Venezuela takes over three more small banks

CARACAS – Venezuela on Friday took over three more banks, raising the week’s tally to seven, in a clean-up of the financial sector that has worried investors but is seen as unlikely to herald a major nationalisation wave.

Finance Minister Ali Rodriguez said the three small private institutions – Baninvest, Central Banco Universal, and Banco Real, which account for just two per cent of Venezuela’s banking deposits – would hopefully be ‘rehabilitated’ by the state.’The rest of the financial system is in good hands despite the criminal campaigns going on,’ Rodriguez said, accusing opponents of socialist President Hugo Chavez of trying to destabilise Venezuela through rumours of a bank crisis.Most analysts believe the Chavez government is engaged in a purging exercise of a minority of banks with funding or ownership irregularities, rather than being on the brink of taking over another sector in the South American nation.Socialist Chavez, a harsh critic of the United States and Wall Street, has nationalised large sectors of his Opec nation’s economy since coming to power in 1999. So far, he has held back from large-scale seizures in the banking sector.’We are not facing a situation of crisis in the national bank system, despite the enormous, deep crisis that has shaken the financial world, and severely affected developed economies, particularly the United States,’ Rodriguez said in a TV speech.A first clutch of closures on Monday – of four small banks accounting for six per cent of deposits – worried depositors and unsettled markets, with Venezuelan bonds plummeting and the bolivar currency weakening in non-official trade.The four banks closed Monday had problems of solvency and unexplained capital movements, the government said. Rodriguez did not specify the reasons for the new closures.’SAVING THE BANKS’Friday’s announcement capped a tumultuous week for Venezuela’s financial system, in which Chavez twice said he would nationalise all private banks if necessary, before softening his rhetoric on Thursday and Friday.’The local bourgeoise are trying to create panic,’ Chavez said Friday in the first of two public speeches on the subject. ‘We are intervening with wisdom.’In a second speech later at a ceremony to give depositors from closed banks certificates guaranteeing the safety of their money, Chavez said his aim was to ‘transform’ the sector.’We are saving the banks … It’s not a case of Chavez liquidating banks … I’m not threatening anyone.’Long lines have formed at some banks, as people check on their money or move it to bigger institutions, and some workers from the closed institutions have protested. But there is none of the wide-scale panic seen during Venezuela’s 2004 financial crisis when half the nation’s banks went under.Chavez said depositors from two of the institutions closed on Monday were all recovering their funds, while the state would take over and reopen the other two banks.’We are not going to leave savers in the street,’ he said, vowing nearly all affected depositors would have their money back before Christmas.Analysts said Chavez may be balking at major bank nationalisations for fear of sparking public panic and a run on funds, and because he may not have enough expertise within government ranks to run the whole sector.’There is a lack of managerial skills in the public sector to run the entire system,’ said RBS analyst Boris Segura. ‘Unless authorities manage the situation poorly, the panic is likely to eventually subside. A full-fledged nationalisation of the banking sector is not in the authorities’ best interests.’Chavez says he will not hesitate to take over private banks that breach the law or fail to lend to the poor.But he insists his action on the banks last week is a case of ‘fixing’ some problem institutions to safeguard the system overall. Analysts say major banks are in a healthy state.Government critics say Chavez is to blame for letting cronies mismanage banks, while he accuses wealthy political foes of trying to spark a bank run and has set up a 24-hour ‘situation room’ to monitor financial institutions.Two of the banks shut on Monday are being ‘liquidated’, while the state will take over two: Banco Confederado and Bolivar Banco.- Nampa-Reuters

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