Banco Santander was planning to sell its Venezuelan subsidiary anyway so Hugo Chávez’s decision to nationalise the country’s third largest bank is not as alarming as it appears at first glance. Nevertheless, the move is yet another sign of growing state control over Venezuela’s commercial banks. Already, their room for manoeuvre is severely hampered by rules that channel half of loan portfolios to sectors including agriculture, housing and (according to the terms of a new banking law) microfinance. Interest rate floors and ceilings are a further burden (and were apparently a factor prompting Santander’s exit). What is worse is that new regulations designed to limit currency speculation could reduce profitability further. The rules designed to force banks to recapitalise and shore up the integrity of the system make complete sense from a regulatory point of view. But if implemented fully they would accelerate the drift towards state control. With Banco de Venezuela in government hands Mr Chávez controls almost a quarter of the banking system. Over the next year or two that proportion seems set to increase.
