Mérida, February 20, 2009 (venezuelanalysis.com)-- After hearing that Allen Stanford’s assets had been frozen, some Venezuelans panicked and withdrew their savings from Stanford Bank Venezuela, prompting the government to take it over.
A civil court in the US has frozen Allen Stanford’s assets and those of the Stanford Group, its subsidiary Stanford International Bank based in Antigua and another subsidiary, investment adviser Stanford Capital Management.
Stanford, from Texas, U.S, was accused of US$8 billion in fraud on Tuesday and of luring investors with promises of improbably high returns. For days he couldn’t be found or contacted, but was found yesterday by the FBI. Stanford is chairman of the Stanford Financial Group, a company founded by his grandfather. The Group is a network of affiliated financial service companies, mostly in the US, Caribbean, and Latin America.
Stanford Bank Venezuela’s assets are separate to the Stanford International Bank but there has been a wave of panic withdrawals. Clients were able to withdraw 57 million bolivars (US$ 26 million) in 48 hours, as most do their banking over the internet.
Hence, Sudeban (National Superintendent of Banks and Other Financial Institutions) advised by the Central Bank and the Banking High Council, took the decision to put the bank under government control and then put it up for immediate sale.
The minister for economy and finances, Ali Rodriguez, said, “The first thing to highlight in this situation is that the problem facing Stanford Bank in Venezuela is totally and absolutely separate to the Venezuelan financial system.”
Rodriguez said that up until the withdrawals, Stanford bank had been stable. He referred to an inspection conducted by the Superintendent this January, which found the bank to be solvent and turning out profits for its shareholders. He said by selling the bank the government was responding to the needs of the depositors.
He explained that they had been trying to find Allen Stanford, as the only shareholder and contact point, but because he had disappeared or was unreachable, “this news provoked alarm in the depositors, not just in Venezuela, but as the press have said, in Panama and Colombia as well, where the corresponding authorities have equally taken measures of intervention.”
The ex-finance minister and current director of the Social Investigation Group (GIS XXI), Nelson Merentes, said the measures the government has taken are efficient and will protect the people with savings in Stanford.
He explained that now the intervening board will make the necessary technical analysis and the new institution that they will create will take over the responsibility for both assets and liabilities, so that depositors will not suffer any losses.
He also said the fact that Venezuela is fully capable of taking such action demonstrates the solidity of the bank system in the country.
The journalist Andres de Chene agreed that the action counters some opposition rumors that the banking system in Venezuela is experiencing a crisis and doesn’t have liquidity.
Further, the economist Santiago Lazo, said on Venezuela’s state television (VTV) that Stanford Bank represents around 1% of the banking system in Venezuela. It only has 15 branches in Venezuela.
The board of directors of Stanford Bank Venezuela SA said in a press release that their clients should stay calm as [Stanford Bank Venezuela] does not have overseas investments, and their activities consist only in “loans to Venezuelan clients [in Bolivars] and a portfolio of securities of Venezuelan companies.”
Rodriguez said the government had already received some offers by potential buyers.
Colombia, Panama, Ecuador, Mexico, and Peru have also suspended Stanford Bank’s activities.
In Colombia, the bank’s activities were suspended, the Superintendent saying it was to “protect the clients and investors…and preserve the confidence in the stock market.”
In Panama the Bank Superintendent took control of the bank’s administration and operation because “the interest of the depositors was at risk due to the withdrawals the bank has experienced by its clients.”
In Ecuador, the Stanford Group Brokerage Firm S.A was suspended for 30 days, and likewise in Peru.
In Mexico and the island of Antigua, hundreds crowded outside the bank trying to recover their deposits.