The chairman of the Bank of Spain’s Orderly Bank Restructuring Fund (FROB), Fernando Restoy, on Tuesday said he was confident that about half of the customers of nationalized banks who were sold preferred shares and subordinated debt, the value of which has fallen sharply, would have the money they invested returned to them.
Restoy told a congressional sub-committee on mortgages and financial products that the haircut imposed on the amount invested in these complex financial products allegedly mis-sold to unsophisticated investors would total about 27 percent. But the losses would be spread unevenly across the nationalized banks concerned: Bankia, Novagalicia and Catalunya Banc, which are controlled by the FROB after receiving an injection of public funds to keep them afloat.
Restoy said the discount on the value of what was invested in instruments issued by Bankia could amount to 40 percent in some cases, while small retail customers of Catalunya Banc and Novagalicia would recover their money in full.
The government has set up an arbitration process for those affected, open to those customers who invested up to 10,000 euros. The opposition Socialist Party has called for the right to arbitration to be extended to everyone aged over 65.
Bankia has 300,000 customers affected by the sale of some 4.9 billion euros of these hybrid products, which many investors believed entailed the same risks as a bank deposit. The number affected in Novagalicia is 62,000, involving 1.6 billion euros, and 40,000 at Catalunya Banc, with the sum involved amounting to 1.608 billion.
The three nationalized banks received the bulk of the around 40-billion-euro loan Spain received from its European partners to bail out banks affected by their exposure to the ailing real estate sector. In return the European Commission insisted that investors share part of the burden of refloating the banks concerned.