Spain Requests Funds for Bank Recapitalisation

December 5th, 2012

The procedure for receiving funds to be used on recapitalising the financial sector in Spain concluded on Monday with a formal request for 36.97 billion euros for the four nationalised entities (BFA-Bankia, Catalunya Banc, NCG Banco and Banco de Valencia), as well as 2.5 billion euros to be used as a contribution from the Fund for Ordered Bank Restructuring (FROB) to the Asset Management Company for Assets Arising from Bank Restructuring (SAREB).

It is expected that Spain will receive these funds from the European Stability Mechanism (ESM) on or around the 12th of December.

This final part of the process began on 28th November, when the European Commission approved the restructuring plans for the financial entities comprising the so-called Group 1 (i.e. the nationalised entities). The steps being taken will enable the injection of 17.96 billion euros into BFA-Bankia; 9.08 billion euros into Catalunya Banc; 5.43 billion euros into NCG Banco; and 4.5 billion euros into Banco de Valencia. The transfer will take place via five series of debt securities redeemable at maturity.

The Financial Assistance Agreement was signed on 29th November, and encompassed all the documents establishing the specific terms and conditions of the loan from the ESM to Spain. That same day, the European partners gave their approval for the scheduled transfer of funds. The Spanish Government newsletter, La Moncloa, reported that Friday’s meeting of the Council of Ministers was informed of the subrogation by the ESM of all the commitments made by Spain to the European Financial Stability Fund (EFSF) and that soon the ESM is expected to sign the acceptance of the request for funds.

Spain requested financial assistance from the Eurogroup on 24th June to recapitalise the Spanish banking system up to a maximum of 100 billion euros. A Memorandum of Understanding (MoU) containing a series of commitments was signed at the time. Those commitments are currently being met in accordance with the established schedule. They include the presentation of restructuring plans by the financial entities and the setting up of SAREB.

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