The Unthinkable Just Happened in Spain

REED more:http://wolfstreet.com/2017/02/18/spain-central-bankers-financial-regulator-in-court-bankia-ipo/ The Unthinkable Just Happened in Spain by Don Quijones • Feb 18, 2017 • 17 Comments Six central bankers and a financial regulator get dragged to court By Don Quijones, Spain & Mexico, editor at WOLF STREET. Untouchable. Inviolable. Immunity. Impunity. These are the sort of words and expressions that are often associated with senior central bankers, who are, by law, able to operate more or less above the law of the jurisdictions in which they operate. Rarely heard in association with senior central bankers are words or expressions like “accused”, “charged” or “under investigation.” But in Spain this week a court broke with that tradition, in emphatic style. As part of the epic, multi-year criminal investigation into the doomed IPO of Spain’s frankenbank Bankia – which had been assembled from the festering corpses of seven already defunct saving banks – Spain’s national court called to testify six current and former directors of the Bank of Spain, including its former governor, Miguel Ángel Fernández Ordóñez, and its former deputy governor (and current head of the Bank of International Settlements’ Financial Stability Institute), Fernando Restoy. It also summoned for questioning Julio Segura, the former president of Spain’s financial markets regulator, the CNMV (the Spanish equivalent of the SEC in the US). The six central bankers and one financial regulator stand accused of authorizing the public launch of Bankia in 2011 despite repeated warnings from the Bank of Spain’s own team of inspectors that the banking group was “unviable.” Though they have so far only been called to testify, the evidence against the seven former public “servants” looks pretty conclusive. Testifying against them are two of Banco de España’s own inspectors who have spent the last two years investigating Bankia’s collapse on behalf of the trial’s presiding judge, Fernando Andreu. There are also four emails from the Bank of Spain’s inspector in charge of overseeing Bankia’s IPO, José Antonio Casaus, to the assistant director general of supervision at the Bank of Spain, Pedro Comín, that very clearly express concerns about the bank’s “serious and growing” profitability, liquidity, and solvency issues. Here are four brief excerpts: [April 8, 2011] “Bankia is unviable, both economically and financially. In the end, the FROB [Spain’s state-owned Fund for Orderly Bank Restructuring] will have to convert its debt into shares for the BFA [Spain’s state-owned banking group] and refund holders of Bankia’s subordinate bonds and “preferentes” shares. […] Find a buyer for the group.” [April 14,2011] “This is not working, it’s getting worse. […] Bankia’s capacity to generate resources is deteriorating.” [May 10, 2011, uppercase used by Causus for emphasis] “The endogenous solution put forward by Bankia — a public listing with a double banking structure without the necessary structural changes — WILL NOT WORK AND WILL HAVE A DEVASTATING IMPACT ON TAXPAYERS.” [May 16, 2011, 2 months before the IPO] “The (bank’s) board is highly politicized and unprofessional. It still has the same directors that led the former entities to need public assistance: [they are] discredited in the eyes of the markets.”