Banco Intercontinental
Brandi Hobbs
Upper Iowa University

Banco Intercontinental Case Study

Introduction Banco Intercontinental (BANINTER) was the second largest privately held commercial bank in the Dominican Republic before it collapsed in 2003. BANINTER was facing a lot of issues related to inefficiencies in the system. The business leaders realized that these inefficiencies resulted in unnecessary expenses and dissatisfied customers. In order to solve this problem, the bank took some steps in order to improve its process (Fishel & Conger, 2009). This was done by creating some processes that were common in other companies during that time. However, there was a lacking of systematic implementation and the efforts tended to be isolated (Fishel & Conger, 2009). The result was that most people in the bank dismissed that these changes in the process would help the business.

The beginning Banco Intercontinental of BANINTER was created by Ramon Baez in 1986. Mr. Baez was a former industry minister and businessman. Mr. Baez oldest son,Ramon Baez Figueroa took over his small bank. His son built this small bank to the second largest private commercial bank. Baez Figueroa bagan buying up controlling intersest or whole companies that touched every person in the Dominican Republics everyday life using the BANINTER Group. Throught the BANINTER Group he manager to control the countries media group, the leading and oldest newspaper , a television cable company, and more than 70 radio stations. Baez Figueroa became a man of great wealth and power. He threw a lavish wedding for a former Domincan Republic president and signed the wedding certificate as a witness. He purchased formar president Mejia a bulletproof lexus as well is successor. Baez Figueroa at one point purchased ten gold Rolex watches worth $15,000 each. Rumors about families fortune began to grow and run rampant that Baez Figueroa was in fact robbing his own bank and using it to fund his families lavish lifestyle and posh gifts. Baez fiuera had person expenses that exceeded $1,000,000. Baez Figueroa was using lines of credit and bank credit cards to live this lavish lifestyle. Not only was Banco Intercontinental funding Baez Figueroa’s lavish lifestyle the bank itself was having it’s own functional issues.

Issue towards Downfall In 2001, Kenneth D. Lewis, the new CEO and chairman of the Banco Intercontinental announced a major change in the way the bank is being managed. A major strategic change was foreseen in which the company would grow through merger, acquisitions, and organic growth. This would require the acquiring and retention of customers so that profit could be enhanced (Fishel & Conger, 2009). This strategy paid off and the company grew substantially after the mergers and acquisitions thus making it extremely strong and helped it gain significant competitive advantage because of an increase in the number of customers. Another advantage was that its customer base was very diverse ranging from blue chip businesses, corporate customers, small, and middle markets etc (Fishel & Conger, 2009). However, despite having the customers, the company did not provide the services that customers demanded. Therefore, they faced problems in acquiring, and retaining customers. This proved that despite the efforts to improve the performances of the key processes, the company was still not performing well (Thomke, 2003). One such issue was that several defects were constantly being noted and correcting them involved a loss to the company (Fishel & Conger, 2009). This also resulted in customers not being happy with the services being provided by the bank. With several close competitors providing better services, the bank soon realized that they were losing customers to competitors. This called for a major change that could lead the company out of this issue by significantly improving the processes (Turney, 2002).

The Need for a Talent Management Program Given the importance of having trained employees who could fill the gaps of executive level leadership, it was decided that employees should be given training to manage the role of executive level leaders whenever the need arose. Six Sigma was given importance here as it would help identify the processes and time period that was necessary to fully train these people (Fishel & Conger, 2009).The first step was to identify candidates who would fill the role of leaders in the future and provide them extensive trainings so that they may fill in the vacant position without any issues. The competitive environment within the bank managed to train a few thousand people. This ensured that they have a sufficient pool of candidates who could be called anytime to lead the organization (Fishel & Conger, 2009).

Future Approaches The bank was making a good public showing of trying to get the operation portion on track. Possible future approaches could include the provision of continuous trainings to every employee so that the bank may not only have a pool of future business leaders but every employee in the organization would be specifically trained which would eventually improve the business processes and increase the efficiency while reducing the common errors in the system (Fishel & Conger, 2009). Another solution could be to provide incentives to employees who would begin to train themselves. In this way the organization would reduce costs and at the same time reduce the time being wasted on training. The constant improvement in performance could be matched with the performance of the employee to determine who is eligible for the incentives (Fishel & Conger, 2009). This type of training would lead to a variety of skills being introduced in the organization thus diversifying its culture and leading to efficient business processes (Fishel & Conger, 2009).

Bank Crisis After all of the acquisitions and making the bank itself more effiecient and profitable the rumors that BANINTER was in trouble that began circulating in 2002 took over and depositors began withdrawing their savings. At this point the Domincan Central Bank stepped in to support BANINTER by issuing it new lines of credit. In 2003, the Dominican government announced tht Banco Del Progreso would aquire BANINTER. A short time after the announcement was made Banco Del Progreso abruptly withdrew from the arrangement. In April 2003 the government took control of BANINTER. By this time Baez Figueroa’s family owned more than eighty percent of the bank.
Investigation
An investigation that was supported by by the International Monetary Fund revealed the true scandal. Officials announced that two-thirds of the money that customers had deposited into BANINTER was kept off the official books by custom designed software. Not only was Baez Fifueroa hiding the money but he was spending it on his own lavish lifestyle and he was also using the bank’s money as well. May 15, 2003 Baez was arrested as was BANINTER vice president Marcos Baez and Vivian Lubrano de Castillo, the secretary of the board of directors, Jesus M. Troncosco and fiancier Luis Alvarez, on charges of bank fraud, money laundering and concealing information from the government. It was a well designed scheme to defraud and hide money to the tune of RD $55 billion or $2.23 billion in US currency value. This was equivilant to two-thirds of the Domincian Republic nation budget which had a huge impact on the Domincan economy. The government was forced to devalue the peso. This caused the collapse of two other banks and a loan for $420,000,000 from the international Montitary Fund.
Conclusion
In November 2005Alverez Renta was found liable by a federal jury of civil racketeering and illegal money transfers. Alvarez was ordered to pay $177 million to the Domincan Republic. The main executives of BANINTER, Baez Figueroa, his cousin Marcos Baez Troncosco Ferrua were convicted of money laundering. There were 350 prosocution and defense witnesses. How could this large scale of money laundering, debt write off’s and sweetheart loans go go on for fourteen years undetected by the government’s financial gatekeepers? All the improvements that were made to the banks ineffeciencys and poor communtiocation could not over come the sneaky, depraved and money hungry actions of the family that own the majority of it.
References

Bank, P. N. C., & National Association. (2011). Bank of America. NA (as Administrative Agent and Collateral Agent) is incorporated herein by reference from Exhibit (10)(3) of the Company’s Form. Retrieved from http://www.wvcsd.org/District/boe/minutes/1112/pdf/ApprovedMinutesBOEReorgMtg07_11_11.pdf
Fishel, B & Conger, J. (2009). Banco Intercontinental lCase Study. Best practices in talent management.
Thomke, S. (2003). R&D comes to services. Bank of America's pathbreaking experiments. Harvard Business Review, 81(4), 70. Retrieved from http://www.ncbi.nlm.nih.gov/pubmed/12687921
Turney, P. D. (2002). Thumbs up or thumbs down?: semantic orientation applied to unsupervised classification of reviews. In Proceedings of the 40th annual meeting on association for computational linguistics (pp. 417-424). Association for Computational Linguistics.