Former Bankia executive gets 14 million euro payoff

The Guardian reports that a former Bankia executive is going to receive a 14 million euro payoff.

While I have nothing against bankers being well paid when their institutions provide ultra transparency and everyone can see the risks taken, ...

A former senior executive at bailed-out Spanish bank Bankia is to receive a €14m (£11.2m) payoff in a move that will cause controversy beyond the country's borders if Europe is asked to help rescue Spain's banks. 

As the government seeks to raise the €19bn needed by Bankia, the news that Aurelio Izquierdo would walk away with such a large payoff raised questions about what Spain's troubled banks have been doing with their money....

News of the payoffs came amid growing uproar over the multimillion euro deals handed out to executives at Spain's cajas, or savings banks, during the boom years when they helped inflate a housing bubble that burst four years ago. 

Many have since been forced out of the banks they ruined, taking millions more euros in payoffs.

Showing that bankers get paid regardless of performance.

The toxic real estate assets they left behind are at the root of growing worries that Spanish banks will need a European-funded bailout on top of the Bankia rescue.... 

Bankia said on Tuesday that bailout money would not be used for the multimillion euro executive payoffs as the sums were already accounted for. In Izquierdo's case, they said, the money was owed by one of the seven cajas that merged to form Bankia, and which remain shareholders, rather than by the new bank. 

Izquierdo was the number two at Bancaja, the second largest of the cajas that were merged two years ago....

Bancaja brought large amounts of toxic real estate to the merger. Bankia's parent company BFA now recognises €40bn of such assets. 

Bancaja operated in eastern Valencia, a coastal region that became a byword for both voracious construction and political corruption. 

With control of individual cajas in the hands of local politicians, their presidents were largely political appointees. 

A study by economists Luis Garicano and Vicente Cuñat in 2009 found a close relationship between political caja bosses and bad loans. These increased by 50% where the president was a politician with no banking experience.... 

Yet another reason for requiring ultra transparency so that market discipline can restrain risk taking.