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25th Jun 2018

Spain MPs to probe €60bn bank bailouts

  • MPs voted unanimously to create a commission to investigate the financial and banking crisis. (Photo: PP/Flickr)

Spanish MPs have voted unanimously to set up a commission to examine mistakes that led to a €60 billion bank bailout in 2012.

In a rare display of unity in Spain's fragmented parliament, all parties signed up to a deal on Wednesday (22 February) to “create a commission to investigate the financial and banking crisis, the listing of savings bank Bankia and its later rescue, the action taken by regulators and the weaknesses, needs and challenges of the financial system”.

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  • Bankia's fall triggered an EU and IMF €60 billion bailout of the Spanish banking sector. (Photo: Arturo R Montesinos)

In 2012, a government led by current centre-right prime minister Mariano Rajoy sought a bailout from the EU and International Monetary Fund (IMF) after Bankia requested €22.5 billion in aid just a year after its flotation under the previous Socialist government. Dozens of other savings banks also needed state cash.

The cross-party deal this week came after the opposition Socialists, anti-austerity group Unidos Podemos and Catalan party Republican Left all lodged separate petitions for commissions.

Expected to hear evidence from April for about six months, the parliamentary commission will in particular look at the controversial listing of Bankia, the largest bank bailout still in public control.

The plunging of Bankia's share price and the bank's subsequent nationalisation wiped out its shareholders, many of whom were small savers encouraged by bank managers to buy shares as a safe investment.

"We need to clarify the political responsibilities for the crisis and to ask why regulators didn't react earlier," Toni Roldan, economics spokesman in the parliament for liberal party Ciudadanos, told EUobserver.

Ciudadanos and anti-austerity party Podemos gained seats in the national parliament for the first time in December 2015, mainly because voters blamed the two main political parties, the ruling Popular Party (PP) and the Socialist Party, for the crisis and corruption scandals.

The PP and the Socialists presided over a decade-long housing bubble, fuelled by cheap credit handed out by savings banks whose boards included politicians. "Fifty percent of the banking system was controlled by political parties ... extending credit to their friends," said Roldan. "The former savings banks gave credit to local mayors and real estate developers."

In recent years, Spain's courts have looked into hundreds of corruption allegations linked to the property boom. Between July 2015 and September 2016, 399 people were convicted of corruption-related offences like embezzling public money, the General Board of Judicial Power (CGPJ), which oversees Spain’s judiciary, said in a report last month.

The creation of the parliamentary commission comes after the high court said last week it would question the former governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, over Bankia's regulation.

Five other officials at the central bank and two former senior managers of stock market regulator, the CNMV, will also be questioned.

Many think Fernandez Ordonez, appointed by the Socialist government of Jose Luis Rodriguez Zapatero, should never have allowed the bank to list at all.

The court is also investigating Rodrigo Rato, a former PP economy minister and IMF chief, who was chairman of the bank when it listed.

Full confidence

Once the parliamentary commission is formed, the political parties will have to agree on the list of people members of parliament should question. Fernandez Ordonez and Rato could be high on their list.

Economists working for the central bank are also likely to be called to ask about internal emails cited in the high court investigation which suggest the bank was not fit to be listed.

"The bank's own inspectors told the directors it wasn't fit for a listing," Nacho Alvarez, economics spokesman for Podemos told EUobserver.

In a statement last week, the Bank of Spain said its board had "full confidence" in all the bank officials summoned by the high court and said the central bank acted "in accordance with regulations, the defence of financial stability and the public interest".

Opposition parties hope the PP government will take note of the commission's conclusions. "The commission's deliberations and conclusions are going to get huge media attention," said Alvarez, suggesting that the government, which is in a minority in the parliament, could feel a pressure to do so.

'The greatest scandal'

However, some Spaniards are sceptical about whether the commission will result in action to prevent bank abuses and a repeat of the crisis.

Consumer association ADICAE, which represents 200,000 consumers, including many who were mis-sold products as banks became desperate to reverse losses, says commission recommendations in Spain have been ignored in the past and it will continue to push cases in the courts.

"This investigation should have happened a long time ago," said ADICAE spokesman Jose Angel Palacios.

"We're a bit sceptical but it is an opportunity for Spaniards to learn about the greatest scandal we've ever had," he said, insisting that the bank crisis resulted in cuts in education and the health service to repay the €60 billion bailout.

EU 'finance ministry' pardons Italy and Spain

Italy, Portugal, and Spain are unlikely to face sanctions for breaking EU budget rules, the European Commission has said, in what it described as a “political” decision by a kind of “common finance ministry”.

Analysis

Greece facing post-bailout challenges

Creditors are expected to agree Thursday on a final loan and debt relief measures for Greece. After eight years on an international lifeline, the country will remain under close surveillance - but will have to find a new economic model.

Basque threat of 'second front' for independence

Last weekend some 175,000 people in the Basque country demanded a 'right to decide'. For some, it means more autonomy from Spain, others independence. "We want to open a second front within the Spanish state," says one Basque politician.

Catalonia diplomats back in action abroad

The new regional government is to reopen its representations aboard. In Brussels, its new foreign minister Ernest Maragall insisted that it wanted to show "responsibility".

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