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Costa Rican regulator takes control of Bancrédito after "severe deterioration"

Conassif, Costa Rica's National Financial System Supervisory Council, on Dec. 22 took control for up to six months of troubled lender Banco Crédito Agrícola de Cartago, or Bancrédito, after the bank continued to struggle with poor financial performance and an inability to meet obligations.

In a statement, the regulator said it made the decision in order to "ensure the stability, soundness and proper functioning of the financial system as well as the public resources held by the bank" and that it took over all the bank's assets to administer them in a way that best suited public interests.

Conassif also said it made the move after Bancrédito showed "severe deterioration" in the areas of liquidity, profitability and assets in the latter part of 2017. "The bank's equity situation has deteriorated since May 2017, with net accumulated losses representing 37% of equity at the end of November 2017," the regulator noted.

The regulator appointed Marco Hernández Ávila as the acting auditor of the bank and Johanni Portilla Campos as a deputy auditor.

The news comes as the financially burdened bank had been working toward a restructuring plan to unwind its financial intermediation business and transform into a development bank. Costa Rica's government announced in May it would speed up its plans of transforming Bancrédito while ceasing its intermediation activities before the end of 2017.

The restructuring plan of Bancrédito included the cancellation of several financial instruments and debt securities. The bank said in November it had sold 57.7% of its loan portfolio denominated in Costa Rican colones and 48.1% of it U.S. dollar portfolio, as of Nov. 24.

As of Dec. 25, US$1 was equivalent to 569.00 Costa Rican colones.