Paper: Central Bank approves Galicia bailout

The three families that control Argentina's largest private bank Banco Galicia will step down as part of a Central Bank-approved rescue plan to save the ailing bank from bankruptcy, Argentine daily Clarin reported. The total rescue package adds up to some US$1.2bn with one third coming from banks in Argentina, US$400mn from the international creditors, and a similar amount from Argentina's deposit insurance fund Sedesa. The bailout also includes the departure of the three owner families Escasany, Ayerza and Braun from the Galicia board. The families controlled the bank through local financial group Grupo Financiero Galicia (Nasdaq: GGAL). Galicia vice-chairman Antonio Garces will take over as chairman and three foreign creditors (banks) will put their men on the board together with professional local administrators. Galicia was one of the banks hardest hit by the deposit outflow that took place prior to a partial deposit freeze imposed on December 3, 2001, by former president Fernando de la Rua. Local press reported on Thursday that a group of 20 banks in Argentina had agreed to save Galicia in exchange for the better parts of Galicia's loan portfolio. Escasany's abdication would herald "the end to Argentina's last local banking dynasty," Clarin said. Escasany is also chairman of Argentina's association of private banks ABA and has been the poster boy of Argentine banking for many years. Escasany prided himself in the fact that Argentina's largest private banks remained in local hands despite the presence of large international players in Argentina. However, that dream of a local bank retaining a leadership position in Argentina's financial system over Spanish, UK, and US-based financial groups appears to be fading fast.