Could Artificial Intelligence Predicted CREA Was In Trouble?
First of all our deepest sympathies for anyone caught up in this financial debacle. We hope the best possible outcome for each and everyone one of you. This article should have been printed six months ago possibly saving many of you the grief your going through now. CuencaLife is going to design a A.I. assisted "WATCHDOG" to start monitoring banks and COOP's using the tools discussed below in order to assist you in seeing potential failures before they occur rather than after. Stay Tuned.
SEPS Initiates Intensive Supervision (March–December 2023)
On March 8, 2023, the Superintendencia de Economía Popular y Solidaria (SEPS) placed CREA under a six-month programa de supervisión intensiva due to concerns that its patrimonio técnico (technical capital) might fall below minimum regulatory levels.
By December 31, 2023, of the 51 corrective strategies CREA was meant to implement:
- 10 were not fulfilled,
- 15 were only partially met,
- only 6 were fully implemented.
- Notably, critical areas like solvency and credit provisioning remained unattended
Extension of Supervision into 2024–2025
Because performance did not improve, the supervision period was extended through March 2025, indicating persistent and unresolved structural weaknesses within the institution.
Weak Financial Performance and Losses
At the end of 2024, CREA reported a net loss of USD 534,521, signaling that it failed to generate basic financial stability.
Elevated Morosidad (Loan Delinquency)
- In May 2024, non‑performing loan rate (morosidad) stood at 10.7%
- By May 2025, it had grown to 16.5%, indicating serious problems collecting loans and deteriorating asset quality
Declining Solvency Ratio
By May 2025, CREA’s solvency ratio had slumped to just 3.36%, far below the minimum 9% required by law. At that point it had only USD 6.5 million in technical capital against USD 196 million in risk-weighted assets.
Warning Sign When observed Why it mattered
SEPS intensive supervision began March 2023 Institution flagged for insufficient capital
Compliance issues with corrective plan Dec 2023 Failed to meet critical criteria
Loss in financial year End 2024 Poor profitability and structural deficit
Low-risk rating (B)April 2025 Lending quality deteriorating rapidly
Rising loan delinquency (morosidad) May 2024 → May 2025 Lending quality deteriorating rapidly Solvency ratio well below legal minimum May 2025 Lack of buffer against losses
Exceptionally high interest rates offered Mid‑2025 Suggests risky attempts to attract deposits
WHAT YOU COULD HAVE DONE TO AVOIDED POTENTIAL LOSSES
- Monitored SEPS bulletins or public notices from March 2023 to track CREA’s entry into supervision.
- Requested or reviewed Union Ratings reports; a “B” rating would have raised caution.
- Compared deposit rates with peers to spot unusually high returns.
- Asked about delinquency and provisioning levels—rising morosidad is a fundamental danger signal.
- Checked solvency ratios and capital adequacy, perhaps via public financial disclosures or audit summaries.
- Diversified deposits across institutions to avoid concentration risk in high-risk cooperatives.
These indicators together painted a picture by late 2023 and into 2024 of an institution in financial decline. Observing one or two of these signs may not trigger alarm, but the combination—especially under regulatory supervision—should have prompted caution.
Present Situation and Compensation Forward
- The SEPS ordered the liquidation of CREA on July 29, 2025, due to substantial failure in PSI compliance and solvency ratio falling below regulatory thresholds
- Up to 98.3% of depositors are protected by COSEDE, which covers up to USD 32,000 per account; estimated first-phase reimbursement amount is around USD 130 million of the total USD 220 million in outstanding deposits
- Depositors with balances exceeding that cap will need to wait until liquidator recovery of assets occurs, which may take 3–5 years