Rescue of Spanish savings bank could cost 2.7 bln euros: report
The rescue of regional savings bank CajaSur, which was taken over by the Bank of Spain at the weekend, could cost up to 2.7 billion euros, a business newspaper reported Monday.
A Bank of Spain spokesman would not confirm the figure but said the unlisted bank, formerly controlled by the Roman Catholic Church and headed by a priest, would receive an injection of “at least” 523 million euros (657 million dollars).
That would be the “legal minimum” amount to ensure financial stability.
“At least 523 million euros will be needed but I can not indicate a precise figure regarding the injection of capital which will be necessary,” he told AFP.
The business daily Expansion said supplementary funds will be needed to clean up the bank’s 1.5 billion euros in doubtful debts and another 364 million euros to make up for irrecoverable credits and the depreciation of property assets.
“The experts consulted indicate that under the most pessimistic hypothesis, up to 2.7 billion euros will be needed, based on the financial information published by the savings bank,” the paper said.
CajaSur, based in the southern city of Cordoba, lost 596 million euros (748 million dollars) last year on revenues of 426 million euros. It posted a loss of 114 million euros in the first quarter of 2010.
The Bank of Spain said Saturday that its Fund for Orderly Bank Reconstruction (FROB) would now manage Cajasur and supply the savings bank with “the capital resources necessary to ensure that (it) attains at the minimum level of solvency.”
The FROB was set up by the government in June 2009 after the central bank was forced to take over the running of savings bank Caja Castilla de la Mancha, Spain’s first major bank rescue in 16 years.
The rescue fund, made up of public money and other existing bank support funds, was capitalised initially with nine billion euros which can be increased ten-fold if necessary to help struggling banks merge or restructure.
Spanish banks got off relatively lightly from the subprime mortgage crisis in 2008 as the country’s strict regulations meant they did not invest heavily in the high-risk loans that hurt financial institutions elsewhere.
But many, especially smaller unlisted saving banks like CajaSur that are usually controlled by regional politicians, were badly hit by the collapse of the country’s once-booming property market in late 2008, both through loans to developers and mortgages.