Banco de Madrid investment funds will remain on hold until July

Failed lender has yet to return clients’ deposits after investigation triggered a bank run

Íñigo de Barrón
The headquarters of Banco de Madrid, in Plaza de Colón.
The headquarters of Banco de Madrid, in Plaza de Colón.GERARD JULIEN (AFP)

Clients of Banco de Madrid, the lender that became insolvent following a US operation against money-laundering at its parent company in Andorra, are still waiting to get their money back.

The Deposit Guarantee Fund, which covers up to €100,000 per account holder, will not start returning people’s savings until April 20. This money will cover around 25 percent of the €600 million deposited in Banco de Madrid.

Over 14,000 clients who had invested €1.8 billion are temporarily trapped

But a lot more money is placed in investment funds and SICAVs – public limited companies that invest in financial assets and benefit from generous tax rates – and these will not have liquidity again until July or so, bank sources said, blaming the extensive paperwork involved.

Banco de Madrid has over 14,000 clients who had invested €1.8 billion in these financial instruments. With 88 SICAVs in its portfolio, Banco de Madrid was one of the giants in the sector in Spain. Clients include successful Spanish entrepreneurs, former Real Madrid player Roberto Carlos, and the Indian investor Ram Bhavnani among others.

Banco de Madrid ceased operating in mid-March, and an interim management team sent in by Spain’s central bank requested a creditors’ meeting in a bid to prevent outright bankruptcy.

More information
Spain and Andorra to combat tax fraud
Attorney from legal watchdog stopped at Andorra border with €9.5k in cash
Catalan ex-premier tells court that secret fortune in Andorra came from his father

The small lender, which manages large fortunes and had plans to expand, saw its fortunes change when US authorities acted against its parent company, Banca Privada d’Andorra (BPA), on suspicion of money-laundering activities.

In an offshoot of that investigation, the Bank of Spain sent two inspectors to BPA’s Spanish branch. But before the team had time to start analyzing Banco de Madrid’s accounts, the entire board of directors walked out, forcing the central bank to appoint a temporary management team and triggering a bank run.

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