April 12 (Bloomberg) -- Spain will adopt European recommendations for what constitutes banker “honor,” handing the Bank of Spain the task of deciding whether Banco Santander SA Chief Executive Officer Alfredo Saenz can stay in his job.
The Bank of Spain will take into account the professional career of bankers as well as convictions for intentional crimes when evaluating the “honor” of bankers, the Economy Ministry said today in an e-mailed statement. In doing so, Spain is applying recommendations of the European Banking Authority, the Madrid-based ministry said.
The decision may give the Bank of Spain more room to maneuver as it examines cases such as that of Saenz, the CEO of Spain’s biggest bank, because it adds new elements to the criteria for determining banker “honor.” The regulator said last month it was reviewing whether to disqualify Saenz from banking after a ruling by the Supreme Court that a government pardon granted to him in 2011 went too far by stating that a criminal record didn’t affect his ability to work in banking.
“The Bank of Spain will rule on Saenz -- it’s not possible to prejudge whether the decree approved today will benefit him or not,” the Economy Ministry said in a statement sent by text message. The regulator wouldn’t be ruling “on a specific case,” it said.
Still, the decision may make it easier for the Bank of Spain to allow Saenz to continue in his post, said Jorge Soley, a senior lecturer in financial management at the Barcelona-based IESE business school. “It’s another sign that the Spanish regulator is becoming a branch” of the European Central Bank, he said in a phone interview.
According to existing regulations, “professional virtue” is a prerequisite for those working in banking and can be lost by anyone with a criminal record. Santander Chairman Emilio Botin told shareholders last month he saw no legal impediment to Saenz staying in his job.
A spokesman for Santander, who asked not to be identified in line with its policy, declined to comment. A spokesman for the Bank of Spain, who also asked not to be identified by name, declined to comment.
The legal proceedings involving Saenz have hung over the 70-year-old executive and Santander since 2009 when he was convicted in a case dating back to 1994.
The case related to a lawsuit stemming from Saenz’s tenure as chairman of Banco Espanol de Credito SA, a consumer bank that is being absorbed by Santander.
Banesto, as the lender is known, sued a group of businessmen to recover loans in 1994. The defendants filed counter-complaints of false accusation, which the judge decided to investigate, and Saenz was held responsible because he approved the filing of the initial lawsuit.
Former Prime Minister Jose Luis Rodriguez Zapatero granted Saenz a partial pardon in 2011 by commuting the jail term and threatened to suspend the maximum fine allowed under the law for the offense. The Supreme Court ruled in February that the pardon had gone too far by seeking to render invalid “derived effects” of the sentence, including “any impediment to exercise banking activity.”
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