Bonus-deprived Caja Madrid directors mull legal action to recover rights

Former Caja Madrid directors are considering legal action to obtain outstanding bonus payments due under a long-term scheme scrapped on Monday by the savings bank's current management board, which also refused to acknowledge acquired rights.

The incentive system in the form of pension plans was approved in 2006 under the lender's then-chairman Miguel Blesa. Under the scheme, 10 directors were due to receive combined payments worth 25 million euros at the end of March.

The former management team presided over a deterioration in the savings bank's earnings that saw profits fall from almost one billion euros in 2006 to 256 million euros last year as Caja Madrid's heavy exposure to the troubled real estate sector forced it to boost provisions to cover for loan losses.

The argument used by Caja Madrid's current management to scrap the bonus system and halt pending payments was its incompatibility with the receipt of state aid. Caja Madrid and six other savings banks, or cajas, received 4.465 billion euros from the Orderly Bank Restructuring Fund (FROB), set up by the government to facilitate consolidation in the sector, after agreeing to merge.

A European Union directive, which Spain has still to incorporate into national law, allows the withdrawal of bonus payment rights in the case of institutions which have received state aid or in situations in which their disbursement would impact balance sheets.