This institution, born in 1908, was created by Francisco Garcia Aviles with a very clear philanthropic purpose towards responsible banking as a way to help people achieve their dreams. It was 50 years later that the institution was sold to Pedro Isaias with the blessing of his father Emilio Isaias. That old and antique bank located in Guayaquil would be the start of an unstoppable financial operation.
Through the years the bank was directed by Pedro and later by Enrique Isaias, but both of them died in tragic and painful events for the family.
Understanding that there were important matters to resolve, and in spite of the enormous pain, Nahim Isaias (2) is chosen by Emilio and the whole board for this new chapter as General Manager of Filantropica.
Nahim’s appointment would signify, for the institution as well as for Ecuador, one of the most prosperous times the country had ever seen.
The conservative model used by most Ecuadorian banks, that only generated interest of the loans given, improves towards an institution with sophisticated financial instruments that could compete amongst the best banks in the world. With that, Filantropica becomes the number 1 bank in the country in technological achievements, and the institution with the most branches throughout Ecuador. The bank’s purpose of serving it´s costumers to the highest standards creates thousands of jobs with prepared personnel that is well versed in national and international financial operations. In addition, Filantropica is named the bank with the most diverse credit portfolio that aimed at helping the Ecuadorian people. By 1969 the Filantropica had grown 750%.
By the end of the 1970´s, after a great marketing operation, Filantropica is rebranded as Filanbanco. This was really a process of modernizing the institution that started with an excellent ad campaign, including a change in image that was both solid and well thought out. All of this rebranding generates international recognition and national admiration. It was the time to tell a great story and enumerate the incredible achievements of this financial institution. The same one that permitted generations of Ecuadorians and Latin Americans to open their business’s, work the land, and create thousands upon thousands of jobs in the fishing and agro-pecuarian industry. But above all, the biggest achievement of the newly named Filanbanco was to give its clients the opportunity to improve their lives, and that of their sons and daughters. Consequently, in less than 70 years, Filanbanco would become a symbol of national development, prosperity and strength.
Since the 1980´s Ecuador has suffered the constant attacks of subversive groups supported, ideologically and financially, by international leftist movements. These groups zeroed in on financial institutions with the objective of securing funding for their national, and also their international, operations. Numerous financial institutions were assaulted as well as diverse media in order to massify their ideological message. The group named Alfaro Lives Carajo, AVC by its Spanish initials, became a constant threat to the nation and also the Isaias family, who owned the perfect bank to take over. For years the AVC planned the kidnapping of Nahim with the intention of demanding 5 million dollars for his life. This money was intended to help fund their operations in Colombia and Ecuador. In august of 1985 they made their move and after 26 days in captivity they killed him while the police was planning a rescue operation ordered by the Ecuadorian president of the time, León Febres Cordero.
FILANBANCO: A NEW ERA
The bank needed to continue its operations regardless of the family’s distress after Nahím´s assassination.
Roberto Isaias Dassum and William Isaias Dassum began their financial development using their uncle Nahim’s model. In 1994 Filanbanco was considered the largest institution in Ecuador with a capital of 115 million dollars and more than 3 thousand direct employees.
THE COUNTRY’S TRAGEDY
When the war with Peru started in 1995 an economic tragedy loomed in the horizon that affected Filanbanco as well as the Ecuadorian people. Almost 4 years of bad luck fall over all of Ecuador with unimaginable consequences:
- The fiscal spending generated by the war creates an inflation process that seemed unstoppable.
- The constant power outages, that resulted from lack of investment in the electric grid of the country, make commerce and industry collapse. Almost 8 hours a day without power put a halt on the economy.
- The financial crisis that happens in Asia, Rusia, Brazil and Argentina results in lack of investments and a suspension of international credit.
- The shrimp fishery affected by the virus known as the white spot syndrome virus (WSSV) results in 90% loss of productivity, creating repercussions for the import-export of goods, and ultimately the economic stability of thousands of workers.
- The climate effects of “El Niño” destroyed crops all over the country, affected the fishing industry, and obliterated important infrastructures that leave many fisherman and farmers without the ability to pay salaries.
- The government starts an exaggerated money emission agenda searching to combat that lack of cash flow present in the country. In turn, this makes international markets worrisome, who then decide to cut their credit lines, affecting Filanbanco directly as it was the biggest international commerce bank in Ecuador
- Without the renewal of international credit lines worth 500 million dollars, Filanbanco decides to pay them off so as to not leave a massive debt that could jeopardize the bank, its clients, and the Ecuadorian state. The latter does not recognize, or give any support, which in turn deepens the bank’s lack of cash flow.
- The constant political instability, the changes in government-and its consequences for the state administration-, deteriorate all of Ecuador’s financial system.
THE BEGINNING OF THE END
The sum of all of these events creates a tragic situation for the Ecuadorian economy, which in turn caused Filanbanco’s lack of liquidity. However, the Isaías where sure that with ingenuity, business vision-and the help of Ecuador’s federal reserves- they could solve this impasse, restore the bank, help its clients, and continue to create new business ventures.
They never imagined that dark forces, lead by people with economic and political interests, would put all of their efforts in jeopardizing the Isaías’ history. Specifically targeting popular opinion, which admired the family, and understood their story of hard work and achievements.
OBSTACLES AND TREASON
As the Ecuadorian financial industry was undergoing a critical situation, the government did not do anything to handle it properly. Finally, the government decides to help Filanbanco towards the end of the year 1998. However, this help was insufficient and could not mitigate the constant withdrawing of clients, and to top it all off the government required an interest tax charge of 300% a year with daily payments. A final blow that was premeditated to take over Filanbanco and end the Isaias’ good family name.
As if this was not enough, there was a smear campaign in the press assuring that Filanbanco was in ruins and reiterating the government’s prohibition to process more loans or use credit cards. As such, the government’s intention of minimizing financial operations was successful, and December 1st of 1998 the Isaías decided to hand Filanbanco to the Ecuadorian government.
THE TRUTH ABOUT 1998
That sad day on December 1st 1998, Roberto Isaias, in front of thousands of workers, and his family, announces that Filanbanco will now be part of the government agency “Garantía de Depósitos del Ecuador” (AGD). An institution created by the government to help resolve the financial crisis. However, this same institution in only a few months, and for many years, became the main source of corruption and illegality managed by government officials of ill repute character. The AGD was also used for the personal gains of Rafael Correa, the Ecuadorian president of the time.
The story told by the Ecuadorian government about Filanbanco, where they accuse the Isaias family of being thieves, is very far from the truth. In the process of handing over the bank to the AGD Roberto Isaias made sure that all the obligations the bank had acquired with clients, creditors, stakeholders, and the government were fulfill. During this process, the bank handed in to the government a detailed account of all the holdings Filanbanco had in Ecuador, which were valuable enough to pay, if it were necessary, any financial obligation not previously covered. On his farewell address to all the bank employees on December 1st 1998, Roberto Isai as cements his compromise with the Ecuadorian people:
“There shall not be a single client left without their money. The trust that the Ecuadorian people have deposited on my family for more than 40 years deserves to be honored properly, and if the capital and assets of the bank are not enough, we will exhaust every resources we possess until every client of Filanbanco has received their money. We will not be in debt with anyone.”
THE GOVERNMENT’S FILANBANCO
Since the moment AGD takes over Filanbanco there was the premonition of a disastrous ending, not only for the bank, but also for all of the Ecuadorian financial system. More than 8 small banks start to fall and the government uses Filanbanco as its own personal petty cash float. An inadequate management of economic policies provoked inflation and a devaluation of the Ecuadorian currency that could not be salvaged.
The massive run of savers from every bank, the total closure of bank accounts, the unmeasured use of credit cards, and the suspension of loan payments, were enough to create a bank holiday in March of 1999 that lasted 24 hours leaving catastrophic consequences.
Filanbanco in the hands of the government continued to operate, showing its solidity as a financial institution and demonstrating that the liquidity problem was a momentaneous one. It also clarified that the government sanctions made against the Isaías family’s Filanbanco obstructed any possibility of recovery. However, it would not last long. Filanbanco’s assets were used to salvage other banks owned by economically privileged sectors, and by the political agents of the moment, who managed them in the most fraudulent ways:
- Filanbanco was obliged to hand in 14 million dollars to the Banco del Pacífico to help fund its operations, even though they were already closed.
- In the case of Banco Progreso, closed on July of 1999, Filanbanco was obliged to pay 1 million dollars on Reprogrammed Certificates of Deposit to very well known political agents before November of that same year.
- By September of 1999 the Banco Popular falls, and again Filanbanco is the one that has to salvage it by handing them millions of dollars.
- Almost 140 million dollars were handed in to sustain banco: Popular, Cofiec, La Previsora, and so many others.
THE CLASURE THE HANDS OF THE GOVERNMENT
By the year 1999 already 16 financial institutions had fallen and the year ends with a destroyed economy. In the year 2000 Ecuador was in ruins and the dollarization of the economy is declared. This economic measure still did not help solve some of the most acute problems and the great Ecuadorian migration begins towards Spain and the United States. A coup against the president Jamil Mahuad ends his 16 months government, and brought Gustavo Noboa as the new president of Ecuador.
For Noboa the challenge was to make decisions under immense economic and political pressures. The merging that he does between financial institutions make evident just how much was on the line and cause public scandal.
As 2001 approached Filanbanco closes indefinitely under the government’s control, and it is then that we see the long lines of clients trying to get their money back. A terrible image that had never happened before, not even in the most dire of circumstance endured by the bank under the Isaías’ ownership.
This is how the story that started in 1958 ends for the Isaías family, but also for the Ecuadorian people and the millions that trusted Filanbanco with all of their life savings.