The state of Interbolsa, Colombia’s largest brokerage firm, is so dire, the only solution is for the company to be bought by a new investor, reported economic newspaper Portafolio Tuesday.
Since Monday night, two banks have engaged in advanced negotiations to acquire the company’s assets.
While people who used InterBolsa to manage their portfolios will not suffer as a consequence of the brokerage firm’s reckless investments, InterBolsa shareholders reportedly will.
Colombian President Juan Manuel Santos himself assured the more than 50,000 people who trusted the financial group with their money that they would remain whole. Those taking it on the neck will be the estimated 1,400 shareholders of Colombia’s biggest investment firm.
At this moment, InterBolsa has two options, according to Portafolio; Either they get taken over by outside investors such as the two banks previously mentioned, or, Fogacol (the government agency designed to provide liquidity support to firms that require it) gives them the funds they need to remain solvent.
Whether or not InterBolsa qualifies as too big to fail, is up to the auditor Fogacol appointed to the case, Jose Ignacio Fogafin Arguello.
Though seven board members abruptly resigned last week, they claimed they were ignorant to the magnitude of the problems InterBolsa faced. Instead, they pointed the finger at the managers who carried out the ill-advised investments and even hid the subsequent losses from the board.
“The plight of illiquidity…presented by repo operations…was reckless and, in any case, [conducted] without consultation and worse, without even informing the Board of InterBolsa SA,” read the board of directors official statement.
Arguello has two months to make his decision if the company has not already been taken over.