Spain says to 'speed up' savings banks reform

23rd January 2011, Comments 0 comments

Spain said on Sunday it will "speed up" reforms this week of its troubled regional saving banks, a major cause of concern over public finances amid the ongoing eurozone debt crisis.

The coming week will be "very important" for the Spanish economy because the government will "speed up" financial reforms, including "fundamentally, savings banks," Deputy Prime Minister Alfredo Perez Rubalcaba said during a meeting of the ruling Socialist Party in the central city of Guadalajara.

He did not elaborate, but on Friday Rubalcaba had announced plans for a shake-up "to increase the solvency and the credibility of the savings banks."

Spain's main banks got off relatively lightly from the sub-prime mortgage crisis in 2009, as the country's strict rules meant they did not invest heavily in the high-risk loans that hurt financial institutions elsewhere.

But many smaller unlisted saving banks, usually controlled by regional politicians, were badly hit by the collapse of the country's once-booming property market, both through loans to developers and mortgages.

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.

But markets remain nervous over the health of the regional banks, known as cajas, which account for about half of all savings in the country.

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.

A report in Spanish daily El Pais on Friday said there was some internal wrangling in the government over the next step for the savings banks, with the finance ministry arguing there was no need for legislative changes but the prime minister's office and the Bank of Spain in favour.

© 2011 AFP

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