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By Angus Berwick
MADRID: Spain’s High Court said on Wednesday it will investigate Caja Madrid, now part of state-owned lender Bankia, over allegations it over-valued mortgages in the years before the country’s housing crisis.
The court will look at whether the saving bank “systematically” inflated the value of mortgaged property between 2002 and 2007 to issue bigger loans, creating a high-risk portfolio that gave it one of the largest default rates among Spanish lenders, the court’s ruling said.
Allegations that Caja Madrid also gave 20-year mortgages to foreigners with only temporary residency in Spain would also be studied, it said.
In the written ruling, judge Jose de la Mata said the investigation, which was triggered by a lawsuit by the bank’s shareholders, would focus on Caja Madrid’s former chairman Miguel Blesa, former financial director Ildefonso Sanchez, Ramon Martinez, former head of risk management, and Ignacio de Navasques, former head of Caja Madrid’s valuation unit Tasaciones Madrid.
Blesa’s lawyer Carlos Aguilar said his client had not yet decided on a response to the court’s ruling. Reuters was not able to reach Sanchez’s lawyer Jesus Castrillo, and could not immediately identify lawyers for Martinez and de Navasques or contact the individuals themselves.
A court spokesman said those named in the ruling were not charged with any crime and so did not need lawyers at this stage of the legal process. The ruling said the court will decide whether there is sufficient evidence to open a trial, without specifying any dates.
Caja Madrid’s losses after Spain’s financial crisis broke in 2008 forced it to merge in 2011 with other troubled Spanish savings banks. Together they formed Bankia, which last month began settling another series of lawsuits triggered by its 2012 bailout just a year after its listing.
Bankia has set aside 1.84 billion euros ($2.1 billion) to cover claims by minority investors whose investments were wiped out in the state rescue. A Bankia spokesman said it would not be impacted by the Caja Madrid case.
Blesa, Sanchez and Martinez are due to stand trial in a separate Caja Madrid case, in which former executives and board members, including ex-IMF chief Rodrigo Rato, are accused of misusing credit cards for personal expenses. All have denied any wrongdoing and a date has not yet been set for the trial.
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(Reporting by Angus Berwick and Andrés González; Editing by Alexander Smith)
Reuters
