A Spanish court has ordered former IMF head Rodrigo Rato to stand trial for fraud over the failed 2011 listing of Bankia, a bank he presided over before it had to be bailed out by the state.
Rato, a former Spanish economy minister, is accused of falsifying information about Bankia's finances to encourage investors to buy into its stockmarket listing.
He will stand trial along with more than 30 other former Bankia executives for investor fraud, and for falsifying 2010 and 2011 accounts, Spain's High Court said in its Friday ruling.
Bankia was bailed out in 2012, less than a year after it was listed on the stockmarket, and tens of thousands of small investors who had converted their savings into shares promptly lost everything.
The near-collapse of Bankia came perilously close to bringing down Spain's entire financial sector, which was bailed out later that year by international creditors at a cost of US$48 billion.
Last year, the Supreme Court ruled that "serious inaccuracies" in the information provided by Bankia had misled investors.
Public prosecutors have asked for Rato, 68, to be given a five-year jail sentence. They argue that as the bank's "main executive" he was "fully aware of the inconsistency of the Bankia project and of its financial weakness" but still gave the green light for the listing.
The court will also put Bankia itself on trial, as well as its parent company, BFA.
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Bankia was created by merging seven regional savings banks, part of a financial sector shake-up brought on by the collapse of a construction boom that dragged Spain into recession.
Last year, the bank said it had paid out 1.2 billion euros in compensation to 190,000 small investors, but still had about 30,000 claims pending.
Rato was sentenced in February to four years and six months in a separate case for misusing funds when he was the boss of Bankia, and Caja Madrid before that.
Rato and the other executives were charged with putting personal expenses on credit cards given to them by lenders, without ever declaring those expenses – including petrol, groceries, holidays, luxury bags and nightclub excursions – to tax authorities.
The case caused outrage in Spain when it surfaced at the height of a severe economic crisis that left many people struggling financially, their plight made all the worse when Bankia later had to be nationalized.
Rato has denied any wrongdoing and said the credit cards were for discretionary spending as part of executives' pay.
He served as economy minister and deputy prime minister in the conservative government of Jose Maria Aznar from 1996 to 2004, before going on to head the International Monetary Fund until 2007.