The Bank of Spain has intervened Banco de Valencia, an entity integrated in Banco Financiero and Savings (BFA), and has allocated 3,000 million euros of public money, 1,000 million to strengthen its capital and 2,000 million line of credit to ensure its liquidity, according to the regulatory body.
The Bank of Spain has replaced the bank’s administrators at the request of its board and will administer it “to stabilize and recapitalize it” in order to face its subsequent sale in a competitive process.
With this objective, the Fund for Orderly Bank Restructuring (FROB), a body dependent on the Bank of Spain, has subscribed the bank’s capital for an amount of up to 1,000 million and has granted it a line of credit of 2,000 million to ensure its liquidity.
Depositors and creditors “can be absolutely calm, since the decisions adopted today guarantee that Banco de Valencia will be able to continue operating normally and will comply with all its obligations vis-à-vis third parties,” says the Bank of Spain.
The decision of the executive committee of the Bank of Spain is made after finding that the Bank of Valencia has not been able to take the appropriate measures to ensure its viability, and after recently sending a letter to its managers requiring an “urgent and definitive” solution for its situation.
The board of the Bank of Valencia formally expressed this Monday to the Bank of Spain the impossibility of finding immediately a viable solution for the future and requested the replacement of its administrators by others appointed by the FROB.
The weight of Banco de Valencia in the Spanish banking system is 0.74% of the total assets, according to data handled by the body chaired by Miguel Ángel Fernández Ordóñez.
THE FOURTH INTERVENTION
It is the fourth financial institution that has been involved by the Bank of Spain since the financial restructuring began, following Caja Castilla-La Mancha (CCM), Cajasur and Caja Mediterráneo (CAM), and the second in the Valencian Community.
Banco de Valencia, which registers a high exposure to the real estate sector and could require provisions for between 600 and 800 million euros, was preparing a capital increase to strengthen its solvency.
The entity has undergone changes in its top management, as José Luis Olivas, current vice president of BFA and vice president of the Bankia subsidiaries, recently left the presidency of the entity, now piloted by Aurelio Izquierdo.
CC.OO. ASK BFA TO BE INVOLVED
In fact, CC.OO. it had claimed BFA, which controls 27% of the capital of Banco de Valencia, to be involved in the problems of its subsidiary and to contribute 300 million euros to the capital increase prepared by its investee.
The Government already contemplated last week the possibility that the FROB would contribute capital to the Bank of Valencia if the intervention of BFA was insufficient to cover the deficiency of funds detected by the inspection of the Bank of Spain.
At the same time, the investment bank Lazard was probing buyer interest for Banco de Valencia in the Spanish financial system, an operation that would allow BFA to divest itself of a participation that it considers merely financial.
Banco de Valencia had requested from the CNMV a postponement to present the accounts corresponding to the third quarter of 2011 due to the fact that it was preparing a financial plan and planned to include it in said accounts.
The entity justified this request to the supervisor who was working on a capital increase to strengthen its solvency, and wanted to transfer its diagnosis of the situation to the accounts for the first nine months of the year.