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Central Bank Shakes Up Banesto, One of Spain’s Biggest Banks

December 28, 1993

MADRID, Spain (AP) _ The Bank of Spain Tuesday replaced directors of Banco Espanol de Credito (Banesto), one of Spain’s largest commercial banks, with a committee of five rival bankers who will try to restore its financial health.

The central bank picked one executive each from Spain’s other major commercial banks to serve on a provisional management committee. The committee will devise a plan to strengthen Banesto battered loan portfolio. The bank has put all its profit made this year into a reserve as a cushion for bad loans.

″Banesto’s situation requires the adoption of provisioning measures that the bank can’t take on by itself and which require the support of the entire banking system,″ said the governor of the Bank of Spain, Luis Angel Rojo.

The management committee will remain under the Bank of Spain’s direct supervision and will act in the interest of the depositors and shareholders of Banesto, the central bank said in a statement.

The Bank of Spain did not say how other commercial banks might help Banesto, whose flashy chairman, Mario Conde Conde, has become a celebrity since taking over the bank six years ago.

Banesto officials declined to comment on the central bank’s action.

The new committee’s mission is to maintain the normal management of the bank, draw up a restructuring program with the Bank of Spain and ensure Banesto’s stability and future, the central bank said.

Alfredo Saenz Abad, a Banco Bilbao Vizcaya (BBV) executive, will chair the committee. Other members are Banco Popular board member Ildefonso Ayala Garcia; Marcial Portela Alvarez of Argentaria; Epifanio Ridreujo Brieva of Banco Central Hispano (BCH); and Matias Rodriguez Inciarte of Banco Santander.

The Bank of Spain said it will guarantee Banesto’s liquidity in domestic and foreign markets, and that the Deposit Guarantee Fund will also back the bank’s requirements.

Trading in Banesto’s shares was suspended on the Madrid stock market earlier Tuesday, arousing speculation that the bank was in trouble.

Stock brokers said there had been widespread rumors of the Bank of Spain’s intention to intervene in Banesto, as well as reports that Banesto’s U.S. financial adviser J.P. Morgan & Co., was pulling out of the final stage of a $1 billion capital increase it has been leading for the Spanish bank.

″J.P. Morgan is still a financial advisor to Banesto,″ said Morgan spokeswoman Madolyn Phillips in New York. She declined to comment directly on the Bank of Spain’s actions.

Banesto has been dogged for months by speculation about the health of its finances. It’s involved in a wide range of retail and commercial banking activities mainly in Spain, but is expanding its presence in the Iberian peninsula by increasing its stake in Portugal’s Banco Totta and Acores SA.

Banesto currently directly owns approximately 20 percent in Banco Totta, but its indirectly held stake is thought to exceed 50 percent.