February 19, 2009 / 5:48 PM / 11 years ago

Venezuela seizes Stanford bank after online run

CARACAS (Reuters) - Venezuela seized a local bank owned by Allen Stanford on Thursday to stem massive online withdrawals as the impact of a U.S. fraud case against the Texan billionaire spread through Latin America.

The government of socialist 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.

Authorities in five Latin American countries have now taken action against Stanford businesses, with Ecuador seizing two local units of the group on Thursday.

In recent days, depositors at the Venezuelan bank had worried over the fraud case against a sister company, Stanford International Bank, although the banks’ assets are separate.

Clients withdrew funds from Stanford Bank Venezuela via Internet banking services. The bank operates 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.

The retail bank’s branches were closed on Thursday and depositors generally stayed away after the government decreed it had suspended all transactions as part of its takeover.

“My mother called me and said I should take the money out,” said Ana Mibellis, 21, who turned up at a branch in a swanky Caracas shopping centre. “I was unlucky. If they shut it once and for all, my money will be stuck there.”

There were no notices on the glass doors at the marble-floored lobby entrance to the main, 12-story Stanford building in an upscale Caracas district, where a golden sculpture of an eagle looms on the skyline.

Industry officials have said the takeover of Stanford Bank Venezuela, whose $288 million of assets represent 0.2 percent of Venezuela’s banking system, is unlikely to cause much disturbance in 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.

U.S. authorities accused him of fraudulently selling $8 billion in certificates of deposit with impossibly high interest rates in a scheme that stretched around the world.

His whereabouts are unknown.


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 seized two investment units that handled $92 million (64 million pounds) in an investment fund, portfolios and trusts.

A local arm of Stanford Financial Group has 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 tried to reassure depositors that the local bank was healthy, but its image was ruined by its ties to the flamboyant Texan, who sponsored sports events, lobbied in Washington and jetted into Venezuela over the years with conspicuous bodyguards.

Chavez blames problems in the global banking system on capitalist greed and imposes strict exchange controls. Last year he vowed to take over banks that failed instead .

Hundreds of people swarmed Stanford International Bank’s local offices in recent days seeking to withdraw their money.

Bank officials said deposits were insured through an agreement with Lloyds of London, some customers said.

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, Brian Ellsworth and Frank Jack Daniel, Writing by Saul Hudson, Editing by Gerald E. McCormick and John Wallace

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