Bank of Spain opens inquiry into Banesto: Board members could face bans and fines

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MADRID (AFP) - The Bank of Spain is to launch a disciplinary inquiry against 20 members of the board of Banco Espanol de Credito (Banesto), including Roberto Mendoza, a vice-president of J P Morgan, the US investment bank.

If the inquiry finds board members to have been at fault they could be barred from holding banking responsibilities.

Luis Angel Rojo, governor of the central bank, has alleged to a parliamentary commission that Banesto had tried 'to realise extraordinary profits by means of contrived accounting' and through operations between subsidiaries.

The authorities dismissed Banesto's board on 28 December and took control. The decision shocked financial circles and focused attention on the close involvement of J P Morgan.

Last week the Bank of Spain and leading banks reached an agreement on a rescue plan for Banesto, which needs new funds of Ptas605bn (pounds 2.95bn). Under the arrangement a majority stake is to be sold to another bank within one year.

If the inquiry finds that there has been 'a slight or serious fault', the Bank of Spain would impose a fine and a ban on those concerned from holding any banking post for several years.

If it found that there had been more serious shortcomings, the penalties would be handled by the economy ministry, which could impose a maximum fine of Ptas10m.

All of the members of the former board are Spanish with the exception of Mr Mendoza, who is an American citizen, and Moises Cosio, a Mexican businessman, who holds 0.014 per cent of the equity.