View from City Road: Apportioning the blame for Banesto

Furious efforts have been under way in the Spanish government, the banking world and among banking supervisers to find someone to blame for the Banesto affair. This is not surprising given that the hole in the finances of the bank rescued by the Bank of Spain just after Christmas is growing every week. At Ptas675bn ( pounds 3bn), the funds needed to restore its balance sheet now appear to be a third higher than the original estimate.

Senior Spanish officials explain the debacle like this: Mario Conde, the bank's charismatic chairman, had already been in conflict with the Bank of Spain on other issues. A previous governor had wanted to remove him several years ago, but was hamstrung by the law.

The Bank of Spain won by a vote at an appeal tribunal when its abrupt seizure of a bank belonging to the Rumasa group was challenged in the courts in the early 1980s. The burden of proof is very much on the supervisors, and they did not have evidence to remove the board until the scale of over-valuation of the assets emerged late last year.

Mario Conde was also seen as a serious conservative political challenger. Officials were apparently concerned that Conde's own newspapers and much of the Spanish media would have accused the Bank of Spain of a politically motivated attack had it moved against him earlier.

They point to how little critical material on Banesto ever appeared in Spanish newspapers, even the most serious, despite the bank's raffish reputation among its competitors. And they wonder how JP Morgan, Banesto's adviser and shareholder, can have become so supportive, when it had access to the same data that had made the central bank worried all year.

The Spanish government is clearly putting the main blame on Mr Conde and his board. But the unanswered question is still whether a more robust attitude to banking supervision might have pinned him down earlier.