News Column

Spanish Banks Need Up to 59 Billion Euros

September 28, 2012
Euro Wallet

Spanish banks have recapitalization needs of up to 59.3 billion euros (76.7 billion dollars), according to a report presented by the Bank of Spain on Friday.

If ongoing mergers are taken into account, the needs will go down to 53.7 billion euros, according to the report, which the Spanish government had commissioned from the consulting company Oliver Wyman.

However, Spain's request for assistance from the eurozone may only total about 40 billion euros, since banks may try to obtain some financing on markets themselves, Economics Ministry official Fernando Jimenez Latorre said.

The eurozone has pledged up to 100 billion euros in aid for Spain's troubled banking sector. Funding for the request would come out of that pot.

The report covered 14 banking groups comprising more than 90 per cent of the Spanish banking system.

The neediest bank is Bankia, which is already being bailed out by the state, and requires 24.7 billion euros. CatalunyaCaixa needs 10.8 billion; NCG Banco 7.2 billion; Banco de Valencia 3.5 billion; and Banco Popular 3.2 billion euros.

Seven banks, including the top banks Santander and BBVA, do not need any aid. They represent 62 per cent of the sector in terms of their credit portfolio.

Press reports have said Madrid wants to use the remaining money for a European Central Bank market intervention to keep its borrowing costs in check. There would have to be a whole new process of approval for that, European Commission officials said earlier, stressing that the 100 billion euros were only earmarked for bank restructuring.

The fact that Spain will need 59 billion euros to recapitalize its lenders left the powerful president of the Eurogroup "comforted," as he deemed the bailout granted by the eurozone to be "more than adequate."

"It should ensure that the recapitalization process of banks can proceed efficiently and in accordance with previously agreed timelines," Jean-Claude Juncker said, noting that reforms demanded by the 100-billion-euro bank bailout would ensure "soundness and stability" in the banking sector.

The European Commission also welcomed the independent assessment of the banking needs as "a major step ... towards strengthening the viability of and confidence in the Spanish banking sector." It said the first recapitalizations are expected to happen by November.

The strengthening of the banking sector will "ultimately (be) crucial for a sustained recovery of economic growth and employment," the European Banking Authority noted.

The International Monetary Fund said it was confident that the recapitalization could be "financed comfortably" in the eurozone support programme.

Bank of Spain sub-governor Fernando Restoy said the ongoing reform of the Spanish banking system would make it "more efficient, solid, and contribute to improving the Spanish economy."

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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