INTRODUCTION:
The new Venezuelan times, whose beginning we can place in that fateful February 1983, when we woke up from an artificial economic boom, which never reached the dispossessed sectors of our population, and now with the recent stage of a so-called Bolivarian revolution, begun in 1999, which has brought hot cloths to poverty with missions supported by handouts, but without real productive economic growth but rather as an increase in the amount of imports due to oil income, it is essential to keep an eye on the management of national wealth from of oil and the productive activity of the entire population. In particular in the administration of capital and national savings.
The middle class is giving a trumpet to the conflict of poorly paid doctors, starving teachers and generally professionals below the Latin American average, all of which can lead to social outbursts in the country., not driven by mistrust in the electoral systems, which is enough, but in the poverty that haunts large layers of the population
In this sense, we consider fundamental the role played by financial institutions that are the depositories of national savings, and can contribute - if the government really encourages private or private initiative and does not discourage it with the obsolete socialism that it proclaims - to improve the real economy and not the one of ports that has been installed.
The analysis of financial matters is no longer of interest only to specialists or professionals in the branch, they are vital as information for large sectors, victims of the administrative mismanagement of the institutions in charge of this sector of the national economy.
The pressure that is exerted with publications, works, essays like this, and in short, everything that can be said, written and stated, to exert due pressure on the State, its control institutions, political parties, civil society organizations and economic agents, whether they are employers or manual or intellectual workers, will be decisive in guiding the course of Venezuela in these future years full of uncertainty.
This essay intends to contribute with clear ideas to combat through the implacable application of the law, one of the facets of widespread corruption in the country and which overthrew the Venezuelan State and depositors in the 1990s: high-level financial corruption.
In the nineties, billions of bolivars pocketed a good group of bankers as a result of the assault on public deposits and the aid provided by the National Government for the sake of helping depositors. The State was helpless in the face of that avalanche of monetary resources escaping from the country, which were going to increase the private accounts abroad of Venezuelans reduced in their morale due to the desire to have and not to be.
The ideal instrument for this combat was approved but had not been implemented: the General Law of Banks and other Financial Institutions. Furthermore, the officials in charge of applying it had not been aware of the new rules and were still under the influence of the old system, which, even though it had provisions and certain controls, did not apply either.
The expedited way to avoid new financial chaos is based on three fundamental elements:
a) Rigid and comprehensive control based on current legislation by the Superintendency of Banks, as will be explained in the body of this essay;
b) Appointment of officials with high public morals and an honorable private performance, in addition to high competence and professionalism; and
c) Surveillance and oversight of civil society on financial institutions and control entities created by the State through the relevant legislation.
The key to exercising this strict control is the strengthening of the Superintendency of Banks, a vital organism so that the Venezuelan State can really guarantee to the inhabitants of this country that their deposits will not be stolen again.
As much the current General Law of Banks and other Financial Institutions as the one that was applied as of January 1, 1994, the national financial crisis was already in gestation since a couple of years before, or perhaps much earlier depending on the approach taken, and it explodes when the events surrounding the Banco Latino occur.
It is good to carry out an analysis that helps to clarify or interpret the legislator's intention in his goal of modernizing financial legislation, and in particular increasing controls on banks and other financial institutions.
Regarding the latter, it is significant that the law expands the powers attributed to the Superintendency; especially regarding control.
Formerly, the Superintendency was empowered to inspect, monitor, and supervise banks and other credit institutions. Now the powers are extended to regulate and control. It is evident that the State is convinced that the Superintendency cannot be a service with limited action but with a very wide control, since it is not defined in the law what type of control. Where the legislator does not distinguish no, he cannot distinguish the interpreter.
Also the Deposit Guarantee Fund (FOGADE) must play a stellar role in establishing credibility in the national banking system.
Its financial strengthening with the contribution of financial institutions has been a definitive legislative success on the part of the State.
However, due to the characteristics of the crisis of the 1990s, as seen in the privatization process of the state banks, the recovery of the escaped monies was a much lower percentage than expected.
The loss on the part of the State, and that it came out of the pocket of all of us through the perverse tax that is inflation was enormous, and only the economic boom of recent years managed to cover that huge gap suffered by the country in those years.
There is currently a transitional mechanism, converted by the current government into a permanent instrument such as Exchange Control, which prevents, to a certain extent, capital flight. However, this does not mean that normal controls are not fine-tuned and financial institutions were monitored to prevent despicable situations that could not be foreseen today due to the temporary bonanza of petrodollars.
I. THE BANKS.
Historical evolution. Short description.
From the change of the metallic currency, to receive it and deliver certificates:
The activity of the first banks, which was limited to changing the metal currency that their customers gave them, was gradually replaced by that of receiving the metal currency, in exchange for which they issued certificates of deposit that served their holders to carry out their operations. without having to worry about the conservation and change of said metallic signs.
The loan of money:
Subsequently, those who engaged in this commercial traffic, observed that a good part of the holders of the certificates of deposit did not require their reimbursement in metallic currency.
Before this verification, the bankers saw the possibility of lending a greater number of certificates than they kept in hard currency in their coffers.
The business was already visible. The commitments assumed by the banks with third parties were superior to the metallic funds that they kept in their possession.
Bank notes:
The later stage in banking evolution shows the transformation of deposit certificates into banknotes originally issued by various banks in each country, to later become the exclusive power of central banks or issuing officers.
The appearance of the check:
The banking business acquires capital importance when the banknote loses relevance in favor of the deposit that can be mobilized with the check. With its appearance it is no longer necessary to make payments in cash or banknotes. Deposits can be mobilized with this instrument.
However, technology does not stop, and money can be moved with other instruments: transfers between accounts; charge on account, etc.
Likewise, the supply of cash, as we all know, can be achieved through ATMs.
And also, through the Internet, accounts can be mobilized, without leaving the site where the account holder is.
Commercial Banks:
They are governed by the provisions of Title I, Chapter V, Section One, of the Law on Banks and other Financial Institutions.
Object and minimum capital:
Commercial banks operate primarily with third-party funds made up of demand and short-term deposits.
The commercial bank that acts as a mere intermediary between those who have available savings and those who need these funds for the evolution of their businesses, will have to take special care to invest these availabilities in such a way that it can face the withdrawals they make in any at sight depositors or at maturity, when it comes to time deposits.
This object is subject to the limitations provided in the Law.
Regarding Commercial Banks,
Article 87 of the law prescribes that: “Commercial banks shall have the objective of carrying out financial intermediation operations and other financial operations and services that are compatible with its nature, with the limitations provided in this Decree Law. ”
And its minimum capital will be, according to Article 88 and thus: “Commercial banks must have a capital paid in cash or by capitalizing accumulated results available for this purpose, not less than Sixteen Thousand Million Bolívares (Bs. 16,000.000.000, oo). The additional increases to said amount must also be in cash or by capitalizing said accumulated results. However, if they have their main seat outside the Metropolitan District of the city of Caracas and have obtained from the Superintendency of Banks and Other Financial Institutions the qualification of regional banks, a paid capital will be required, in the aforementioned conditions, not less than Eight Billion Bolívares (Bs. 8,000,000,000, oo).
Once the minimum capital required has been modified, commercial banks must adjust, within a period of ninety (90) continuous days, counted from the modification made, their share capital to the corresponding amount. ”
And regarding universal banks, Article 74 of the law establishes that, “Universal banks are those that can carry out all the operations that, in accordance with the provisions of this Decree Law, are carried out by banks and institutions specialized financial institutions, except for second-tier banks. ”
And regarding the minimum capital, Article 75 provides that: “The minimum capital required to operate as a universal bank will be Forty Thousand Million Bolívares (Bs. 40,000,000,000, oo), in cash or through the capitalization of accumulated results. available for this purpose. The additional increases to said amount must also be in cash or by capitalizing said accumulated results. However, if they have their main seat outside the Metropolitan District of the city of Caracas and have obtained from the Superintendency of Banks and Other Financial Institutions the qualification of regional bank, a paid capital will be required, in the aforementioned conditions, not less than Twenty Billion Bolívares (Bs. 20,000,000,000, oo). ”
The prohibitions:
The law establishes prohibitions on commercial and universal banks, which, to some extent, characterize these banks.
Commercial and universal banks may not:
Grant credits for terms greater than three years, except in the case of special financing programs;
Acquire private shares and obligations for amounts that together exceed twenty percent of its paid-in capital and reserves, except in special cases;
Make investments in medium and long-term private obligations, in companies not registered in the National Securities Registry;
Excess in investment in foreign currency in accordance with the limits set by the Central Bank;
Grant credits in current account or money order, not guaranteed, for amounts that jointly exceed five percent of the bank's total assets.
On the Performance of Banks Abroad:
The Banking Law establishes the regulations pertaining to the entire process of opening, transfer or closing of offices, branches or agencies abroad, of commercial or universal banks incorporated in Venezuela; for this they need the authorization of the Superintendency of Banks.
Likewise, the limitations for the granting of loans, credits and investments by these dependencies located abroad are established.
Among others, such limitations are:
a) Such credits, loans or investments must not exceed the amount of the assigned capital, plus the obligations contracted and deposits received in the respective currencies. The Central Bank of Venezuela may extend the limit established herein, upon a reasoned request from the interested bank;
b) When it is intended to acquire a number greater than 20% of the paid-in capital of the bank of shares of bank companies established abroad, the authorization of the Superintendency is required;
c) Operations carried out abroad with funds obtained in Venezuela should not exceed twice the paid-in capital and reserves.
The Mortgage Banks:
The law establishes:
“Article 94. The mortgage banks will have the purpose of granting loans with mortgage guarantee, directed towards the construction sector, home purchase and mortgage release, as well as to carry out the operations and financial services compatible with their nature, with the limitations foreseen in this Decree Law.
Minimum Capital
Article 95. Mortgage banks must have a capital paid in cash or through the capitalization of accumulated results available for that purpose, not less than EIGHT BILLION BOLIVARS (Bs. 8,000,000,000, oo). The additional increases to said amount must also be in cash or by capitalizing said accumulated results. However, if they have their main seat outside the Metropolitan District of the city of Caracas and have obtained from the Superintendency of Banks and Other Financial Institutions the qualification of regional banks, a paid capital will be required, in the aforementioned conditions, not less than SIX BILLION BOLIVARS (Bs. 6,000,000,000, oo).
Once the minimum capital required has been modified, the mortgage banks must adjust, within a period of ninety (90) continuous days, counted from the modification made, their share capital to the corresponding amount. ”
Object:
It is a bank that takes funds from small savers and grants them, under certain conditions, long-term loans for the construction, acquisition or renovation of their homes.
Such loans are guaranteed by mortgages that banks acquire on the real estate of borrowers.
Likewise, mortgage banks can grant loans for cancellation of mortgages or credits obtained for construction, as well as may finance urban planning works, and in general for the construction industry.
This type of bank issues a deposit instrument called mortgage securities.
Of the Prohibitions:
In accordance with the provisions of the Law, mortgage banks may not:
a) Receive demand deposits mobilizable by checks;
b) Grant current account credits;
c) Acquire shares and private obligations for amounts that together exceed twenty percent of its paid-in capital and reserves.
d) Provide bonds and sureties;
e) Grant mortgage loans for terms that exceed twenty-five years or for more than seventy-five percent of the value of the property given as collateral, according to the appraisal practiced. The Superintendency of Banks may increase the indicated term.
f) Have invested or placed in foreign currency or securities an amount that exceeds the limit set by the Central Bank of Venezuela.
Investment Banks:
From Investment Banks
Article 104. The investment banks will have the objective of intermediating in the placement of capital, participating in the financing of operations in the capital market, financing production, construction and investment projects, and, in general, executing other operations compatible with its nature, with the limitations provided in this Decree Law.
Minimum Capital
Article 105. Investment banks must have a capital paid in cash or through the capitalization of accumulated results available for such purpose, not less than TEN BILLION BOLIVARS (Bs. 10,000,000,000, oo). The additional increases to said amount must also be in cash or by capitalizing said accumulated results. However, if they have their main seat outside the Metropolitan District of the city of Caracas and have obtained from the Superintendency of Banks and Other Financial Institutions the qualification of regional bank, a paid capital will be required, in the aforementioned conditions, not less than FIVE BILLION BOLÍVARES (Bs. 5,000,000,000, oo).
Once the minimum capital required has been modified, investment banks must adjust, within a period of ninety (90) continuous days from the modification, their share capital to the corresponding amount.
Of the Securities
Investment banks, whose previous name was a financial company, will aim to intervene in the placement of capital, finance production, construction and investment projects, participate in the financing of operations in the capital market and, in general, execute other operations compatible with their nature as investment banks, with the limitations provided in this Law.
These banks, by their nature, can subscribe the entire capital stock of a company that they promote, for a period of three years with an extension of three more years. This regulation establishes the particularities of this type of investment with its limitations.
The provisions of the Law on mortgage matters will govern for investment banks, insofar as they are applicable.
Of the Prohibitions:
Investment banks may not:
a) Receive savings deposits or demand deposits mobilized by checks;
b) Grant current account credits;
c) To grant loans to finance services or consumer goods, for amounts that exceed twenty percent of the total of its credit portfolio;
d) Have invested or placed in foreign currency or securities an amount that exceeds the limit set by the Central Bank of Venezuela.
The other financial institutions subject to the control of the Superintendency of Banks are the Capitalization Companies, and The Financial Leasing Companies, to which we will not refer in this essay.
II. THE SUPERINTENDENCY OF BANKS AND OTHER FINANCIAL INSTITUTIONS.
Current law gives it such autonomy and independence that it constitutes an institution equipped to exercise broad control over all financial institutions.
Here are the rules of the law:
CHAPTER I GENERAL PROVISIONS
From the Superintendency of Banks and Other Financial Institutions
Article 213. The inspection, supervision, surveillance, regulation and control of banks, savings and loan entities, other financial institutions, exchange houses, border exchange operators, and credit card issuers and operators, will be in charge of the Superintendency. of Banks and Other Financial Institutions.
The Superintendency of Banks and Other Financial Institutions is an Autonomous Institute, attached to the Ministry of Finance for the sole purposes of administrative protection and enjoys the prerogatives, privileges, and exemptions of fiscal, tax and procedural order, which the law grants to the Republic.
The Superintendency of Banks and Other Financial Institutions by virtue of the unipersonal nature of the body that directs it, is exempt from complying with the provisions of the Organic Labor Law regarding labor directors.
Autonomy
Article 214. The Superintendency of Banks and Other Financial Institutions shall enjoy functional, administrative and financial autonomy in the exercise of their powers under the terms established in this Decree Law, and shall have the organization that this Law and its Internal Regulations establish.
The Superintendency of Banks and Other Financial Institutions will only be subject to the subsequent control of the Office of the Comptroller General of the Republic.
Of the Highest Authority
Article 215. The Superintendency of Banks and Other Financial Institutions will act under the direction and responsibility of the Superintendent of Banks and Other Financial Institutions.
The Superintendent will designate an Operational Intendant and an Inspection Intendant, who must meet the same requirements as the Superintendent and will be subject to the same limitations. The Intendants will be freely appointed and removed from the Superintendent and will have the powers that this and the Internal Regulations indicate.
Functions of the Superintendency
Article 216. The Superintendency of Banks and Other Financial Institutions shall exercise the inspection, supervision, vigilance, regulation, control and, in general, the powers indicated in article 235 of this Decree Law, in a consolidated manner, covering all banks, entities of savings and loans, other financial institutions and other companies, including their subsidiaries, affiliates and related, whether or not they are domiciled in the country, when they constitute a decision or management unit.
Scope of the Functions of the Superintendency
Article 217. The inspection, supervision, surveillance, regulation and control exercised by the Superintendency of Banks and Other Financial Institutions must comprise, as a minimum, the following aspects:
1. Ensure that banks, savings and loan entities and financial institutions have adequate systems and procedures to monitor and control their activities at the national and international level, if applicable.
2. Obtain information about the financial group through regular inspections, audited financial statements and other reports.
3. Obtain information on the transactions and relationships between the companies of the financial group, both national and international, if applicable.
4. Receive consolidated financial statements at the national and international level, if applicable, or comparable information that allows the analysis of the situation of the financial group on a consolidated basis.
5. Evaluate the financial indicators of the institution and the group.
6. Obtain information on the respective shareholding structure, including the data that allows to determine with precision the identity of the natural persons, final owners of the shares or of the companies that hold them.
7. Obtain the necessary information, through on-site or off-site inspections, in order to verify that the agencies, branches, offices, subsidiaries and affiliates abroad, of Venezuelan banks or financial institutions, comply with the applicable regulations and provisions of the place where they work.
8. Ensure that banks, savings and loan entities, financial institutions and other companies subject to this Decree Law, have adequate systems and procedures to prevent them from being used to legitimize capital from illicit activities.
CHAPTER II OF THE SUPERINTENDENT
From the superintendent
Article 218. The Superintendent must be Venezuelan, older than thirty (30) years, of recognized competence and moral solvency, have experience of not less than ten (10) years in banking matters, and not be subject to the causes set forth in article 12. of this Decree Law. Their appointment will be made for a period of five (5) years, extendable once and for the same period, by decision of the President of the Republic, after completing the same formalities for their original appointment.
Appointment of the Superintendent
Article 219. The Superintendent will be appointed by the President of the Republic, and his removal may only be made by a decision motivated by the following causes:
1. Lack of probity, injury, immoral conduct or detrimental act to the good name or to the interests of the Superintendency of Banks and Other Financial Institutions.
2. Serious material damage, caused intentionally or by manifest negligence, to the assets of the Superintendency of Banks and Other Financial Institutions.
3. Definitively firm criminal conviction involving deprivation of liberty.
4. Administrative responsibility order, issued by the Office of the Comptroller General of the Republic.
Temporary and Absolute Absences of the Superintendent
Article 220. The full Intendant of Inspection will fill the temporary absences of the Superintendent of Banks and Other Financial Institutions. These absences may not exceed a period of ninety (90) continuous days; if after this period elapses and the fault subsists, it will be considered an absolute fault.
In the event of absolute absence, the appointment of the new Superintendent of Banks and Other Financial Institutions must be made within thirty (30) continuous days following the date on which it is declared.
Prohibitions to Exercise the Position
Article 221. A person who is related to the fourth (4th) degree of consanguinity or second (2nd) of affinity with the President of the Republic, with the Executive Vice President of the Republic, may be appointed Superintendent of Banks and Other Financial Institutions, with the Minister of Finance, with the President of the Central Bank of Venezuela, with the President of the Deposit Guarantee and Bank Protection Fund, with the President of the National Securities Commission, with the President of the National Banking Council, with the Superintendent of Insurance or with a member of the board of directors of the subjects who are subject to their supervision.
Superintendent Prohibitions
Article 222. The Superintendent of Banks and Other Financial Institutions may not be a directive member, advisor, advisor, agent or commissioner of the subjects subject to the control of the Superintendency of Banks and Other Financial Institutions. Their spouse, children or ancestors will be subject to the same limitation, unless they already were at the time of the appointment of the Superintendent. The violation of this article will lead to the absolute nullity of the appointment in the respective financial institution.
Powers of the Superintendent
Article 223. The Superintendent must dedicate himself exclusively to the activities of the Superintendency of Banks and Other Financial Institutions and will have the following powers:
1. Exercise legal representation of the Superintendency of Banks and Other Financial Institutions.
2. Plan, organize, direct, coordinate and control the operation of the Superintendency of Banks and Other Financial Institutions, as well as authorize the actions that it must carry out in the exercise of its functions.
3. Set the orientation of the action of the Superintendency of Banks and Other Financial Institutions and elaborate the programs to be fulfilled in each budget year.
4. Prepare and execute the annual budget of expenses of the Superintendency of Banks and Other Financial Institutions;
5. Appoint and remove the officials of the Superintendency of Banks and Other Financial Institutions, assign them their functions and obligations, and fix their remuneration, without any limitations other than those established in this Title and in the official statute.
6. To issue the Internal Regulations of the Superintendency of Banks and Other Financial Institutions, the Systems and Procedures Manual and the administrative regulations necessary for its operation.
7. Impose the fines and other sanctions established in this Decree Law, and in the other laws that govern the activity of the institutions subject to the supervision of the Superintendency of Banks and Other Financial Institutions, except for special provisions.
8. Attend, when deemed convenient, the meetings of the administrative boards and the shareholders' assemblies of banks, savings and loan entities, other financial institutions and other companies under their control, or be represented in them by an official of its dependency, with the right to voice.
9. Prepare and publish a report in the course of the first quarter of the year on the activities of the Agency under its charge in the preceding calendar year and accompany it with the demonstrative data it deems necessary for a better study of the situation of the banking system in the country..
10. Celebrate and sign the contracts that are necessary for the fulfillment of the purposes of the Superintendency of Banks and Other Financial Institutions and acquire the goods required for this purpose.
11. Request from the Central Bank of Venezuela and the Superior Council the opinions referred to in this Decree Law.
12. The others indicated by the laws.
All this set of rules speak for themselves of the power it can exercise, and it should be so so that the savings of all natural and legal persons can be managed with great neatness and preventing the perverse events of 1993 and 1994 from happening again. that sank much of the national bank.
I. PHILOSOPHY OF THE SUPERINTENDENCY:
On the other hand, in the past the Superintendency appeared as a special technical service attached to the Ministry of Finance. Now it is a body endowed with legal personality and its own and independent patrimony of the National Treasury. Furthermore, it is given functional, administrative and financial autonomy. With this we can clearly establish the intention of turning the Superintendent and other officials and employees into servants of the State. State officials who are at the service of any political bias as expressed in the Constitution of the Republic. Even the appointment of the Superintendent in charge of two powers reinforces this thesis, which gives him true independence in the exercise of his powers. It is not even a government agency in the strict sense of the term,referred to the Executive Branch. It is a state agency.
However, in the first few changes, the appointment of the Superintendent of Banks through the new system was subjected to the greatest possible vicissitudes. A stretch and shrink led to the appointment of a professional linked to the financial interests of the country's economic power, limiting his independence, which ultimately led to his dismissal or departure.
The correct thing would have been the appointment of a professional with a comprehensive knowledge of the financial and banking situation, totally unrelated to the strong interests of the center of the Republic in this delicate area.
It was not and has not been so. It is still too early to know if the current Superintendent can resist the pressure of financial groups in his obligation to strictly control banks and other financial institutions. And on the other hand, if their ties can weigh more, due to their leading role as head until recently of one of the most important bank auditing companies in the country, and which participated in many opinions of the national bank, or its inescapable duty to control banks without hindrance.
The objective of this State institution with absolute independence in relation to the financial activities that it must control, and protected against foreign influences, must be based on the following principles:
1. Independence vis-à-vis the administrative bodies and immobility of its members.
2. Conditions for the appointment of the Superintendent so that he does not respond to political interests but to his suitability, capacity, professional ethics and sense of a true public service.
3. The staff of the institution must be appropriately chosen through competitions and its stability guaranteed in a statute issued for this purpose.
II. THE PHILOSOPHY OF CONTROL.
In our opinion, it is through this power of control that the Superintendency can exercise preventively and accurately the task that the law has indicated.
Indeed, in accordance with the basic principles that inform public control, this is a true reflection of a concept of sovereignty.
If the State, through the Superintendency of Banks, establishes that private or public entities, which act by official concession in the handling of money of natural and legal persons, must be subject to its control, it acquires public character and its foundation it resides in the sovereignty exercised by the people through the organs of the Public Power, all in accordance with the democratic system configured in the Constitution of the Republic.
It is therefore evident that there is a public interest underlying control. The funds that financial institutions manage belong to the active community and therefore their investment and management must be inspired by the interest of that community. Such an interest must be public. This delegated control by the sovereignty of the people, exercised through the constituted powers, and specifically through the Superintendency of Banks, the autonomous body of the State, must ensure the protection of those large funds that constitute the national savings of all natural and legal entities of the nation.
However, above this pristine philosophy, the political powers have moved and have distorted the original intention of the autonomy of the Superintendency of Banks with the Financial Emergency Law where that previous focus on control over banks was somewhat distorted.
The secondary role attributed to the Superintendent of Banks in the Superior Council of the Superintendency with political officials directing the financial emergency process undermined the legal power of the direct control body.
It is advisable to thoroughly review all this legislation, once the Emergency Law has been repealed, in order to return to the legislator's initial criteria of autonomously strengthening the Superintendency of Banks, which must be a true General Comptroller of the National Financial System.
III. INTEGRAL CONTROL.
As the legislator attributed to the Superintendency of Banks the control of the financial institutions governed by this law, it is clear that such control must be understood as integral and not partial, as even; according to the previous law, the Superintendency had been doing it intermittently and not systematically.
You must not do any financial activity of the banks that is beyond the control of the Superintendency of banks.
It is good to remember how the banks, in their eagerness to bypass the Superintendency's inspection, whose oversight left much to be desired, created banks such as Liquid Assets, which by nonsensical criteria did not enter the ordinary controls of the Superintendency. Hence, the deposits of liquid assets accrued more interest, presumably because they are not subject to the rules of registration and control and audit of the financial statements.
The Liquid Assets disappeared recast in the Savings Accounts. Now they are not justified.
Many will remember, as a Creole vividness, having a Liquid Assets account and not a Savings account because the latter was for the ignorant or poor people who did not know how to manage their finances as the "smart" of Liquid Assets.
The Integral Control that the Superintendency of Banks must exercise, and we hope that it is fulfilling it as an autonomous body, includes both legal and financial control.
Thus, in accordance with control techniques, the Superintendency of Banks, with this new authority, must establish the following controls:
1. Prior Control.
Referring to those operations that must be previously analyzed by the Superintendency and given their approval to prevent errors, misdemeanors, negligence, possible fraud and in some cases prevent recidivism. These operations must comply with legal regulations and therefore we would be in the presence of the Legal Control of contracts and other obligations assumed by the financial institution. This type of control is all the more important since it can be affirmed that many of the situations that originated the Banco Latino debacle, and the events that have led to the illiquidity and even insolvency of other banks, are the lack of prior control by part of the State through the Superintendency of Banks. If a suitable organism, provided with all the necessary elements,had exerted strict prior control over the erroneous operations of some, willful or faulty others of those banks, the situation may have been different.
2. Perceptual Control or "In Situ".
It is an eye inspection work, in place, without notice, in order to establish, on the fly, any failure or error in the operation. Now it is possible, through information technology, to be present remotely in the control of certain operations.
This aspect of control is essential in monitoring banking activities and operations.
It is not possible that the Superintendency of Banks can fulfill its role as integral comptroller of financial institutions if its computer system is inferior in technology as compared to those that all banks today have in all their modalities.
Furthermore, there must be a penetration by the Superintendency of Banks into the computer systems of the entities subject to its control and banish bank secrecy, which has only served to hide crimes committed from within and with complicity from outside to defraud the public. and to the State.
Even "honest" and neutral Switzerland, now discovered by the traffic of gold stolen by the Nazis towards Spain and Portugal during the Second World War, is back in the matter of bank secrecy, given the number of accounts in Swiss banks that wash dollars from the drug trafficking.
2.1 Evasion of Funds.
Based on this type of control, it is necessary to provide the Superintendency with an instant information system in line with all financial institutions, and control, among other operations, the transfer of funds, in order to avoid, prevent, events such as those that occurred with the evasion of official funds towards “off shore” banking, violating the legal reserve. This was a common practice on the part of Venezuelan banks, which created banks with the legislation of the Caribbean islands, such as Curaçao and Aruba, and with small offices concealed an alleged banking activity in those islands, when in reality all activity was performed in the country.
Of course, not all of these “off shore” banks (translated as offshore) were poorly managed. Even these banks still exist by those who did not fall into the financial debacle.
We have already alerted, since November 1992, and this is stated in press articles and in communications to the Superintendency and other organizations related to the matter, about this illegal practice. Also included in this type of control are cash or cash balances to verify accounting balances with reality.
3. Post Control.
It is an objective operation aimed at verifying whether the documents subject to control are brought in accordance with legal and regulatory requirements, or the instructions of the controlling entity, in this case the Superintendency of Banks. In other words, it is the set of studies, analyzes, audits and works, based on the methodical examination, partial or total, of the books and documents of the financial institution in question. All in order to be sure that the figures recorded in the balance sheets and other financial statements, or accounting documents of any kind, are rigorously exact, without approximations. Always in accordance with the regularity of the operations that they represent as the accounting principles legally accepted.
3.1 Balance Makeup.
This practice is criminalized in all banking laws. We understand that it has never been applied. Prison is from two to five years.
This malicious activity was widespread. Be careful if it is still practiced!
It consists of altering, with fictitious operations in some cases, or with manipulated operations in others, the result of the financial statements. Other times the balance is made up with deferrals of expenses already made to reduce the expenses of the year or month in the eyes of the auditors. So, either with induced loans to subsidiary companies or related companies, whether real or fictitious, the income is increased by generating interest that does not enter or becomes convenient operations between related companies. Or, the record of expenses already made is omitted and dragged until the situation degenerates into what has recently occurred.
The current regulations prescribe:
Documentary Fraud »
Article 433. Whoever forges, adulterates or issues documents of any nature or uses false data, with the purpose of committing or hiding fraud in any of the persons subject to the control of the Superintendency of Banks and Other Financial Institutions, will be punished with imprisonment of nine (9) to eleven (11) years.
False Information to carry out Banking Operations
Article 434. Those who, for the purposes of carrying out banking, financial, credit or exchange operations, present, deliver or subscribe, balance sheets, financial statements, and in general, documents or collections of any kind that turn out to be false, adulterated or forged, or that Containing information or data that does not reasonably reflect their true financial situation, they will be sentenced to eight (8) to ten (10) years in prison.
The members of the administrative board, directors, administrators or employees of the people subject to the control of the Superintendency of Banks and Other Financial Institutions will be punished with the same penalty under this Decree Law, knowing the falsity of the documents or previously mentioned collections approve the referred operations.
False Financial Information
Article 435. Whoever prepares, subscribes, authorizes, certifies, presents or publishes any kind of information, balance or financial statement that does not reasonably reflect the true solvency, liquidity or economic or financial soundness of the people subject to the control of the Superintendency of Banks and Other Financial Institutions under this Decree Law, will be punished with imprisonment of eight (8) to ten (10) years.
In the event that, based on said information, the bank, savings and loan entity, financial institution or exchange house makes the distribution or payment of dividends, the penalty will be increased by one third (1/3) of the same..
The penalty provided in the heading of this article will be increased by two-thirds (2/3) when the measure of suspension of the distribution or the payment of dividends, issued by any supervisory body, is omitted. "
A personal experience of the author of this essay led him to request the Superintendency of Banks to suspend the publication of Banco Popular's balance sheets, which I had to preside for almost a year, due to balances that did not reflect the reality of the institution. The situation was in such a serious way that while the balance prior to my arrival at the administration of that bank showed profits of more than 50 million bolivars and we are talking about the year 1992, the reality was that I was losing about 60 million bolivars per month. And this despite the fact that the commissioners appointed by the Industrial Bank, owner of that local bank, had warned about these totally irregular practices, and which, as stated, were of a malicious nature.
These balance sheets were published in full makeup. To the extent that the latter recorded income from sales of buildings of the same bank for amounts close to 200 million bolivars to subsidiaries whose capital was 5 million bolivars. Of course there was no transfer of funds. It was a fraud.
This very serious situation was reported by me to the Superintendent on duty by the end of 1992, and the answer was to turn a blind eye. In the same terms, the President of Banco Industrial was informed.
This “policy” of pretending to be ignored, personally felt by the person who writes this, had been in force for many years and therefore the banks, not all of them naturally, could move the public's money as they saw fit and in accordance with their interests, leaving aside the interests of your customers and depositors.
One of the most impressive drains was the financing of "resort" and tourist hotels by commercial banks.
The money used for this came largely from short-term deposits from the public. Hence the spiral of rates that led some banks, such as the Latino, to pay rates of around 80% per year, in order to maintain funds to meet customer requirements.
Well, with the powers that the Banking Law attributes to the Superintendency and an efficient functional structure, these malicious practices should not be repeated until today with impunity because, if a banker is in prison today, it is for crimes committed abroad, and there is no no important prisoner in the country.
4. Management Control.
All the controls outlined above are written in the legal, financial and accounting realms, and to some extent are a management control budget.
The administration of a financial entity may be legal and accounting correct, however, it may be susceptible to observations and objections in order of its costs, results, goals; Or what is the same of its management.
With an example we will bring more clarity to these statements. The administration of a financial institution may decide to buy a 900 million bolivar airplane for use by officials who must inspect branches and agencies. The operation can be legally and statutorily correct; financially viable, in the sense that there are funds for it and that it is accounted for correctly by being attributed to the corresponding account. But, isn't that an overspending? Is it justified based on the magnitude of the financial entity?
For this reason, the modern company has embraced Management Control. Likewise in the public sphere, the Comptrollers have been assigned this management control, and thus the Comptroller General of the Republic, according to the law that governs, has among its powers such control.
In order to define management control, we will first use the criteria of Dr. José Muci-Abraham that states: “Management control seeks to complete the legality exam, which will always be consubstantial to the management action that seeks to complement the legality exam, that it will always be consubstantial to the action of the Comptroller, with studies that tend to determine, in a word, if an administration is suitable to fulfill its purposes. That is: if from the economic or financial point of view the costs of that administration are adequate for the purposes pursued; if the achievements or results achieved are proportional to those costs; if the planned goals have been obtained, and, if not, what kind of reasons have influenced or influenced not to achieve those results. Anyway, if the controlled administration,In addition to formally complying with the law, it is carrying out its tasks efficiently, to the point of making it possible to affirm that it is an effective administration; or, conversely, if this is not the case, what type of administrative reasons or causes are preventing the achievement of this ideal of efficiency. "
Another concept consistent with the previous one says: “Management control must determine if the facts or operations are in accordance with the interests of the company, if the organization and methods are good or should be modified, and in what sense, if the decisions have been made with full knowledge of all the elements of a given problem, or if, on the contrary, more favorable initiatives could have been taken; in short, if the management is conceived and maintained in a correct, supervised and constructive way. ” (Management Control. F. Jonio and others).
There is a traditional criterion of attributing Management Control to the internal organs of the administration itself. This may be the case insofar as they refer to private companies that do not manage public funds. However, when the public interest is involved, Management Control must correspond to external control bodies, in this case the Superintendency of banks, which is a reality, according to its law, a Comptroller General of banks and other Financial Institutions. It is understood that the term Superintendent is maintained as a tradition.
On the other hand, this legal-financial control made up of the prior, perceptual and subsequent controls acts, to a certain extent, in a static way, particularly if it refers to the accounting issue. Furthermore, as it has been so far under the repeal law that spoke of inspection, surveillance and oversight. On the other hand, the management control not only takes into account the accounting elements, but also moral, intellectual, economic, psychological elements and makes a critical and reasoned, objective and constructive contribution to the management of the financial entity, therefore it acts dynamically.
For all these reasons, it is imperative to establish a Superintendency Control Plan that complements both types of control and thus achieve the fundamental objective of preventing extremely serious situations of insolvency and illiquidity, as a result of erroneous or intentional handling by financial entities and correcting bad practices. in short, to obtain an effective administration in this very sensitive sector of the national economy.
IV. CONCLUSIONS
1. Regarding the Superintendency of Banks.
1.1 Ideal structure.
To put all this control aspect into practice, it is necessary to restore the Superintendency of Banks in order to incorporate new divisions or departments that take care of these fundamental tasks for the full fulfillment of its powers. We have no recent information of such a transformation being carried out. Apparently, with the advice of foreign entities, you are on that path with studies on the subject.
An important aspect is the budget to achieve these ends. The same Law of Banks establishes the entrance of funds contributed by the banks to start a complete reorganization of the institution.
With the new powers, regulation, not analyzed in this work, and control: object of the same, as well as a functional structure appropriate to the current legislation, this body may be in a position to fulfill the delicate role that the law provides. attributes.
1.2. Human Resources.
However, for this, it is also essential to provide it with the necessary human resources and specialize even more the current ones.
Regarding human resources, the officials and employees of the Superintendency must assume a new awareness regarding their public work. As previously stated, your conscience must be directed towards feeling like servants of the State. They must enjoy great stability, and salaries at the highest possible level depending on their professional character and degree in public administration.
The selection of the personnel must be under strict managerial norms and train them as specialized personnel exclusively in the tasks of resolution, control, surveillance, inspection and supervision of the financial entities that handle public money. They must have high morale and expect only good remuneration and recognition from the State and the community for their task of safeguarding the savings of natural and legal persons.
It is necessary in Venezuela to adopt the personnel policies that exist in other more developed countries.
Political patronage must be eradicated. More in these entities of a professional and technical nature, in charge of which are matters as delicate as the monitoring of the funds of the Venezuelan community.
The public official must feel like servants of the State. The Constitution of the Republic, as stated. It has it established. Political parties must make an effort for the good of the country and totally divorce themselves from the unhealthy practice of putting their members into office, who feel that they belong more to the party and not to the National, Regional or Municipal State.
The contest system should be generalized to provide the charges. Of course, avoiding certain vicious practices in certain competitions, as is the case with some of those recently carried out to designate the Internal Comptrollers, Autonomous Institutes, State Companies, in accordance with the provisions of the Organic Law of the Comptroller General of the Republic and the instructions of the Comptroller General.
Some of these contests have been manipulated to leave the current owner in office
And thus make fun of the law and the Comptroller General of the Republic, who with manifest determination has been working to accentuate controls over the Public Administration.
If the law is evaded and no sanctions are imposed on violators, the effort of officials imbued with the need to control public income and expenses will be useless.
The creation or implementation of a training process for technical and professional personnel is key to the exercise of these integral control functions.
The Training School for Managers and Directors of Administration, both active and passive, is an urgent need.
This training must be combined with the competition of high-level private institutions such as IESA and Universities, which must play a determining role, not only, as they are now doing to train high-level professionals, but in Public Management courses. to have a suitable template to handle administrative processes within the State and its institutions.
1.3 Material Resources.
Computer equipment must be the most modern, state-of-the-art, to match those of banks and systematically monitor the fundamental operations of the entities subject to their control. You can not skimp on expenses and investments in these teams or in hiring highly qualified personnel, if we look at how billions of bolivars have had to be provided by the State to save the current financial situation.
With a superintendency thus conceived, events such as those of Banco Latino and those of other Venezuelan financial entities should not occur.
Civil society organizations cannot stand still before the actions of financial institutions and those that control them.
The surveillance of unions, unions, corporations, neighborhood associations, social prevention institutions, savings banks, commercial and manufacturing companies, and finally all those entities, whose funds, few or many, are managed by others and supervised by organs of the State, it fulfills a new but preventive role, in this sense they must organize internally to be observers, and I emphasize the term, and I use the Dictionary of the Royal Academy of the Spanish Language, to explain the intention we have, “Veedor. Who sees, watches or records with curiosity the actions of others. The one that is designated by office in the cities or towns, to recognize if they are in accordance with the law or ordinance the works of any union or offices of bastions. ”.
Well, all these institutions must assume that civil society has commissioned them to observe and monitor the works, actions, of those who manage our money and of those who by law are obliged to control them, represented by the Superintendency of Banks.
The combination of control elements, both inside and outside, and the vigilance of the public, and in particular of the depositors of financial institutions, taken into account in the Financial Emergency Law but preterred by the Banks' Auditors, who If they had them as strangers when they were handling their money, it can allow criminal situations and fraud to be prevented against those who have their funds entrusted to financial institutions.
Furthermore, it is convenient to modify the legislation allowing in some way a greater participation of the depositors of a financial institution in the Shareholders' Meetings where it is decided the destination of funds that are not those shareholders but other people who are not represented in those high decision organizations.
These propositions are not rhetorical statements. They will, sooner or later, form legislation that provides early warning mechanisms, and thus avoid new financial crises for the country that undermine the assets of so many Venezuelans and foreigners who trusted banks and still continue to trust those essential institutions, for the normal economic development of the country.
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