English language newspaper for Ibiza, published and online every week.

Front Page News

Bank Problems
‘Bankia’ was formed in December 2010, a conglomerate of seven banks, headed by the giants Caja Madrid and Bancaja and five other small regional members. Initially it was headed by a President, Rodrigo Rato, who was a leading light in the PP conservative government of José María Aznár and later managing director of the International Monetary Fund. However, last week he resigned to clear the way for the government to mount a rescue plan to attract international investors and assure them of the country’s financial stability. One of the biggest headaches faced by all the Spanish banks is the amount of dead money which they have invested in bricks and mortar, leading to a serious lack of available funds for customers to borrow. Although Bankia made a profit of 309 million euros last year, they have had to close several branch offices, resulting in a loss of jobs for a quarter of their staff. Under the plan being finalized by the Bank of Spain and the Economy Ministry, Bankia could receive public funds in the form of convertible bonds which would carry commercial interest rates of around eight percent. Market sources believe that the group could well need between five and ten billion euros to clear up its balance sheet.
Rato’s successor, José Ignacio Goirigolzarri, has approached the government asking for a bail out and to partly nationalize Bankia. They will be granted a loan of 4.5 billion euros from the so-called ‘Orderly Bank Restructuring Fund’ as shares, which will carry an interest of ten percent over five years. Bankia is the country’s fourth biggest financial entity, with over ten million customers and assets of 340 billion euros. However, this step depends on the go-ahead by the European Commission, which has the final say on financial matters, but at least would mean that it is not Joe Public’s money which is being pumped into the concern.
At Friday’s Cabinet meeting it was agreed that banks with ‘bad assets’ should remove them from their balance sheets and transfer them to property agencies, which will be set up before the end of the year. These companies will be obliged to sell at least five percent of their assets annually.