“Non-bailed out Spanish banks are as sound as German, French entities”


705456MADRID | Just a few days before the partial rescue of the Spanish banking sector was announced, Amado Franco talked to journalist Carles Francino during an interview broadcast by SER.

Franco is president at one of the largest and healthiest cajas or Spanish savings banks. He is 66 years old and has spent 42 working at Ibercaja. He has been auditor, branch manager, executive, CEO and President since 2004. Franco is a strong supporter of a Spanish savings bank model but keeping it independent from political parties.

Ibercaja is clearly a sound entity that will merge with two others. Are you doing it voluntarily or forced by the exigencies of the ministry of Economy to do mergers at all costs? Ibercaja is one of the most solid institutions of the country, we just need to take a look at the books and the rating. It is in the process of merging with Liberbank and Caja3 because of the circumstances. The government is clearly seeking fewer and larger entities.

It seems that it is not the model that has failed, but other things. I am a strong supporter of the savings bank model but two characteristics are fundamental: professionalism in management and political independence. That has characterised Ibercaja and allowed us to maintain these solvency ratios and our current strength.

Who has put an end to the cajas model, if it actually could and can work? First we have to blame ourselves. Had there not been mismanagement in some cases, none of this would have happened: mismanagement, political interference and so on. But the problem is that we not been able to differentiate healthy institutions from those who were not. We used to say, and I agreed, that we had the best financial system in the world, that we were the pioneers in the counter-cyclical provisions, and it was true. But as in all families there are some black sheep. In that spirit of corporatism, of trying to say that we are all good, we have degraded the image of the entire sector. If we had intervened some financial institutions quicker three or four years ago, our i

mage abroad would be different and we had foreign investor's confidence, which is what we lack today.

Do we really know our situation? I think we are much better than what markets say. Yes, it is true that there are entities that are being intervened and, as the chairman of Banco Santander said, will need around €40 billion. But I think, after the last pieces of legislation, the rest of our financial sector is gifted. Much healthier than German, French or Italian. What happens is that we are in a maelstrom of tremendous distrust. We have lost respect for the real figures.

Are you in favor of the external audit of the Spanish financial system by two foreign consultants? It worries me. Because, what are the audits that financial institutions have already made for? What about all the information from the Bank of Spain? And do you think you can see the real picture of a financial institution within 15 days?

How do you think the government has handled the whole crisis of Bankia? I will not look for a culprit. For me, the key is that Bankia should have never been born. That merger should never have seen the light. Then again, about having politicians on the boards, there are good and bad politicians, as elsewhere. When public money is used, of course someone should be held accountable. Another thing is if the timing is right or not. I think we're throwing a lot of fuel to the fire, we may wish to wait a bit.

Following the latest unemployment figures in Spain, do you have any idea when we will emerge from this situation? Hopefully, by the end of next year. No doubt that unemployment is the scourge of this crisis, but I believe that by the end of 2013 we will start creating jobs.

Will we overcome this crisis only with austerity measures? We will overcome it by working hard and when those who have the most will sacrifice a little more to maintain solidarity in this country. Otherwise there is a risk of social unrest. And we must remember that if we want to sell products or services, someone has to buy them. Unfortunately, with Spain's current unemployment figures domestic consumption is not working, so we'll have to go abroad and be competitive.


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.