UPDATE 2-Chavez again threatens Spain bank unit with takeover

* Venezuela leader phones BBVA unit official on TV

* Demands better attention for mortgage seekers

* Chavez government now runs a third of banks (Updates with bank statement, paragraphs 14-16)

By Andrew Cawthorne

CARACAS, Jan 26 (Reuters) - Venezuela's President Hugo Chavez phoned an official at Spanish bank BBVA's local unit (BBVA.MC)(BBVA.N) live on TV on Wednesday to threaten it with nationalization if mortgage seekers were not better served.

The socialist president has frequently threatened to take over any banks that stand in the way of financing for much needed home building in the country, and has singled out BBVA'S Banco Provincial unit in the past. [ID:nN07106700]

But he upped the ante on Wednesday when, after hearing complaints by would-be homeowners about lack of attention from Provincial, he phoned the official during a televised meeting.

"If Banco Provincial, which you preside over here in Venezuela, is not prepared to comply with the law and presidential decrees, then prepare to hand me the bank. I'll pay whatever it costs," Chavez told the official whom he named as Pedro Rodriguez, Provincial's executive president.

"I can expropriate it whenever I want," Chavez added, in a classic example of the political theater that has been a hallmark of his controversial rule.

Since coming to power in 1999, Chavez's government has nationalized large swathes of the economy in the South American OPEC member in the name of "21st century socialism."

In 2009, Venezuela bought one of the country's biggest banks, Banco Venezuela, from Spain's Santander (SAN.MC) in a negotiated agreement, and has also taken over a string of small failing banks since late 2009.

The public sector now controls about a third of the banking system, and the government has passed laws obliging private institutions to release more funds to promote home building to try to address a national shortage.

FOURTH-LARGEST BANK

Provincial is Venezuela's fourth-largest bank, with 12.29 percent of total deposits, according to the state regulator.

During his tetchy exchange with Rodriguez, whose responses could not be heard, Chavez grew visibly more angry.

"Be careful how you are replying ... It's not for sale, but you know perfectly well I can expropriate it," he said, sitting in front of a painting of independence hero Simon Bolivar and drawing applause from his audience of mortgage seekers.

"This is very serious. Obey the law, or hand over the bank ... I'm not going to argue with you ... You are involved in this, like it or not. You cannot wash your hands like Pontius Pilate. Face up to your responsibility."

Chavez ended the Rodriguez call with an apparent agreement for the executive to meet the people criticizing his bank.

In a statement issued later, Provincial reiterated its commitment to funding homes for Venezuelan families and to complying with all the nation's laws and regulations.

"For more than 50 years, this institution has provided financial support to thousands of Venezuelan families so that they could buy homes and has therefore contributed to improving their quality of life," the bank said.

"We also reiterate our commitment to stay in the country and to supporting the progress of Venezuelan society."

Last month, Venezuela passed a new banking law that would make nationalizations easier and also created stringent new operating rules, including forcing banks to give 5 percent of their profits every six months to community groups. (Additional reporting by Diego Ore and Eyanir Chinea; Editing by Daniel Wallis and Kenneth Barry)