News Column

Bankers' Sky-high Salaries Fuel Anger as Bankia Is Rescued

May 25, 2012

Sinikka Tarvainen

bankia

Rodrigo Rato, chief of Spain's fourth-largest bank Bankia, resigns just before the bank is nationalized to rescue it from its financial quagmire. Media then report that Rato is entitled to compensation of 1.2 million euros ($1.5 million).

The redundancy pay Rato was expected to get following his resignation earlier this month would be among the more modest such payments in the Spanish banking world.

Rato's successor Jose Ignacio Goirigolzarri, for instance, left his previous job at the BBVA bank with a pension of more than 50 million euros.

The huge earnings of bank executives are increasingly in the spotlight in Spain, where the deepest economic crisis in decades is plunging growing numbers of people into poverty.

"We are not merchandise in the hands of bankers," became one of the slogans of the Indignant Ones protest movement, which brought tens of thousands of people to the streets as it marked its first anniversary mid-May.

Spain's economy is expected to contract by nearly 2 per cent this year, while unemployment has soared to a staggering 24 per cent.

There is "no talent" that deserves such enormous financial compensation as bank executives are arranging for themselves, Jorge Uxo, associate professor of economics at the University of Castile-La-Mancha, told dpa.

The greed of financial executives for high salaries and bonuses made them embark on risky large-scale operations, thus helping to create the global crisis, Uxo said.

In Spain, the crisis was partly created by regional savings banks, such as the seven making up the Bankia group, which were often politically controlled.

They gave almost unlimited credit to real estate companies, helping to launch a decade-long construction boom which allowed politicians, bankers and entrepreneurs to get rich.

In the eastern region of Valencia, for instance, massive building and sports projects were launched while corruption flourished. The projects, some of which came to naught, left the region with huge debt problems after Spain's property bubble burst during the global crisis.

The Spanish state is now pumping tens of billions of euros into faltering banks while international concern grows over the country's solvency and the stability of the euro.

Yet despite the role of bankers and other executives in creating the economic crisis, the salary gap between company chiefs and their staff has only deepened.

Among the companies listed on the Madrid stock exchange's main index, Ibex 35, 534 executives received in 2011 an average annual income of 1.07 million euros. Their employees had an average annual income of 43,353 euros, according to figures quoted by the daily El Pais.

In 2007, the average top income stood at 873,666 euros, while the average lower-level income was 37,122 euros.

Uxo attributes the growing difference to the erosion of lower-level salaries under the pressure of the economic crisis. The growing disparities are fuelling "social unease," the economist observed.

High salaries are allegedly justified by the profit that top-level executives bring to shareholders. But many of Spain's high-earning bankers left their banks in trouble.

Bankia, for instance, needs to be rescued by the state, with a capital injection eventually amounting to more than 15 billion euros, financial sector sources said.

Another bank, Novacaixagalicia, needed state funds worth more than 2 billion euros. But three of its former executives walked away with compensation totalling about 20 million euros, several media reported.

Twenty-five Spanish bank executives and board members pocketed a total of 130 million euros on leaving their jobs between 2010 and 2011, according to a figure quoted by the daily El Mundo.

Courts are investigating some cases.

Even the government felt bankers had gone too far, ordering in February that executives of banks receiving loans from the bank restructuring fund FROB could not make more than 600,000 euros annually.

That is still a huge salary in Spain, where the economic crisis is leaving growing numbers of people with no income at all. More than a quarter of the country's households have trouble making it until the end of the month, according to the National Statistics Institute.



Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH


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