Publication: Dealing with Distressed Financial Cooperatives : A Caribbean Experience

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Astaphan, Eleanor
Cerruti, Caroline
Gomez, Ruben
This working paper analyzes the restructuring of a distressed systemic financial cooperative in the Caribbean and draw lessons for supervisors or policy makers. It explains how the cooperative was intervened, restructured and revived in less than nine months. It analyses how a major contagion impact to the rest of the local financial system was averted with the supervisor building the necessary confidence from the members to recapitalize the cooperative. No public funding was disbursed. Success was never guaranteed during the intervention period and hinged on a comprehensive approach addressing liquidity, solvency and long-term viability issues. This paper attempts to draw some lessons for policymakers and financial supervisors who may be confronted with a similar situation. The first part describes the distressed institution and the challenges it presented to its supervisor; the second part analyzes the key components and timeframe of the restructuring strategy; the third part draws tentative lessons for supervisors. Importance of the document: while the World Bank has been and is involved in the development and restructuring of financial cooperative sectors, to the knowledge of the authors no case study of specific restructuring has ever been documented. This paper is designed to share knowledge on a specific case for Bank staff working on financial cooperatives, and also for supervisors of financial cooperatives or policy makers who may be confronted with a similar situation featured in the paper.
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Astaphan, Eleanor; Cerruti, Caroline; Gomez, Ruben. 2015. Dealing with Distressed Financial Cooperatives : A Caribbean Experience. © World Bank, Washington, DC. License: CC BY 3.0 IGO.
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