Aristóbulo de Juan has just turned 93  He has been the Director General of the Bank of Spain and is the author of four books on banking as an expert international banking analyst. His clarity in recalling details from his time at Banco Popular and his close relationship with its president, Luis Valls (LV), is remarkable. He worked for the entity from 1962 to 1978, long enough to deeply understand Valls’ personality and management style. Aristóbulo de Juan believes Valls was a shy, bold, distrustful, controlling, enigmatic person, a great strategist and visionary, and a pioneer in banking management practices, such as transparency. Banco Popular was one of the first to publish the Annual Report before it was mandatory. According to the veteran banker, Valls participated in political life, promoted the transition, and advocated for the legalization of the Communist Party, later transparently financing all parties. He feared the bank’s nationalization, which did not happen. He turned a small cooperative-origin bank into one of the seven significant banks and achieved leadership in profitability. With his flaws and virtues, he is considered the soul of Banco Popular, where he always had unquestionable moral authority for over 40 years.

Question. You knew Luis Valls for 16 years while working at Banco Popular. How would you describe his personality?

Answer. To understand his style of management at the bank, it is important to explain his personality because it imbued all his work. Luis Valls was born in 1926, the same year Banco Popular was founded, as if he were predestined. From his youth, he belonged to Opus Dei. Like a true Gemini, he had a dual personality. He was timid and used his boldness to compensate for this shyness. He had an indirect way of saying things, making him very enigmatic. Sometimes, I had to interpret his words to his brothers, who were both bank executives, because it wasn’t easy to understand what he wanted to say. Of course, he had a unique and original personality. He was very austere in some aspects, as is reflected in his residence room, which was like a monk’s cell with barely any furniture and just a small window. However, at the bank, his office was spacious, with an area to watch TV, a library, and a large wooden meeting table. His desk was always full of papers. There was even a pool on the top floor of the Beatriz Building in Madrid, although I doubt if he used it.

Q: Valls’s years in charge of Banco Popular were politically complicated. He created legal protection systems to avoid unwanted entry into the entity; is that correct?
A: Yes, another characteristic of his personality was his great distrust. He always feared a nationalization of the banks or that, for political reasons, the Bank of Spain, which had competent people but with socialist leanings, would treat him more harshly than other banks. But he also feared that one day, some shareholders would turn against him or that, within the bank, a group of employees would conspire against him. That distrust led him to create a defensive structure. He listened to many people before deciding but did what he thought was best, even if some, like his brother Javier, co-president of the entity, didn’t like it.

Q: During Felipe González’s mandate, do you think Banco Popular had a tough time because it was considered an entity linked to Opus Dei?
A: Among the left, it didn’t raise much sympathy, a sentiment that for Luis Valls was embodied in the governor of the Bank of Spain, Mariano Rubio. That’s why he embarked on improving the entity’s image, becoming an example of a bank that rigorously followed the sector’s rules and was enviablely profitable.  Executives from other sectors who were unrelated to Opus Dei, joined the bank, including the six CEOs who continued after Rafael Termes left.

Q: How was your personal and professional relationship with Valls?
A: It was a close and very personal relationship, but that doesn’t mean he never showed his distrust towards me because, he sometimes suspected the people around him. Some top executives he trusted betrayed him, which exaggerated his natural distrust.

Q: How would you evaluate the trajectory of Banco Popular’s former president?
A: His personality left an indelible mark on the bank and the sector. He joined Banco Popular in 1958 and left in 2004. During those years, the bank went from being a modest entity with no national relevance to being one of the seven central banks. He made it the most profitable bank in Europe during the 1980s. He had a natural authority that made it easier for him to lead. He was executive vice president from 1960 to 1972. When President Camacho died, he didn’t want to be named president. However, the board and his entourage made him see that it was necessary to recognize the evidence of his presidency legally.

Q: Was he a strategist with a vision for the future?
A: Yes, he always saw further than others; he was a great strategist. He also had a lot of good information about economic and political matters. For example, in 1973, a small group of executives met at my house in Buitrago, Madrid, for three days. He held these types of meetings frequently. At that time, the oil crisis had broken out, and he already foresaw that the abundance of petrodollars would cause a massive international crisis in the markets, which is what happened. He asked us, “What will we do when this happens?” He was obsessed with balance sheet equilibrium, the proportion between loans and deposits. The loan portfolio volume shouldn’t be greater than the deposits. Against those who maintained the thesis of growth for growth’s sake, at any cost, Valls was in favor of profitability, even if it meant growing less; he didn’t want to aim to increase the bank’s size because he believed that excess liquidity unbalanced the balance sheet and led to a loss of the sense of risk.

Q: According to you, his distrustful nature presided over many of his actions and led him to be protective by building a security structure. Could you describe this structure?

A: In the late 1950s, Luis Valls, barely over thirty old, came to the bank from a position of power; he managed to group 32% of the shares in a holding company that he later merged with the Syndicate, which had the core shareholders. The Syndicate was a pact signed by the signatories that committed to supporting the agreements proposed by the board at each general meeting. In return, they were informed of the content beforehand.

Later, he established the General Fiduciary Society, whose shares had to be subscribed by Banco Popular and the group’s financial company. Their presidents committed to submitting major decisions for prior approval, which would then be taken to the boards. It was like a vaccine against surprises.

He also created “popularises,” five holding companies legally detached from Banco Popular, which bought Banco Andalucía, Banco de Vasconia, Banco de Galicia, etc. They weren’t subsidiaries to avoid being nationalized along with Popular if it came to that. Each of these five holding companies had its shareholders and boards of directors in proportion to those in Popular, but formally, they weren’t consolidated with Popular.

Q: Do you think Valls liked controlling information inside and outside Banco Popular?
A: Yes, he had an excessive fondness for information, which made him the best-informed bank president in Spain. He also controlled what happened in the entity: the group’s general managers had to send him a note with the names of the people they met daily, the topics discussed in meetings, and their duration. He made his own note.

Q: How do you think Valls’ banking vocation arose?
A: He entered banking to have a voice in Spanish political life. He created Esfina, a holding company from which he gathered money from the Catalan bourgeoisie and the environment of Opus Dei until he reached 32% of the bank. With that capital, he took control of Popular.

Q: Was he a respected president in meetings of the seven central banks?
A: Once he placed Popular among the seven central banks, he always attended the luncheons of the seven central banks, which met once a month at the headquarters of the largest bank, which for many years was Banesto. He managed to get there and was closely listened to and respected because he had good judgement.

Q: In what areas was he a pioneer?
A: In internal transparency, for example, in publishing the Annual Report years before it was mandatory. He relied on Manuel Martín to explain in detail to analysts and journalists how the bank was doing. He also created the Annual Repertoire of Topics, where he described the bank’s problems during the year.

Q: You said he was interested in participating in political life. Through what means did he do this?
A: He was very active in the political transition from Francoism to democracy. He had a good relationship with the Royal Household, with Don Juan, the father of King Juan Carlos. In this area, he also used his ability to foresee the future. That’s why he wanted to somehow enter public life by creating FACES, Promotion of Cultural, Economic, and Social Activities, a sort of political club, where he got people of all colors to join – from Antonio Fontán, whom he made director of the recently purchased newspaper Madrid, José Nicolás de Urgoite, director of El Sol during the Republic, to the Marquis of Valdeiglesias, who was conservative, as well as figures from the left.

Valls influenced the appointment of the so-called “technocrats,” the Opus Dei ministers who piloted Spain’s economic opening up in Franco’s last years. He also promoted the legalization of the Communist Party, which seemed like a mortal sin to some, after advocating for the return to Spain of Dolores Ibárruri, La Pasionaria, its mythical figure. As I said, in the first general elections, Banco Popular financed all political parties, including those on the left, and Luis Valls had good relations with Comisiones Obreras, especially with Antonio Gutiérrez.

Q: What is your opinion about the social action created by the then president of Banco Popular?
A: It was an effective system through several foundations that were nourished by the statutory emoluments of the directors, who were “induced” by Valls to waive their rights. According to the bank’s statutes, the council’s remunerations were 10% of the profits. No one ever refused. They focused on helping needy people and religious orders, which no bank would lend to, and Popular did so without charging interest. In some cases, he obtained the collaboration of the Episcopate and the social work of Caja Madrid.

Q: How was Valls’ relationship with unions and workers?
A: Sometimes there were complaints because Popular’s salaries were meager, among the most modest in the sector. We worked at the bank because we liked the criteria applied, but not for the wages. It also had to do with the unique charm that emanated from Valls’ personality. He looked at you, and you were convinced.

Q: How did you join Banco Popular?
A: In 1962, when I was working at an international organization in Brazil, the Director of Personnel at Banco Popular, who had been a colleague of mine, called me. He was impressed that I had learned English without traveling to England and had an international career. I had lunch with Luis Valls, during which we didn’t talk about banking or Popular. I doubted that I would fit in at the bank because I wasn’t an economist but a law graduate. Still, they proposed creating a consulting subsidiary of Banco Popular dedicated to economic studies, and I accepted.  According to Valls, the vital thing was personality. Three years later, in 1965, I was appointed assistant to the president. I remember that many days, in the late afternoon, around seven, Luis Valls would drop by my office and would unburden himself about the various problems, expecting a reasonable opinion from someone inexperienced in banking.

Q: Why did you leave the bank?
A: In 1962, I joined the group, and in 1978, from the various positions I held, I served as a bridge between the disparate policies of Luis Valls and Rafael Termes, which created numerous difficulties for me. In 1974, I was appointed Director General, leading the proponents of profitability against the “passivists” or those who advocated growth even at the expense of reduced profitability; in the sector, growth was seen as a symbol of good health and leadership. Between the animosity of the “passivists” and the latent enmity of Termes, my life wasn’t easy.

In 1975, the banking crisis broke out, and in 1978, the Bank of Spain asked banks for candidates to lead a cleanup of the system. To the surprise of Popular’s leadership, I offered my services for that task, and the Bank of Spain chose me. Thus, I was appointed president of the Banking Corporation and Secretary General of the Deposit Guarantee Fund until 1982, when I was appointed Director General of Supervision of the Bank of Spain. I was at the Bank of Spain until July 1986, when I was appointed Financial Advisor to the World Bank. Since 1989, I have had my consulting office in Madrid and have written four books on troubled banking.