Bank of Spain chief to exit early
Miguel Angel Fernandez Ordóñez's early exit as Bank of Spain governor signals Madrid's desire to restore its credibility, days after the government was forced to stage the country's biggest ever bank rescue.
Mr Ordóñez met prime minister Mariano Rajoy today to say he was leaving on June 10th, leaving Spain's leader with just days to announce a new head for the once-feted central bank.
The Bank of Spain has seen its reputation demolished as the mounting pile of toxic assets at Spanish banks threatens to push the country into a bailout that would jeopardise the future of the euro common currency.
In the latest humiliation for the central bank, Spain's government bowed last week to European pressure and hired outside auditors to examine the country's banks, acknowledging a lack of trust in home-grown assessments from the Bank of Spain.
Politicians and cabinet ministers from the ruling centre-right People's Party, or PP, have piled blame on Mr Ordóñez, who was due to step down on July 12th at the end of his six-year term.
The political name-calling has only undermined Spain's credibility at a time when its borrowing costs have soared to levels close to unsustainable because of risks at the banks.
"At a moment when Spain's credibility is in question, the very credibility of Spanish institutions should not be put into doubt by political parties," said Antonio Barroso, political analyst at consultancy Eurasia Group in London.
Mr Ordóñez sought to defend his legacy before parliament, but the ruling party has blocked his request. The PP criticised him for being too politically close to the Socialists and having experience in law and economy rather than in finance.
"At this point it's more about the technical expertise a candidate has than the political associations. The government needs someone who can deal with the ECB, talk to the press, and commands respect in Brussels," said Mr Barroso at Eurasia Group.
The government says it rules out seeking European rescue money for the banks. But the recent €23.5 billion bailout for the biggest problem bank, Bankia, has revived concerns that the bill will get so high that Spain cannot handle it alone.
The first priority for whoever takes over from Mr Ordóñez will be to restore international confidence in the Bank of Spain, which had historically been respected for risk controls.
On Friday the government named Luis Maria Linde, a former general director at the Bank of Spain, to the central bank's board, generating speculation that he could be prime minister Mariano Rajoy's candidate for the governorship.
However, under the bank's statutes he would have to retire in three years when he turns 70, and would not be able to complete a six-year term.
A high-level Spanish banker and a prominent foreign investment banker in Spain both said the strongest candidate is Jose Luis Gonzalez-Paramo, the respected Spanish board member at the European Central Bank, whose term ends shortly.
Other possible candidates are the Bank of Spain's current regulation director Jose Maria Roldan, though he has defended the bank's handling of the crisis; European Central Bank lawyer Antonio Sainz de Vicuna; and Banesto board member Belen Romana.
Jose Viñals, current head of the International Monetary Fund's capital markets division who warned of Bankia's capital shortfalls, could be a strong candidate.