Amid a liquidity crisis, seven high-ranking Grupo InterBolsa board members resigned late Friday night.
High-risk investments and rapid expansion have left Colombia’s biggest brokerage firm in a dangerously low cash flow position. Created in Medellin in 1990, InterBolsa started out solely as a local brokerage firm, but through a variety of aggressive maneuvers it grew into a financial institution with an international presence.
News of InterBolsa’s problems came to light last Thursday when the Colombian market regulator (AMV) announced it was temporarily taking over the investment sector of InterBolsa and closing the entire stock market for five days.
“People who have investments [with InterBolsa] in stocks or bonds, are not going to lose their investments…investors simply have to switch brokerage firms,” Colombian President Santos assured the more than 50,000 InterBolsa customers on Saturday.
Those familiar with the company say InterBolsa’s issues are nothing new. The cavalier expansionist methods left the company facing liquidity problems for months.
In 2009, InterBolsa purchased the Brazilian brokerage firm Finabank for $21 million. This came on the heels of two other purchases that netted them two additional investment firms, one in Panama and the other in the United States.
This strategy was not initially portrayed as risky, but rather as aggressive. InterBolsa’s problems arose when they compounded their expansion with high-risk investments that failed to pan out. Repo transactions, for example, “went above reasonable limits, [and left the company with] a serious lack of liquidity.”
Although not all facets of the company face scrutiny, the brokerage wing is more or less InterBolsa’s “nervous system” and the AMV’s actions resulted in InterBolsa stock falling 30%.
