Three more Spanish banks announce alliance
Three more Spanish savings banks announced plans on Tuesday to form an alliance to weather the country's uncertain economic outlook sparked by the collapse of a property boom.
The three -- the Monte de Piedad y Caja General de Ahorros de Badajoz, the Caja de Ahorros y Monte de Piedad del Circulo Catolico de Obreros de Burgos and the Caja de Ahorros de la Inmaculada de Aragon -- are to join forces under a so-called "cold fusion" or "virtual" merger.
Under the set-up, the banks will keep their own brands, balance sheets and employees but a single management will monitor solvency and liquidity centrally.
It is the latest in a series of mergers and cooperation agreements promoted by Spain's central bank to restructure the country's financial sector.
Spanish banks got off relatively lightly from 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 badly exposed to bad debt since the collapse of the property sector at the end of 2008.
The government has encouraged their consolidation in order to maintain liquidity.
The savings banks, many of which are owned by regional politicians, have requested a total of about 11 billion euros (13.5 billion dollars) from a special government fund to carry out their merger plans, the Bank of Spain said last week.
Spain plunged into its worst recession in decades at the end of 2008 following the collapse of a decade-long property boom and only returned to tepid growth this year.
© 2010 AFP