MADRID, March 22, (AFP): Every Thursday dozens of pensioners gather outside bailed-out lender Bankia in the Spanish capital with a simple demand: Give us our money back. The pensioners, and many thousands like them across Spain, say they unwittingly became holders of complex and risky “preference shares”, which their banks had assured were as safe as a savings deposit. Those preference share investments quickly became a costly trap. Spanish banks’ balance sheets were strewn with red ink after a 2008 property crash, forcing Spain to prop them up with 42 billion euros ($54 billion) in rescue loans offered last year by its eurozone partners.

As one of the conditions of extending the rescue funds, Brussels demanded that holders of preference stock share in their banks’ losses. “This is shameful! The government knows that Bankia has swindled pensioners,” said 70-year-old Antonio Rodriguez as he protested in Madrid’s central Puerta del Sol square outside a branch of the former savings bank Caja Madrid, which merged with six other regional savings banks to form Bankia in 2010. Rodriguez said he poured 72,000 euros ($93,000) into preference shares in Caja Madrid in 2009 after being told by his bank manager that it was a “safe” product that would deliver a 7.0-percent annual rate of return.

“If he had told us that we risked losing everything, we would never have signed,” he said. After Spain’s decade-long property bubble burst in 2008 sending the economy into a tailspin, savings banks sank into a sea of toxic property loans and they stepped up their marketing of preference shares as they tried to boost their solvency ratios to meet stricter regulatory demands. Nearly one million Spanish depositors, many of them pensioners, poured money — in some cases their entire life savings — into preferred shares issued by their banks, according to banking consumer association ADICAE.

“No other European country sold preferential shares to small savers. The pressure of the banking lobby in Spain is enormous,” said ADICAE spokesman Fernando Herrero. But as Spain’s economic downturn deepened, the value of the preferred shares plunged and it made it effectively impossible to resell them. Small investors bought 30 billion euros in preferred bank shares, which are not protected by the government’s deposit guarantee fund, according to ADICAE. Bankia, the largest of four lenders which the government was forced to nationalise, alone has 3.9 billion euros of preference shares distributed among tens of thousands of its clients while Banca Civica, which was bought by larger rival La Caixa last year, has 9.0 billion. “Bankers needed to take money where they could find it, which is in the hands of old people who are the biggest savers,” said 75-year-old Antonio Baraona Ortiz, one of the protesters outside of Caja Madrid in Puerta del Sol.

“I worked at night. We raised four children. We made a lot of sacrifices to save 68,000 euros and they have stolen it all,” he added. The European Union, which last year agreed to lend Spain up to 100 billion euros to help the country shore up its banks, has insisted that bank customers who bought preferred shares would have to absorb losses. Spain has so far received 41.4 billion euros from its euro zone partners to fix its troubled financial industry. Numerous legal cases have been brought by bank clients who allege they were sold risky products as secure deposits and some have succeeded in winning their money back.

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MADRID: The head of Spain’s main banking association said Thursday he had no fear of contagion from debt-hit Cyprus, which is fighting to avoid a banking meltdown. But Spanish Banking Association chairman Miguel Martin Fernandez criticised an initial plan to tax deposits in Cyprus bank accounts, a scheme that sowed near panic on the island. Investors have so far shown no sign of fleeing the Spanish debt market over concerns that the Cyprus turmoil could spread to other troubled euro zone states. “I have no doubt that Cyprus will not be made a precedent and there will be no contagion,” the Spanish banking association chief told a news conference.

“It does not make any sense for deposits in euros in a European bank, even if it is Cypriot, to be treated differently to deposits in any other European bank, even if it is in Germany,” he said. The Cypriot government was meeting Thursday to find a “Plan B” after lawmakers unanimously rejected the startling plan to impose a one-off levy on bank deposits in return for a 10-billion-euro ($13 billion) international bailout. The European Central Bank has warned it is ready to pull the plug on emergency funding for Cyprus banks unless the government clinches a bailout deal by Monday. Despite the Cyprus worries, Spain’s borrowing costs dipped in a bond auction Thursday.