Spanish banks announce new provisions following reforms

Three top Spanish banks — Santander, CaixaBank and Bankia — Sunday said they would set aside some 10 billion euros in additional funds this year to meet new government reforms on risky assets.

Santander, the biggest eurozone bank by market capitalisation, said it would set aside an additional 2.7 billion euros.

Bankia, which is being partly nationalised, said it would set aside 4.7 billion, and CaixaBank, the country’s third largest, will provision 2.1 billion more this year.

And the Banca Civica, whose merger with CaixaBank was announced in March, will provision an additional 1.2 billion euros, CaixaBank said.

On Friday, the Spanish government announced drastic reforms forcing banks to set up a new 30-billion-euro financial cushion and to remove risky property assets from their accounts. Many of the banks were badly hit by the 2008 collapse of the housing market.

The new provisions come on top of the 53.8 billion euros the banks were told to set aside to comply with reforms announced in February.

Overall, the provisions will bolster coverage of property-related assets to 30 percent from seven percent.

European Commissioner Olli Rehn, who is responsible for economic affairs, welcomed the measures announced by Madrid to strengthen the banking sector.

“I welcome the measures announced on Friday by the Spanish authorities to further reform the banking sector,” Rehn said in a statement Sunday.

“A prompt and profound reform of the banking sector is a cornerstone of Spain’s crisis response and its overall reform strategy,” he added.

Rehn said the banking reform measure was a crucial addition to Madrid’s efforts at consolidating its budget and implementing structural reforms aimed at laying a foundation for sustainable growth and job creation.

Spanish Prime Minister Mariano Rajoy on Sunday defended the reforms, “because we didn’t deal with reforming the financial sector four years ago, we have to do it now, late in the day, in a rushed way and after everyone else”.

Two more banks, Banco Sabadell and Bankinter, said they would provision an extra 412 million and 136 million respectively.