Spanish Banking Restructure
April 24th, 2009
- Spain says restructuring to strengthen banking system
- Spain’s banks at disadvantage, savings bank head says
- CECA sees more bailouts after Caja Castilla
- Banking association head calls for capital injections
Spain’s government on Wednesday said it would restructure the Spanish banking system as one lobby group warned of “catastrophic” risks without contingency plans to deal with further bank bailouts.
“We shall start a process of restructuring with them (credit institutions) to strengthen the system,” Economy Minister Elena Salgado said on Wednesday in the Spanish parliament.
The government must move quickly to set up a fund to bail out troubled financial institutions and should expect to have to intervene again in the sector, the head of savings bank association CECA said at a banking conference in Madrid.
Spain’s banks have so far largely avoided writedowns due to their limited exposure to toxic assets.
CECA chief Juan Ramon Quintas said this was no reason for them to miss out on state help, if necessary, to put them on a level footing with foreign rivals.
“It would be a great shame if the best prepared system finds itself in a worse condition than its competitors from countries that have helped their institutions,” Quintas said during a conference.
The banking system needs to be restructured if it is to compete with foreign rivals that have been recapitalised after state intervention, said the chairman of the Spanish Banking Association Miguel Martin at the same conference.
“Our competitors have been capitalised without need to restructure, which has allowed them to capture resources at an advantage,” Martin said.
“Under these conditions, the system will have to be restructured … so it may be strengthened, made more efficient and remain competitive,” he said.
In March, the Bank of Spain was forced into a bailout of savings bank Caja Castilla la Mancha, backed by 9 billion euros ($11.6 billion) of guarantees. Quintas said further rescues were likely. “Other interventions will probably be necessary,” CECA’s Quintas said.
The Bank of Spain denied a report on Wednesday in the El Economista newspaper that it had drawn up a list of seven savings banks which would need restructuring.
Further afield, Germany expects a plan for dealing with its banks’ toxic assets to be in place by summer, senior ministers said after a meeting of policymakers on Tuesday.
In March, the U.S. government offered incentives for private investors to help rid banks of up to $1 trillion in bad assets, and in February Britain launched a 500 billion pound ($725 billion) scheme to cover banks against losses on risky investments.
Credit quality at Spain’s savings banks, which are not listed and have few opportunities to raise capital, has deteriorated rapidly and some analysts believe sector recapitalisation could cost as much as 60 billion euros.
Quintas said last week the creation of a fund to aid the Spanish financial system, hard hit by the economic slump and collapsing property prices, could be just weeks away.
Salgado told Parliament on Wednesday any restructuring would involve a minimal cost to state coffers.
According to the opposition Popular Party, the government has already rejected a Bank of Spain proposal which included a call for the creation of a fund to help troubled banks.
“Before Easter, the Bank of Spain sent a proposal on the savings banks but it was rejected by the then Economy Minister Pedro Solbes. Since the new Minister (arrived), we’ve heard nothing from the government,” said opposition lawmaker Alvero Nadal Belda.
Story from Reuters
Related Posts
- Spanish Banking Breaking Down
- Zapatero: Banking Support, Not Nationalisation
- Spanish Banking Services for Foreign Residents
