Banco de Madrid is the Spanish Lehman Brothers, analyst says
Bank of Spain decided to make an example of the Spanish private bank
Updated : 11:07
Banco de Madrid's liquidation reminded him of the beginning of the financial crisis in 2008, with Lehman Brothers' fall in US, according to DiverInvest's analyst David Levy.
In a monthly investment letter, the analyst commented on some reasons behind Bank of Spain's decision on Banco de Madrid's future.
“I have the feeling that the (Spanish) government and Luis de Guindos (Spanish Minister of Economy) needed to have their own Spanish Lehman Brothers”. Levy wrote, although he pointed out money laundering and the bank's operations related to the mafia as the main reasons that have been used by Bank of Spain to justify Banco de Madrid's liquidation.
It is very likely that we will see another corpse, and Lehman Brothers fits the numbers
Levy began the monthly letter by bringing back to mind the letter he wrote to investors in September 2008, just days before Lehman Brothers' bankruptcy was announced: “It is very likely that we will see another corpse, and I think this time they will leave it in the middle of Wall Street, so that everybody can see it and it serves as an example. So far, Lehman Brothers is the one who fits the numbers.”
Levy applied this example to the situation at Banco de Madrid. The “government wants to use this as an example for the rest of banks”, this expert said. “As it is a private bank and the market situation is much more calm, Bank of Spain can justify its decision not to bail it out”.
The analyst also points out that “99.9% of Banco de Madrid's clients have nothing to do with this issue.
“We are seeing the suffering of savers that do not know how their investments will end up due to the bad practices of some few.”
The system is still the same
With this example in mind, Levy recommends to “diversify not only in bank entities, but also at a geographical level.”
“The system is still the same,” Levy concluded.
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