There must be an investigation

On Monday the board of directors of the newly merged caja de ahorros (publicly administered regional savings bank) Novacaixagalicia announced that they are negotiating with the former directors of the Galician savings banks, concerning their renunciation of the scandalous severance payments they received when they left the bank.

This is a minimum condition for Novacaixagalicia, which is the now-merged group of Galician cajas nationalized in September to forestall bankruptcy. Not only should they return the money, but the shocking quantity of the golden handshakes also calls for the opening of an internal inquiry to determine whether these payments, in excess of 25 million euros, were granted in strict compliance with the law. The huge pressure of public opinion over these shameful sums has so far produced few results. Alone among the recipients, the ex-assistant director Javier García de Paredes has said he will give back four-fifths of the ¤5 million he received.

The case of Novacaixagalicia features every ingredient of bad practice in the payment of top caja officials. Firstly the legality of the operation must be investigated, since the payments were approved surreptitiously at a meeting of the merged banks in August. One brief point in the day's agenda mentioned the cancellation of several top executive contracts, for which a 25-million euro provision of funds was established. It seems likely that in the writing of the agenda there was a clear intention to conceal these frankly alarming and disproportionate severance payments.

But even in the case that the board had been correctly informed of the amount of the payments and of the (four) executives who benefited from them, the legality of the methods does not make the remuneration legitimate: firstly, due to the situation of the cajas - bankrupt and requiring to be bailed out with public money; secondly, because the quantity of these payments bears no relation to the merits of the beneficiaries, since it rewards a set of managers who were responsible, by action or omission, for the bankruptcy of the institution.

In this scandal there is one institution that bears chief responsibility - the Bank of Spain - and a number of culprits: the executives who have slipped these remunerations through, and the boards of directors, packed with politicos who look the other way in these situations (as shown by the similar case of golden handshakes in the Valencian caja CAM). What is glaringly apparent is the intimate connivance between financial and political institutions, the result of years of legally doubtful practices.

From 2012 on, the Bank of Spain will be responsible for payments to bank executives. It must ensure that the process of their remuneration conforms with the law, and that their salaries are in line with the balance sheet of the institution. The purpose of this new function is to prevent situations of pillage as ignominious as those of Novacaixagalicia, CAM and others.