Spanish banks pass stress tests, five 'cajas' fail: report

23rd July 2010, Comments 0 comments

All eight major Spanish banks that underwent stress tests to see if they could cope with worsened economic conditions passed, but five of the 19 regional lenders known as 'cajas' that were tested failed, Spanish media reported Friday.

Top-selling daily El Pais, which said it had access to results of the tests that were to be published later on Friday, said the exercise revealed that the eight banks "have enough capital to surpass the most difficult situations."

But it warned that the tests showed that some of the banks could see their net profits "drop significantly" if the economy worsened.

Meanwhile the online edition of daily newspaper El Mundo, citing sector sources, said five regional savings banks, including those that have been involved in recent mergers, had failed to pass the stress tests.

Among those that did not pass was the group that emerged from the recent merger of Caixa Catalunya, Caixa Tarragona and Caixa Manresa, which received 1.25 billion euros from the Spanish Fund for Orderly Bank Restructuring (FROB), it said.

The FROB was set up in June 2009 after Spain's regional savings banks were hit hard by the bursting of Spain's real estate bubble which they had largely financed.

A second group, made up of Caja Duero and Espana, also failed the stress tests despite receiving 525 million euros from the the fund.

A third group, made up of Caixa Sabadell, Terrassa and Manlleu which received 380 million euros from the FROB also failed the stress tests.

The lender that merged from the merger of Caixa Galicia and Caixanova also failed the stress tests as did Cajasur, which the Bank of Spain took over in May.

Earlier this month the central bank sold Cajasur at auction to BKK, a regional savings bank based in the northeastern Basque region.

Spanish banks got off relatively lightly in the global credit crunch in 2008 as the country's strict rules meant they did not invest heavily in the high-risk US home loans that hurt financial institutions elsewhere.

But many regional savings banks have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.

The regional savings banks, many of which are owned by regional politicians, account for about half of all lending in Spain.

© 2010 AFP

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