VENEZUELA: Government takes control of mid-sized bank Banco Federal

Record ID: 560880

  • Title: VENEZUELA: Government takes control of mid-sized bank Banco Federal
  • Date: 15th June 2010
  • Summary: CARACAS, VENEZUELA (JUNE 14, 2010) (REUTERS) THE CITY OF CARACAS PEOPLE WALKING THROUGH THE CITY
  • Embargoed: 30th June 2010 13:00
  • Keywords:
  • Topics: Finance
  • Reuters ID: LVA94DH4JH94POXLV4M3XU3MGVPO
  • Story Text: Venezuela on Monday (June 14) took over the mid-sized Banco Federal citing liquidity problems and risk of fraud several months after President Hugo Chavez threatened the bank for links to an anti-government TV station.
    The takeover, which could be temporary, follows a spate of nationalizations of small troubled banks at the end of last year.
    "The decision was to intervene and stop the financial intermediation of the Banco Federal company," said Banking Minister, Humberto Ortega Diaz.
    Customers had limited access to their deposits on Monday, after which all operations will be frozen.
    "We want to highlight that the FOGADE [Bank Deposit and Protection Guarantee Fund] has 2-billion, 150-million [bolivars] available liquidity in the Venezuelan Central Bank. The intention is that once the audit is complete and there is a report we can decide the payment of the guarantees to be paid and rehabilitated or what will be liquidated with the bank, but these resources are available to pay those Venezuelans what they are guaranteed," added Ortega Diaz.
    Of the bank's 284,000 customers, 96 percent are covered by a 30,000 bolivar ($6,970) savings per person guarantee that the government insists they have the money to pay.
    Authorities have an initial 60 days to see if Banco Federal will reopen or be liquidated, officials said, with another 60 day extension if needed.
    Savers flocked to Banco Federal branches in Caracas to try and withdraw their savings before the freeze on accounts began mid-afternoon.
    "I just heard the news that they are intervening on our bank. And truthfully I wonder why we did not leave this for another one. First the small ones and now this bank. I am old and I have my little saving here. I don't know, they say in 60 days. How will I live? I can't believe we are going through this situation," said Banco Federal account holder, Maritza Lopez.
    Many account holders told Reuters they were not confident that they would ever see their savings fully returned despite government promises guaranteeing their money.
    "I am worried about the take over of Banco Federal because the little that I have is here. I have my doubts that they will pay it back to me. They are not going to pay it back. I think this is like some kind of revenge that they just want to fill up with power, and hate, and so therefore, Venezuelans are suffering from this because we can't be blamed for what we are going through right now," said account holder, Marianela de Almeida.
    Banco Federal's president, who is also a director of anti-Chavez TV station Globovision, denied wrongdoing.
    Bank officials said the government was taking revenge and had gutted the bank in recent months.
    "So far the information is not clear. We don't know how long we have to wait until we can get our money," said account holder, Elena Ron Pedrique.
    The socialist Chavez says he is at war with 'parasitic bourgeoisie,' in the OPEC-member nation as he warms up for legislative elections in September.
    During 11 years in power, Chavez has increased the state's hand in the economy through nationalizations, regulation and taxes.
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