Customers with Banco de Madrid, which ceased trading on Wednesday, are only guaranteed €100,000 of their money back as, for the first time since the financial crisis began, Spain has applied the legal limit on deposit guarantees for insolvent lenders.
Until now, the authorities had opted to bail out struggling lenders using taxpayers’ money rather than let them fail. In 2012, the Rajoy administration requested assistance from a EU bailout fund to save lenders that had been hard hit by the collapse of the property market.
Banco de Madrid ceased operating earlier this week, and an interim management team sent in by the central bank has requested a creditors’ meeting in an attempt to prevent outright bankruptcy.
It is reported that around 14,000 clients hold a combined €600 million in Banco de Madrid, as well as around 27,000 customers who placed €1.5 billion in investment funds. All of these accounts are currently frozen.