August 11, 2020

The bank bailout cost almost 6,000 million more than previously believed

The Court of Auditors raises the cost of financial sector aid to 2018 to 66,577 million

It was already intuited and in many banking forums it was an open secret. But the Court of Auditors has ratified it. In its latest report, the total cost of the bank bailout has been raised to 66,577 million euros until December 2018, a figure slightly higher than the 65,725 million estimated by the Bank of Spain. This difference of 852 million – 1.32% higher than that calculated by the bank supervisor – would be explained by the different methodology used by each agency. However, the true qualitative leap of the Court of Auditors estimates focuses on the lag of 5,859 million euros more calculated with respect to the report made by the same institution at the end of 2015, which listed the 45,344 million contributed to the bank by the State through the Banking Ordinance Restructuring Fund (FROB) and the 21,295 million of the Credit Institution Deposit Guarantee Fund (FGDEC), to which the 62 million obtained by the Bank of Spain in interest would have to be subtracted. What the Court of Auditors does agree with the Bank of Spain is to ensure that the total cost of aid to the sector will not have a definitive figure until the sale of Bankia is executed, since “certain operations after the date of the estimation can cause an increase or decrease of the mentioned amount, ”he explains in his note.

The amount of total resources committed in the restructuring by the FROB, the FGDEC and the Bank of Spain as a result of the actions carried out between 2009 and 2018 was 122,754 million euros. Of this amount, the FROB committed 77,506 million euros; the FGDEC 35,446 million – financed with contributions from credit institutions -; and the Bank of Spain 9,802 million – with the aforementioned positive balance of 62 million between income and expenses. Approximately half of these contributions have been incorporated into the capital of credit institutions and in participatory installments, although not all the resources committed involved a cost for the restructuring process, either because the amounts were recovered or will be recovered later; well, because they did not materialize in outflows of public resources. In addition, the audited entities obtained income from certain operations carried out within the framework of the restructuring processes – such as interest and commissions -, which must be taken into account when estimating the cost. Specifically, contributions were made to the capital of the entities and in participatory installments amounting to 60,247 million, with Banco CAM (26,307 million) and BFA-Bankia (22,427 million) the entities that required more public funds.

In the specific case of Bankia, the cost assumed in the bank bailout is estimated at 12,864 million euros, resulting difference between the 22,424 million euros contributed by the FROB and the net impairment value in which its balance remains at December 31 of 2018, 9,560 million euros. But it is in the distribution of assumed costs where the Court criticizes the performance of the Restructuring Fund and the banking entity. The Court notes that the FROB “has not carried out documentary checks of individual files” to know if the limits and conditions established in the distribution agreements are met, performing only “checks at an aggregate level”, so it recommends establishing “a system of BFA management that facilitates to the FROB the verification of the determination and the fulfillment of the established conditions.

. (tagsToTranslate) Finance (t) Court of Accounts (t) Bankia (t) FROB

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