Government closes Cuenca-based financial coop CREA due to insolvency and mismanagement

The Superintendence of Popular and Solidarity Economy (SEPS) suspended all operations of the Cuenca-based CREA financial cooperative Tuesday morning, citing a lack of liquidity and failure to comply with improvements ordered by regulators. SEPS director Christina Murillo ordered liquidation of coop assets to begin immediately.

CREA headquarters at Unidad Nacional and Av. Mexico in Cuenca.

According to Murillo, CREA had $6.5 million cash-on-hand against outstanding loans and other liabilities of $196 million. Under SEPS rules, a coop must have cash assets of 9% of its total portfolio. Murillo added that CREA had been under “intensive supervision” due to deficiencies uncovered in a 2023 inspection. “There had been very little response to our recommendations and the financial mismanagement continued, forcing today’s actions,” she said.

Murillo said 98% of coop customers would receive full refunds of their deposits based on Deposit Insurance Corporation coverage of $32,000. She added that customers with larger deposits would have to wait until the liquidation process is complete to recover their money.

At the time of its closure, CREA had 98,000 customers in nine provinces — Azuay, Cañar, Cotopaxi, Guayas, Loja, Morona Santiago, Pastaza, Pichincha and Tungurahua – with more than 60% of those in Azuay and Loja Provinces.

Murillo appointed Luis Cabrera CREA administrator for the duration of the liquidation process.

CREA management issued a statement Tuesday afternoon disputing Murillo’s claim that it did not respond to SEPS’ recommendations but admitting mismanagement by previous directors. “The new management followed up on its commitment to comply with the provisions specified,” adding, “However, it is admitted that the deterioration accumulated in previous years by CREA’s old management prevented achievement of the necessary results.”

In a statement, SEPS said the impact of the CREA collapse will be “substantially less” than the 2013 bankruptcy of the Cuenca cooperative Coopera due to higher levels of insurance coverage. Thirty large Coopera depositors lost an estimated $10 million in the collapse.

According to SEPS records, 130 foreign residents, most of them from the United States, were Coopera investors.

For more information, CREA customers can contact SEPS at luis.cabrera@seps.gob.ec.