A senior executive of Galicia Bank He resigned after the investigation carried out by the National Securities Commission (CNV) for suspicious operations in the use of puts. As confirmed Ambitthis is Pablo León, EVP Financial Area of Banco Galicia who is also president of Galicia Securities, and he left the bank for a “personal decision”.
Although the shares of Grupo Financiero Galicia (GGAL) fell on the stock market by up to 2%, they do not seem to be based on this abrupt change but rather on a general negative trend.
The CNV investigation in the spotlight
Last Thursday, the agency opened an investigation into one of the operations that it observed as suspicious carried out last February. It would be what is called wash trade (artificial transactions) in the management of debt bonds. With the move, Galicia would have earned more than $23,000 million.
The CNV accusation is based on a notification from the Central Bank for questioned maneuvers with public debt securities in charge of Galicia to artificially inflate their price (wash trade) and then collect insurance (puts) guaranteed by the Central Bank, according to the summary opened by the market regulatory body.
Galicia became aware of the investigation late Tuesday. Following this it began “an internal investigation to analyze the questioned operations and control processes and will respond to the CNV within the expected deadlines.”
From the bank they acknowledged when asked Ambit that, “the CNV investigates a possible regulatory infraction due to the exercise of a put by Banco Galicia against the BCRA, at a price that would have been higher than what would have corresponded without considering some transactions carried out by the related companies.”
Why is Banco Galicia being investigated?
“Various bond issues carried out by the Treasury gave the participating banks the possibility of buying puts, which grants the right to sell said bonds to the BCRA as a liquidity option. Although the Bank exercised several puts within the normal course of business, the price at which the put was exercised on the aforementioned date is being investigated in particular,” a CNV statement quotes.
The investigation points to a set of market operations carried out by Banco Galicia with the dual bond maturing in January 2025 (TDE25). Specifically, an operation carried out on February 19 is examined. Two minutes before the market closed, the CNV detected a very high trading volume of that bond in the MAE wholesale market.
This dynamic was repeated, according to the CNV, on February 20, with a negotiated amount greater than usual for that same bond, which led to an increase in its price in the market.
The next day, the Galicia Bank specified its “liquidity option” (put, in financial jargon), a resource that the BCRA enabled for certain bonds that it guarantees to the entities the possibility of collecting, before maturity, the value in pesos of those debt instruments.
“The expansive monetary effect, as a consequence of this execution, was $112,794 million, $23,072 million higher than that resulting from having been exercised at the extrapolated price,” says the CNV investigation.
“The operations carried out in the type TDE25 dated 02/19/2024 and 02/20/2024 denote the intervention of said companies belonging to the same Financial Group, the same being arranged between one or another company of the Group as counterparty,” says the accusation, which points against Banco Galicia, Galicia Securities and Inviu – three firms controlled by the Group. At the same time, he adds that “said practice could be framed in that recognized by doctrine as wash trade or “washed negotiation.”
Specifically, the CNV investigates whether these operations between companies in the same group were aimed at artificially increasing the value of the assets, in order to obtain a greater profit from the execution of the puts.
