Venezuela seizes Stanford bank after online run
CARACAS (Reuters) - Venezuela seized a local bank owned by Allen Stanford on Thursday to stem massive online deposit withdrawals as the impact of a U.S. fraud case against the Texan billionaire spread through Latin America.
The government of President Hugo Chavez said it would quickly sell the bank -- Stanford Bank Venezuela, one of the country's smallest commercial banks -- and that it had already been approached by potential buyers.
In recent days, depositors at the bank had worried over the fraud case targeting a sister company, Stanford International Bank, even though the companies' assets are separate.
Depositors withdrew cash using Internet banking services. The bank takes deposits and makes loans only in the OPEC nation's local currency.
"Most depositors of Stanford Bank Venezuela are from the (highest) income classes. They move their funds on the Internet, and this allowed for a massive withdrawal that pushed the bank into a precarious state," Finance Minister Ali Rodriguez told reporters.
"The authorities were forced to take the decision to intervene and there will be an immediate sale," he added.
Industry officials have said the fall of a bank, whose deposits represent only 0.2 percent of Venezuela's banking system, is unlikely to cause much disturbance in the rest of the sector.
Allen Stanford was charged on Tuesday with "massive fraud" related to Stanford International Bank and his Houston-based broker-dealer and investment units.
The U.S. Securities and Exchange Commission accused him of fraudulently selling $8 billion in certificates of deposit with impossibly high interest rates in a scheme that stretched around the world.
LATIN AMERICA TAKES ACTION
Authorities in five Latin American countries have taken action against Stanford businesses.
On Thursday, Peru's securities regulator suspended the local operations of the Stanford Financial Group for 30 days.
Panama regulators have taken over a Stanford affiliate there, and Ecuador has stopped a brokerage linked to the group from operating. A local arm of Stanford Financial Group also halted its activities on the stock exchange in Colombia.
Venezuela is one of the countries most affected by the scandal, with an estimated $2.5 billion invested by wealthy and middle-class individuals in Stanford's offshore business.
The government had sought to calm fears about Stanford Bank Venezuela, declaring on Wednesday that it was healthy and saying it was working to prevent a run on the bank.
But the bank's image was ruined by its ties to its owner, and depositors dismissed the government's reassurances.
Chavez, who blames problems in the global banking system on capitalist greed and imposes strict foreign exchange controls, said last year he would expropriate any bank that failed rather than bail it out.
Hundreds of people swarmed Stanford International Bank's local offices in recent days seeking to withdraw their money.
While lines at Stanford Bank Venezuela were much shorter, enough depositors withdrew their cash online to prompt the government's action.
Many Venezuelans remember a 1994-1995 crisis that cost the country $11 billion as half the nation's banks fell.
"Our authorities guarantee that the Venezuelan financial system is solid and operating normally, so in no way is there any risk that might have an impact on its stability and strength," Finance Minister Rodriguez said. "Depositors can keep their faith in our financial system."
Still, the industry faces a tough year because oil income, economic growth and consumer spending are all falling.
(Additional reporting by Deisy Buitrago and Jorge Silva, Writing by Saul Hudson, Editing by Gerald E. McCormick and John Wallace)
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