September 22, 2019

Investors in Bankia to Sue Bank of Spain Over Losses

The group, estimated to be 400 investors, will seek about 200 million euros, or $260 million, in compensation from the bank and the country’s other supervisory authorities for losses incurred when Bankia shares they had bought for 3.75 euros a share in 2011 devolved into a penny stock.

In a complaint sent to the Bank of Spain this week, Cremades Calvo-Sotelo, the Spanish law firm representing the disgruntled investors, accused the central bank and other authorities of failing to adequately oversee Bankia, from its formation to its listing in July 2011, and then its nationalization last May.

“The measures used to contain the deterioration of Bankia in the context of a severe economic recession provoked exactly the opposite,” according to the complaint, which the law firm used to inform the parties that a suit would be filed. “The entire process of restructuring and intervening in Bankia demonstrates a behavior on the part of the financial authorities that was fully contrary to the standards of prudential regulation.”

Spanish regulators almost entirely erased the already heavily reduced value of Bankia’s equity in March, part of a cleanup that required the country to use 18 billion of its 100 billion euro European bailout in order to keep the bank afloat. Over all, Spain has used 41 billion euros of its bailout to rescue its banks.

The lawsuit against the Bank of Spain — the first of its kind against the country’s central bank — would be extended to Spain’s Economics Ministry as well as its stock market regulator, said Javier Cremades, the chairman of the law firm.

“Bankia’s handling and supervision,” Mr. Cremades said, “shows some very serious mistakes on the part of the Bank of Spain and the other financial authorities and it is essential to hold them liable if we want citizens and investors to recover their confidence in our system.”

The approval of Bankia’s listing also helped “spread the disease indiscriminately,” according to the complaint sent to the Bank of Spain, creating distrust among investors toward the entire Spanish financial sector.

The Bank of Spain had no immediate comment.

Bankia’s collapse has already led to separate litigation. Last July, Rodrigo Rato, the former executive chairman of Bankia, appeared in court after he was named along with 32 other former Bankia executives and board members in a criminal inquiry into potentially misleading accounts at the time of Bankia’s listing, which involved tens of thousands of the bank’s retail clients buying into the stock offering.

Mr. Rato and the others denied wrongdoing and have not been formally charged with any crime.

In February, Bankia reported a loss of 19.2 billion euros for 2012, a record for the Spanish banking industry. It forecast a swift return to profit, following the bailout and a cleanup of its balance sheet. Still, Standard Poor’s, the credit rating agency, downgraded Bankia, noting that the bank was likely to remain dependent on financing from the European Central Bank for the foreseeable future.

Article source: http://www.nytimes.com/2013/05/10/business/global/spanish-central-bank-to-face-suit-over-bankia-bailout.html?partner=rss&emc=rss

Spanish Court Rejects Part of Pardon for Santander Chief

MADRID — The Spanish Supreme Court ruled unexpectedly Tuesday that the previous government had gone too far in its pardon of Alfredo Sáenz, the chief executive of Banco Santander, reinstating his criminal record and throwing into question his continued tenure at the bank.

The decision put a cloud over the future leadership of Santander. As chief executive, Mr. Sáenz, 70, has long been second in command to Emilio Botín, the bank’s chairman. Mr. Botín, 78, has been Spain’s most influential banker for almost three decades, transforming what had been a midsize Spanish bank into one of the largest financial institutions in the euro zone.

It now falls to the Bank of Spain to decide whether Mr. Sáenz must step down.

Santander declined to comment immediately on the ruling.

Luis de Guindos, the economy minister, would not comment on Mr. Sáenz’s case but he insisted that “both the Bank of Spain and the government will apply the law and respect court rulings.”

Mr. Sáenz received a pardon in November 2011 after fighting an unsuccessful court battle over charges that he had made false accusations against alleged debtors to Banesto, a troubled bank that was eventually taken over by Santander, in a case that began in 1994.

In March of 2011, the Supreme Court upheld the rulings against Mr. Sáenz.

The pardon came weeks before José Luis Rodríguez Zapatero, the outgoing Socialist prime minister, was scheduled to hand over power to a conservative government under Mariano Rajoy.

The government offered no justification for the pardon, which commuted a three-month prison sentence and a temporary ban from working as a banker into a fine.

The Supreme Court on Tuesday unanimously rejected the government’s contention that having a criminal record did not affect one’s ability to conduct banking activities. The high court maintained the other terms of the pardon.

Despite his legal problems, Mr. Sáenz remained as chief executive, helping steer Santander through a Spanish banking crisis that started in 2008 and eventually required the government to seek a bailout from Europe for the country’s most troubled banks. It secured that bailout last June.

While Santander suffered from its exposure to a collapsed property market, its assets outside Spain, particularly in Brazil, have allowed it to weather the crisis better than many of its counterparts.

Mr. de Guindos underlined on Tuesday the importance of Santander. “I am convinced that its management capacity will lead it to keep being one of the principal banks in Europe and the world,” he said.

Article source: http://www.nytimes.com/2013/02/13/business/global/spanish-court-rejects-part-of-pardon-for-santander-chief.html?partner=rss&emc=rss

Strong Debt Auction Provides Some Relief for Spain

The Bank of Spain announced that the Treasury had sold €6 billion, or $7.8 billion, of bonds, far above the €3.5 billion it had set as the maximum target for the auction.

The sale included €2.2 billion of 10-year bonds, priced to yield 5.24 percent, down from the 5.43 percent it paid to sell similar securities on Oct. 20.

The yield for 10-year bonds of another beleaguered euro zone member, Italy, fell 0.22 percentage point, to 6.514 percent, in the open market even after the government called a confidence vote for Friday on a new austerity package.

Analysts said the European Central Bank’s new medium-term bank financing program
, which gets under way next week, was already helping to buoy euro zone debt.

The E.C.B. last week said it would start providing banks loans for three years, compared with a previous maximum of about one year. It also cut its benchmark interest rate target to 1 percent from 1.25 percent.

“Without a doubt it’s helping to generate support,” said Charles Diebel, head of market strategy at Lloyds Banking Group in London. “I don’t think it was really Spain-specific.”

Mr. Diebel said banks were taking advantage of low borrowing costs to take advantage of the so-called carry trade.

“If you can get funding from the E.C.B. at 1 percent and buy bonds from the Spanish government at 5.4 percent, that carries pretty well for three years,” he said. “You’re earning 440 basis points,” or 4.4 percentage points.

Steven Saywell, head of global currency strategy in London for the French bank BNP Paribas, said, “to really turn things around, we’re going to need more aggressive action from the E.C.B. I don’t think this is a turning point.”

Indeed, Mario Draghi, the president of the European Central Bank, again ruled out more aggressive sovereign bond purchases by the central bank, saying during a speech in Berlin that the euro zone’s “firewall” was the bailout fund set up by European governments.

He also indicated that struggling governments in Europe would in the end have to solve their own problems.

“There is no external savior for a country that doesn’t want to save itself,” he told the audience in Berlin, The Associated Press reported.

That idea was reinforced Wednesday by Ben S. Bernanke, the U.S. Federal Reserve chairman, who told senators at a meeting behind closed doors in Washington that the Fed was not planning to ride to the rescue of the embattled euro, news agencies reported.

The euro ticked back above $1.30 during trading Thursday, from an 11-month low of $1.2946 during trading Wednesday. European stocks rose as well.

But Mr. Saywell predicted the euro would remain weak in the near term, with selling driven both by fears of a breakup of the currency union as well as more prosaic concerns about the economic outlook, with the European economy now widely expected to be mired in recession for at least part of next year.

A survey of euro zone purchasing managers showed both the services and manufacturing sectors continuing to contract for a fourth straight month in December. Markit Economics said Thursday that its composite index rose to 47.9 from 47 in November, but still signaled a contraction. A reading above 50 indicates an expansion.

Further weighing on the euro, Mr. Saywell said, was the E.C.B.’s rate cut, which had the effect of narrowing the advantage money market managers gain by holding euro-denominated assets and making dollars relatively more attractive.

This article has been revised to reflect the following correction:

Correction: December 15, 2011

An earlier version of this article gave a wrong date for when the European Central Bank’s new medium-term bank financing program, announced last week, goes into effect. It is next week, not Thursday.

Article source: http://www.nytimes.com/2011/12/16/business/global/strong-bond-sale-in-spain-and-russian-support-fail-to-lift-euro.html?partner=rss&emc=rss

Mixed Signals for European Central Bank as Data Point to Slowdown

The Organization for Economic Cooperation and Development forecast Monday that euro zone economies will see a “marked slowdown” next year, and called on the European Union to clarify its anti-crisis measures, The Associated Press reported.

In an update of economic forecasts timed to coincide with this week’s meeting of the Group of 20 major economies, the Paris-based O.E.C.D. said “patches of mild negative growth” were likely in the euro zone in 2012.

It predicted economic growth in the euro zone would stall at 0.3 percent next year, after just 1.6 percent growth this year. That is down from the O.E.C.D.’s forecast in May of 2 percent growth in the euro zone in 2012.

“Detailed information is needed” on how the European Union will implement the package of measures announced last week aimed at resolving the European debt crisis, the O.E.C.D. said.

Inflation in the 17 countries that belong to the euro area was steady in October at 3 percent, according to figures from Eurostat, the European Union statistical agency. That was contrary to analyst predictions of a slight drop because of slowing economic growth. However, unemployment edged higher to 10.2 percent in September from 10.1 percent in August, Eurostat said.

The data, along with a muted official forecast for Spanish growth, offer no easy choices for Mario Draghi when he presides over his first monetary policy meeting as president of the European Central Bank on Thursday.

Some economists expect the E.C.B. to cut its benchmark interest rate on Thursday in response to signs of a marked slowdown by the euro area economy. The Bank of Spain said Monday that the Spanish economy stopped growing in the three months through September, as government austerity measures cut into domestic consumption.

At the same time, inflation remains well above the E.C.B.’s target of about 2 percent. As a result Mr. Draghi, anxious to establish his credentials as an inflation fighter, may be hesitant to preside over a rate cut just days after succeeding Jean-Claude Trichet as E.C.B. president.

“Our forecast is for the first cut to be delivered this week but this uncomfortably high headline inflation reading may make the E.C.B. want to wait until December,” analysts at HSBC wrote in a note to clients Monday.

Economists said joblessness was likely to rise further as the sovereign debt crisis continues to act as a drag on euro-area growth. An additional 188,000 people became unemployed in September, a total of 16.2 million people, the biggest increase in two years.

“The outlook is not particularly bright for the euro area labor market,” Francois Cabau, an analyst at Barclays Capital, wrote in a note.

Unemployment was highest in Spain, at 22.6 percent, and Greece, at 17.6 percent. Italy recorded one of the biggest jumps in joblessness, to 8.3 percent from 8 percent, as well as one of the biggest increases in inflation, to 3.8 percent from 3.6 percent.

The rise in Italian prices was caused partly by an increase in the value-added tax. Still, the data may add to the heat that Prime Minister Silvio Berlusconi is feeling from other leaders, who are showing frustration with his failure to push through policies to make the Italian economy perform better. Italy has replaced Greece as the biggest threat to the euro area, as bond investors begin to doubt that the country will be able to service its debt.

Article source: http://feeds.nytimes.com/click.phdo?i=97129c5c581e857a4bc049ca9c7f4abb