Word: banco
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...government insists it is trying to get to the bottom of the issue, but its efforts are widely viewed as slow and inept--a perception that has grown since the first and biggest bank closed its doors. That institution was Banco Latino, Venezuela's second largest, which at its peak claimed $1.4 billion in deposits. By the time the national banking superintendency took it over in January 1994, Latino's deposits had been reduced $1 billion. In going over the books, government inspectors uncovered false entries, fraudulent accounting and insider lending...
...Banco Latino closure sparked runs on other banks. In an effort to quell the panic, the government pumped $3 billion into eight troubled financial institutions--a policy that many analysts believe helped expand the crisis. In June 1994 all the subsidized banks were declared insolvent and closed down; none reopened. Some of the rescue money was used to pay off depositors, whose savings accounts were insured up to $23,000, but much of it simply disappeared. William Davila, vice president of Venezuela's Senate finance committee, charges that bank managers loaned themselves the money and shipped it to overseas accounts...
...took advantage of the shift was Pedro Tinoco, president of Banco Latino and an old friend of Perez's. The President made the extraordinary move of naming him head of the central bank, even as Tinoco remained Banco Latino's largest shareholder. Soon millions of dollars in government funds were deposited in Banco Latino, which used them to help launch a major expansion. By 1993, the year in which Tinoco died of cancer, Banco Latino had blossomed from the country's eighth largest bank into its second largest...
...bank managers and directors, as well as to real-estate operators who had the appropriate political connections. Laissez-faire took on new meaning as bankers used their institutions as personal cajas chicas, or petty-cash drawers. One oft-cited example of banker extravagance: only weeks before its collapse, Banco Latino chartered an Air France Concorde supersonic jetliner to speed friends of the bank to a party celebrating the opening of a Paris branch. The estimated cost of the Concorde rental...
...took a sharp downturn. The crunch hit hardest at real- estate and construction companies. As they started to default, the banks attempted to compensate by offering sky-high interest rates--up to 18 percentage points above going levels--to attract new depositors and fresh funds. The most aggressive was Banco Latino. Within weeks of Banco Latino's takeover by the government, arrest warrants were issued for 82 of its directors and managers; many were believed to have fled the country. As bank after bank failed, the wanted list swelled. While some of the bankers turned themselves in and were released...