Have money in COACECSS, think about this

[Lee Zeltzer]

I received this today, I am passing it on with no comment beyond the source is very reputable.

Dear Lee, 

I have been very concerned for months about the marketing of this Savings and Loans Coop (and have been advising clients who ask, not to make deposits in Savings and Loan Coops) and a client just told me last Friday that they have been outside the Tuesday Meetings. 

The financial newspaper in Panama (Capital Financiero) published a note this week saying that the government entity that oversees Savings and Loans Coops has just intervened COACECSS (which is the one being promoted by this group of Americans in Panama) because of an audit which showed the sustained non-compliance with the law that regulates them and the "financial and administrative deterioration of this Coop which jeopardizes the investments of the Coop". 

 

[Jim Thompson]

You are absolutely correct Roger........it's a pleasure to come across people who know of what they speak......I am pleased to read the words of someone who speaks with his brain in gear.  jT

[Jim Thompson]

I have annual reports for 2011 free for the asking, every Tuesday morning 9:30am to 11:30am at BCP at the Gringo meeting.  Stop by and pick one up............

[Ray]

A link to the article in Capital Financiero:

http://www.capital.com.pa/intervienen-cooperativa-de-trabajadores-d...

[Jim Thompson]

By the way, the Credit Union in question is in great shape.  No financial problems.  No shortage of money.  Number 5 out of all the credit unions in Panama and there could be between 165 up to 180 of them.  Customers are all very happy.  It's funny that Lee knows exactly how to reach me, or contact me to find out such information.  I can only suppose that he got busy with other projects.  Please call me next time if you need some information.  I am only too happy to help out with this subject.  We will have a complete story on our internet radio program Boquete Chatter, heard every Friday at 9am and 9pm, which is 10am and 10pm EST.  www.overseasradio.com is the website............

 

The source that Lee is claiming is reputable from his original note is Mata-Kelly, a lawyer from International Living.  You will notice that she talks about Credit Unions as though they were American style "Savings and Loan" companies, that failed miserably in the US.  Using that old association hook, are we?  No story here. 

 

There has never been a Credit Union failure in Panama since they began in 1948, and some historians claim that it was 1946.  I spoke with Credit Union manager folks the other day regarding the Capital Financiero newspaper story, and they claimed that there were considerable errors and mis-information in this story.  Someone should have checked first.

 

This group of Americans in question met with this marvelous understanding woman who was representing IAPCOOP in this current process, Marta Luna Veliz. Apparently, after a six month audit of the Credit Union, IPACOOP determined that there were corrections that needed to be effected in the accounting and loan departments of the credit union.   If allowed to continue long term, it would effect the financial solvency of the Credit Union in the distant future. 

 

The interest rates being offered by the Americans were too high, and also a half a percent higher than were being offered to Credit Union members.  Credit Union rules state "Cooperatives can provide services to others, but such services can not be made on terms more favorable than provided to its members or to undermine the services to them."  New rates are forthcoming.  Those with the old rates will keep them as contracts were signed.  Lucky you.

 

Perhaps no more really sweet deals at this Credit Union.  It was good fortune for those who got in early, a few years ago, and locked in long.  And by the way, we will not be able to open new accounts at the Credit Union until after the rates are changed and everyone is in agreement.  There are still some i's to dot and t's to cross before getting back to normal day to day activities and new accounts at the Credit Union.  We appreciate your understanding and thanks to Lee for all the promotion and advertising.  You can e-mail me for any particulars at [e-mail]

 

Here is a bit of information to correct some errors or add info to this website: 

• This is an “Administrative Intervention” and as such by definition, in no way involved the immediate financial health or solvency of the Credit Union
• The credit union will continue to honor all interest payments in both certificates of deposit and Money Market savings accounts,
• The credit union has the solvency to pay all principal amounts of certificates of deposit when matured and if requested.

And most importantly, clients funds are not in jeopardy.  Never were.  Never will be.  Credit Unions are wonderful organizations to deal with.  The people are exceptional and I am most happy to be involved with this particular Credit Union. 

 

 

 

[Lee Zeltzer]

Jim, I did not think it necessary to ask you, a person selling for the coop, to comment on an article in the Financial Newspaper. The seizure was brought to my attention by a person with a far better understanding of Panamanian law and reality than me; maybe you are more knowledgeable?

You can say what you wish, but the words written in the newspaper seem a bit more forceful than yours. I do not have a complete understanding of what the regulators think and why they intervened; but they did.

Jim this is the quote 

The resolution JD/11/2012, by authorizing the intervention, indicated that the audit carried out"details an alarming deterioration of financial and administrative organization through this cooperative and that such circumstances pose a serious risk to the investments by the cooperative and therefore the money from partners and third parties. "

Sounds a little more serious to me. The words "serious risk" ring loud.

[Jim Thompson]

Serious risk means that if left unchanged, if everything continued as it was going, it would be bad for the investors in the future.  That's why IPACOOP is there, to make sure that bad things get fixed.  They have a list of recommendations that the board of directors will implement and it's back to business as usual. Expect to see things back to normal soon, and with a clean house. 

 

They now have 12 offices, just added one in Puerto Ameulles and 2 more in Panama City.  No one is agressively promoting the credit union at the Tuesday morning meetings.  It is very passive.........jT

[Gordon James]

What you are admitting to Jim is that someone in your organization broke the rules by offering expats a higher rate of return than its members. A nudge, nudge, wink, wink honest mistake I presume? This practice would have continued had IAPCOOP not intervened.

You stated: "And most importantly, clients funds are not in jeopardy.  Never were.  Never will be.  Credit Unions are wonderful organizations to deal with.  The people are exceptional and I am most happy to be involved with this particular Credit Union." - Sounds like a used car sales pitch. Never say "NEVER" in your sales pitch because the truth is that anything can happen at anytime.

Be careful in Panama folks.

[Jim Thompson]

No one from that group of Americans in question had anything to do with breaking any rules.  It would be the Credit Union in particular that did not know that rule and accepted the proposal.  Think about it.  Everything the credit union does has to be passed by it's Board of Directors.  Why would they knowingly break a rule.  What's in it for them?  There was a proposal, they agreed to it, and it stood for 2 years until the audit and some brainiac brought it to everyone's attention.  It's easy to fix.  Consider it done.........jT

[Gordon James]

I am not questioning the legitimacy of credit unions and their safety. What concerns me is that right now there is a frenzy of expat money flowing into these coops who have a different purpose than a typical member. There are many hard pitch sales men pushing this deal. Without proper forward thinking and planning this can lead to a financial shortfall which may result in losses or a collapse. An example would be writing CD's for 8.5% without any type of limits or controls in place. If someone wanted to deposit $10MM @ 8.5% would you turn him away? How would the credit union sustain the high interest? The term moral hazard comes to mind.

You said: "Everything the credit union does has to be passed by it's Board of Directors.  Why would they knowingly break a rule.  What's in it for them?" - My goodness, this is Panama. More deposits = more commission paid out + more money to place their bets. They know the rules. It's not getting caught that's the hard part.

[Jim Thompson]

If someone wanted to deposit, too high an amount, they would most definitely be turned away.  For those that attended a meeting with the General Manager of the Credit Union in Boquete recently, he explained that he had to turn down a lady who had 4 million dollars to invest.  He explained that the Credit Union was not able to find enough members in his credit union to make loans to cover it.  They can only take so much money at any given time and have to find members to take out loans.  Recently they started a new car program to increase the loans at the credit union.  They are looking to find new programs all the time to make sure that all the money that gets invested, gets loaned out.  That is the fear at this credit union.  That one day, it will be full.  They won't be able to accept any more money because the loans are maxed out.  They have been looking for other groups to join them who do not have Credit Unions, such as police or firemen.  The membership has grown from 13,000 to 14,000 in a few years, but if the money continues to flow as it has, they need many more members.  A little known fact.  You can borrow against your Credit Union CD.  If you need money, the Credit Union will lend it to you at 1.5% above your CD interest rate, using your CD as collateral.  It's another way to get the money flowing. 

[Mateo]

"There has never been a Credit Union failure in Panama since they began in 1948, and some historians claim that it was 1946."

Actually, three failures.  In 17 years. If I read COFEP right.

Starting at: World Council of Credit Unions
                 http://www.woccu.org/about/intlcusystem/icus_country?region=LA&...

Then proceeding to: Corporación Fondo de Estabilización y Garantía
                              de Cooperativas de Ahorro y Crédito de Panamá, R.L.
                              http://www.cofep.com/servicios.html

We arrive at COFEP's site.

"El fondo de garantía ha cubierto 3 quiebras de cooperativas, desembolsando más de B/110,000 en ahorros acumulados por sus asociados."

and

"El objetivo del Fondo de Garantía es devolver las cuotas de aportaciones y ahorros netas que no han sido satisfechas a los asociados de una cooperativa que cierra por insolvencia, hasta la suma de B/.7,000 por asociado. La experiencia ha sido muy satisfactoria, al resarcir solamente 3 cooperativas durante 17 años de operaciones."

See: http://www.cofep.com/historia.html for more background on COFEP.

There's a study out there that says there have been five. Since that same study also states that:
"el Fondo es totalmente voluntario y privado, sólo para las cooperativas afiliadas a la entidad",
the COFEP number may only include those closures covered by COFEP.

Or maybe the study refers to a different time period.  The study says:

   "fue utilizado en cinco oportunidades entre los años 1989 y 2003"

 
See: http://www.cemla.org/old/actividades/2011/2011-09-SupervisionCooper...

[Gordon James]

I would be less concerned about the past failures and more concerned about a company breaking the rules and getting caught and then acting smug about it as if there's nothing to see and everything is fine.

Due to the banking privacy laws being relaxed in Panama recently, there is a capital flight to safety which right now are credit unions. This feeding frenzy creates opportunity for independent brokers on commission (not employees of the company) to make money signing up new clients. Be careful of too good to be true sales pitches.