By Jeremy Morgan
Latin American Herald Tribune staff
CARACAS – The Interior and Justice Ministry announced that police had arrested a former president of Banco Industrial de Venezuela (BIV) on a warrant citing alleged offences under the Law Against Corruption.
The scientific and investigative police, CICPC, arrested Luis Rafael Quiro in Ciudad Bolívar, capital of the state of the same name, and were bringing him back to Caracas, where he would be brought before a court to face formal charges, officials said. No further details of the likely content of the charges were disclosed.
The government took control of BIV in mid-May, when finance Minister Alí Rodríguez Araque announced in a televised statement that “problems of a certain severity” had been uncovered at the bank, the largest state-run financial institution in the country.
At the time of the intervention, it was said that figures from the Banking Superintendent’s Office (Sudeban) showed that the bank had run up losses totalling BsF190.7 million – around $88 million at the official exchange rate of Bsf2.150 to the dollar – during the preceding 22 months.
The bank’s financial position worsened during the first four months of this year, at the end of which income on the credit portfolio totalling BsF71.8 million was outpaced by a 74% increase in payroll costs.
In the wake of the intervention, reports suggested that BIV would need a “cash injection” worth BsF511 million – the equivalent of $237.6 million at the official exchange rate – to set its accounts straight.
Rodríguez Araque claimed that BIV had fallen foul of “inherited problems.” This remark was seen as an attempt to shift the blame away from the government, which has overseen the bank since President Hugo Chávez first came to elected power in 1999.
The crisis at BIV coincides with government claims that negotiations over the state takeover of Banco de Venezuela with the Sander Group of Spain have reached the final stage. Chávez has said the deal could be sealed by May 22.
Banco de Venezuela is the third largest bank in the country. Rodríguez Araque has scotched suggestions that profitability at Banco de Venezuela could go into decline once it comes under state control by a government that sees banking as being at the service of the people rather than a going business.
Pointing at the global financial crisis, the minister said the aim would be to “design a strategy of channelling resources to the stimulus of production and the stimulation of the real economy in Venezuela.”
However, official figures suggest this does not seem to have been what may have been happening at BIV before it hit the buffers. At the close of the first quarter of this year, private banks were channelling an estimated 61% of their customers’ deposits into loans and credits, whereas the comparable figure for BIV and other state banks was only 27%.
Financial analysts suggest the difference may have something to do with differences between the roles which state and private banks respectively play in the system.
In practice, they explain, the chief purpose of state banks such as BIV, Banco de Tesoro and Banco Agricola has been to buy up state debt bonds issued by the government. In contrast, private banks do much more of their business in loans and credits.
But the curious detail in all this, analysts add, is that the incidence of bad debts appears to be significantly higher at state banks, which do the bulk of their business with the state, than in the private sector.
Rodríguez Araque last week called up a program on state television to say that the takeover of Banco de Venezuela would be important for the state because the bank would “carry out a capital function as part of the strategy drawn up by the national executive to strengthen the public financial system.”