Four Spanish savings banks agree to merger
Four regional Spanish savings banks said Wednesday they had agreed to merge ahead of a June 30 deadline to tap a government rescue fund aimed at shoring up the country's weaker banks.
In a joint statement Caja Murcia, Caixa Penedes, Caja Granada and Sa Nostra said the merger would create a lender with 73 billion euros (89 billion dollars) in assets, 1,703 branches and four million customers.
The new entity will be led by Caja Murcia which will have five seats on the new group's board, with four for Caixa Penedes, three for Caja Granada and two for Sa Nostra. Two more seats on the board will be for independents.
The announcement comes two days after Caixa Girona agreed to merge with Spain's largest savings bank, La Caixa.
Merger negotiations by troubled regional savings banks have gathered pace ahead of the expiry at the end of the month of the Fund for Orderly Bank Reconstruction set up last June after the Bank of Spain was forced to take over the running of savings bank Caja Castilla de la Mancha.
The rescue fund, made up of public money and other existing bank support funds, was capitalised initially with nine billion euros which can be increased 10-fold if necessary to help struggling banks merge with stronger rivals or restructure.
Last week the Bank of Spain tightened rules on provisions the banks have to make against impaired loans in what was seen as an effort to speed up the merger process by forcing lenders to clean up their balance sheets.
Under the new rules banks must make provisions for impaired loans within one year after arrears have emerged as opposed to between two to six years as was the case previously.
Spanish banks got off relatively lightly from the subprime mortgage crisis in 2008 as the country's strict regulations meant they did not invest heavily in the high-risk loans that hurt financial institutions elsewhere.
But many, especially smaller unlisted saving banks that are usually controlled by regional politicians and which account for half of total loans, were badly hit by the collapse of the country's once-booming property market, both through loans to developers and mortgages.
© 2010 AFP