Venezuela Approves Financial Regulation Law in First-Round Vote

Business Week
March 16, 2010
By Corina Rodriguez and Daniel Cancel

Venezuelan lawmakers at the National Assembly approved a proposal today that would create a system to supervise financial system regulators.

The measure, which needs to be approved in a second round of voting to become law, would create a committee to oversee regulatory bodies for banks, brokerages and insurance companies to detect irregularities, Simon Escalona, vice president of the finance committee, said today in a telephone interview.

The proposal would also establish maximum percentages for commissions charged at brokerages and establish jail sentences of between 4 years and 8 years for employees of institutions that commit financial crimes, according to a copy of the bill on the Web site of lawmaker Juan Jose Molina.

“This law is seeking to put order in the system and supervise the action of bank, insurance and capital markets regulators,” Ricardo Sanguino, president of the finance committee, said today on National Assembly TV. “A series of other laws will follow this one to end financial speculation.”

Venezuela is increasing regulation of the financial system after closing 10 banks and 12 brokerages since Nov. 20 as part of a probe into the diversion of deposits and illegal loans between financial institutions.

The former president of the securities regulator, Antonio Marquez, was arrested Dec. 10 for alleged irregularities in approving brokerage acquisitions. Attempts to contact Marquez for comment regarding his arrest weren’t successful.

Commission Board

The commission proposed under the measure would be known as the Superior Organism of the National Financial System, and would be headed by Finance Minister Jorge Giordani. The board of the commission would include the president of the central bank and three members designated by President Hugo Chavez, according to the draft.

Article 12 of the proposed law says the panel would be created to “regulate, supervise, control and coordinate the functions of institutions in the system to achieve stability and confidence and to promote the economic development of the country.”

Lawmakers will have to approve the legislation in a second debate before being published in the Official Gazette as law.

The proposed commission is similar to an “emergency financial board” created in 1994 following a banking crisis in the country, according to Jose Grasso, president of Softline Consultores, a Caracas-based research firm.

“Before there was no control over commissions charged at brokerages -- the banks were the only ones really regulated,” he said in a telephone interview. “This is part of the process for greater control over financial activity.”

source: http://www.businessweek.com/news/2010-03-16/venezuela-approves-financial...