More Venezuelan private banks targeted: Chavez

A bank customer tries to use an automated teller machine of Banco Canarias in Caracas November 30, 2009.

CARACAS (Reuters) - Venezuelan President Hugo Chavez on Wednesday said his government may target more banks for state intervention, sparking investor jitters two days after his government shut four private banks.

Venezuelan benchmark bonds fell by the most in three months and the cost to insure Venezuelan debt shot to its highest since July amid what one analyst called "significant distress" in the financial system.

Authorities closed four small banks on Monday owned by a wealthy businessman with close ties to the government, citing internal irregularities.

That brought hundreds of worried depositors onto the streets, and sparked talk among Venezuelans that more of the nation's nearly 50 banks may also be closed or taken over by the state.

Reviving memories of a 1994 financial crisis that wiped out half of Venezuela's banks, opposition TV stations have been running stories of stranded depositors, though the government says it is protecting those affected by this week's closures.

"We have our radar switched on to another group of banks," Chavez said in a speech, without giving more details.

"Rest assured that if I was forced to intervene in all the private Venezuelan banking (system), I will do that, no one should doubt that."

Venezuela's benchmark global bond due in 2027, one of the most widely traded emerging market bonds, slumped 4.250 points to bid 68.000 on Wednesday, offering a yield of 14.231 percent.

It was the biggest one-day percentage fall in the price of the bonds since August 26. The bond's yield was its highest since July 27.

The cost to insure Venezuela's debt annually against default climbed to about 27 percent of face value on Wednesday compared with about 25 percent, according to data from Markit on benchmark five-year credit default swaps, the highest level since the end of July.

The bank interventions raised pressure on financial firms already hit by Venezuela's economic recession, said Goldman Sachs analyst Alberto Ramos.

"Depositors remain agitated...there are also reports that a number of brokerage houses are experiencing some distress," wrote Ramos.

BLAME-GAME

Chavez said he was aware of telephone calls and Internet messages meant to spark a bank run and undermine his government.

He said Venezuela's wealthy elite would suffer, if it was they who were behind them, as the plan would backfire and "the private banking system would fall".

Opposition leaders blame Chavez allies -- whom they mock as the "Bolibourgeoisie" after Chavez's idol and independence hero Simon Bolivar -- for enriching themselves through mismanagement of some banks.

Chavez said the old guard wealthy elite were the real "mafia" who were fanning fears in the financial sector.

"I blame all the oligarchy for causing the problems of capitalism, corruption and a barrage of attacks that try to generate (bank) runs," he said.

On Sunday, Chavez, a socialist, said he would not hesitate to nationalize any private banks failing to sufficiently help national development and lend to the poor.

On Monday, the government shut down Banco Confederado, Banco Canarias, Banco Provivienda and bolivar Banco.

Those four banks accounted for just 6 percent of the South American nation's deposits, and their administration was taken over by the government on November 20 for violations of solvency regulations and unexplained capital increases.

In power for a decade, Chavez has nationalized broad swathes of the economy since 2007, including Venezuela's biggest telephone and electricity companies, as well as $30 billion in projects to extract crude from tar-like deposits.

The only major private bank, foreign or Venezuelan, to fall into state hands under Chavez was Spain's Banco Santander unit Banco de Venezuela, sold in July for $1.05 billion.

(Additional reporting by Ana Isabel Martinez in Caracas and Karen Brettell in New York,; Editing by Andrew Cawthorne and Andrew Hay)