Spanish government denies run on bank

The Spanish government is denying a report that said customers withdrew over one billion euros, or $1.3 billion, from the nationalized lender, Bankia, over the last week.

LOS ANGELES, CA (Catholic Online) - Bankia said that deposit activity was normal. However, the government's denial has helped its shares to regain some of their losses. Many Spanish banks have suffered heavy loan losses since a property market crash in 2008, and may have to write off more bad loans. The concerns about the state of the banks have upset financial markets.

Economy Secretary Fernando Jimenez Latorre denied a deposit flight was underway. "It's not true that there is an exit of deposits at this moment from Bankia."

Bankia tried to reassure its customers. "Bankia's operations have been within their usual parameters at the branch network over the past few weeks. The trend in activity shows deposit balances will not register substantial changes in the next few days."

Shares in Bankia have decreased about 30% today, as small investors sold their holding which have lost nearly two-thirds of their value since a flotation in a July stock market listing.

"Bankia depositors can be absolutely certain about the security of their savings that they have entrusted with the bank," said newly-appointed Chairman Jose Ignacio Goirigolzarri.

It is reported that Goirigolzarri had told the board meeting about the flow of money from the banks. According to the meeting, one billion euros were equal to about 1% of retail and corporate deposits at the bank. The government took over Spain's fourth largest bank to calm the fears that Bankia couldn't handle huge losses caused by a property crash, which began in 2008.

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