San José, Costa Rica, since 1956

Bank Back to Normal after Rumors, Chaos

CALM has returned to BAC San José after rumorsof a closure earlier this week incited a rush on thebank’s branches around the capital. Spurred by talk ofa possible government freeze of funds that began tocirculate Monday, thousands of bank clients panickedand withdrew savings totaling $9 million by Wednesdayafternoon.The main branch of BAC San José stayed openfrom Tuesday until 3 a.m. Wednesday attending aboutten times as many people as normal.The bank’s and the country’s top economic officialsthis week strongly backed the bank and shooktheir heads at what they said was a baseless rumor.“Right now we have control of the situation andthe amount of withdrawals are reducing,” BAC SanJosé manager Gerardo Corrales told The Tico Times.“It’s this entity’s policy to show its face in both thegood moments and the bad ones. We want to showcustomers they have nothing to fear.”The privately run bank, which has 32 branches inCosta Rica, manages $800 million in a network ofbanks from Guatemala to Panama, he said.CENTRAL Bank President Francisco de PaulaGutiérrez confirmed in a televised press conferenceWednesday that rumors of a planned interventionwere false. “The truth is, the rumors took me by surprise because we have never discussedsuch measures for this bank,” Gutiérrezsaid. “There is a good reason for that. TheBAC San José bank is a bank that is able topay all its debts; it’s a well-financed andwell-administrated bank; it’s a bank that ispart of a financial group that is strong.When one hears this kind of rumor, one hasto ask where it came from. The bank is in astrong position of liquidity.”Luis Diego Vargas, president of the government’sSupervision Council of theFinancial System (CONASSIF), said the lessonlearned is, “It’s important for people tolearn to better filter the financial informationthey receive from informal channels. Theymust evaluate it more intelligently.”One of the ironies of the panic was themugging of a BAC customer as he left abank with $10,000 in cash. The man, in his60s, was shot multiple times, gravelyinjured, and robbed Tuesday morning afterhe left a BAC branch in Pavas, the JudicialInvestigative Police (OIJ) confirmed. Hewas reported in delicate condition at anarea hospital.His was the only incident directlylinked with the bank run, according to theOIJ, although agents on Wednesday afternoonarrested two armed suspects on amotorcycle for allegedly planning toassault clients exiting a bank in Moravia.Of the $9 million withdrawn by customersthis week, $5 million had been redepositedby yesterday, according toCorrales.ON Tuesday night, the lobby and stairwellof BAC’s main branch was crowdedwith customers waiting to withdrawmoney, and armored cars crawled along thecongested streets around it.BAC branches around the capital andATMs that serve the bank forked over $5million that day alone to an estimated 5,000customers, which was 1% of its totaldeposits, Corrales said. On a normal day, thebank pays out to about 500 customers.Though the bank made efforts to stockits branches, in some cases this week locationsran out of cash and paid customers incheques de gerencia – checks from thebank’s account in the Central Bank that canbe deposited at other banks.THE chaotic situation occurred justfive days after the Superintendence ofSecurities (SUGEVAL) temporarily frozefunds at the brokerage house Financorp anda month and a half after the Superintendenceof Financial Entities (SUGEF) frozefunds at Banco Elca (TT, July 9).SUGEVAL intervened at FinancorpAug. 7 after discovering it had conductedsome transactions that were not listed intheir statements, and SUGEVAL frozeapproximately $80 million in assets of theprivate bank Banco Elca in early July afterdiscovering it was “conducting bankingpractices that were putting in danger itsfinancial solvency.”CONASSIF’s Vargas noted that anintervention at a failing bank is a positivething because it helps people recover mostof their money. Regarding this week’s rushto withdraw funds from BAC San José, hesaid nothing similar has happened in CostaRica in recent years.The origin of the rumor was the questionmost often asked of Gutiérrez duringthe press conference Wednesday, but neitherthe Central Bank president nor BACauthorities knew how it started.“It hurts me to think someone wouldmanipulate the financial markets in thisway to hurt us,” BAC San José managerCorrales said.When he first heard of the rumorTuesday morning, Oscar Rodríguez, Superintendentof Financial Entities, said hethought it was a joke.“It is necessary to find out who or whatwas responsible for this rumor,” he said.Bank and government authorities areinvestigating the source of the rumors.NOT all customers panicked.Kenneth Rivera, a non-disgruntledBAC customer, did not break a sweat whenthe rumor caught up to him. He received atext message on his cell phone – he doesn’tknow who sent it – that read, “There arerumors that BAC San José is going toclose,” but said it did not worry him.“No, I have not withdrawn my money.The situation does not worry me. BAC SanJosé is a solid bank, a Central Americanbank with an international status of recognition.I am more worried about the peoplebecause if they panic, the problem couldbecome much bigger,” he said.(Tico Times reporter Steven J. Barry contributedto this report.)

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