Bank of Spain takes over management of Church-run savings bank
The Bank of Spain said Saturday it was taking over the running of a regional savings bank controlled by the Roman Catholic Church after it experienced financial difficulties.
The Spanish central bank said it was replacing the directors of southern-based Cajasur after the failure of a plan to merge it with another savings bank, Unicaja.
Cajasur would be managed by representatives of an offshoot of the Bank of Spain, the Fund for Orderly Bank Reconstruction (FROB), it said, citing "problems of viability and the impossibility of finalising the merger with Unicaja."
The Bank of Spain had given Unicaja and Cajasur until midnight Friday to conclude a deal, voicing exasperation at the slowness of negotiations which had begun in December.
Cajasur management, headed by a priest, Santiago Gomez Sierra, said the plan had failed, blaming union resistance to staff cuts.
Cajasur chalked up losses of 596 million euros en 2009 and 114 million in the first quarter of 2010. According to the national daily El Pais it was facing bankruptcy, and Spain's national radio said the central bank could inject as much as 550 million euros into Cajasur immediately to keep it afloat.
Press reports said problems with the merger plan included salary differences between Cajasur and Unicaja, and distrust in Cajasur of Unicaja boss Braulio Medel.
Without giving a figure, the central bank said Saturday the FROB had ample funds and would provide "the capital resources necessary to ensure that (Cajasur) attains the minimum level of solvability."
While Spain's major banks have generally weathered the storm of the global financial crisis, the regional savings banks, often run by municipal authorities, have been weakened by the fall in property prices and the increase of bad debts.
In March last year the central bank had to rescue the bank of Castilla-La Mancha serving the region southeast of the capital, and in November Bank of Spain governor Miguel Fernandez Ordonez said at least 15 such banks would have to merge in order to survive.
© 2010 AFP