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Local Banks Weather WTC Collapse Aftermath Well

Fed action expected to provide boost, Gov. Calderon & GDB’s swift action praised


September 20, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

Puerto Rico’s commercial banking sector weathered the aftermath of the devastating attacks on the U.S. financial nerve center with impressive resilience.

The sector’s relatively smooth handling of the shockwaves emanating from New York was due in no small part, banking industry leaders say, to swift assistance from the Government Development Bank (GDB) and Gov. Sila Calderon.

In order to protect the local financial system, the GDB made between $400 and $450 million dollars available to institutions which momentarily found themselves in a bind due to communications problems affecting their ability to access the federal funds market.

"There was not an emergency," Puerto Rico Banking Association Executive Vice President Arturo Carrion told CARIBBEAN BUSINESS in reference to the GDB action. "But it did give our institutions an additional option that was there to help avoid any problems," he added.

The government also provided the sector with assistance in getting more than $170 million dollars in checks drawn on U.S. mainland banks back to the U.S., in order to expedite the availability of these funds. Governor Sila Calderon ordered a Puerto Rico Air National Guard cargo plane to fly the checks to the states.

"The government realized the importance of not waiting for commercial air service to resume in order for those checks to be cleared," Puerto Rico Bankers Association President David Chafey said. The plane then returned to Puerto Rico with mainland-deposited checks drawn on Puerto Rico banks.

Bankers said that cash withdrawal rates following the disaster were far below those than typically occur when hurricanes threaten the island.

Chafey, who is also Banco Popular’s Senior Executive Vice President, said Banco Popular’s operations center in New York was intact but–due to its location near the area affected by the destruction–was forced to remain closed during the week the attack took place. However, Banco Popular’s 48 branches in New York–along with their employees–were physically unaffected by the destruction in lower Manhattan and had resumed business. Chafey said the attack would not alter Banco Popular’s stateside expansion plans.

In Puerto Rico, Chafey noted that economic activity during the week of the disaster had suffered a slowdown, but was expected to recover quickly for most sectors by the end of the post-disaster week. If Federal Reserve interest rate cuts materialize as expected, he said, it should benefit not only the banking sector, but also the rest of the economy and boost consumer confidence.

While the initial strain of the stateside economy to recover will also be felt in Puerto Rico, the banking industry leader said he thinks the unity and resolve of people and institutions to recover may actually help accelerate the economy’s recovery from the current slowdown.

This Caribbean Business article appears courtesy of Casiano Communications.
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