The Bank of Spain has completed a report into the stock market launch of nationalised bank Bankia, and concluded that it was a complete fraud organised by Rodrigo Rato, the President of the bank at the launch, and carried on by his successor Goirigolzarri.
Bankia is a nationalised bank that was formed from the corpses of several failed banks that went under during the recession. Spain forcibly merged them into one super bank and then privatised it via the stock market. The stock was aimed mainly at private investors – some 347.338 private investors are believed to have sunk their savings into what was promised to be a “safe” stock offering good dividends. 13.004 of these were former employees of the banks merged into Bankia who were expected to invest – they were later made redundant in the 2012 re-collapse.
Furthermore, an audit carried out by Bank of Spain has overturned the official Deloitte audits for 2011 and 2012, declaring them “not a true reflection of the bank’s situation”. The audit accuses Rato of inflating assets by 544 million euros, and hiding a loss of over 2 billion euros at the bank in 2011. Goirigolzarri not only continued with the fraud, but oversaw a further loss of 1,2 billion euros in 2012.
The report was commissioned by Judge Fernando Andreu of the National Audience who is investigating complaints of financial fraud and deception at the state owned bank.
According to the damming report, which lays bare the corruption and incompetence of modern Spain, Rato organised a massive stock purchase of Bankia’s shares at their launch in order to prop up the share price, and managed to artificially inflate the market price. The companies then proceeded to dump their shares, having created a bubble, and even turned a tidy profit.
The stock price then collapsed and since has been trading at very low prices. It launched in July 2011 at €3,75 and quickly dropped. In May 2012 Bankia requested a 19 billion euros cash bailout from the government which saw another stock price collapse, and saw Rato replaced by Goirigolzarri. By November 2012 its shares were trading 70% down from its launch and Bloomberg’s poll of polls said 100% sell.
By January 2013, Ibex 35 stock market announced it would relegate Bankia’s shares, which were running at 90% of their launch price. In April 2013, to try to shore up the core business, Bankia announced a contrasplit, giving new actions of which each was worth 100 of the old ones. The share price slumped a further 19% on the news. But in December 2013 the shares returned to the Ibex 35 market, and by February of this year the government felt able to sell 7,5% of the company, reaping 1.3 billion euros. The share price reached it’s highest point – 1,6 euros.
The report today has caused a further sinking of the shares, to just 1,33€ by the close of session, and a further large fall is expected tomorrow. There has been a suggestion that Europe will become involved, in order to see if the bank falsified its reports which it gave to Brussels to pass the recent “stress test”.
The auditors of the Bank of Spain have said in their report to the Judge that there appeared to be “a connivance between the various regulators, government overseers, auditors and the directors of the bank to present a fake front to the world”.