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a775: A financial disaster waiting to happen? (fwd)

From: Pierre Jean <pierrejean01@yahoo.com>

On Friday, February 8, Sogebank stopped accepting
deposits from "Les Coeurs Unis", the flashiest (and
probably wealthiest) cooperative this time around. It
seems Sogebank went so far as to actually close the
accounts of that cooperative and a few others. Total
monies returned to the owners: a few million US

In an environment where commercial banks are charging
up to 30% a year in gourdes or 16% in US dollars on
loans, some cooperatives are routinely paying to
depositors 10-12% a MONTH on their gourdes deposits
(100-144% annualized on a non-compounded basis)or 5-7%
a MONTH on their dollar deposits (60-84% annualized on
a non-compounded basis.) This means that they must be
"lending" at levels of at least 120-160% a year in
gourdes or 70-100% in US.

However, instead of lending, the majority of these
cooperatives actually deposit their funds at
commercial banks, earning no more then 14-20% a YEAR
on their gourdes deposits or 6-10% on their dollar
deposits. Clearly, something does not compute. How can
the cooperatives afford to pay out that much to their

The fact that Sogebank has declared some cooperatives
"persona non grata" means that there is a problem.
Many people long suspected these cooperatives of money
laundering. Rumor has it that Sogebank was unable to
justify where these cooperatives were getting the
millions and was asked to close these accounts by its
US correspondent banks. All this as part of tougher
money laundering monitoring procedures.

The repercussions of such account closures are hard to
predict and quantify, but there could conceivably be a
panic movement among cooperative "members" when they
discover that their cooperative is not as kosher as
they expected it to be. If that happens, then the
entire financial system may be in for a rude shock.

The Ministry of Finance and the central Bank had
better monitor this situation closely. They have
closed their eyes on this worrisome explosion of
dubious cooperatives and may pay the consequences if
they don't step in and clean up the mess.

Pierre Jean

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