OREANDA-NEWS. According to Fitch Ratings, the one day delay in which Consubanco S.A., Institucion de Banca Multiple (Consubanco) incurred reflects inefficiencies in its operational policies and limitations in the management of its contingency plans but does not immediately impact Consubanco's ratings. The delay was related to the payment of periodic interest on one of its certificate of deposit. The interest due amounted to MXN92,172.67 and was paid on Nov. 10th along with additional interest corresponding to the one day delay.

The delay was caused by an administrative error that resulted in the untimely identification of a lack of funds in the bank's account in S.D. Indeval, the local market securities central depository, to which periodic interest payments are funded to be subsequently transferred to the holders of the certificate of deposit. Resources were not transferred on time to Indeval despite the sufficient liquidity of the bank at the time of the event. Additionally, Consubanco was not able to complete the payment using an alternative method due to the limitations in its operational contingency plans that resulted in liquidity risks.

Even though this event is not a sign of significant operational control gaps in the bank, Fitch considers the inability to detect the lack of funds evidences limited controls over relevant processes given the high reliance of the entity on market debt funding; the failure to use alternative methods was a result of overly reliance on one individual, which proves the lack of effective operational contingency plans.

Local authorities were informed of the event immediately after it occurred and they in turn communicated the situation to some market participants at that time. Three weeks later the regulator requested the bank to make the announcement to all market participants. In Fitch's opinion this is not in line with best practices in terms of transparency.

Fitch considers this recent contingency was a result of inadequate operational procedures and controls, and was not due to liquidity issues. Consubanco's liquidity position is adequate, as reflected in its regulatory liquidity coverage ratio (LCR) which averaged 138.4% during the third quarter of 2015. However, its concentrated funding base, which consists mainly of short- and long-term market debt issuances, is one of Consubanco's limitations.

Fitch acknowledges recurrent operational errors of this nature could undermine Consubanco's creditworthiness and increase its refinancing risk. Fitch expects that the bank will be able to strengthen its internal controls and operational contingency plans in order to prevent future contingencies. However, it will closely monitor the development and enforcement of such controls in order to assess potential adverse effects con Consubanco's ratings.