Bankia chief sought views of Irish banks

THE HEAD of Spain’s biggest problem bank, Bankia, said he sought the views of Irish bankers on Ireland’s experience of setting up the State’s “bad bank”, the National Asset Management Agency, and drafting restructuring plans for the European Commission.

Jose Ignacio Goirigolzarri, executive chairman of the nationalised Spanish lender, said he spent the last two to three months researching Ireland’s experience on setting up Nama as Spain establishes its own bad bank and plans how to value bad loans in transfers out of the banks.

Mr Goirigolarri stressed that Spain’s banking problems were “completely different” from those of Ireland and that the solutions to the country’s banks would be “very different”.

Spain had a problem with residential mortgages, not development loans or commercial property, he said.

The Spanish banker was speaking to The Irish Times ahead of today’s results of independent stress tests of Spain’s banks, which are expected to confirm a capital shortfall of about €60 billion.

The Madrid government unveiled more budgetary measures last night, with further spending cuts but protection for costly state pensions as Madrid deals with a shrinking economy, 25 per cent unemployment and a growing constitutional crisis as it tries to avoid a sovereign bailout.

The measures were described as “a crisis budget designed to exit the crisis” by Spain’s deputy prime minister Soraya Saenz de Santamaria.

Bankia is expected to require about €26 billion in today’s stress tests after a more severe stress case scenario was applied to it than the bank’s earlier recapitalisation of €19 billion in May, which forced Spain to seek a bailout of up to €100 billion for the countrys banks.

Spain’s third-largest lender was nationalised in May after the country’s bank restructuring fund, FROB, injected €4.5 billion into the bank. Mr Goirigolarri, who took over as executive chairman in early May, announced two weeks later that Bankia would require a further €19 billion.

Euro leaders agreed in June to recapitalise the Spanish banks directly from the euro bailout funds, while Madrid announced plans for a bad bank to purge its banks of toxic property loans in August. Bankia has received just €4.5 billion of the €19 billion from FROB.

Mr Goirigolzarri, a former second-in-command at Spain’s second largest bank BBVA, stressed the importance of acting quickly to move toxic assets into the bad bank but that this had to be supervised carefully. “You cannot have any gap in the management of real estate,” he said.

Spain has about €185 billion of distressed property loans and repossessed properties, including about 46,000 foreclosed apartments on Bankias books. Property prices have fallen by an estimated 25 per cent during the countrys four-year property crash.

Mr Goirigolzarri said he expects the bank deal signed by euro leaders in July to be honoured, despite the joint statement from the German, Finnish and Dutch finance ministers earlier this week saying that “legacy assets” or past bad bank debt should stay with national governments.

“For me it is difficult to understand what the statement meant. Were they talking about the Irish banks or where they considering the Spanish banks?” he said.

“I don’t have a clear understanding of what they said but in any case, in July, we defined the procedures and a memorandum of understanding. I suppose – and I hope – that everyone is going to honour their words.”

Speaking at a banking conference in Madrid last night, Jonathan McMahon, the head of banking supervision in Ireland until earlier this year, said it would be wrong to think of the bank debts of Ireland and Spain “as exclusively as the liability of Irish or Spanish taxpayers”.

“Government absorption of the losses in Spain and Ireland has been good for the good of the euro zone as a whole, and it now needs to be discharged by the euro zone as a whole,” said Mr McMahon, who is now a consultant at Mazars.