Venezuela shuts 8th private bank in 11 days

CARACAS – President Hugo Chavez’s socialist government on Friday shut private bank Banorte on grounds it was unable to meet short-term obligations, threatening to undermine confidence in Venezuela’s financial system.

It was the eighth private bank closed by the government since November 30.Chavez said he shut seven banks last week to uproot financial corruption and protect depositors. Earlier Friday he told remaining private banks to lend more or face extinction.The seven banks shut last week accounted for about eight per cent of Venezuela’s total bank deposits. Two will be liquidated and the rest will be merged into a new state bank.State bank deposit insurance agency Fogade would protect 93 per cent of Banorte’s 68 865 depositors, the superintendency said.It said Banorte and other recently shut small banks threatened ‘the credibility and confidence necessary for the stability of our financial system’.Banorte officials could not be reached immediately for comment.Chavez faces 2010 congressional elections as economic problems mount. Venezuela slipped into recession in the third quarter of this year amid the highest inflation in Latin America, running at an annual 12-month rate of 26.2 percent.The latest bank closures are a growing political issue.Lines of panicked investors at banks shut last week revived memories of a mid-1990s financial crisis that wiped out half the nation’s banks and cost the state $11 billion.Chavez says he is an anti-corruption fighter intolerant of government-allied bankers he said breached the law at banks shut last week.Venezuela’s opposition has accused Chavez of having turned a blind eye to corruption for years by a new elite enriched by government ties. They say he has clamped down on just a fraction of those businessmen profiting from government ties and when it suited him.Only hours before the Banorte shutdown announcement, Chavez said he wanted banks to boost payments for government deposit insurance to insure more deposits and help refund account holders in seven private banks the government shut last week.In a speech, Chavez said he wanted banks to triple deposit insurance premiums from this month to 1,5 per cent of deposits to raise the ceiling of Venezuela’s insured deposits to 30 000 bolivars (US$13 940) from 10 000 bolivars (US$4 652).Increased premiums would also help fund an estimated 113 million bolivars (US$52,5 million) in payments to 35 469 insured depositors applying to recover money in shut banks, he said. Over 16 000 of them have received 59 million bolivars (US$27,4 million).Chavez suggested banks were unduly using their funds.’I’ve studied the topic a lot,’ he said. ‘I’m aware that banks are using (funds) for other things that they shouldn’t.’’I say this with respect to private bankers: I’m going to squeeze you hard,’ he said in a televised speech. ‘I’m not accepting more excuses … earmark your great wealth of resources to credits for production or (you) can’t exist.’ – Nampa-AFP

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