Without state aid, 9 Spanish banks would fail tests: report

26th July 2010, Comments 0 comments

Four regional Spanish savings banks survived the stress tests on ability to face a crisis only with the help of state aid, in addition to the five which failed, press reports said here on Monday.

Without counting in the state aid, nine banks not five, would have failed in all, the reports said.

Five such banks were deemed to have failed the tests, according to results released on Friday by the Committee of European Banking Supervisors (CEBS).

If Spanish state funds had not been counted as part of their capital, four more banks would have been deemed under-capitalised and unprepared to face a new financial crisis, the reports said.

Overall, seven European banks, five in Spain and one each in Germany and Greece, failed the stress tests.

Under the testing procedure the Spanish central bank allowed lenders to count funds received from the state in 2009 as part of their capital.

The amount of assistance made available to date is 10.58 billion euros (13.7 billion dollars), according to the Bank of Spain.

Spanish banks got off relatively lightly from the subprime mortgage crisis last year, 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.

There has lately been a consolidation movement among such banks in order to shore up their finances.

© 2010 AFP

0 Comments To This Article