What’s the deal with the Bankia bank run?

I find it a bit bizarre that everyone is freaking out about Bankia, when it is probably better capitalized than most banks in Spain. Remember that “Bankia” consists of two parts, a holding company BFA, which owns an enormous pile of steaming shit plus 45% of Bankia SA (the publicly trade company) stock. This was the split that made the IPO possible.

Note that the deposits are held by Bankia SA so even if BFA is completely nationalized, broken up, goes bankrupt, or gets expropriated by some random South American country, this just changes the ownership of the 45% stake in Bankia SA, but doesn’t mean that the parent company can go reach into Bankia SA and start taking stuff.

Of course, if Bankia SA did anything really stupid, like lend money to BFA or guarantee any of its debts, then they’d be in trouble, but as far as I know, nothing like that has happened.

So why the panic? The government is not really doing itself a favor by not clearly drawing a line between BFA and Bankia, and since investors are not entirely stupid, you start to wonder what’s going on behind the scenes.

If it turns out that Bankia (excluding BFA) is actually in such bad shape, you’d wonder what the rest of the Spanish banks must be hiding, since during the carve up of BFA and Bankia, Bankia got all the good stuff.