Caja Madrid abolishes bonus scheme for directors

Spanish lender Caja Madrid's management board on Monday decided to do away with a controversial bonus scheme for directors after being given public funds to facilitate its merger with six other regional savings banks, or cajas.

The bonus scheme had been introduced in 2006 under the former chairmanship of Miguel Blesa. Ten Caja Madrid directives were due to receive 25 million euros in bonuses despite presiding over a slump in the bank's earnings from almost 1 billion euros in 2006 to 256 million last year as the lender became heavily exposed to the ailing property sector. The current board, however, is refusing to acknowledge directors' rights to the bonus payments.

Caja Madrid's response to the crisis was to agree a virtual merger with Bancaja and five other smaller cajas. In order to do so, the union received 4.465 billion euros in loans from the Orderly Bank Restructuring Fund (FROB), set up by the government in order to push consolidation in the savings bank sector, which has seen the number of its players drop to 17 from 45.

Blesa also received a severance payment of 2.8 million euros when he left Caja Madrid last year. The bank is now chaired by former IMF managing director Rodrigo Rato, who was also economy minister in the conservative Popular Party government of then Prime Minister José María Aznar.

Caja Madrid and its partner plan this year to list the commercial bank they set up as part of their merger.