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BANKING

Ex-IMF head Rato on trial points finger at Spain central bank

Former IMF chief Rodrigo Rato said Tuesday Spain's central bank knew all that was going on at Bankia as he testified for the first time in a trial over the alleged fraudulent listing of the bank he once led.

Published: 9 January 2019 10:16 CET
Ex-IMF head Rato on trial points finger at Spain central bank
Photo: AFP

The trial, which harks back to the years of Spain's economic crisis, is being closely followed with Rato as then Bankia chief accused of fraud and falsifying the books to the detriment of investors in the 2011 stock listing. 

In a court near Madrid, Rato. also a former economy minister who later headed the International Monetary Fund from 2004 to 2007, said Spain's central bank was fully aware of everything that went on in Bankia which had to be rescued by the Spanish state to prevent its collapse after it listed.

That in turn prompted the state to borrow 41 billion euros ($47 billion) from the European Union to keep the rest of Spain's banking sector afloat.   

“The Bank of Spain would tell us 'do this, do that',” said Rato, who prior to Bankia headed up Caja Madrid, which ended up merging with six other struggling savings banks to create Bankia in 2010.

“And if at some point we did something they didn't feel was good, it said no,” he said.

“During my two years and three months heading up Caja Madrid and Bankia, the Bank of Spain never warned me, orally or in writing, that we weren't respecting its recommendations,” Rato added.

A total of 35 people and companies including Bankia, its parent company BFA and Deloitte consultants are on trial in San Fernando de Henares.   

The image of a smiling Rato ringing the bell and sipping champagne on July 20, 2011, to mark the start of Bankia's listing has since become a symbol of the scandal.

More than 300,000 small shareholders bought share packages for a minimum of 1,000 euros, attracted by a major advertising campaign and the profits boasted by the bank.

But in 2012, after a disastrous year that saw its share value collapse, the bank admitted that in the year it listed it had actually made a loss of close to three billion euros.

That forced the state to nationalise the bank to save it from bankruptcy by injecting more than 22 billion euros into Bankia.   

Thousands of small-scale investors lost their money.

READ MORE: Ex-IMF chief Rato in dock again in major Spanish bank trial

BANKING

Card over cash? Why Germany is seeing a new payment preference

Cash has long been king in Germany, with many smaller retailers refusing to join the rest of the world in adopting contactless payment systems. But card-based payments are on the rise, as recent stats about Girocard use reveal.

Published: 13 February 2024 12:31 CET
Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year. 

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons. 

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26. 

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.”

With reporting by DPA

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