Venezuelan banking crisis of 1994
Encyclopedia
The 1994 banking crisis occurred in Venezuela
when a number of the banks of Venezuela had to be taken over by the government. The first to fail, in January 1994, was Banco Latino
, the country's second-largest bank. Later, two banks accounting for 18% of total deposits (Banco Consolidado and Banco de Venezuela
) also failed. On 9 August 1994, Banco de Venezuela became the tenth bank bailed out by the Venezuelan government during the crisis, with the government taking a majority stake for an estimated at US$294m. In total, between January 1994 and August 1995 17 of the country's 49 commercial banks, as well as some subsidiaries, failed - representing 53% of the system assets. Estimates of the total cost of the bailout range from 18 to 31% of GDP; one estimate gives the total cost of the bank bailouts as 1.8 trillion Bolivars, or $12bn.
Financial liberalisation in the early 1990s and lax banking supervision had laid the seeds for the crisis, which was then triggered by the cumulative effects of a collapse in the oil price, which led to sharply reduced government spending and weakened the Venezuelan economy.
Ruth de Krivoy, who was President of the Central Bank of Venezuela
at the height of the crisis in 1994, later published a book on the episode.
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
when a number of the banks of Venezuela had to be taken over by the government. The first to fail, in January 1994, was Banco Latino
Banco Latino
Banco Latino was a Venezuelan bank based in Caracas, and at the time of its 1994 failure was the country's second largest. It had a good relationship with the government, such that ministries moved their accounts to the bank, and the army and the state-owned oil company PDVSA entrusted their...
, the country's second-largest bank. Later, two banks accounting for 18% of total deposits (Banco Consolidado and Banco de Venezuela
Banco de Venezuela
Banco de Venezuela is an international universal bank based in Caracas. It was the market leader in Venezuela until 2007, when it fell to third place, with an 11.3% market share for deposits; its major competitors are Banesco, Banco Mercantil and BBVA Banco Provincial...
) also failed. On 9 August 1994, Banco de Venezuela became the tenth bank bailed out by the Venezuelan government during the crisis, with the government taking a majority stake for an estimated at US$294m. In total, between January 1994 and August 1995 17 of the country's 49 commercial banks, as well as some subsidiaries, failed - representing 53% of the system assets. Estimates of the total cost of the bailout range from 18 to 31% of GDP; one estimate gives the total cost of the bank bailouts as 1.8 trillion Bolivars, or $12bn.
Financial liberalisation in the early 1990s and lax banking supervision had laid the seeds for the crisis, which was then triggered by the cumulative effects of a collapse in the oil price, which led to sharply reduced government spending and weakened the Venezuelan economy.
Ruth de Krivoy, who was President of the Central Bank of Venezuela
Central Bank of Venezuela
The Central Bank of Venezuela is the central bank of Venezuela. It maintains a fixed exchange rate for the Venezuelan bolívar.-External links:*...
at the height of the crisis in 1994, later published a book on the episode.
Further reading
- de Krivoy, Ruth (2000), Collapse: The Venezuelan banking crisis of 1994, Group of Thirty. ISBN 978-1567081138