Abif pledges support to BBVA

Chile's banking association Abif has pledged its backing to the stock brokerage unit of local bank BBVA Chile in the face of an embargo request from Chile's industrial development arm Corfo, local daily Estrategia reported. Corfo announced Thursday its plans to request an embargo against BBVA Corredores de Bolsa for a sum of 29bn pesos (US$46.2mn). According to Abif chairman Hernan Somerville, BBVA can rely on the association's support on this issue. The bank has proved a distinguished association member, he added. Local judge Patricio Villarroel will announce Friday if the embargo is to be upheld. Spanish parent group BBVA (NYSE: BBV) will be required to assist BBVA Corredores de Bolsa in this issue given that the stock brokerage held equity of around US$16mn as of end-September this year. If the embargo request was to be upheld it would affect the assets belonging exclusively to the stock brokerage and its board and would not extend to funds held by investors. Corfo's judicial action follows a ruling in Chile's appeals court in October based on 11 financial operations conducted between now intervened Chilean financial group Inverlink and BBVA Corredores de Bolsa's former executive Juan Pablo Prieto. The transactions allegedly took place between December 2002 and February this year and were estimated to involve sums totalling 26.4bn pesos. According to market analysts contacted by BNamericas, the judicial measures taken by Corfo represent the quickest route available to reaching an extra-judicial agreement with BBVA and to force the Spanish group to the negotiating table. This pressure tactic proved beneficial to Canada's Scotiabank in reaching an extra- judicial agreement for a sum estimated at 3bn pesos. If BBVA were to negotiate an extra-judicial agreement the Spanish group would be attributing the blame to the stock brokerage and not to one individual, the analysts added. With full guns blazing in its defense, BBVA stated in a press release that the blame for Corfo's capital shortfall lay directly at the feet of the agency as a result of the misappropriation of funds and negligence on the part of Inverlink executives. Corfo has suffered no ill effect as a result of operations conducted by BBVA Corredores de Bolsa, the press release added. This situation will cause considerable damage to the image of Chile's financial system, far more than the damage to BBVA's capital base given that the sum involved is relatively small, the analysts said, adding that the lack of transparency in this case is very bad with respect to future foreign investment. Inverlink was intervened earlier this year following charges linking the company to large-scale theft from state agency Corfo and espionage against the central bank.