Spain's rescued Banco de Valencia says needs 562 mn euros

23rd November 2011, Comments 0 comments

Rescued Spanish bank Banco de Valencia said Wednesday it needs at least an extra 562 million euros ($870 million) to cover its exposure to stricken property assets.

The small lender, taken over Monday by the Bank of Spain, said its accounts showed it needs the extra money to cover for the asset risk, and the shortfall could be even bigger when a full analysis is complete.

The bank's accounts have "a deficit of provisions amounting to a gross amount of 562 million euros" for risks on certain assets, it said in a statement to the Madrid stock exchange.

"This deficit could be bigger" if other potential losses are found on further inspection, it added.

The central bank said Monday it was injecting a billion euros ($1.3 billion) via a public rescue fund into Banco de Valencia and opening a two-billion euro credit line to the troubled lender.

It was the fourth Spanish bank to be bailed out amid instability in a sector that was heavily exposed in a real estate bubble that burst in 2008.

"These measures aim to stabilise and guarantee the normal operation of Banco de Valencia so that it can meet all its obligations," the bank said.

The stability of the banking sector is one of the biggest concerns for the international markets that lend money to Spain to finance it day to day.

Spain's borrowing costs have risen in recent weeks, raising concerns for its long-term financial stability and putting pressure on conservative leader Mariano Rajoy, who won general elections on Sunday, to cut the public deficit.

© 2011 AFP

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