Alexa

Spanish savings banks in 2nd restructuring

Spanish savings banks in 2nd restructuring

A second group of Spanish savings banks says it has begun work to merge operations and establish a new bank following pressure from the government for the troubled sector to raise more capital and reveal its exposure to bad debt with greater transparency.
Unnim, a Catalan-based group formed by Caixa Manlleu, Caixa Sabadell and Caixa Terrassa _ all savings banks or "cajas" _ said in a statement late Friday its board had agreed to begin the process of creating a listed bank.
The statement echoes a decision taken Thursday by La Caixa, the leading Catalan savings bank and one of Spain's most well-known financial institutions.
Spanish cajas have been required to raise more capital through listings or by attracting new investors after becoming exposed to bad debt when the country's real estate sector deflated.
Finance Minister Elena Salgado said Wednesday that cajas will have to meet a new core capital ratio of between 9 and 10 percent, although the final figure is yet to be defined.
Those levels are higher than the 8 percent requirement Salgado announced Monday for regular commercial banks, which alongside cajas have been operating on a capital ratio requirement of 6 percent.
The government estimates the banking sector needs (EURO)20 billion ($27 billion) in new capital to raise its ratios, a figure Salgado insisted was accurate despite misgivings expressed by some analysts who claim it is too low.
Banks and cajas have until late September to raise capital to meet the new required levels, and savings banks that fail to do so will be forced to list on the stock market from where the government will buy stakes in them in a process of partial nationalization.
The Bank of Spain has had to bail out two cajas, Caja Castilla-La Mancha and CajaSur, and many of the rest have been obliged to undergo a government-mandated merger process that has reduced their number from 45 to 17.
So far, the Bank of Spain has invested (EURO)15 billion ($20 billion) in re-capitalizing the cajas through the Fund for Orderly Bank Restructuring, a mechanism set up to aid such institutions.
Spain's large international banks, led by Banco Santander, S.A. and Banco Bilbao Vizcaya Argentaria S.A., have been posting profits and have withstood the international crisis thanks to strict regulations that had required them to set aside provisions during good times, as well as timely incursions into Latin American markets that have ridden the recession better than much of Europe.