The last time former Central Bank Governor Domingo Felipe Maza Zavala spoke out was in September on the Venezuelan economy at large and the prospect of a bolivar devaluation. Today, Noticiero Digital is carrying excerpts of an interview he gave, presumably over the weekend, to Ismael Garcia on Globovision about the recent bank intervention situation. Following are what I consider the most telling quotes. Original is here.
The government and "factors in its sphere of influence", namely the insufficient oversight of the Superintendency of Banks (Sudeban), are responsible for the financial situation that has made necessary the current government takeover of banks.
There is "a crisis within the crisis" that affects the functioning of the economy whose effects could have been "predicted, for the most part." The most affected by the crisis are small and medium sized depositors and employees of the banks in question, estimated to be some 1 million people.
The banking crisis is so far confined to the intervention into seven institutions, and therefore does not truly constitute a real financial crisis such as that which occurred in 1994. "Actually, as we have pointed out, a small percentage of people is affected, however from a social standpoint, the impact is quite significant because more than 1 million depositors and employees are affected. But furthermore many institutions, public and private, held deposits in these banks in current accounts or time deposits, and at this point there has been no clarity regarding the recovery of those resources."
He said this process will result in the public doubting the efficiency and capital adequacy of the banking institutions. He further explained that if they resort to asking the Central Bank of Venezuela (BCV) for financial aid, current estimates will probably not be sufficient, and inflation will be further aggravated, "because naturally increased money will increase circulation beyond what is currently available."
"I think one result will be higher inflation over the coming year, in addition to other factors that we are expecting, such as higher government spending, supply shortages, restrictions on electricity and water services, these will make the situation more difficult for citizens and production activities will have to be more affected as a result of such factors."
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