Banesto customers in rush to withdraw deposits

WORRIED depositors withdrew more than than 120bn pesetas ( pounds 585m) from the troubled Spanish bank Banco Espanol de Credito - Banesto - last week.

They apparently voted with their feet following Tuesday's decision by the Spanish central bank to take control of Banesto, which urgently needs an estimated 500bn pesetas to rebuild a balance sheet badly holed following a disastrous expansion of its loan book.

The bank replaced Banesto's directors with a temporary board consisting of representives from the five biggest Spanish banks and headed by Alfredo Saenz, previously vice-president of Banco Bilbao Vizcaya.

The banking authorities have repeatedly attempted to reassure investors that they have no cause for alarm. On Sunday Mr Saenz, who has reportedly asked the accountancy firms Price Waterhouse and Arthur Andersen for an urgent audit of Banesto and its industrial arm, Corporacion Industrial y Financiera de Banesto, told depositors, clients and employees that there was nothing to worry about.

'We have a promising future ahead of us,' he said, adding that he was confident he would be able to relaunch the bank.

Nevertheless, the withdrawals represent more than 8 per cent of the bank's short-term deposits. According to official sources these amounted to 1,560bn pesetas at the end of September.

The bulk of the money was reclaimed across counters at branches of the bank, although around 23bn pesetas was withdrawn by the clearing organisation which handles interbank transfers.

Shares of Banesto, suspended just before the Bank of Spain's intervention, were last quoted at 1,995 pesetas. Traders said a number of transactions had taken place off-market on Friday at prices between 1,995 and 1,950 pesetas, but others took place at well below these levels.