Spanish savings banks against new shake-up plan

Spain’s troubled regional savings banks, a major cause of concern over public finances, are opposed to a new shake-up announced by the government, press reports said Saturday.

Deputy Prime Minister Alfredo Perez Rubalcaba said Friday that the government was preparing a plan designed “to increase the solvency and the credibility of the savings banks.”

The plan was being drawn up in conjunction with the Bank of Spain and the Spanish Confederation of Savings Banks (CECA), said Rubalcaba, who is also interior minister.

He said the details will be announced once the plan is finalised.

But Spain’s Fund for Orderly Bank Restructuring, the FROB, outlined a scenario in which it could take a stake in the savings banks, in a presentation published online.

The daily El Mundo said the scheme had sparked “confusion and indignation” among the savings banks, while El Pais said they were in a state of rebellion.

El Mundo said CECA head Isidro Faine, had threatened to resign from the body if any reforms were imposed against its will. Faine also heads the country’s leading savings bank, the Caixa.

The economic daily Expansion said the banks wanted urgent clarification of the government plans, which El Pais said could be finalised as early as next Friday.

They argued that a massive shake-up which began 18 months ago, with mergers and new legislation, was quite sufficient.

Spain’s main banks got off relatively lightly from the sub-prime mortgage crisis in 2009, 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.

Forty regional banks, from a total of 45, are now in the process of merging or forging operating alliances as part of a restructuring led by the Bank of Spain.

But markets remain nervous over the health of the regional banks, known as cajas, which account for about half of all savings in the country.

All eight major Spanish banks passed European Union bank stress tests conducted in July on their ability to weather a crisis, but five out of 19 regional lenders examined failed.

El Pais said Friday there was some internal wrangling in the government over the next step for the savings banks, with the finance ministry arguing there was no need for legislative changes but the prime minister’s office and the Bank of Spain in favour.

CECA director general Jose Antonio Olavierrata said in an interviw published Monday in the daily ABC that the banks had been seeking new investors in Europe and the United States, and would also be tapping the Middle East anjd Asia.

“Funds have approached us and there will soon be injections of private capital in the savings banks,” he said.