The discovery of a shortfall of several billion euros in Bankia has prompted its nationalization and a fresh confrontation between the Popular Party (PP) government and the Socialist opposition. Once again, and before the bewildered gaze of citizens and the watchful eyes of investors, we are witnessing partisan accusations launched to and fro across a desolate battleground. Of course, the nationalization of the country’s fourth-largest bank requires a complete explanation before parliament. This explanation should be both credible and offer solutions to the ongoing financial crisis. Parliament is the most appropriate place for such a process, and the model could be the congressional commission set up in the United States to probe the 2008 financial crisis.
The chain of errors made over Bankia stretch back to include the strong political involvement of the PP in the running of both Cajamadrid and Bancaja, the two main elements in the fusion of savings banks that created the new entity. Both were suffering from massive bouts of real estate indigestion under their respective chairmen Miguel Blesa and José Luis Olivas, and their requisitioning for the dubious investment policies of the regional premiers in Madrid and Valencia. Despite all this, when the time came to face up to the problems, the first political mistake was the unfortunate approach to mergers of José Luis Rodríguez Zapatero’s Socialist government. The fusion of Cajamadrid and Bancaja should never have been accepted because the two were not complementary and, combined, were weighed down by an unbearable burden of toxic stocks.
The chosen route toward banking mergers was a long and winding one with a balance clean-up in mind, when more urgent action was badly needed. In any case, these mergers could only work if the Bank of Spain had imposed the most appropriate marriages of portfolios, but the supervisory body proved incapable of doing so.
The second major error was the process whereby Bankia was floated on the stock exchange 10 months ago. The cause is a clearly political one. The secretary of state for the economy came up with a perverse system of incentives: those lenders who were floated could present balance sheets with eight-percent core capital; the others were required to show 10 percent. Bankia was floated in the midst of a capital drought and with almost the entire share offer relying on take-up by small shareholders through bank branch offices. The share value of Bankia has since depreciated by 45 percent. But it is also necessary to point to management errors on the part of Rodrigo Rato, the bank’s outgoing chairman. He neither completed a boardroom clean-up after the mergers, nor did he get it right when trying to name a competent team to drive through the changes. His successor at the helm of Bankia, José Ignacio Goirigolzarri, ought to have a more complete understanding of the banking business.
Catastrophe or consensus
The leading opposition party is now demanding that the government account for the use of public money in the Bankia intervention which, although following similar practices to those deployed with other savings banks, is spectacularly different in terms of the sheer amount of stock involved, its 10 million customers and the outright refusal on the part of the auditors to sign the accounts from 2011. But Bankia is not just a bank: its plight reveals a catastrophic situation at the heart of the Spanish financial system, and this is a problem that cannot be resolved amid the short-term dynamics of confrontation between the government and opposition parties.
Socialist leader Alfredo Pérez Rubalcaba on Saturday asked for inter-party pacts on growth, social cohesion, financial reform and the consolidation of regional government complete with a disavowal of partisan use of the country’s institutions, all aimed at overcoming the “critical” state in which Spain finds itself. Prime Minister Mariano Rajoy should now emerge from his silent retreat and lead a consensus-based exit from a national crisis.