Spain readies ‘nationalization’ of Cajas

The Spanish government is preparing a plan to outsource the control of the people’s banks by demanding larger reserves in a short period of time.  The result?  Banks will probably not make it and the government will ask foreign investors to take control of the Cajas.

AFP
March 6, 2011

Spain’s ailing regional savings banks are scrambling to raise billions of euros of fresh funds to meet strict new capital requirements by a Thursday deadline.

The country’s 17 savings banks, known as “cajas,” are weighed down by loans that turned sour after the collapse of a housing bubble in 2008 and are at the heart of fears the country could need an Irish-style international rescue.

Last month the government approved stricter rules on the amount of rock-solid core capital that banks must hold on their balance sheets, seeking to shore up confidence in the battered economy.

Under the new rules, savings banks must raise the proportion of core capital they hold to 8.0 percent of total assets from the current six percent, or 10.0 percent if they are unlisted.

The Bank of Spain will determine Thursday which savings banks have met the new core capital requirements and in the case of those that have fallen short, how much capital they need to raise to meet the new requirements.

Up to 11 of Spain’s 17 regional savings banks will need additional capital to reach the levels of solvency set by the government, the ratings agency Standard & Poor’s said last month.

The government estimates that all the savings banks will need to raise 20 billion euros to meet the new requirements, a figure many analysts describe as too low.

The state is threatening to take temporary stakes — a form of nationalisation — in those lenders that fail to abide by the new rules by September.

Credit rating agency Moody’s put a 50-billion-euro price tag Monday on the recapitalising of Spanish banks hit by the property market collapse.

“The government is trying to attract foreign investors for the cajas, so it is logical that it attempt to downplay the amount to make it more attractive,” said Gonzalo Gomez Bengoechea, a researcher at Madrid’s IESE Business School.

The government is encouraging the savings banks to recapitalize using private funds which gives them several options:

– selling assets;

– opening their capital to investors;

– listing on the bourse, which would require they become fully fledged banks.

Under pressure from the government, many of the savings banks merged last year, reducing their numbers from 45 to 17, to improve their efficiency.

Ten of these new savings bank groups have decided to transform themselves into banks, or are thinking of doing so, and of these five plan to list on the stock market.

Foreign investment funds — about a dozen according to Spanish media reports — as well as Spanish banks have shown interest in investing in the cajas.

BBVA, Spain’s second largest bank, has said it wants to “take advantage of opportunities” and “enter the game”.

Two regional Spanish savings bank groups, Caja Duero-Espana and Banco Mare Nostrum, are mulling a merger, Spanish media reported last week.

“Every move that can strengthen our project is welcome,” the spokesman for Caixa Penedes, one of the four banks that make up Banco Mare Nostrum, Alberto Puig, said when asked about the reports.

“Among the cajas, everyone is talking to everyone,” he added.

Another four savings bank groups have sold assets to raise their capital.

The Bank of Spain will allow cajas on a case-by-case basis until December to close stake sales to private investors and will give them until March 2012 to hold intial public offerings.

As Predicted, Spain on the Brink of Collapse

The tentacles of the international banking cartel are about to envelop the fifth most important economy of the old continent

The Independent

European leaders meet in Brussels today amid growing fears that Spain, Europe’s fifth-largest economy, is preparing to ask for a

The horns of the depression are in Spain's rearview mirror. An aid package is in the works to rescue one more failed State.

bailout which would dwarf the €110bn (£90bn) rescue plan for Greece.

The Spanish government yesterday dismissed reports that it was already in discussions with the European Commission, International Monetary Fund and the US Treasury for a rescue package worth up to €250bn.

Officials in Madrid, Brussels and Paris were forced to deny that a Spanish bailout – which would take the European debt and euro crisis into a potentially dangerous new phase – was on the Brussels summit agenda.

“Spain is a country that is solvent, solid and strong, with international credibility,” said its Prime Minister, Jose Luis Rodriguez Zapatero. The European Commission spokesman said: “I can firmly deny [that a Spanish rescue is under discussion]. I can say that that story is rubbish.”

Brussels diplomats have been at pains to send out feel-good signals ahead of a summit in which Europe’s leaders are supposed to take the first steps towards more disciplined and co-ordinated, control of national finances. Those reforms are meant to restore confidence in the euro and underpin the €750m EU and IMF safety-net, created last month for euroland countries that lose the confidence of the financial markets.

However, it is proving hard to shake off persistent market fears about Spain, which, if it needed a lifeline, would swallow up a large part of the emergency fund. Worryingly for the EU, the doubts about Spain – whether real or driven by speculation – are eerily similar to the gradual seeping away of confidence that sent Greece into a financial death spiral in March and April. The Spanish government’s cost of borrowing hit a new record yesterday. The interest rate gap, or spread, between 10-year Spanish bonds and their German equivalents, rose by more than 0.10 of a point to 2.23 percentage points.

A senior Spanish banker, Francisco Gonzalez, chairman of the BBVA financial services group, confirmed that foreign private banks were now refusing to provide liquidity to their Spanish counterparts. “Financial markets have withdrawn their confidence in our country,” he said. “For most Spanish companies and entities, international capital markets are closed.”

As a result, the European Central Bank is said to have provided record amounts of liquidity to Spanish banks in recent days. The closure of bank-to-bank credit to Spanish institutions recalls to some market commentators the ripple of crisis through the global financial system after the fall of Lehman Brothers in the Autumn of 2008.

The IMF chief Dominique Strauss-Kahn is expected in Madrid tomorrow to see Mr Zapatero – but brushed off speculation of a crisis. “It’s a working visit,” he told reporters in Paris. “I am in France [today] – are there such rumours about France?”

Fears over Spain’s finances checked the recovery of the euro on money markets yesterday. The single currency lost much of the gains it had made in the past seven days.

One of the proposals on the table at the Brussels summit is public “stress tests” to force banks to reveal the state of their books. The Spanish government offered yesterday to open the books of its own private banks unilaterally to prove that they were sound.

Today’s summit in Brussels was intended to be a time for the EU leaders to catch their breath and discuss ways of restoring the euro’s long-term credibility. The threatened Spanish crisis may blow all that out of the water.

Despite an apparent rapprochement between Paris and Berlin this week, President Nicolas Sarkozy and Chancellor Angela Merkel remain deeply divided on how to prevent the currency and debt crisis from dumping Europe back into recession. Mr Sarkozy has agreed to drop his proposals for new institutional machinery for a political “government” of the euro by its 16 member states. Ms Merkel prefers to talk of a vague “governance” of the euro, and European state spending, by all 27 EU governments.

More fundamentally, Paris is deeply concerned that the austerity plans announced by Berlin last week could – on top of budget cuts in other countries – plunge Europe into crisis.

The French fears were echoed yesterday by the billionaire investor, George Soros, who warned that Europe would almost certainly face a recession next year which might generate “social unrest” and the kind of populist nationalism seen in the 1930s. “That’s the real danger of the present situation – that by imposing fiscal discipline at a time of insufficient demand and a weak banking system… you are actually… setting in motion a downward spiral,” he said.

The collapse of Spain’s housing boom has helped fuel a deep downturn which has sent unemployment spiralling to 20 per cent, the second worst in the EU. Mr Zapatero introduced a range of measures last month, including spending cuts of €15bn over two years and reductions in public sector wages and spending. Unions have called a general strike over labour reforms.

Bolsa de España cae 6.64%

Las dudas sobre la recuperación de la economía europea y el retroceso de los mercados internacionales, entre otros factores, han provocado que el índice de referencia de la bolsa española, el Ibex-35, haya perdido 662,80 puntos, equivalentes al 6,64%. Se sitúa así en 9.314,70 puntos.

Terra.es

La bolsa española ha bajado en la jornada del viernes el 6,64%, lamayor caída desde octubre de 2008, y ha descendido hastbolsaa 9.300 puntos, afectada por las dudas sobre la recuperación de la economía europea, la ejecución de órdenes de venta automáticas y el retroceso de los mercados internacionales.

Así, el índice de referencia de la bolsa española, el Ibex-35, haperdido 662,80 puntos, equivalentes al 6,64 por ciento, hasta 9.314,70 puntos. Las pérdidas anuales crecen hasta el 21,99%, mientras que en la semana suben el 2,97%.

En Europa, con el euro a 1,239 dólares, nivel desconocido desde abril de 2006, poco antes del cierre de la bolsa española, Milán y el índice Euro Stoxx caían el 5,25%; París, el 4,8%; Fráncfort, el 3,75%, y Londres, el 3,4%.

Todos los grandes valores del Ibex bajaron: Banco Santander perdió el 8,98%; BBVA, el 7,58%; Iberdrola, el 6,69%, y Repsol, el 6,11%.

La Bolsa española acusaba poco después del mediodía lapresunta intención del Banco Central Europeo (BCE) de reducir los niveles de compra de deuda soberana de algunos países europeos y su principal indicador, el Ibex-35, perdía el 4,55% con los bancos sufriendo fuertes caídas. La presunta intención del BCE ha sido interpretada como un indicio de que reduciría las compras de deuda de países periféricos, entre ellos España.

Sin embargo, es posible que el BCE tenga que desdecirse y se vea obligado a comprar más deuda de la que en realidad quisiera. En opinión de Virginia Romero, analista de Ahorro Corporación, losvaivenes del BCE hacen mucho daño al mercado y resultan ‘poco apropiados’ en un momento en el que la recuperación de la confianza y la salvaguarda del riesgo soberano debe ser la principal prioridad.

Hasta las 12.15 el mercado continuo había negociado 130 millones de títulos por un importe de 1.197 millones de euros, de los que 321 correspondían al Santander, 235 a Telefónica, y 217 a BBVA.

En el mercado de divisas el euro marcaba su mínimo anual en su cambio frente al dólar y equivalía a 1,244 dólares.