BANKING REFORM

Bankia plans to lay off 5,000 workers and cut wages

Bank proposes capping compensation at 14 months’ salary

Nationalized bank Bankia has opened talks with labor union representatives on a restructuring plan that includes laying off 5,000 employees and cutting wages by between 40 and 50 percent.

Labor sources said Tuesday that the bank, which was taken over after coming unstuck due to its exposure to the ailing real estate sector, has initially proposed to pay workers who are sacked 22 days’ wages for every year worked, up to a maximum of 14 months. The labor reform introduced in February establishes compensation in the case of layoffs for economic or technological reasons of 20 days for every year worked up to a maximum of one year.

A CCOO labor union representative described the proposal as a “provocation, an unprecedented act of aggression and hardly a respectful way to start off talks.”

Bankia’s restructuring plan was approved by the European Commission at the end of last month. Bankia will receive almost half of the 37 billion euros Europe is to lend to Spain’s four nationalized banks to clear up their balance sheets. One of the conditions imposed by Brussels in exchange for the loan is that banks receiving funds have to reduce the size of their operations by 60 percent by 2017.

“Behind this measure is the philosophy that salary cuts should only be borne by the workers and not the managers,” the CCOO source said. “We believe this is a very risky position because it could entail an enormous conflict with workers.”

The 5,000 jobs to be shed would be at Bankia itself and its units Bankia Privada, Finanmadrid and Madrid Leasing. The bank could also sell off subsidiaries such as the Miami-based City National Bank of Florida to reduce its workforce.

Bankia Chairman José Ignacio Goirigolzarri said Tuesday that the bank would inform labor leaders about a definitive number of jobs to be shed after completing the process of externalizing some of its business. He said the maximum number of jobs that would go was 5,000.

Separately, the European Financial Stability Facility (EFSF) on Tuesday transferred the first tranche of the loan for the banking sector.

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