Venezuelan President Hugo Chavez said on Wednesday his government may target more banks for state intervention, sparking investor jitters two days after his government shut four private banks.
Venezuelan benchmark bonds fell by the most in three months, the cost to insure Venezuelan debt shot to its highest since July and the bolivar weakened to about 5.80 to the US dollar from 5.50 in the parallel non-official currency market.
“There is anxiety in the market .... There is a lot of demand for dollars,” said Flavio Fasano, president of the local financial firm Financial Markets.
On Monday, authorities closed the banks owned by a wealthy businessman, Ricardo Fernandez Barruecos, who has close ties to the government, citing internal irregularities.
The four banks accounted for 6 percent of the South American nation’s deposits, and their administration was taken over by the government on Nov. 20 for violations of solvency regulations and unexplained capital increases.
The closure of Banco Confederado, Banco Canarias, Banco Provivienda and Bolivar Banco brought hundreds of worried depositors onto the streets, and sparked talk that more banks may also be closed or taken over by the state.
Reviving memories of a 1994 financial crisis that wiped out half of Venezuela’s banks, opposition TV stations have been running stories of stranded depositors, though the government says it is protecting those affected by this week’s closures.
“We have our radar switched on to another group of banks,” Chavez said in a speech, without giving more details.
“Rest assured that if I was forced to intervene in all the private Venezuelan banking [system], I will do that.”
Venezuela’s benchmark global bond due in 2027, one of the most widely traded emerging market bonds, closed 2.687 points lower to a bid of 69.563 on Wednesday, for a yield of 13.903 percent.
It was the biggest one-day percentage fall in the price of the bond since Aug. 26. The bond’s yield was its highest closing rate since July 31.
The cost to insure Venezuela’s debt annually against default climbed to about 27 percent of face value on Wednesday compared with about 25 percent on Tuesday, according to data from Markit on benchmark five-year credit default swaps, the highest level since the end of July.
The action on the four banks raised pressure on other firms already hit by recession, Goldman Sachs analyst Alberto Ramos said. “Depositors remain agitated .... There are also reports that a number of brokerage houses are experiencing some distress.”
The Venezuelan Prosecutor’s Office said on Wednesday that its agents raided the Interbursa brokerage and the U21 brokerage as part of the probe into the four banks that were taken over.
Chavez said if it turned out Venezuela’s wealthy elite was behind telephone calls and Web messages aimed at sparking a bank run, then it would backfire and the “private banking system would fall.”
Critics blame Chavez allies, whom they call the “Bolibourgeoisie” after Chavez’s idol Simon Bolivar, for mismanaging some banks.
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