* Move provides market liquidity
* Interbolsa operations remain suspended
* President Santos says Colombia investment not affected
By Helen Murphy and Nelson Bocanegra
BOGOTA, Nov 6 Troubled Colombian brokerage
Interbolsa ceded control of its local bond portfolio to
Bancolombia, the financial regulator said on Tuesday, in a bid
to ease investor concern just days after taking administrative
control of the financial entity.
Interbolsa handed management of 1.6 trillion pesos ($875
million) of local Treasury bonds, known as TES, to Bancolombia,
the nation's biggest bank by assets, Gerardo Hernandez, head of
the financial markets watchdog, told reporters.
The regulator intervened in Interbolsa on Friday after the
brokerage failed to make a scheduled 20 billion peso payment to
a local bank. It will decide in the coming weeks whether
liquidation is in order for Interbolsa, which executes one-third
of daily operations on the stock market and has about 50,000
"This will guarantee, to a good degree, liquidity in the
system," Hernandez said in Bogota.
"In the financial market, TES provide the most liquidity to
the system so our fundamental priority, as far as protecting the
payments system, is to reach this kind of agreement."
Hernandez said the move allows Interbolsa to reduce its
obligations "substantially" and helps provide room to develop
alternatives. He would not comment on whether the portfolio
handover means liquidation is on the cards.
BAD CASH FLOW
The regulator's intervention came as Colombia's capital
markets rise and companies are increasingly going public to tap
local resources for investment abroad.
Foreign direct investment this year is expected to reach a
record $17 billion, mostly into the oil and mining sectors. Back
in 2002, when many international investors rejected Colombia
because of the violence caused by decades of war, the economy
attracted just $2 billion.
President Juan Manuel Santos said Interbolsa's actions -
which he blamed on poor decision-making and bad cash flow
management - will not affect the safety of Colombian investments
and other brokerages would not be affected.
Interbolsa's shares tumbled 30 percent on Thursday, when the
brokerage said it had a "temporary liquidity constraint" but
kept operating normally.
Interbolsa operations will remain suspended until at least
Nov. 13, Hernandez said.
The market regulator last took control of an entity in 2011,
when it liquidated the Proyectar Valores brokerage over poor
Interbolsa is part of Interbolsa SA Comisionista de Bolsa
that includes insurance and investment arms and also
operates in Brazil, Panama and the United States.