Tags: spanish | bank | bankruptcy

Spanish Bank Seeks Creditor Protection After Withdrawals

Monday, 16 Mar 2015 11:07 AM

Banco de Madrid SA stopped operations and is seeking protection from creditors after the U.S. accused its parent, Banca Privada d’Andorra, of money laundering.

Customers of the Spanish bank withdrew significant amounts of funds, leading to a “strong deterioration” of its financial situation, according an e-mailed statement Monday from Banco of Spain, the central bank. Client deposits of up to 100,000 euros ($105,000) are guaranteed by Spain’s deposit-guarantee fund, the central bank said.

A U.S. Treasury report on March 10 indicating that parent bank BPA, based in Andorra, is a “primary money laundering concern” sparked withdrawals, said Banco de Madrid, triggering Spain’s first banking collapse since 2003. Andorra, an independent nation of 181 square miles (470 square kilometers) between France and Spain that counts private banking as one its main industries, in June pledged to end bank secrecy by adopting the OECD standard for the exchange of client information.

“This is the first time a solvent bank is worth zero,” Juan Ignacio Sanz, a banking professor at Barcelona’s Esade business school, said by phone. “Its funds have been contaminated by the money-laundering allegations and no one wants to work with it. This is not a solvency problem, it is a reputational problem.” The bank had a solvency ratio of 38 percent at the end of 2013, according to data from Bank of Spain posted on Banco de Madrid’s website.

Illicit Activities

BPA processed hundreds of millions of dollars through four U.S. correspondent banks in transactions that bore signs of being done for illicit purposes, the Treasury said. The bank engaged in activities involving proceeds from criminal groups in Russia and China, and with Venezuelan money launderers, the report said.

Spain’s stock-market regulator, CNMV, on Monday suspended redemptions on Banco de Madrid’s mutual funds and so-called sicavs. BPA’s new management, appointed last week by the Andorran regulator, limited transfers and cash withdrawals to 2,500 euros a week.

Banco de Madrid, a lender with 21 branches, was bought by BPA in 2011. Specialized in private banking and asset management, Banco de Madrid had 1.8 billion euros in assets and 1.6 billion euros of deposits, according to financial statements dated September 2014, posted on its website. Assets under management totaled 3.9 billion euros in mutual funds and sicavs at the end of 2014, according to data from Spanish fund association Inverco.

Andorran and Spanish regulators had installed new administrators of BPA and its Madrid unit last week following the arrest on Friday of Joan Pau Miquel Prats, BPA chief executive officer. A Banco de Madrid spokeswoman in Madrid declined to comment on the arrest.

The last Spanish bank to suspend operations and seek protection from creditors was Eurobank del Mediterraneo SA, in 2003, according to a Bank of Spain spokesman.

A real-estate crash in 2008 forced Spain to bail out some of the nation’s banks and seek 41 billion euros in funds from the European Union. At the time, Bank of Spain and the bank rescue fund, known as Frob, appointed controllers at some nationalized lenders and encouraged mergers of saving banks to help avert bank failures.

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Banco de Madrid SA stopped operations and is seeking protection from creditors after the U.S. accused its parent, Banca Privada d'Andorra, of money laundering. Customers of the Spanish bank withdrew significant amounts of funds, leading to a "strong deterioration" of its...
spanish, bank, bankruptcy
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2015-07-16
Monday, 16 Mar 2015 11:07 AM
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