BOGOTA, Nov 8 (Reuters) - The collapse of Colombian brokerage Interbolsa will not impact the overall market and other financial entities have not reacted with worrying turbulence or sought extra liquidity, Finance Minister Mauricio Cardenas said on Thursday.
In a bid to calm any market concern that Latin America’s fourth-biggest economy could face a liquidity squeeze after the biggest brokerage failed to make a scheduled payment, Cardenas said the market was operating normally. Cash offered by the central bank - in a tandem measure to shore up any brokerages facing problems - was not used, he said.
The government on Wednesday began the process of liquidating the assets of troubled Interbolsa to pay investors and other obligations. Cardenas said he had seen no signs of contagion to other brokerages.
“The information we have is that things are normal,” Cardenas said on local Caracol Radio. “There haven’t been any requests for support, that means there haven’t been any problems. Small brokerages are operating in stable conditions.”
The financial market regulator intervened on Friday and essentially took over Interbolsa after it was unable to pay 20 billion pesos ($11 million) to a local bank. Interbolsa, with about 50,000 clients and one-third of daily operations on the stock market, also ceded control of its local bond portfolio to Bancolombia SA.
“The problem was concentrated in Interbolsa so there should be no worrying spillover to other brokerages,” Juan Pablo Cordoba, head of the stock exchange, said in a separate interview with Caracol Radio.
“We are convinced there won’t be, but if there are liquidity problems, the central bank will provide liquidity.”
The central bank on Wednesday offered an additional 300 billion pesos ($165 million) of liquidity to brokerages via repurchase agreements backed by corporate debt holdings.
The last time the regulator was forced to take control of a financial entity was in 2011, when it liquidated the Proyectar Valores brokerage over poor management.
The liquidation does not impact Interbolsa’s parent company Grupo Interbolsa.
The government has blamed Interbolsa’s cash flow problems on bad decision making - which began when it became too dependent on liquidity from repurchase agreements tied to the price of shares - and insists Colombia remains attractive to investors.
Colombia’s capital markets have risen steadily over the past several years as a U.S.-backed offensive against Marxist rebels and right-wing paramilitaries made the nation safer for business. Local companies are increasingly going public to tap local resources for investment abroad.
Foreign direct investment this year is expected to reach a record $17 billion, mostly in oil and mining sectors. In 2002, when many international investors rejected Colombia because of violence caused by decades of war, the economy attracted just $2 billion. (Reporting by Helen Murphy, editing by Nick Zieminski)