Spanish Central Bank Chief to Leave Early as Crisis Gathers
Published: May 29, 2012
MADRID — The governor of the Bank of Spain said Tuesday that he would quit his job early, just days after watching Spain’s banking sector sink deeper into crisis because of a huge bailout request from Bankia, the country’s biggest mortgage lender.
Miguel Ángel Fernández Ordóñez, the governor, told Prime Minister Mariano Rajoy that he would leave a month ahead of schedule, on June 10, arguing that his early departure would give his successor a chance to take better charge of the situation and open “a new chapter where important decisions must be taken.”
Still, Mr. Fernández Ordóñez, an appointee of the previous Socialist administration, had come under heavy criticism recently for the central bank’s failure to identify and warn earlier about the problems at Bankia and other troubled institutions. The costly rescue is now threatening Spain’s entire banking system.
The announcement also came as Bankia’s parent company disclosed a commitment to pay Aurelio Izquierdo, one of the group’s executives, a pension of nearly 14 million euros, or $17.5 million.
Word of the hefty pension payout immediately fueled controversy at a time when many opposition politicians have been demanding a full investigation into how Bankia had misstated its accounts before being given billions of euros in additional public money.
Marga Sanz, a politician from the United Left party, on Tuesday denounced Mr. Izquierdo’s pension deal as shameful. She called on the conservative Rajoy government to use Bankia’s nationalization to abolish immediately such “unjust privileges,” which, she added, “reward in a scandalous fashion the bad management of executives who have put us in this situation.”
Spain seized control of Bankia on May 9. On Friday, the bank’s board said it would need an additional 19 billion euros in capital, bringing the total cost of its bailout to 23.5 billion euros. After reviewing its most recent losses and the state of its real estate portfolio, Bankia also restated its accounts, to a 2011 loss of almost 3 billion euros rather than the 309 million euro profit reported in February.
With the government expected to be saddled with another three ailing banks, investors kept the country’s borrowing costs near record levels Tuesday, making it expensive for Madrid to raise the money needed to salvage its banks.
In a regulatory filing late Monday, BFA, the parent company of Bankia, said that Mr. Izquierdo was entitled to 13.9 million euros in pension payments, under the employment terms agreed by Bancaja, one of the seven savings banks whose merger in 2010 created Bankia. Mr. Izquierdo is the finance director of the Bancaja unit.
A significant part of Bankia’s problems have stemmed from Bancaja, as well as another bank in which it has a stake, Banco de Valencia. The two entities are based in the region of Valencia, which headed lending during the boom years to a construction sector that collapsed at the onset of the world financial crisis. Bancaja had not previously disclosed Mr. Izquierdo’s pension.
The upheaval at the top of the Bank of Spain follows criticism of Mr. Fernández Ordóñez by some politicians from the conservative Popular Party that took office in December.
The Bank of Spain was seen as a beacon of rigor at the start of the financial crisis. But once Greece requested a bailout and the euro debt crisis started to deepen, Spain began to face accusations of mishandling problems in the banking sector and being too slow to address the collapse in the real estate market.
Much of the criticism was aimed directly at Mr. Fernández Ordóñez for not standing up to vested political and banking interests, particularly when they kept the central bank from forcing failing banks to close.
Even before the Nov. 20 general election that brought Mr. Rajoy to power, Soraya Sáenz de Santamaría, now the deputy prime minister, said the central bank should bear responsibility for the “unethical” behavior of some managers of the collapsed savings banks.
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