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Banco Madrid, the first and strange bankruptcy of a solvent entity

Two people talk in front of a Banco Madrid office, in 2015 in the capital.GERARD JULIEN (AFP)

About seven years after the fall of Banco Madrid, one of the most solvent entities in the system at the time, the unknowns and contradictions about this unique case are still valid. All its managers have been exonerated of money laundering, the accusation for which they left the entity that ended up intervened and liquidated. It was paid by the 15,000 clients —some of the money still needs to be recovered from some—, the 300 employees, who lost their jobs in a dramatic situation, and the administrators, who have gone through a long legal walk.

The case has been closed with a single accusation from the Executive Service for the Prevention of Money Laundering (Sepblac): a fine of one million euros to Banco Madrid for faults in the system of control of the origin of the money, a sanction overcome by a large part of the large Spanish banks every year. But no one has been held responsible for the bank's collapse, which has led the Cierco family, owner of 75% of the entity's capital, to claim 142 million from the Bank of Spain, considering that its intervention and that of Sepblac “far of tackling the crisis experienced, hastened its end in a few days”, according to the lawsuit.

The first of the two most The serious consequences came on March 10, 2015, when FinCen, the anti-fraud department of the US Treasury, considered the Banca Privada de Andorra (BPA), owner of Banco Madrid, as a “financial institution subject to first-order concern in money laundering.” ” and cut off all its operations in dollars, in such a way that it drowned it and took it out of the market.

BPA and its Chinese, Russian and Venezuelan clients

The entity was immediately intervened. BPA maintains numerous open cases in Andorra —a country that did not recognize the tax offense until 2014— for alleged illicit activities of its organized crime clients of the Chinese and Russian mafias, the Mexican Sinaloa cartel and former leaders of the Chavista leadership of Venezuela . There have been no convictions yet, although the CEO of the Andorran bank and that of Banco Madrid, Joan Pau Miquel, spent a year and seven months in provisional prison.

Another relevant fact is that 11 months after the accusation, FinCen withdrew the complaint on the understanding that the management of BPA and Andorran legislation had changed. “This mechanism is very disproportionate; it doesn't make sense that it exists in international banking legislation because you don't need to present evidence to take down a bank”, points out a senior manager of a European organization who recalls that the United States uses it with small entities, “never against the big ones”.

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Hectic days and bank run

The following days were frenetic and ended in something unusual: the first liquidation of a solvent bank experienced in Spain, after removing the bank card. New administrators of the Bank of Spain were appointed and then came the resignation of the board of directors of Banco Madrid “to preserve the stability of the entity”, according to the supervisor. With this departure, the intention was to favor the search for a solution: to segregate the Spanish subsidiary of BPA and sell it, according to its former managers, something that did not bear fruit despite its high solvency and having “an attractive business model for competitors, as was seen with the speed that they gave to keep the assets”, point out former directors of the bank.

This whole operation happened because the Bank of Spain would have reassured customers —as has always happened on other occasions— and thus prevented a bank panic. But he didn't. The leak of deposits is the third extraordinary fact. In addition to knowing the arrest in Andorra of the CEO, between March 11 and 15 the most serious details -never proven- of the Sepblac report were leaked, as well as the decision of this body to send the file to the Anti-Corruption Prosecutor's Office. A good number of media cited “sources of the organization”, in reference to Sepblac, to ratify the information about the alleged criminal clients. El Mundo, which he dedicated four consecutive front pages to the case, on March 14, 2015, he stated that the Sepblac investigation had been “piloted by the Ministry of Economy”, directed by Luis de Guindos and whose Secretary of State for Economy, Íñigo Fernández de Mesa, was responsible direct from the body. In an interview with the aforementioned media, on March 16, Fernández stated: “There are irregularities in Banco Madrid.”

Juan Moscoso, then spokesman for the PSOE in Congress for the Economy, asked the Secretary of State in his appearance on Banco Madrid to identify the “sources of Sepblac” because “they appeared in all the media and their information totally conditioned the evolution of the entity”. Fernández de Mesa did not respond, but announced that the PP government was going to investigate why the Socialist Executive had allowed BPA to enter Spain through Banco Madrid, an operation that had the support of Sepblac. Fernández de Mesa, now vice president of the CEOE and president of Rothschild Spain, framed his actions in a plan against money laundering. The PSOE recalled that the PP allowed two new Andorran entities in 2012.

Leakage of unsecured deposits from the Bank of Spain

In the midst of these tensions, between March 11 and 15, the Bank of Spain, led by Luis Linde decided to cut off Banco Madrid's access to international operations in euros, a blow as deadly as access to the dollar was for BPA. The supervisor did not guarantee the deposits, nor with internal lines backed by assets of the entity itself, called ELA, which do not require public money. Nor did it appeal to State resources via the Rescue Fund, FROB, as in so many cases in amounts a hundred times larger.

According to Fernando Restoy, then deputy governor, Banco Madrid lost 20% of deposits and there were no reasons of general interest that justified the support of public money. The bank entered the UVI due to money laundering problems, which later did not exist in the subsidiary, but it died due to lack of liquidity. On March 16, it was sent to liquidation, a process that is still open, with a significant cost for creditors.

The 'patriotic police' of the PP

However, the Cierco family assured that it all started in the first weeks of 2014 The cause was politics: the Catalan independence movement and the hidden fortune of the Pujol family, which the “patriotic police” of the PP government were eagerly pursuing. The CEO of BPA, Joan Pau Miquel, received a message from the Chief Commissioner for Internal Affairs of the National Police, Marcelino Martín Blas. According to what Higini Cierco told the Andorran judge, the threat was that if they did not provide the requested data, “the bank will die”.

The fourth extraordinary fact is that Andorra separated the suspicious business from BPA and relaunched a new bank, Vall Banc, with the healthy business, which is operational. Banco de Madrid disappeared with all its assets, despite its enormous solvency and without money laundering convictions. In fact, the judge who determined the directors' innocence was based on statements by Sepblac inspectors who denied that it had a structure to launder money, and spoke of new control systems established since José Pérez became president. They also admitted that of the more than 15,000 clients, they only analyzed 152 suspects.

“Everything will be cynically presented as a disgraceful result of a sequence of fortuitous events that happened in dizzying concatenation. There will be no culprits and the damage will be irreparable”, affirms a former director of Banco Madrid.

The settlement continues: eight are missing million from the Guarantee Fund

That fateful March 16, 2015 marked the end for most of the 300 employees who had Banco Madrid. But a small group, around a dozen, after experiencing the ERE applied to the entire workforce, stayed with the bankruptcy administrators. They manage client inheritance problems, investment funds that were closed without being able to be liquidated and other small matters, according to sources familiar with the operation.

The objective of this group is to liquidate the approximately 6,000 million in off-balance sheet assets and about 1,000 million that the entity's balance sheet had. After overcoming the legal problems of the investment funds, which required changes to the laws, the manager was sold to Trea for 16.5 million in 2017.

The expectations of the global liquidation are optimistic, although it has not yet been closed and nobody guarantees that it will do so in 2022. It is expected that 99% of the assets will be recovered, after selling the loan portfolio to a high price due to high customer guarantees, according to these sources.

However, the Deposit Guarantee Fund, which protected with 100,000 euros per holder of each account, he has not recovered everything. It injected 125 million and, with the latest known figures, as of December 2020, there are still eight million to recover. Between the money of the Fund and that of Banco Madrid, 13% of the total is missing, according to sources of the operation.

The most common belief among former employees is that Banco Madrid could have been sold without problems due to its type of business. “We grew at 20% per year, with good professionals who mostly relocated, although others had a very bad time. However, Andorra was mixed up and it was all over”, they lament.

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