arranged by the government to protect the depositors with the net effect being the depositors did not lose any money. This is what happens in the USA and these mergers are generally arranged by the insuring agencies themselves that in the case of Guatemala is the government itself. Let us look at some of these incidents in detail with links to authoritarian sites to establish the facts. One anti-Guatemala site actually quotes from an unknown persons blog site for support to their misleading allegations knocking the Guatemala banking system and country as a whole.

Banco Café – Here we have a Guatemala bank that got into trouble. There was a $40,000,000 misappropriation of funds. The government picked this up and the culprit was forced to repay the funds in spite efforts to flee. Please let us be clear that there is a like sounding unaffiliated bank that failed in Nicaragua, which is not the bank we are talking about. See this link http://www.envio.org.ni/articulo/1468.

Now what the Guatemala government did was merge this failed bank in with a large solvent bank named Banco Industrial. This took a few days and the depositors did not lose a single dollar. Now you can satisfy yourself that this is the truth by going to this webpage which is part of the International Monetary Fund website for the real facts. The mention of Banco Café can be found in the last paragraph in the Background section of the linked page and you can see it is considered a successful resolution of the problem which means depositors were not hurt at all.

Banco de Comercio – This is another successful correction of a bank getting into trouble. This was a small bank that did not meet the strict ratios that the Guatemala government requires and thus was closed. The bank was promptly merged with Banco Industrial, which is Guatemala's largest bank. Banco Industrial made sure all the depositors did not lose their deposits. Banco Industrial was also assisted by the Guatemala agency that insures bank deposits which is called: FOPA which stands for: Fondo para la Proteccion del Ahorrante. Yes, Guatemala does have a deposit insurance fund owned and operated by the Government of Guatemala and they did step in and write a big check to help resolve the problem. To see the story told by an authoritarian website please go to this page on the D & B website referencing how Fitch is treating the situation:

http://www.allbusiness.com/services/business-services/4012834-1.html

Banex – There was a bank named Banex that got into trouble with the BANGUAT (the central bank of Guatemala bank regulatory agency). This was successfully resolved by having a large solvent bank by the name of G & T buy Banex. No depositors lost any money and the situation was resolved successfully. Again another ending without any depositors losing any money.

Fitch Ratings – Fitch is a service that rates banks. The bank that we use for clients is Banco Industrial in Guatemala. It has a Fitch rating of BB, Positive Outlook. This is an encouraging rating to say the least but it gets better. Fitch goes on to say the Guatemala government would step in to shore up Banco Industrial if necessary. You can read this yourself on this page from the D&B website.

Banco Industrial is owned by BiCapital Corporation, which was recently acquired by Honduras Banco del Pais, S.A. that has a Fitch rating of A+. So what we are saying is the entity that owns Banco Industrial of Guatemala has a Fitch rating of A+. If anything were to go wrong with Banco Industrial they would most likely step in to shore things up fast before it got out of hand requiring government intervention. However Fitch is also of the belief that if it did reach a position of requiring government intervention the government of Guatemala and their deposit insurance fund would step in to shore things up protecting the creditors completely. The key to secure banking is not only to pick a good privacy jurisdiction but to also select a bank that has related banks in other countries who will step in promptly to shore the bank up if it gets into trouble to avoid the tarnishing of the name and reputation of the other related banks.

Guatemala Currency - The Quetzal is the currency of Guatemala. It is named after their national bird. Guatemala is considered to have a dollarized economy. Their national currency is tied to the USD. It is actually floated. The Quetzal is an actual printed currency. In Panama, which is also dollarized, the currency is referred to as a Balboa and is pegged to the USD at a ratio of one to one. The Quetzal is free floated. That being said it does remain stable. The range of fluctuation over the last five years ranges from a high of approximately 7.9 quetzals to the dollar to a current low of 7.46 quetzal to the dollar. Let us not forget the fact that the USD did a lot of declining in these years so in light of this the Quetzal remained fairly stable and this is a reflection of the position of the Guatemala Central Bank to maintain a stable economy.

If you have any doubts about Guatemala come for a visit and then you will fall in love with the country.

-http://www.panamalaw.org


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Top-level comments on this article: (2 total)
» left by Anonymous 1 year 305 days ago.
HI Aurelia, if you do not know what really happened in Guatemala with Banco de Comercio why are you commenting on this matter, your comments are really far from the facts. Banco Industrial did not merge with Banco de Comercio , this bank took the opportunity of getting all Banco de Comercio's clients, but in reality most of us lost our money, and the blame for, is not only the people from this bank but also the goverment of Oscar Berger. So do not talk about what you don't know,when they talk about insurance, that does not cover anything don't even compare to what the goverment does In USA.
» left by Rene Castro from Paraguay 170 days ago.
whoever wrote this article do not know what he or she is taking about, I am from Guatemala, and I know what is like to lose money to the hands of thieves in Guatemala, You, whoever you are, you know nothing about the situation in Guatemala, according to what you stated in this blog you must be a banker or relative of these thieves in Guatemala, I must say that Guatemala as a country it has beautiful places to visit but it is violent people, bunch of gangsters waiting there for you, if you bring some money there, be careful you may lose it right away, as soon as you put your feet at the airport.
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