Regulators on Friday issued a cease and desist order and levied $1.8 million in fines against Caracas-based Banco Industrial de Venezuela and its agencies in Miami and New York.
The Venezuelan state-owned bank must cease and desist from unsafe and unsound banking practices in the United States, including operating for an extended period with negative or insufficient capital, and failing to have adequate management at its agencies, or oversight for them, banking regulators said.
The order also outlines various issues related to Banco Industrial’s financial condition, found in repeated examinations by the Federal Reserve and Florida and New York banking supervisors. It also cites a lack of audited financial statements.
As a result, Banco Industrial cannot make new loans or take on new customers without the approval of U.S. banking supervisors. The bank is also required to submit plans to improve its agencies, including their management, internal and operational controls, loan quality and internal audit practices. The bank must also adhere to regulatory reporting deadlines.
Banco Industrial’s Miami agency declined comment on the order.
Ken Thomas, a Miami-based banking expert and economist, said that $1.8 million is high in terms of bank penalties. He said the order puts Banco Industrial “on a tight leash.’’
“This is a case where the bank has had a tremendous amount of violations, serious violations,’’ Thomas said.
Among the order’s requirements, Banco Industrial must submit financial statements for its consolidated organization and for each of its agencies that have been audited by an “acceptable, independent, internationally recognized accounting firm.’’
Banco Industrial’s $1.8 million in penalties will be divided equally among the Federal Reserve’s Board of Governors, the New York State Banking Department and the Florida Office of Financial Regulation.
It is not the first time that the bank has run into trouble with U.S. regulators. A written agreement was first reached with banking supervisors in April 2005. Another written agreement, from July 2006, regarding compliance with anti-money laundering and Office of Foreign Assets Control procedures, remains in place.
Banco Industrial is owned by ministries of the Venezuelan state. The bank was subject to an intervention by the Venezuelan government in May 2009 — a form of conservatorship under Venezuelan law. At that time, the interveners acknowledged that the bank had negative equity, until at least March 31, 2010. In January of this year, the intervention was lifted
