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Nicaragua FINANCE
Banking
Prior to 1979, Nicaragua's banking system consisted of
the
Central Bank of Nicaragua and several domestic- and
foreign-owned
commercial banks. One of the first acts of the Sandinista
government in 1979 was to nationalize the domestic banks.
Foreign
banks were allowed to continue their operations but could
no
longer accept local deposits. In 1985 a new degree
loosened state
control of the banking system by allowing the
establishment of
privately owned local exchange houses.
In 1990 the National Assembly passed legislation
permitting
private banks to resume operations. In 1992 the largest
stateowned commercial bank was the National Development Bank
(Banco
Nacional de Desarrollo--BND), originally established by
Chase
National Bank. Other state-owned commercial banks were the
Bank
of America (Banco de América--Bamer) and the Nicaraguan
Bank of
Industry and Commerce (Banco Nicaragüense de Industria y
Comercio--Banic). The People's Bank (Banco Popular)
specialized
in business loans, and the Real Estate Bank (Banco
Inmobilario--
Bin) provided loans for housing. Three foreign banks
continued
operations: Bank of America, Citibank, and Lloyds Bank.
The Inter-American Development Bank (IDB) was
instrumental in
restructuring Nicaragua's technically bankrupt banking
sector. In
December 1991, the IDB approved a US$3 million technical
cooperation grant to restructure the Central Bank, and in
March
1992, it approved a US$3 million loan to a new commercial
bank,
the Mercantile Bank (Banco Mercantil). The Mercantile Bank
program was expected to make loans available to small- and
medium-sized private-sector enterprises and to finance
investments to bolster fixed assets and create permanent
working
capital. The Mercantile Bank was the first private bank to
be
established in Nicaragua since 1979. Three additional new
commercial banks were scheduled to open in 1992.
Restructuring of the National Financial System (Sistema
Financiero Nacional--SFN) was one of the key elements of
the
government's economic reform program. According to an
agreement
between President Chamorro and the World Bank, Banic was
to be
merged with Bin. The BND would handle only rural credit
operations, and the People's Bank was to take over all
credit
operations for small- and medium-sized industry.
International
operations, which had been managed exclusively by the
Central
Bank since 1984, were transferred to the BND and Banic.
The
Central Bank would continue to handle operations
pertaining to
the central government, while the newly merged banks would
be
responsible for letters of credit, imports, transfers, and
dollar
checking accounts.
The Central Bank also auctioned off one of the
government's
largest exchange houses. This exchange house had been
established
in 1988 under the direction of the Financial Corporation
of
Nicaragua (Corporación Financiera de Nicaragua--Corfin).
In 1989
the Central Bank authorized the exchange house to operate
a
foreign money exchange office as an agent of the bank. In
May
1991, Corfin voted to turn over its shares in the exchange
house
to the Central Bank so that the exchange house could be
sold.
Opponents charged that this sale was unconstitutional.
They
argued that the exchange house was the property of the
Central
Bank and could not be transferred. The Federation of Bank
Workers
also charged that the new government banking policy was
weakening
the state bank while giving the advantage to the private
banks.
Data as of December 1993
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