Andorra Announces Plan to Establish “Bad Bank” in Response to Banca Privada d’Andorra Scandal
Andorra La Vella, Andorra (Reuters) - In an effort to distance itself from the latest financial scam involving Banca Privada d’Andorra (BPA) and restore its reputation in the global banking community, the Andorran government announced plans to establish a “bad bank” on February 25, 2023.
Seizure of BPA and Government’s Response
The micro-nation, known for its financial services, seized control of BPA earlier this month following a U.S. Department of the Treasury announcement that the bank had been used as a conduit for money laundering by international criminal organizations.
Government spokesman Gilbert Saboya confirmed that they are implementing a good bank/bad bank structure to segment the lawful operations of the bank from its illicit dealings.
Upcoming Legislation and Possible Outcomes
The Andorran government intends to pass legislation next week to fast-track the resolution of the BPA debacle. The potential outcomes for the bank may include:
- Selling off assets
- Resuming business operations
- Liquidation
Financial Implications and Government Assistance
Standard & Poor’s, a leading credit rating agency, had previously warned that the issues plaguing BPA—which represents approximately 20% of all assets and liabilities within the Andorran banking sector—could jeopardize the nation’s finances.
To help alleviate the immediate financial hardships faced by BPA’s corporate clients, the Andorran government recently approved a credit line of up to 100 million euros ($108 million) to help cover their operational expenses such as employee salaries.
Restrictions and Detainment
State-appointed administrators at BPA have imposed restrictions on cash withdrawals. The former bank CEO has been detained on suspicion of money laundering.
Isolated Incident or Wider Issue?
Despite the gravity of the situation, Andorra continues to affirm that BPA is an isolated incident. However, Banco Madrid, BPA’s Spanish division, had filed for bankruptcy earlier in February.
(Writing by Sonya Dowsett; Editing by Mark Potter)