Sede- alencia bankia

Rajoy to the rescue.

Major Spanish bank in mortal peril.

Reference: Financial Times Germany and El País in Spain

The IMF had clearly signaled that Bankia was a systemic risk and that in the most critical language IMF had ever used. The CEO of Bankia, Rodrigo Rota is a former CEO of the IMF and a key figure in Rajoy’s party. At first CEO had refused state influence in the running of the bank and demanded public assistance. Something Rajoy until a week ago had flatly refused.

That might have flown in the autumn of 2008; but not today. Considering the budget cuts Rajoy must make and other hardship on the Spaniard – the moment could be said to have been chosen in very bad taste.

After a heart to heart talk Rota with Rajoy. Rota stepped down “for the greater good” and little fluffy rabbits.

The main problem seem to be a poor administration so nobody has any clear idea of the amount needed to recapitalize Bankia – Financial Times Deutschland mentions 5-10 bio. EUR., but that must be assumed to be pure guesswork. Bank books are as a rule much worse on closer inspection – as are all books in the event of a bankruptcy – but just as bad is the mess they are in.

We know Bankia has tons of bad debts among other things a real estate portfolio of 38 bio. EUR of which most should simply be written off – according to hearsay evidence from financial inspectors – which means it is anybody’s guess. A balance of 300 bio. EUR.

It doesn’t help that Bankia is overstaffed and with too many branch offices.

With a consolidated real estate port folio of 14 bio. EUR – and the housing market taking its second plunge after a very brief pause in 2009 at 80% of top value – there is of course no other resort but public ownership.

But now for the piece de la resistance: Bankia is the GOOD bank in the Good Bank/Bad Bank in BFA-Bankia!