Chavez's Bank Law Won't Spark Nationalizations, Venezuela's Escotet Says
“We’re studying the bill closely because it allows greater control of banks, but it’s not a first step in a state takeover of the industry,” Escotet said today during a news conference in Caracas. “The bill includes a separation between private and public banks so deposits aren’t at risk.”
Lawmakers aligned with President Hugo Chavez presented the banking bill yesterday in the National Assembly. The legislation would force banks to surrender 5 percent of their pre-tax profit for social programs and declares the industry to be of social interest, making it easier to nationalize banks that fail to comply with the law.
The bill, which Escotet called “excessive” and “discretionary,” was approved in a first vote yesterday and must pass a second vote in the assembly dominated by Chavez allies before being signed into law and published in the Official Gazette. According to Softline Consultores, 5 percent of Venezuelan bank profits amounted to 314 million bolivars ($73.1 million) in 2009 and to 168 million bolivars in the first half of this year.
Chavez said yesterday that he’ll impose rules on private banks to finance middle-class housing projects to resolve the country’s deficit and won’t hesitate to nationalize banks that refuse to support government-led initiatives.
The government has closed more than a dozen banks in the past year for unauthorized mergers and noncompliance with capital requirements.
“Let’s get organized and put that money in a fund,” Chavez said on state television. “Private banks that don’t follow the law, nationalize them.”
Banks are already forced to dedicate 16 percent of their loan portfolios for mortgages and home building which totals 25 billion bolivars, Escotet said.
Banks are also hoping that the government honors 4.8 billion bolivars in outstanding loans from companies that have been expropriated by Chavez, he said.
‘Accept the Challenge’
Escotet, who is also president of Banesco Banco Universal, one of the largest private banks in the country, said the association will present a plan to the government to work together in a bid to build 1 million homes in four years.
“The bankers understand. After 13 bank takeovers, we know the government will act firmly against the sector,” Escotet said. “We accept the challenge to work on the housing issue.”
New York-based Citigroup Inc., Bilbao, Spain-based Banco Bilbao Vizcaya Argentaria SA, and Toronto-based Bank of Nova Scotia all hold stakes in banking operations in Venezuela.
Madrid-based Banco Santander SA sold its local bank to the government for $1.05 billion last year. The state now controls about 25 percent of the industry.
To contact the editor responsible for this story: Joshua Goodman at firstname.lastname@example.org
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.