Spanish Bank’s Ex-Leader Defends His Record There
The former chairman of Bankia, the institution at the center of Spain’s banking woes, countered harsh questioning by a parliamentary panel on Thursday with an emotional defense of his legacy at the bank, saying he left it in better financial shape than critics are now contending.
Rodrigo Rato said every big decision he made during his two years at Bankia had been under the guidance of the Spanish government and Spain’s central bank, the Bank of Spain. And he said he had been pressured from on high to proceed with a public stock offering for Bankia last July, even as a deteriorating economy and financial market made that move unadvisable.
“Both the government and the Bank of Spain shared with me their preoccupations about what not listing would mean in terms of trust in the country,” he said.
Mr. Rato, 63, previously one of Spain’s most powerful financial figures, as a former finance minister who rose to become managing director of the International Monetary Fund, also rejected any suggestion that he and fellow Bankia directors had ignored or hidden the lending problems that resulted in bank’s seizure by the government in early May, two days after he resigned.
His testimony might have been a preview of the position Mr. Rato will take when he eventually testifies before a national court judge, who has ordered him and nearly three dozen former Bankia directors to respond to criminal fraud accusations over their stewardship of the bank. No date has yet been scheduled for that court appearance.
The court case has been brought by a small political party, Union, Progress and Democracy, that opposes the Popular Party of Prime Minister Mariano Rajoy, with whom Mr. Rato has long been affiliated.
The U.P.D. party wants to hold Mr. Rato and others responsible for accounting irregularities that resulted in Bankia’s restating its 2011 financial results after being seized in May. Suddenly, a reported profit of €309 million became a loss of almost €3 billion, the largest in Spanish banking history.
“The perfect crime is that which appears to be an accident, which is how you have described the fall of Bankia,” Irene Lozano, a U.P.D. lawmaker, told Mr. Rato at the hearing Thursday.
The supervisory board that is now running Bankia on behalf of the government has said it needs €19 billion in new capital to prop up the bank, which has been badly damaged by a portfolio of property loans that have become increasingly troubled since the collapse of Spain’s real estate bubble.
But Mr. Rato said Bankia could have been salvaged by a €6 billion infusion from the government, which he said he requested but was not given, shortly before he resigned.
That contention could raise new questions about the true depth of Spain’s banking crisis. Prime Minister Rajoy is yet to announce how much of a €100 billion European rescue package his country will actually need and how the money will be distributed among troubled banks.
Mr. Rato was one of six former politicians or bankers to appear this week in front of the Parliament’s economic committee, which is trying to shed light on how Spain plunged into a banking crisis. His hearing was the most eagerly anticipated, not only because of the size of Bankia’s demise but also because of his political relations.
Mr. Rato was finance minister in a previous conservative administration in which Mr. Rajoy was also a member.
At the start of the hearing, Mr. Rato provided a detailed and chronological account of his two years at the helm of the bank, underlining the extent to which Bankia’s decisions were regularly approved by auditors, financial consultants, markets regulators as well as inspectors from the central bank.
Mr. Rato emphasized the auditing independence of Deloitte, saying that “we have never put any pressure on the auditor.” Beside working for Bankia, he noted, Deloitte has the largest list of Spanish banking clients. “We’re not talking about the signature of someone who doesn’t have experience,” he said.
Mr. Rato repeatedly argued Thursday that the restating of accounts since he left Bankia reflected a new, stricter interpretation of how potentially troubled loans should be booked and at what stage they should be considered to be in default.
“We are talking about bringing forward possible future deteriorations, and not about holes or losses,” he said.
But several lawmakers expressed frustration with Mr. Rato’s explanations.
“If you have done things well, you have to explain during an appearance in Parliament who has done it badly,” said Ana Oramas, who represents a regional party from the Canary Islands.