BANK SCANDALS ARE nothing new. From BCCI to
Barings, financial institutions have been brought down in the
wake of the discovery of holes in their accounts. Now you can
add Baninter to the list.
In the case of the third-largest bank in the Dominican Republic,
though, the effects were much worse than those of bank frauds
elsewhere. The scale of deception was so big that it has devastated
the entire economy, which has suffered a currency collapse, a
dramatic widening of bond spreads, and a downgrade of its credit
ratings.
The bank within a bank at Banco Intercontinental (Baninter) was
uncovered in April, after its purchase by Banco del Progreso was
agreed. Baninter had 14.6% of the banking system's assets, while
Progreso was the sixth-largest bank, with 7%. The deal never
closed. Progreso's due diligence uncovered what regulators and the
bank's auditor had missed for more than a decade: embezzlement and
fraud that had siphoned off...
