Finding out who is to blame

The announcement that the state Orderly Bank Restructuring Fund (FROB) has filed a lawsuit in the National High Court against the former chairman of Banco de Valencia, José Luis Olivas — also the former premier of the Valencian regional government, and one of the founders of Bankia — and some of his colleagues in the bank’s management team casts new light on the issue of apportioning blame for the banking crisis that has led to the European Union bailout.

The suit is the first to be filed directly, without the intermediate step of submitting the dossier to the attention of the Prosecutor’s Office. This suggests that the irregularities detected have been of a particularly egregious nature. It also points to a surprising departure from normal proceedings in that there have been no prior imposition of administrative sanctions; nor have there been any formal demands for answerability emanating from parliamentary channels.

The deplorable quality of the management of the Banco de Valencia became apparent as soon as it was brought under public control through a significant injection of state funds after the parent Bancaja declined to assume the task of restructuring it, as is usual in such cases.

The conglomerate of both banks showed a worrying concentration of risk in real estate development and construction firms, a scant focus on normal banking business, an excessive bias for speculative operations and a high degree of involvement in financing the often whimsical and megalomaniac public works projects of the regional government under the leadership of the Popular Party (PP).

One symptom of the bank’s servitude to political interests is the inexplicable loan to the former Balearic Islands premier, Jaume Matas, to pay the bail bond which kept him out of prison on a first-instance corruption conviction.

If the sister savings bank, Caja de Ahorros del Mediterráneo (CAM), was “the worst of the worst,” according to the Bank of Spain, in terms of quality of assets and management, as much could be said of Bancaja/Banco de Valencia. The three banks constituted the principal extra-budgetary resource of the Valencian regional government. Which, just to make the flow of funds more fluid, modified the regional savings banks law so as to remove discrepant voices from its governing bodies.

The FROB’s judicial action joins that initiated by a nucleus of minority shareholders for presumed corporate crime, false accounting and dishonest administration. Independently of the criminal guilt that must be determined by the courts, the public has a right to demand explanations from the protagonists of this fiasco, in mercantile, administrative, civic and political terms: of how they started out on this road that led from casino capitalism to the failure of the prevailing financial power of a particular, and dynamic, regional economy. The channel for these urgently needed explanations can hardly be other than the parliamentary one.