March 7, 2021

"The Bankia brochure accounts did not reflect the true image"

"The Bankia brochure accounts did not reflect the true image"

The judicial experts of the Bank of Spain, Antonio Busquets and Víctor Sánchez Noguera, have continued insisting on their thesis with which they affirm that the accounts included in the Bankia stock exchange prospectus "did not reflect the true image".

After two weeks of confrontation in the expert phase of the trial that investigates irregularities in the IPO of Bankia in July 2011, which takes place in the National Court of San Fernando de Henares (Madrid), judicial experts and those hired by Bankia -BFA, Rodrigo Rato and Deloitte maintain the same discourses defended with the same arguments.

Once the first debate block dedicated to the Institutional Protection System (SIP) is concluded, the second thematic part of this expert phase of the process is focused on the entity's IPO.

However, and despite the calls of attention from the president of the Court, Ángela Murillo, about the reiterations, or even of some of the expert witnesses who have criticized "the space-time hole", they have continued to reoffend in the same matters.

Busquets explained that when a company debuts in the market it has to provide the audited accounts of the last three years, although in Bankia it was not possible because it was a newly created entity.

"To supply this problem, the National Securities Market Commission (CNMV) requested that the balance sheets of the BFA funds and accounts be provided," said the expert assigned to the case by the Bank of Spain before the fourth section of the the criminal room.

Provisions that were not recorded

In this regard, they recalled that, after analyzing the accounts of the seven savings banks that gave rise to Bankia, they could verify that there was information available as of December 31, 2010 to make certain provisions that were not made or were not recorded in accordance with the regulations, imputing them against reserves and not against results.

"When we analyzed the 2010 BFA accounts, we considered that the fair value registry in 2010 did not include all the write-downs that PwC had estimated," said Sánchez Noguera.

In this way, the judicial experts believe that all this would show that Bankia "went public with insufficient assets". In fact, they added that the proforma accounts of Bankia included in the brochure were based on a profit figure of 500 million euros before taxes, which stood at 359 million euros after making adjustments.

"The problem is that the profit figure before tax is the sum of the profits of the savings banks, of which we have already mentioned that there were losses incurred that were not accounted for with a charge to results", they underlined.

Likewise, Sánchez Noguera remarked that "what has no discussion is that the incurred loss detected by both the inspection teams and the supervision of the Bank of Spain had to be charged against the income statement."

Attack of Deloitte

Manuel García Ayuso, expert witness proposed by Deloitte, has criticized the courts for their "ignorance about IFRS 3". "It could be understood when the regulations had just come out, but not that at this point these gentlemen continue without recognizing the legitimacy of the recognition of provisions," he said.

As noted, IFRS 3, under the "blessing of IFRS 1", provides that a company can make adjustments in adoption of international financial reporting standards, which expressly estimates the possibility of putting assets and liabilities at fair value with adjustment to reserves. "

"This ignorance can not distort the Court's understanding of this issue, no matter how much they take Circular 4/2004 as a frame of reference for denying the undeniable," García Ayuso reproached.

In this sense, he insisted that "the provisions existed, so he has indicated that this" contumacy in not recognizing reality can not continue to clog "the process.

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