By Kevin Belanger,
International Business Writer
On Monday, March 16, Banco de Madrid, a small Spanish bank which mainly catered to wealthier clients, filed for bankruptcy.
The bank has approximately 15,000 clients and has 21 offices. According to El Pais, the bank had 600 million euros in deposits with the bank and 1.5 billion euros in investment funds with the bank. Its collapse comes on the heels of the bank’s parent company, Banca Privada d’Andorra (BPA), being accused of laundering money for organized crime in Russia, China, and Venezuela. The bank was labeled a “primary laundering concern,” by the Financial Crimes enforcement. According to the New York Times, Banco de Madrid filed for bankruptcy in order to avoid mass withdrawals by anxious depositors.
BPA’s alleged money laundering is detailed in a report from the United States Treasury Department, which claims that BPA used various practices such as under-invoicing, falsified loans, and false contracts to achieve its laundering. The president of BPA, Joan Pau Miquel Prats was arrested in Andorra on Friday, March 13, following the forced removal of BPA’s board of directors by the Andorran government. Banco de Madrid’s board of directors also met with the Central Bank of Spain and agreed to resign and be replaced by a three person panel. Both Banco de Madrid and BPA have been taken over by the Spanish government and Andorran government respectively.
According to ABC news, the bank allegedly helped to develop shell corporations which enabled Venezuelan Oil Giant Petroleos de Venezuela to launder up to two billion dollars. Spanish businesses have also been accused of laundering money through the bank. The Treasury Department report also stated that the bank helped to launder money for Andrey Petrov, accused of making bribes to Spanish political leaders on behalf of Russian organized crime. On Wednesday, March 18, the Spanish government announced that it would not bail out Banco de Madrid but instead will allow it to be liquidated. The Spanish Deposit Guarantee Fund told depositors that their deposits are still insured. However, on Wednesday March 18, the Deposit Guarantee Fund informed depositors with Banco de Madrid that they will only receive a maximum of 100,000 euros, the maximum amount that a deposit can be insured.
According to Spanish law, depositors can seek to recover more than 100,000 euros only after the bank has been fully liquidated. The Orderly Bank Restructuring Fund, the Spanish agency responsible for ensuring the stability of the nation’s banks, stated that Banco de Madrid did not follow the legal protocols required to receive a government bailout. According to El Pais, this is the first time that the Spanish government has refused to bail out a bank since the 2008 financial crisis.
A version of this article appeared in the Tuesday, March 24th print edition.
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