Venezuela government intervenes in 4 banks

Venezuela takes over management of 4 private banks, citing violations of regulations

AP - A customer sits at the entrance of a branch of the Canarias bank in Caracas, Friday, Nov. 20, ...

CARACAS, Venezuela (AP) -- Venezuela's government took over management of four private banks on Friday, citing serious irregularities and violations of banking regulations.

Finance Minister Ali Rodriguez announced the government intervened in the small banks Canarias, Confederado, Bolivar and ProVivienda (BanPro) after determining they were not complying with various rules.

The four banks, which account for 5.7 percent of the Venezuelan banking sector, were purchased in September and October by a group of investors headed by businessman Ricardo Fernandez, who is involved in the food industry and sells products to a network of state-run subsidized markets known as Mercal.

Fernandez and other investors did not immediately respond publicly to the accusations. Fernandez went voluntarily to provide his testimony to Venezuela's Disip investigative police and to explain the origins of his funds, a source close to the businessman said. She spoke on condition of anonymity because she wasn't authorized to speak publicly about the matter.

Shareholders and executives issued a statement saying the banks are operating normally and have been cooperating with regulators as the banking agency has appointed officials to oversee their operations.

Rodriguez said the government has an obligation to confirm the sources of funds when banks are sold, and said that demand was not met. He also said a series of problems were detected, including increases in capital without specifying the origin of the funds.

"The authorities made recommendations, measures, demands that systematically were not complied with," Rodriguez said at a news conference. He said that bringing the banks under state control will allow the government to "correct the problems that have appeared."

Rodriguez said the banks will remain open as usual while the government measures are in place. It's unclear how long that may be.

The four banks had been facing regulatory sanctions since late last year because they weren't complying with rules against giving loans to companies owned by the same shareholders, or with a prohibition on distributing dividends to shareholders, banking superintendent Edgar Hernandez told state media.

The government's intervention in the banks took effect Friday with the measure's publication in the Official Gazette. The banking regulatory agency said Confederado, Bolivar and BanPro violated rules by providing financing to Fernandez, a leading shareholder.

It said those three banks also flouted regulations by buying between $269 million and $289 million each in shares in two companies, Inverfactoring C.A. y Activos Corporativos AG. Officials did not give details about the apparent links between those companies and the banks' shareholders.

The rest of the Venezuelan financial system is operating as usual, said banker Victor Gill, head of the National Banking Council. He said the banking sector supports the government measures, saying they are aimed at protecting depositors.

In a similar action earlier this year, Venezuelan authorities in February seized temporary control of Stanford Bank SA -- which was previously controlled by Texas financier R. Allen Stanford -- after panicked clients withdrew an estimated $93 million, about 37 percent of the bank's deposits. That bank was auctioned off in May for the equivalent of $112 million to the only bidder, Venezuela's Banco Nacional de Credito.

President Hugo Chavez's government also has sought a bigger state role in the banking sector, and in May agreed to buy the formerly private-run Banco de Venezuela from Spain's Grupo Santander for about $1 billion.

With that acquisition, Chavez's government now has five commercial banks, which together account for about 21 percent of deposits and 16 percent of loans. Other banks remain in private hands.