User:Michael Powerhouse/sandbox3

In 1972, Granahorrar Bank was part of a conglomerate called Grupo Grancolombiano. The conglomerate also owned Banco de Colombia, which is Colombia’s largest bank. In 1982, the conglomerate underwent a period of crisis. Consequently, the Colombian government nationalized it.

Core businesses
In the 1980s, Carrizosa became the major shareholder of Granahorrar Bank and a significant investor in other financial institutions such as Davivienda and Ahorramás. The construction and housing credits (mortgages) became the bank’s core business. The housing policy of the former President Belisario Betancur helped boost the bank's success. From 1988 to 1998, the bank showed a real annual growth rate of 45%.

Shareholders fight
The Carrizosa family was the principal shareholder of Granahorrar Bank. Jorge Enrique Gonzalez was a large shareholder and Jorge Enrique Amaya was the CEO, but he did not own any shares in the bank. According to the Colombian magazine Semana, the Carrizosa family held a 54% ownership interest and the Robayo and González families held 28% and 18% stakes, respectively. In 1998, the Gonzalez family, owners of the construction company Megacorp, decided to sell their Granahorrar shares in order to fund their construction business, which was facing an economic crisis, as was the whole country. The Gonzales family, due to desperate measures, created a so-called “shareholders fight” in order to sell their shares in order to force a sale of the bank.

National liquidity crunch
In the late 1990s, Colombia faced a profound crisis started by the high cost of funding initiated by the Central Bank in order to protect the government's fixed rate of exchange. This led to increased levels of credit defaults and a high cost of funding. While the Central Bank tried to reduce liquidity, all financial institutions started to suffer from a liquidity crunch. Granahorrar, one of the seven highest-rated financial institutions, also suffered from the government's withdrawal of funds causing a liquidity distress. The Central Bank and the government, instead of providing liquidity to the sector, continued to withdraw funds from the system to the point where many financial institutions began to fail.

The forced expropriation of Granahorrar Bank
The misguided efforts by the authorities thought that the systemic crisis could be avoided by attracting foreign investment and forcing shareholders of Granahorrar Bank to sell in order to receive government funds. This situation was later reviewed at length by the Council of State. In their determination, Granahorrar was expropriated without compensation.

Granahorrar, as it is explained in detail below, was expropriated in 1998 as part of the economic policies executed by the Colombian government to mitigate the financial crisis. Granahorrar was the only bank expropriated without compensation. On October 31, 2005, the government sold Granahorrar to the Spanish bank BBVA.

At the time of its expropriation, Granahorrar Bank was Colombia’s third largest mortgage lender and the seventh largest financial institution in the country.

In 1998, according to an official statement of Julio Carrizosa, “The equity of Granahorrar Bank was worth 220,000 million pesos - more than 120 million dollars - and, in spite of the difficulties of liquidity that the entity suffered for some months, [it] had the confidence that the crisis would be overcome, because all the indicators were optimal and Granahorrar [Bank] was listed as the seventh entity in size of the financial system, with 1,600,000 clients, and 2.5 trillion pesos in assets”.

On October 3, 1998 (a Saturday, a day that banks were closed), the government of Colombia intervened in Granahorrar Bank due to alleged liquidity constraints and cessation of payments related to the real estate crisis within Colombia that took place that year. The Carrizosa family claimed since that time that the authorities did not verify the alleged insolvency of the bank and that they did not receive any notification of such decision. According to Carrizosa, the shareholders lost the bank without any compensation. The authorities responsible for this act were the Banking Superintendence, the Fund of Financial Guarantees (“Fogafin”), the Ministry of Finance and the Central Bank.