Venezuelan Financial System to be Limited to Universal and Microfinance Banking
Caracas, Venezuela, November, 12 2010 -
The bill on Banking Sector Institutions restructures the system. Banks will have to adapt to socialist plans, the banking service will be declared of public utility, and there will be fewer financial institutions.
The legal instrument, set to replace the General Law on Banks and approved by the National Assembly in a first session, states that "the architecture of a new private banking sector." In addition, there will be only universal banking, microfinance banking and money exchange offices. No more commercial banks, thrifts and credit unions, mortgage banks and investment banks.
Venezuelan lawmakers wrote down in the recitals that "the previous types of (financial) institutions shall migrate towards new forms of organization in order to purge the sector from institutions that are not operating and prevent the existence of (financial) entities with very small capital stock relative to the rest of the banking sector."
"There will be two types of banks because a trap was set with the current law; financial institutions had stock exchanges, insurance companies and mutual funds." Ricardo Sanguino, the President of the National Assembly's Committee on Finance, reiterated in the plenary session.
According to the bill, commercial banks will have to change. To become a full-service bank they shall meet new requirements, such as the increase of share capital. According to the Venezuelan Superintendence of Banks and other Financial Institutions there are currently eight commercial banks in Venezuela.
Under the draft law, a universal bank in the metropolitan area of Caracas should have, as a minimum, a capital amounting to USD 39.5 million. If a regional bank, its capital should reach USD 19 million, as a minimum. In the current law, full-service banks are required to have USD 9.3 million and USD 4.65 million, respectively.
Microfinance banks will have a capital of USD 8.14 million and, based on the bill, their goal is to promote and finance small businesses related to "the people's and alternative economy."
One of the provisions of the bill states that the figures may be updated every two years, as suggested by the Superintendence of Banking Sector Institutions (which will replace the Venezuelan Superintendence of Banks and other Financial Institutions).
The draft law eliminates the National Bank Council.