One of Spain’s biggest banks has been officially declared worse than worthless, leaving 350,000 small investors likely to be virtually wiped out in a restructuring expected to go ahead next month.
The disastrous state of Bankia, a grouping of seven savings banks hammered together in 2010 and floated in 2011, shows it is valued at -€4.2 billion (-£3.5 billion), dashing any lingering hopes that its shareholders might salvage anything from the wreckage.
Shares in the bank — formed out of Caja Madrid and six much smaller savings banks, a deal known as Snow White and the Six Dwarfs — slumped by another 20 per cent yesterday to €0.55 after the latest valuation was published by the Fund for Orderly Bank Restructuring, the Spanish bailout organisation.
Don’t forget: this mess in Spain was nothing at all to do with The City, wholesale money markets, CDOs, swaps, trading or even the greed of shareholders. These were charitably and communally owned mortgage banks. Who all went bust simply by lending too much for mortgages. Under the control of local politicians and union leaders in the main.
It’s not even a problem of fractional reserve banking. They simply lost all their money on bad mortgages.
The important point being to note that as this problem was caused by none of the things the British left keep pointing to and screaming about, their proposed solutions won’t stop such a thing happening again in the future.