Bank Chief Steps Down as Spain Considers Rescue
Rodrigo Rato, the executive chairman of Bankia, resigned Monday before an anticipated government recapitalization of the company, Spain’s largest real estate lender, which is sitting on €32 billion of troubled assets.
Mr. Rato, a former finance minister and past managing director of the International Monetary Fund, is the most prominent Spanish banker to quit since the start of the euro zone’s sovereign debt crisis, which has raised concerns not only about the solvency of Spain’s banks but of its economy as a whole.
While the government and the central bank have been debating in recent days how to clean up the balance sheets of the most troubled banks, Prime Minister Mariano Rajoy confirmed for the first time Monday that such a rescue plan could involve public money. Earlier, he had pledged not to make taxpayers bear the cost of saving the banks.
Bankia is now expected to receive €7 billion to €10 billion, or $9.1 billion to $13 billion, of additional state funding, in the form of convertible bonds, according to reports Monday in the Spanish media.
“Something urgently had to be done about Bankia because the size of its problematic assets made it the most delicate and dangerous part of the whole financial sector,” said Jordi Fabregat, a finance professor at the Esade business school in Barcelona. “What’s unclear is whether this will be enough to restore confidence among investors, or whether in fact €10 billion will end up being a drop in the ocean should all the problematic assets turn out to be worth zero.”