Lost Pension Funds Case: How Was the Fund Deceived by Banca CIS's Inflated Figures?

The deepening story of financial scandals in San Marino continues with striking details in the process of directing pension funds. The series, which previously addressed similar issues faced by the compulsory pension fund ISS, now puts the spotlight on what happened to Fondiss, the complementary pension fund. The transfer of workers' savings for their future to Banca CIS, and the impossibility of recovering this money, form the backbone of the story. According to court rulings, the process revolves around a single figure, signed and approved, that portrayed the bank's financial situation much better than it actually was. All these events are conveyed to the readers in an impartial manner by journalist Marco Severini, in light of the documents and official decisions identified by the judiciary.

The incident begins in September 2018 when Fondiss requested an investment proposal to evaluate the worker contributions it held. Fondiss initiated a formal tender process by sending a letter to all banks in San Marino stating that it could invest up to 28 million avro. The most critical criterion in determining the winner of the tender was high return rather than the security of the investors' funds; since the money in question was pension funds, security comes before anything else. On 17 September 2018, Banca CIS stood out in the process with a proposal signed by general manager Daniele Guidi. Along with his proposal, Guidi submitted a document containing the bank's financial data as of 30 June 2018, which he verified with his own signature.

This financial statement presented by Guidi gives the impression that the bank is an extremely solid institution. The document states that the bank's net equity is 52 million avro and its regulatory capital is approximately 49 million avro. Additionally, it shares the information that the bank has a total of 494 million avro in customer deposits and a credit volume of over 383 million avro. The 115 million avro non-performing loans and 122 million avro doubtful receivables in the statement are presented as a tolerable risk relative to the bank's size. However, the most crucial point of the document was that the capital adequacy ratio, which indicates a bank's health and whose minimum limit is set at 11% by the Central Bank, was announced as 16.18%.

Trusting this reassuring ratio, Fondiss initially transfers 14 million 340 thousand avro to Banca CIS as an investment. However, court proceedings and expert forensic examinations reveal how far this inflated picture is from the truth. It is determined that the capital adequacy ratio, recalculated by the experts, was actually below even 14.84%, and that the regulatory capital was effectively zeroed out when hidden problems were uncovered. Over time, with the bank being placed under special administration in early 2019, it becomes clear that the so-called 49 million avro safety buffer had dropped to negative values. This situation can be compared to a person inflating their payslip to get a loan from a bank; however, here, the deceiving party is the bank itself.

According to the court ruling, Banca CIS's financial troubles were not unexpected surprises that emerged out of nowhere, but rather chronic issues known since 2016. The Central Bank officially notified the bank of these problems in 2016 and requested corrections. When Daniele Guidi signed that misleading table in September 2018, it was impossible for him not to know the true financial situation, as he should have been aware of the warnings from two years prior. Consequently, the minutes of Fondiss's investment decision confirm that the fund selected these banks entirely based on the financial reliability data they declared. All these findings expose the lack of oversight in the management of pension funds and highlight the need to be extremely careful when questioning the reliability of financial institutions.