Banks asked to pay into two-billion-euro fund to help preference share victims

Spanish banks will be asked to contribute some two billion euros to the deposit guarantee fund (FGD) to help an estimated 300,000 clients recover some of the money they lost by investing in preference shares, Economy Minister Luis de Guindos has announced.

The money will also go to help buy out shareholders who also invested in the now-state-owned NCG Banco and CatalunyaBanc, the minister said after Friday’s Cabinet meeting.

Anger on the part of people who lost money after they were convinced by the banks to invest in worthless preference shares has risen over the past few weeks. Anxiety has been especially prevalent in Galicia where hundreds of protestors have been “invading” town hall meetings on a daily basis across the region, demanding that politicians do something to help them recover their losses.

Under this new plan, which was approved by a ministerial decree, clients who bought preference shares will be able to trade them in for other financial instruments which they can sell to recover at least some of the money they lost, De Guindos explained.

Not all banks will be asked to contribute the same amount. All financial institutions will be asked to make a one-off special contribution of three euros per every 1,000 euros they hold in deposits. Those banks that have already contributed money to the so-called bad bank, Sareb, can deduct 30 percent from the total they will have to contribute, the economy minister said.

Hundreds of protestors have been “invading” town hall meetings on a daily basis

In the case of BBVA, Spain’s second-largest bank, which refused to contribute to Sareb, De Guindos said he will give chairman Francisco González until the end of the year to change his mind and take advantage of the 30-percent discount.

The first payment, which will be about 40 percent of the total amount, will be due during the first 20 days of 2014. The rest can be paid off over a seven-year period.

Institutions that are under the control of the Orderly Bank Restructuring Fund (FROB) won’t have to contribute, and banks with less than five billion in deposits will only have to find half of what they would be required to pay, according to the minister.

Last year, Brussels agreed to rescue Spain’s ailing banks to the tune of 41 billion euros, but has insisted that the costs should be passed on to investors.

Investors in preference shares can still file complaints against lenders to seek full compensation if they believe that bank officials were not up front with them about the financial instruments they were purchasing.

Separately, the Cabinet agreed to present a bill in Congress that will allow the government to close down illegal download websites. Education, Culture and Sports Minister José Ignacio Wert said the bill also allows for fines of between 30,000 and 300,000 euros for webmasters who continually violate copyright infringement laws.