Banco de Madrid has filed for bankruptcy less than a week after its Andorran parent was accused of money laundering by US authorities.
The US Financial Crimes Enforcement Network said last Tuesday that Banca Privada D’Andorra – which holds all of the capital of Banco de Madrid – was a bank of “primary money laundering concern”
The scandal, which implicates organised criminals in Russia and China and interests connected to Venezuelan oil, has since felled the boards of both banks and resulted in a downgrade of Andorra’s credit rating.
The Bank of Spain, which last week took over the management of Banco de Madrid, said that the bank’s provisional administrators had made the decision to suspend the bank’s operations.
The Bank of Spain said in a statement on Monday:
“The decision is in response to the serious deterioration in Banco de Madrid, S.A.’s financial position as a result of the sizable withdrawals of funds made by customers and of the latest developments to come to light, which have affected the bank’s ability to duly meet its obligations.”
The Bank of Spain said an application for insolvency will “help ensure fair treatment for the bank’s depositors and for the rest of its creditors”. Deposits of up to €100,000 per client are guaranteed under the Deposit Guarantee Scheme for Credit Institutions, the Bank of Spain added.
Banco de Madrid has around 15,000 customers, assets of €6bn and operates in 21 offices across Spain, a spokesperson for the bank said on Monday.
Andorra – a mountainous principality between France and Spain – had its credit rating downgraded to BBB by Standard & Poor’s. It had previously been downgraded in October last year, with the rating agency citing risks from the principality’s fast-growing banking sector.
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