FROB rules against bail-out of Banco de Madrid
- Five hundred clients have more than €100,000 in deposits
- Parent company BPA affected by the decision
The Spanish Orderly Bank Restructuring Fund (FROB, as abbreviated in Spanish) resolved not to bail out Banco de Madrid. Clients are guaranteed a withdrawal of up to a maximum of €100,000.
The decision followed the Spanish justice system's ruling on Tuesday when the Banco de Madrid's insolvency proceedings were suspended after intervention by the Bank of Spain.
The FROB, which depends on the Bank of Spain, pointed out that following the non-payment of deposits, Banco de Madrid will not be able to return them in the immediate future. In accordance with the law, the Spanish Deposit Guarantee Fund will cover up to a maximum of €100,000 (£72,470) of each client's deposits.
Nevertheless, out of the bank's 15,000 clients with €675m(£489m) in deposits, there are 500 clients with more than €100,000. In these cases, the total amount of their deposits that will be returned to them will depend on how much money the FROB gets from the liquidation of assets.
The decision not to proceed with the bailout was based on the FROB's conclusion that the bank did not pose a threat to the Spanish financial system.
Banco de Madrid's parent Banca Privada d'Andorra (BPA) has been affected by the news and clients are currently limited to withdrawing €2,500 per week. Andorra's Finance Minister Jordi Cinca said on Wednesday that the government has not reached a solution for BPA. However, he indicated that the most likely plan was to maintain restriction on the withdrawals and begin the restructuring process.
In addition, €150m is thought to have “flown” from BPA before the intervention in Banco de Madrid, as a consequence of a tip-off given to clients by the bank's managers. It is believed that the money was transferred to other major banks in Spain such as Barclays, BBVA or Santander, El Confidencial Digital reported.