Europe is Safe... Just Ask Spanish Depositors... Who Have Lost EVERYTHING

Phoenix Capital Research's picture


Anyone who wants to get an inside look at both the European banking system and the politicians in charge of fixing it need to only look at Spain’s Bankia.

Bankia was formed in December 2010 by merging seven totally bankrupt Spanish cajas (regional banks that were unregulated). The bank was heralded as a success story and an indication that European Governments could manage the risks in their banking systems.

Indeed, in 2011, Bankia even reported a profit of €41 million. And in April 2012, it was proposing paying a dividend. Then, in the span of two weeks, the bank revised its 2011 profit to a €3.3 billion LOSS, requested a formal bailout from Spain, and had to be nationalized.

What’s striking about this sequence of events is that throughout it, Spain’s Prime Minister Mariano Rajoy was claiming that Spain’s banks were in great shape. Indeed, on May 28 2012, (after Bankia had already requested a €19 billion bailout, the single largest bailout in Spanish history), Rajoy stated , "there will be no rescue of the Spanish banking sector."

Bear in mind, Spain itself was just days away from requesting outside aid from the EU.

The timeline says it all:

  • May 9th: Bankia requests €4.5 billion loan, Spanish Government states that the bank is “solvent.”
  • May 21st: Spain meets Bankia’s request for loan and takes a 45% stake in the bank thereby instigating a partial nationalization.
  • May 23rd:  Bankia’s bailout needs grows to €11 billion/ Rajoy retorts to France’s Hollande, "Hollande does not know the state of Spanish banks."
  • May 24th: Bankia’s bailout needs grow to €15 billion
  • May 25th: Bankia’s bailout needs are now €19 billion (2011 profits revised to €4 billion loss)… the Spanish Bailout Fund has just €5 billion in cash.
  • May 28th: Rajoy comments, "there will be no rescue of the Spanish banking sector."
  • Weekend of June 8-10th: Rajoy texts to his finance minister: “Aguanta, we are the fourth European power. Spain is not Uganda… If they want to force the rescue of Spain, they need to start getting ready €500 billion and another €750 billion for Italy, which will have to be rescued afterwards.”/ Spain informally asks for €100 billion bailout/ EU Finance Ministers OK the bailout.
  • Sunday June 10th: Rajoy states that the bailout is a “victory” before commenting, "This year is going to be a bad one: Growth is going to be negative by 1.7 percent, and also unemployment is going to increase."

Thus, in just one month’s time, Spain implements the largest bank nationalization in its history and requests €100 billion from the EU to recapitalize its banks. And yet, throughout this time, Spanish politicians maintain that Spain’s banking system is “solvent” or in great shape… right up until they get the €100 billion at which point the truth comes out: “This year is going to be a bad one.”

Also note that Rajoy sealed the deal and which he proclaimed a “triumph”  (along with the above statement about 2012 being a bad year) before hopping a plane to watch Spain’s soccer team play Poland.

Fast forward to December 2012, and Bankia is again in the news, this time with Spain revealing that despite receiving the largest bailout in Spanish history, the bank still had a NEGATIVE value.

Bankia’s shareholders have received a nasty new year’s surprise. They may lose most of their investments or even all of them says the Spanish bank rescue fund in its latest report.

According to FROB, the Fund for Orderly Bank Restructuring, Bankia has a negative value of 4.2 billion euros, and its parent group BFA is 10.4 bn in the red.

Valuation is key in the recapitalisation of Spain’s banking system, weighed down by massive bad loans accumulated in a property bubble that burst in 2008. Bankia/BFA is set to receive 18 bn euros of European aid, and become the country’s biggest bailout recipient.

At this point the following is obvious:

  1. Europe’s banks are in far far worse shape than anyone publicly admits
  2. The political class in Europe has no idea how to solve this mess
  3. No one has quantified the bank’s actual losses or their capital needs
  4. Everyone is lying about just about everything related to Europe’s financial system

You could honestly end the story here and know everything you need to about Europe. But then you’d be missing out on Bankia’s newest achievement: setting the record for corporate losses in Spanish history.

Nationalised Spanish lender Bankia is expected to reveal a €19bn loss next week, the largest in the country’s corporate history.

On Thursday Bankia will report full-year earnings, including a €12.6bn provision taken at the end of last year. The writedown is a result of the lender moving assets into Spain’s “bad bank” at heavy discounts.

Bankia, which is seen as a symbol of Spain’s financial woes, was created through the merger of seven smaller savings banks before being listed on Madrid’s stock exchange. When the company failed, hundreds of thousands of people who had been sold shares saw their savings wiped out. The collapse forced Spain to ask Europe for a bailout for its banking sector, which has meant the lender is subject to tight controls.

It’s a little known fact about the Spanish crisis is that when the Spanish Government merges troubled banks, it typically swaps out depositors’ savings for shares in the new bank.

So… when the newly formed bank goes bust, “poof” your savings are GONE. Not gone as in some Spanish version of the FDIC will eventually get you your money, but gone as in gone forever (see the above article for proof).

This is why Bankia’s collapse is so significant: in one move, former depositors at seven banks just lost virtually everything.

And this in a nutshell is Europe’s financial system today: a totally insolvent sewer of garbage debt, run by corrupt career politicians who have no clue how to fix it or their economies… and which results in a big fat ZERO for those who are nuts enough to invest in it.

Be warned. There are many many more Bankias coming to light in the coming months. So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We're literally at most a few months, and very likely just a few weeks from Europe's banks imploding, potentially taking down the financial system with them. Think I'm joking? The Fed is pumping hundreds of BILLIONS of dollars into EU banks right now trying to stop this from happening.

We have produced a FREE Special Report available to all investors titled What Europe’s Collapse Means For You and Your Savings.

This report features ten pages of material outlining our independent analysis real debt situation in Europe (numbers far worse than is publicly admitted), the true nature of the EU banking system, and the systemic risks Europe poses to investors around the world.

It also outlines a number of investments to profit from this; investments that anyone can use to take advantage of the European Debt Crisis.

Best of all, this report is 100% FREE. You can pick up a copy today at:


Phoenix Capital Research

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Volaille de Bresse's picture

Bankia is one BIG pile of shit that was created by aggregating seven small piles of shit : in other words they took 7 bankrupt cajas meregd them into one entity named Bankia. 

greatscott's picture

I can't stand all of these article's where the author assumes that the corrupt politician's actually want to fix the corrupt system.  If the politicians wanted to fix the system, it would already be fixed.  Instead, they seek to destroy the corrupt financial and monetary system to gain more power and control.

Silver Garbage Man's picture

Bang on greatscott. This is a takedown. No one is trying to fix this, only trying to delay it as long as they can. It drives me crazy watching the "smart people" talk about possible solutions.....there are none. BUY PHYSICAL SILVER NOW. Time is short.

rwe2late's picture

Do they really want to destroy the corrupt financial and monetary system?

Or do they wish to entrench and expand "the corrupt financial and monetary system"?

It seems all they wish to actually destroy are any barriers to their gaining "more power and control".

Edward Fiatski's picture

FROB, the Fund for Orderly Bank Restructuring, eh? More like We Fucking ROB you blind.

BlackVoid's picture

"Bankia’s shareholders have received a nasty new year’s surprise. They may lose most of their investments or even all of them says the Spanish bank rescue fund in its latest report."

FINALLY!!! I would like to see the creditors lose everything too.

Volaille de Bresse's picture

"if France and Germany ditch this thing all hell is going to break loose on the streets"


You're very kind to put us on the same level as Germany but frankly we're only co-pilots in this plane now.

Only Cpt Merkel knows where the plane flies to...

andrewp111's picture

Draghi has pledged to do whatever it takes to save the Euro. He has the power of the printing press. Therefore, I do not believe any near term doom predictions about the Euro.  There is in fact only one mechanism that could doom the Euro - State secession. If any major Euro State leaves (other than Greece), it is game over.  Until that happens, relax.

Joe A's picture

You are right regarding NEAR term doom... The EU policy is kicking the can down the road. But if all these problems regarding corruption, nepotism and clientism in Soutern European countries are not fixed forever then the rest will get pulled down along.

fijisailor's picture

Excuse me but in this article there seems to be confused between depositors and shareholders.  Clearly shareholders lost their ass but what about depositors?  Please clarify this.

Sukumvir's picture

It appears there is a confusion and the Telegraph articles makes no mention of depositor losses becoming official yet! although the looming risk is there for sure.

The sale of the airline and Utility Co/Endesa stakes held by Bankia appears crucial...ultimately the government could step in to buy the stakes and guarantee deposits....

Letting shareholders, preferred holders and bondholders (Merkel & Co.) take the hit

Marco's picture

The ECB can't allow deposit insurance to not get paid ... at least not yet.

The moment a single European bank falls without the government making good on it's deposit insurance is when it all ends ... after that we will have bank holidays in most EU countries and the end of the Euro.

Dareconomics's picture

Spain will be forced to top off those initial bank bailouts. This year, Draghi might be forced to do whatever it takes to save the country from default.

How bad is Spain's real budget deficit?

ebworthen's picture


"...swaps out depositors’ savings for shares in the new bank."

Another form of "vaporized"?



Go Tribe's picture

Swaps out 401k's for US government shares.

ebworthen's picture


You read my mind.

willwork4food's picture

Swap out US gov. shares for a few AK47 mags delivered personally to the politicians and bankers just out of general principle.

Might not get your money back, but maybe they have a hot daughter...

BattlegroundEurope2011's picture

Pffft Those lying Banksters again.

disabledvet's picture

It's really hard not to sound truly alarmist about the WHOLE euro zone. We've had two World Wars start there and if France and Germany ditch this thing all he'll is going to break loose on the streets. My understanding is that Greece has really descended into a near war zone already. If these Italian elections go "full frontal" over the weekend...well, I guess the best that can be said is "we don't want the terrorists to win" here. 400 million dollar diamond heist in broad daylight? WTF is up with that?

new game's picture

disab... that heist intrigues the hell out of me too.

hats off to them-gutsy stuff.  love it when the bloody stuff like diamonds

gets stolen from the theives of other peoples misfortions and corupt peoples(africa diamond trade).

nasty stuff at the source.  also, like ripping off vegas...

watching, the west, and i will say one thing-it was brutal, but what made it all happen was a limited government,

and free men and women prospered from their toil. if only...-i digress.

dogbreath's picture

no worries,  Lloyds or AIG insured the shipment

NoDebt's picture

Do they actually FORCE you to take shares in the new bank, or is it merely strong coercion by the local bank managers?  I can never seem to get a straight answer on this.


MillionDollarBoner_'s picture

I'm thinking Cajas were prolly mutuals, in which case the "members" (savers) are the shareholders. Anyone know if this is true?

rwe2late's picture

 Any comparison to US credit unions?

MrSteve's picture

It is sadly true. An AP newswire story shows these banks were serving mostly rural cities and villages and were the local core economic service centers, so all the towns' people with savings, mostly over 60 years old, are completely wiped out.

Coming to a bank and currency very, very near you!

SmallerGovNow2's picture

Thanks for the link Steve.  From the story...

Now the 77-year-old Valls feels betrayed as he finds himself locked out of his hard-earned money.

"I don't understand what's going on," he said. "The only thing I want is for them to return what is mine."

His plight is shared by thousands of his fellow townspeople and nearly a million across Spain: Lured by the family-like ties nurtured between bankers and customers, they poured their life's savings into higher-yielding financial instruments recommended by the people managing their money. When boom turned to catastrophic bust, they found the stock they had acquired had become all but worthless.


ebworthen's picture

If I were a Son or Daughter of those poor old folks I would be hanging bankers and politicians in the town square.

willwork4food's picture

If I were ONE of those poor folks that lost money I would be hanging bankers and politicians from the nearest tree they happened to be by.

MillionDollarBoner_'s picture

For all those who knock gold as a haven in "difficult" times.

Gold is down 2% in Sterling this week. However the pound just got slammed (again), so whereas holding cash would have seen my savings dwindle by 5% I'm only out 2%. And chances are gold will bounce next week, as soon as Comex expiry is out of the way, at which point all UK holders of PMs will be in the green. 

Wealth preservation. Are you getting it yet, you anti-gold asshats?

CompassionateFascist's picture

"chances are gold will bounce next week". Who cares. If I were you, Boner, I'd stop thinking about PMs as short-term money-makers, and more as long term money per se. Once Ponzi collapse occurs and the Jews shut down their national grocery store chains in an attempt to Ukraine (White) fly-over country, I believe an oz. of silver might buy as much as 2-3 days of food at the local green-market. Provided you can find one that hasn't been hit by a regime Predator.

Blue Horshoe Loves Annacott Steel's picture

Articles like this don't help the Spaniards!  Destroying confidence in the banking system prevents the politicians and bankers from doing their jobs.

I'm, of course, being sarcastic and joking.

The only good central banker is a dead central banker.

Volaille de Bresse's picture

Gold is cheap... and a true life-saver!

Parrotile's picture

Gold's just a shiny metal.

Only knowledge can make you money.

Remember knowledge (and it's application) is the difference between being a cave-dweller and having space-age technologies.

Not Gold, Silver, or Diamonds

Just knowledge.

Scro's picture

I think I'll buy some gold. Knowledge is good.

bunnyswanson's picture

Knowledge is not going to get you much at all when you have to eat, the system has completely collapsed and the dollar is being used to wipe asses.  But gold that I have around my neck will be accepted by some pawn shop (the only business doing well in this town) and give me enough change to pay my utiility bill.  Not stones from the ground, not anything else other than silver or a wide screen TV is the pawnshop going to consider purchasing.

TPTB_r_TBTF's picture



Knowledge is not going to get you much at all when you have to eat,

How about the knowledge of which plants in your surroundings are edible, or the knowledge of how to start a cooking fire without a match or lighter?

And ... if your carry your gold around your neck, then you donT have enough to make a difference nohow.

akak's picture

Does holding the knowledge that, after examining hundreds of examples of monetary manipulation, depreciation and crime over thousands of years, gold is the ultimate store of value in an insane world dominated by fiat-issuing bankster sociopaths and their government lackies count as "knowledge that can make you money"?

Parrotile's picture

I believe you answered your own question there!

Gold (and everything else tangible) is just an asset.

What your assets are "worth" to you is only what a buyer is prepared to "pay" you for them - in currency of the realm, or other "value - able product", be that a service, or information.

Consider that, when "push comes to shove", all your "hard assets" may not even buy you 10mg morphine - when you or yours really need it, from someone who has the knowledge and attendant skills, to cultivate, extract and purify raw opium.

That, my friend, demonstrates the "power of knowledge".

And that is a scenario that may be coming to a Country near you rather sooner than you would wish . . . . .

Dead Canary's picture

Spain is like a zombie movie. No matter how many times you hit it with a shovel, IT JUST WON'T  D I E!

AbbeBrel's picture

History doesn't repeat but it rhymes.   Any student of history would note that in an environment (like post WW uno) with massive unemployment - the workers might shift left to communism and revolution.   Therefore this may be the first indication of a shift hard left, leading to (who knows) Spanish Civil War - the Sequel - as the hard-right elites (with the military carbon units under their firm control - or is it the reverse?) - react.   In any case - this will be really interesting to see how it "resolves".    At least there is a common currency so we won't see the Weimar hyperinflation, LOL / 2.

Spectre's picture

If Banks here stated mark to market ideaology you could write the same Fucdup story here in the USA. Tick, Tick ........

jeff montanye's picture

the banks are as insolvent but, again, the central news in this story is the part where the reorganized banks' depositors have their deposits replaced with equity shares in the reorganized banks.  if true this seems hideously immoral and quite different from the practice in the u.s. where no depositors are forced to take shares for demand or time deposits.  the author reiterates this point with a citation so giving at least the pretense of credibility.  the article cited however refers to shareholders losing savings so seems ambiguous.

this article,, however, refers to 100,000 euro of fdic type insurance for depositors in spanish banks and implies that the small depositors were "sold a bill of goods", voluntarily invested in bankia, and now are trying to sell their positions at reduced prices.  this claim, as made by phoenix capital, still seems yet to be proved.

Blue Horshoe Loves Annacott Steel's picture

That last comment was written by Timothy Geithner.

MillionDollarBoner_'s picture

Nope...that would have been "I suck so badly, I blow!"