BBVA honorary chair Gonzalez quits to limit spy probe impact ahead of AGM

* Gonzalez quits for now as honorary chair of foundation

* Shareholders expected to express discontent at AGM (Adds quotes from the letter sent by Gonzalez)

By Jesús Aguado

MADRID, March 14 (Reuters) - Former BBVA head Francisco Gonzalez said on Thursday he would temporarily step down as honorary chairman to avoid any harm to the Spanish bank's reputation during an inquiry into alleged spying.

Gonzalez announced his decision a day ahead of BBVA's annual shareholders meeting in a letter to the board and addressed to Carlos Torres, his successor as the bank's executive chairman.

The veteran banker, who is known widely in Spanish business circles by his initials "FG", also resigned temporarily as honorary head of BBVA's foundation.

"In order to avoid the use of my person to harm the entity, I have decided to temporarily leave my positions in the foundation and the bank while investigations are ongoing", Gonzalez said in the letter, which was seen by Reuters.

The inquiry is related to contracts with a jailed ex-police chief, Jose Manuel Villarejo, whom news reports said the bank hired to spy on top executives of a potential buyer, construction company Sacyr, in 2004 when Gonzalez was BBVA's executive chairman.

The bank has officially acknowledged that it hired Grupo Cenyt, a security firm owned by Villarejo who was arrested in 2017 as part of a separate investigation and remains in jail.

Torres, who replaced Gonzalez as executive chairman in January, has said that Cenyt provided various services to BBVA, but that the bank had found no evidence of spying.

In his letter, Gonzalez said he had ordered the internal investigation into BBVA's relationship with Villarejo in June 2018 to ensure that the bank had complied with the law and transparency rules.

Gonzalez said that among the biggest challenges that BBVA faced when he was at the helm was the "attempt by Sacyr to take over the bank with the inexplicable collaboration of the government, which did not come to the rescue of the institution as it should have done".

The European Central Bank (ECB) has recently expressed concerns over press reports that BBVA hired Villarejo to investigate executives of Sacyr and senior government officials as part of efforts to stop a takeover bid by the company.

The alleged spying case is not on the agenda of Friday's shareholders meeting, but the Spanish Association of Minority Shareholders (AEMEC), expect investors to voice their concerns over the reputational damage to the bank.

Gonzalez, who began his professional career in 1964 as a programmer, became chairman of Argentaria in 1996 before it merged with BBV in 1999, and has been widely credited as being behind the bank's digital transformation.

His resignation as honorary chairman has to be signed off by BBVA's board ahead of the shareholders meeting. (Editing by Ingrid Melander and Alexander Smith)

First Published: 2019-03-14 19:42:40
Updated 2019-03-14 20:42:36

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