MEXICO CITY, Mexico-The failure of a credit union that had 98% of its loans out to one company here has led to losses for more than 6,000 members.
According to authorities, fraud at Ficrea SA, seized by regulators in November of 2014, led to the failure. At the time, it had $395 million in loans outstanding, 98% of which was represented by loans to one company, according to CNBV, the financial regulator.
Under Mexican law, credit unions are subject to a different level of regulation than banks and have their own insurance system that guarantees deposits only up to 131,000 pesos, less than a 10th the limit for bank accounts. Regulations have also allowed credit unions to pay deposit rates as high as 10%, three times the average rates paid by banks, which has led to a 43% increase in deposits at CUs over the past 12 months, to $7.7 billion.
The national regulator said that a search is underway for some in management at the credit union, and has asked Interpol for assistance.
Regulators said just 42% of the CU’s depositors will have all of their savings returned to them.