Spain prepares new plan to help savings banks

21st January 2011, Comments 0 comments

The Spanish government said Friday it is drawing up a new plan to restructure the country's regional savings banks, the weak link in its banking system and a major cause of concern over the public finances.

The government is preparing a plan "to increase the solvency and the credibility of the savings banks," Deputy Prime Minister Alfredo Perez Rubalcaba told a news conference following a cabinet meeting.

The plan is being drawn up in conjunction with the Bank of Spain and the association of regional savings banks, with the details to be announced once it is finalised, said Rubalcaba, who is also interior minister.

Spain's regional savings banks, which account for about half of all savings in the country, loaned heavily to the property sector before the housing bubble collapsed in 2008 and plunged the country into recession.

All eight major Spanish banks passed European Union bank stress tests conducted in July on their ability to weather a crisis but five out of 19 regional lenders examined failed.

Forty regional banks, from a total of 45, are now in the process of merging or forging operating alliances as part of a restructuring led by the Bank of Spain.

European Union finance chiefs, prompted by Ireland's banking catastrophe, promised this week they would soon launch new, more stringent tests across the bloc to check bank liquidity levels.

© 2011 AFP

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