Colombia finance chief sees no system risk in brokerage takeover

Colombia’s financial markets are reacting calmly to the takeover of the nation’s biggest brokerage, whose unwise management decisions don’t reflect any system-wide risk, Finance Minister Mauricio Cardenas said.

Cardenas, in an interview, said that financial regulators will appoint nov. 6 a special agent to manage Interbolsa SA’s brokerage, which was seized Nov. 2 after the company said it faced a funding shortage.

“No financial market is exempt from companies that once in a while make mistakes and bad business decisions,” Cardenas said in Mexico City, where he was invited to attend a meeting of finance officials from the Group of 20 richest nations. “

But the supervisor did exactly what it was supposed to do.”

The takeover is a surprise reversal for the brokerage, which just last month said it was expanding into Perú and Chile. 

Interbolsa is the most-visible face of Latin America’s best- performing stock market. 

The benchmark IGBC index has surged 13.5 percent this year, more than any major gauge in the region, as the country’s resource wealth opens up to investment.

Cardenas said a muted reaction in Colombian stock prices after Interbolsa’s takeover was announced is a sign that there’s no risk of contagion to other assets.

“Investors are seeing that we have a strong regulator that acted in a pre emptive way,” said Cardenas, a University of California, Berkeley educated economist who took over as finance minister in September.

The IGBC index fell 1 percent on Nov. 2, in line with the Standard & Poor’s 500’s loss. 

The gauge fell 5 percent over five days, its longest streak since may, led by a 37 percent drop in Interbolsa’s shares through Nov. 1 before their trading was suspended for five days.

Cardenas, before traveling to Mexico City, held meetings last night in Bogotá to analyze Interbolsa’s future. 

A first analysis of the brokerage’s books shows that it is solvent and that excessive risk taking tied to Interbolsa’s structuring of repurchase agreements on shares of textile company Fabricato SA (FABRI) were to blame for the liquidity crunch, he said.

Cardenas said there’s “no risk” to Interbolsa’s 50,000 account holders, echoing comments over the weekend by President Juan Manuel Santos, who said that the savings of the brokerage’s clients are in safe hands.

Officials stepped in after Interbolsa said it couldn’t make a payment on a 20 billion peso ($11 million) loan.

Interbolsa also has an investment fund unit that had more than 2 trillion pesos of assets under management as of april, according to its website. 

The company also operates a brokerage in Brazil.