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Bankia: an entity dotted with controversy | Economy

Ten years after the collapse of Bankia, an entity that ended up gobbled up by CaixaBank, it continues to be the great symbol of the collapse of savings banks. Some judicial fringes are still pending, for example the one that implicates Rodrigo Rato for an alleged favor treatment in the granting of advertising contracts of the financial entity in the framework of the case on the alleged illicit origin of his assets. Although the big cases have already been resolved and the excesses that dug the bank’s grave have been put black on white: the preferred ones, the black cards and the IPO have forever marked this entity dotted with controversy.

The preferred

One of the most controversial episodes for the sector in general and Bankia in particular occurred after the 2008 financial crisis. Many entities launched a new product on the market in search of cheaper liquidity: preferred shares. It was a complex and high-risk instrument for investors. And the big problem was that they were sold in the branches to all kinds of clients, who did not fully understand it and without distinguishing the risk profile of each one. In many cases, they bought it out of trust with the bank but without knowing what they were exposing themselves to.

These small investors put their savings into a product that required a link “in perpetuity”, and although the banks initially left an escape route to recover the money, when things got ugly the system trapped thousands of people. There were demonstrations for years and it was one of the photos left by the Great Recession. Bankia was not the only entity that sold preference shares, but its case was more striking because it had to be rescued with public money.

The massive sale of these products reached 42,500 million euros since 1999, although the National Securities Market Commission (CNMV) believes that only 6,000 million were incorrectly marketed. Bankia inherited the problem from what was done by Caja Madrid, Bancaja, La Caja de Canarias, Caja Ávila, Caixa Laietana, Caja Segovia and Caja Rioja, which were transferred to the new bank after the merger in July 2010. It had some 300,000 affected customers. The case went to court and the National Court considered that Bankia could not be accused of any crime for this marketing.

Protest by the consumer association Adicae in front of the Bankia headquarters for preferred shares, in Madrid.
Protest by the consumer association Adicae in front of the Bankia headquarters for preferred shares, in Madrid.

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The cards black

In the autumn of 2014, the case of bonuses to managers of Caja Madrid and Bankia was uncovered. The FROB, the public rescue fund for banks, denounced that nearly 80 directors and senior managers of the bank used company credit cards between 2003 and 2012, opaque to the treasury, with which they spent 15.5 million euros in restaurants, bars, underwear, food, shopping in supermarkets and travel. The directors and managers also took out more than two million euros in cash from ATMs without any type of control. A major scandal that openly reflected the abuses committed in savings banks.

The card system black it was devised by the former president of Caja Madrid Miguel Blesa and maintained by Rodrigo Rato after he became president of the bank. He also transferred the system to Bankia after the merger: the music never stopped playing. Two and a half years after the case broke out, in February 2017, the National High Court sentenced the 65 accused of misappropriation to sentences of between three months and six years. Miguel Blesa, who committed suicide five months after hearing the sentence while awaiting the decision of the Supreme Court, was sentenced to six years in prison. Rato received a sentence of four and a half years. The Supreme Court finally upheld the sentences imposed.

IPO

The National Court acquitted the 34 defendants in the trial for Bankia’s IPO in September 2020, including the former president of the entity Rodrigo Rato, of the crimes of fraud against investors and accounting falsehood of which they were accused. The ruling highlights that the stock market debut had the approval of all the supervisors —Bank of Spain, CNMV, FROB and EBA—. It was one of the most important economic trials in the history of Spain that almost became the trial of an era of excesses, that of the end of the savings banks.

Bankia went public in July 2011. In March of the following year it presented the annual results accounts with a profit of 309 million. In May 2012, already with Rato gone and with José Ignacio Goirigolzarri in the presidency, these accounts were reformulated and Bankia went on to present losses of 2,979 million. After that, the entity was rescued with 22,424 million public money. Experts from the Bank of Spain assured that the bank made up its accounts to go public and attract investors. But the sentence knocked down that argument when considering that “specific facts” were not imputed to those responsible for Bankia and that they only attribute “generic attitudes” to them.

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