Mr Rojo and Pedro Solbes, the Economy Minister, appeared before the Spanish parliament's economics committee to explain the Bank of Spain's dramatic takeover of Banesto on Tuesday, when its chairman, Mario Conde, and the entire board were ousted.
Facing polite but direct criticism from opposition party members of the committee over why the central bank had not acted sooner, Mr Rojo said it had made five inspections of Banesto's finances since March 1992, when 'weaknesses and deficiencies' were evident.
Serious problems were obvious by late 1992, he added, but the extent of the bank's huge balance sheet deficit only became clear last month.
The governor said the ousted administrators of Banesto, once the country's biggest private bank, had tried to 'generate extraordinary profits . . . using what were little more than accounting tricks and inter-group operations'.
Responding to questions, however, he added: 'There is no basis for pointing to responsibility that was other than purely commercial.'
Mr Rojo said it was clear that Banesto was in serious trouble by the end of 1992, but that the central bank had agreed to a rescue plan including sales of subsidiaries and a capital increase backed by JP Morgan, the US investment bank.
The central bank governor said Banesto had expanded too fast between Mr Conde's takeover as chairman at the end of 1987 and 1991, more than doubling its loan portfolio at a time when other Spanish banks were being more cautious in the face of world recession.
'Its proportion of bad debts was way over the ratio for the banking sector as a whole,' he said.
He insisted Tuesday's move was not aimed at 'making Banesto disappear' but at restructuring it to emerge reinforced. 'I am convinced that the situation of Banesto is healthier today than it was a week ago.'
The Bank of Spain has guaranteed Banesto's solvency at home and abroad, but the fact that it was known to be in dire straits at least a year ago has raised fears among banking sources in Spain that the country's standing in world financial markets could be damaged.
View from City Road, page 27Reuse content