The Spanish state was forced to step in to prevent the bank's collapse and then to borrow 41 billion euros from the EU to keep Spain's banking sector afloat.
The 69-year-old Rato, head of the bank at the time, is accused of falsifying the books and fraud to the detriment of investors. The trial is expected to last at least seven months, until the end of June.
A total of 35 people and companies including Bankia, its parent company BFA and Deloitte consultants are on trial.
Prosecutors are seeking a five-year jail sentence for Rato, who is already serving four-and-a-half years in prison for misusing funds when he was the boss of Caja Madrid, another bank, and of Bankia between 2010 and 2012.
'Delusions of grandeur'
The image of a smiling Rato ringing the bell and sipping champagne on July 20, 2011 to mark the start of Bankia's listing has since become a symbol of the scandal.
More than 300,000 small shareholders had bought share packages for a minimum of 1,000 euros ($1,100), attracted by a major advertising campaign and the profits boasted by the bank.
But in 2012, after a disastrous year that saw its share value drop, the bank admitted that the year it listed it had actually made a loss of close to three billion euros. That forced the state to nationalise the bank to save it from bankruptcy by injecting more than 22 billion euros into Bankia. That in turn prompted an EU rescue plan for Spain's banking sector.
The results presented to investors had been “completely false,” investigating magistrate Fernando Andreu wrote in a court document. He said the moment when the bank recognised it was in difficulty brought to an end “the dreams and delusions of grandeur of the entity”, born in 2010 through the fusion of struggling savings banks.
For its part, Bankia said it had handed back 1.9 billion euros to more than 220,000 small shareholders since 2016.
“For us, that doesn't settle the incredibly serious fraud that was committed,” said Fernando Herrero, secretary general of the Adicae association of bank users, a plaintiff at the trial.
The state, which still owns 61 percent of Bankia and should in theory privatise the bank again, has recognised several times that it won't be able to recover much of the money it disbursed.
Series of scandals
“The listing of Bankia was a kamikaze operation,” said Ernesto Ekaizer, a journalist who wrote a book on the affair.
He says regulation authorities such as the central bank are also responsible, accusing them of ignoring the whiffs of financial crisis that were coming their way.
Generally speaking, Bankia has become the symbol of financial excess at a time when Spain was in deep recession after a housing bubble maintained by multiple bank credits burst.
In the first scandal to go to trial, Rato and dozens of other former executives and board members were found guilty of having paid for personal expenses with credit cards put at their disposal by both Caja Madrid and Bankia.
They were accused of misusing 12 million euros between 2003 and 2012, spending on fuel for their cars, supermarket shopping, pricey holidays, luxury bags, and parties in nightclubs.
Rato was sentenced to four and a half years in jail for embezzlement. The former economy minister is also accused of tax fraud in a separate case.