Bancaja joins Spanish savings bank merger talks

10th June 2010, Comments 0 comments

Spanish savings bank Bancaja said Thursday it is was talks to merge with its bigger peer Caja Madrid, which in turn is negotiating a merger with five other lenders.

If the six were to merge they would create the country's biggest savings bank by assets, surpassing Barcelona-based La Caixa.

The board of Valencia-based Bancaja, the country's fourth largest savings bank by assets, will meet later on Thursday to discuss the possible tie-up, it said in a statement.

The merger would be a so-called "cold fusion" or "virtual" merger where each bank would keep its own brand, balance sheet and legal structure but monitor solvency and liquidity centrally under a single management.

Many of Spain's 45 regional savings banks have been exposed to bad debt following the collapse of the property sector at the end of 2008 and the Spanish government has encouraged their consolidation in order to maintain liquidity.

The Bank of Spain's proposal to tighten rules on provisions the lenders have to make against real estate on their balance sheets has added to pressure on regional savings banks to merge.

The pace of merger talks picked up following the central bank's move to take control of troubled regional savings bank CajaSur last month.

The approach of a June 30 deadline to tap a government rescue fund aimed at shoring up the country's weaker banks has also acted as a catalyst for mergers.

© 2010 AFP

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